<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 3, 1999
OR
[ ] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Transition period from _________ to _________.
Commission file number 0-23418
MTI TECHNOLOGY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-3601802
- ------------------------------- -------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.)
4905 East La Palma Avenue
Anaheim, California 92807
- --------------------------------------------------------------------------------
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (714) 970-0300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $227,617,758 on July 23, 1999, based on the closing sale
price of such stock on The Nasdaq National Market. The number of shares
outstanding of Registrant's Common Stock, $0.001 par value, was 29,079,007 on
July 23, 1999.
<PAGE> 2
PART II
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
Information with respect to the Company's executive officers is set
forth in Part I, above, under the caption "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.
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.
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 the investor relations and
marketing for various companies for approximately 30 years.
DIRECTORS' FEES
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,
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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, Mr. Melrose and Ms. Kreidel in the
event he or 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 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.
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
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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 5 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 Ray Noorda, Val Kreidel and John Repp were filed one day late.
ITEM 11. EXECUTIVE COMPENSATION:
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($)
- --------------------------- ---- --------- -------- ------------------ ------------ ---------------
<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.
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<PAGE> 5
(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 $20,215 for reimbursement of
relocation expenses.
(3) Mr. Sitzman joined the Company on August 18, 1997.
SUMMARY OF OPTION GRANTS
The following table sets forth the individual grants of stock options
made by the Company during the fiscal year ended April 3, 1999 to each of the
Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- --------------------------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM (2)
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (#) YEAR (1) ($/SH) (1) DATE 5%($) 10%($)
---- ------- -------- ---------- ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earl M. Pearlman 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.
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<PAGE> 6
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 shall 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 $8.31, which expires July 8, 2008, vests 25% on year after the
commencement date of the grant, and one-twelfth of the remaining unvested
shares subject to the option grant shall vest each quarter thereafter. All
such options have provisions accelerating the vesting in the event of a
change in control.
SUMMARY OF OPTIONS EXERCISED
The following table sets forth information concerning exercises of
stock options during the year ended April 3, 1999 by each of the Named Executive
Officers and the value of unexercised options at April 3, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR FISCAL YEAR
SHARES END (#) END ($)
ACQUIRED ON VALUE --------------- -----------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE (2)
---- ----------- ---------- --------------- -----------------
<S> <C> <C> <C> <C>
Earl M. Pearlman 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.
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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 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.
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<PAGE> 8
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 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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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
[PERFORMANCE GRAPH]
<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
Mar-99 61 337 688
</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> 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
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.
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(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.
ITEM 13. 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 for a
purchase price of $6,000,000. Upon completion of the transaction, the Company
will own approximately 25% of the outstanding capital stock of Caldera. The
Canopy Group, Inc., a major stockholder of the Company, currently owns all of
the 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. Consummation of this transaction remains subject to
customary closing conditions, including satisfactory completion of the Company's
due diligence review of Caldera. There can be no assurance that the proposed
equity investment in Caldera will be consummated.
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.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following Consolidated Financial Statements of the Company are
attached to the Company's Annual Report on Form 10-K for the fiscal year ended
April 3, 1999.
(a)(1) Consolidated Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets as of April 3, 1999 and April 4, 1998
Consolidated Statements of Income for fiscal years 1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity for fiscal years 1999,
1998 and 1997
Consolidated Statements of Cash Flows for fiscal years 1999, 1998 and
1997
Notes to Consolidated Financial Statements
(2) The following financial statement schedule for fiscal years 1999, 1998
and 1997 is submitted herewith:
Schedule II -- Valuation and Qualifying Accounts (See page S-1)
All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or
notes thereto.
11
<PAGE> 12
(3) Exhibits included herewith (numbered in accordance with Item 601 of
Regulation S-K):
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of the Company.(1)
3.2 Restated By-laws of the Company.(6)
4.1 Form of Registration Rights Agreement between the Company
and certain Purchasers, and schedule of such Purchasers.(1)
4.2 Registration Rights Agreement among the Company, Dialogic
System Corporation and NFT Ventures, Inc., dated June 15,
1992, as amended as of April 1, 1993 and as of February 11,
1994.(1)
4.3 Registration Rights Agreement between the Company and NFT
Ventures, Inc., dated November 30, 1992.(1)
4.4 [Intentionally omitted]
4.5 [Intentionally omitted]
4.6 Registration Rights Agreement between the Company and
Dialogic Systems Corporation, dated November 30, 1992.(1)
4.7 Specimen Stock Certificate.(1)
10.1 [Intentionally omitted]
10.2 Triple Net Lease between the Company and Catellus
Development Corporation effective December 20, 1991.(1)
10.3 Owner Participation Agreement between the Company, Catellus
Development Corporation and Anaheim Redevelopment Agency,
dated as of January 7, 1992, including exhibits.(1)
10.4 [Intentionally omitted]
10.5 [Intentionally omitted]
10.6 [Intentionally omitted]
*10.7 Form of Nonqualified Stock Option Agreement under the Stock
Incentive Plan.(1)
*10.8 Form of Indemnification Agreement.(1)
10.9 [Intentionally omitted]
10.10 [Intentionally omitted]
*10.11 Micro Technology, Inc. Incentive Stock Option
Plan -- 1985.(1)
*10.12 1987 Incentive Stock Option and Nonqualified Stock Option
Plan of the Company (the "1987 Stock Option Plan").(1)
*10.13 Form of Incentive Common Stock Option Agreement under the
1987 Stock Option Plan.(1)
*10.14 Form of Nonqualified Common Stock Option Agreement under the
1987 Stock Option Plan.(1)
*10.15 Stock Incentive Plan of the Company.(1)
*10.16 1988 Stock Option Plan, as amended August 12, 1991, of SF2
Corporation.(1)
10.17 Form of Consultant/Employee Confidentiality Agreement.(1)
10.18 Lease between Oak Creek Delaware, Inc., and the Company,
dated December 18, 1993.(1)
*10.19 Form of Incentive Stock Option Agreement under the Stock
Incentive Plan.(1)
*10.20 MTI Technology Corporation 1994 Employee Stock Purchase
Plan, as amended.(2)
*10.21 MTI Technology Corporation Directors' Non-Qualified Stock
Option Plan.(1)
10.22 Asset Purchase Agreement, dated February 9, 1996, between
EMC Corporation and Registrant, dated as of February 9,
1996. (Confidential treatment granted pursuant to Rule
24b-2)(3)
10.23 [Intentionally omitted]
10.24 1996 Stock Incentive Plan(4)
10.25 Amendment No. 2 to Stock Purchase Agreement and Senior
Promissory Notes dated as of October 3, 1996 between Earl M.
Pearlman, William E. Decker, the William E. Decker Trust and
Registrant.(4)
*10.26 Employment Agreement dated August 1, 1997, between Chuck
Sitzman and Registrant.(5)
10.27 Loan and Security Agreement between Company and Silicon
Valley Bank and General Electric Capital Corporation, as
co-lenders, and Schedule thereto.(7)
*10.28 Severance Agreement dated as of July 15, 1998, between Earl
Pearlman and Registrant.
*10.29 Severance Agreement dated as of July 15, 1998, between Dale
Boyd and Registrant.
*10.30 Severance Agreement dated as of July 15, 1998, between Tom
Raimondi and Registrant.
*10.31 Severance Agreement dated as of July 15, 1998, between Gary
Scott and Registrant.
*10.32 Severance Agreement dated as of July 15, 1998, between Chuck
Sitzman and Registrant.
*10.33 Severance Agreement dated as of July 15, 1998, between Venki
Venkataraman and Registrant.
21.1 Subsidiaries of the Company.(8)
23.1 Consent of KPMG LLP.(8)
24 Power of Attorney.(8)
27 Financial Data Schedule.(8)
</TABLE>
- ---------------
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form S-1
(No. 33-75180).
(2) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended April 2, 1994.
(3) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended December 30, 1995.
(4) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended October 6, 1995.
(5) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended October 4, 1997.
(6) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended January 3, 1998.
(7) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended July 4, 1998.
(8) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended April 3, 1999.
* Management or compensatory plan or arrangement.
(b) Reports on Form 8-K
Form 8-K, dated May 14, 1999, regarding the Company's right to receive an
additional $10 million under the Asset Purchase Agreement, dated February 9,
1996, between EMC Corporation and Registrant.
Form 8-K, dated May 24, 1999, regarding the preliminary approval of the
Company's settlement of its stockholders lawsuit.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 30th day of
July 1999.
MTI TECHNOLOGY CORPORATION
By: /s/ Earl M. Pearlman
---------------------------------------
Earl M. Pearlman
(President and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Earl M. Pearlman President and Chief Executive July 30, 1999
- ------------------------------------ Officer
(Earl M. Pearlman)
/s/ Dale R. Boyd Vice President, Chief Financial July 30, 1999
- ------------------------------------ Officer (Principal Financial and
(Dale R. Boyd) Accounting Officer)
/s/ Stephanie M. Braun Corporate Controller, Chief July 30, 1999
- ------------------------------------ Accounting Officer
(Stephanie M. Braun)
/s/ Raymond J. Noorda Chairman of the Board July 30, 1999
- ------------------------------------
(Raymond J. Noorda)
/s/ Val Kreidel Director July 30, 1999
- ------------------------------------
(Val Kreidel)
/s/ Al Melrose Director July 30, 1999
- ------------------------------------
(Al Melrose)
/s/ John Repp Director July 30, 1999
- ------------------------------------
(John Repp)
</TABLE>
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of the Company.(1)
3.2 Restated By-laws of the Company.(6)
4.1 Form of Registration Rights Agreement between the Company
and certain Purchasers, and schedule of such Purchasers.(1)
4.2 Registration Rights Agreement among the Company, Dialogic
System Corporation and NFT Ventures, Inc., dated June 15,
1992, as amended as of April 1, 1993 and as of February 11,
1994.(1)
4.3 Registration Rights Agreement between the Company and NFT
Ventures, Inc., dated November 30, 1992.(1)
4.4 [Intentionally omitted]
4.5 [Intentionally omitted]
4.6 Registration Rights Agreement between the Company and
Dialogic Systems Corporation, dated November 30, 1992.(1)
4.7 Specimen Stock Certificate.(1)
10.1 [Intentionally omitted]
10.2 Triple Net Lease between the Company and Catellus
Development Corporation effective December 20, 1991.(1)
10.3 Owner Participation Agreement between the Company, Catellus
Development Corporation and Anaheim Redevelopment Agency,
dated as of January 7, 1992, including exhibits.(1)
10.4 [Intentionally omitted]
10.5 [Intentionally omitted]
10.6 [Intentionally omitted]
*10.7 Form of Nonqualified Stock Option Agreement under the Stock
Incentive Plan.(1)
*10.8 Form of Indemnification Agreement.(1)
10.9 [Intentionally omitted]
10.10 [Intentionally omitted]
*10.11 Micro Technology, Inc. Incentive Stock Option
Plan -- 1985.(1)
*10.12 1987 Incentive Stock Option and Nonqualified Stock Option
Plan of the Company (the "1987 Stock Option Plan").(1)
*10.13 Form of Incentive Common Stock Option Agreement under the
1987 Stock Option Plan.(1)
*10.14 Form of Nonqualified Common Stock Option Agreement under the
1987 Stock Option Plan.(1)
*10.15 Stock Incentive Plan of the Company.(1)
*10.16 1988 Stock Option Plan, as amended August 12, 1991, of SF2
Corporation.(1)
10.17 Form of Consultant/Employee Confidentiality Agreement.(1)
10.18 Lease between Oak Creek Delaware, Inc., and the Company,
dated December 18, 1993.(1)
*10.19 Form of Incentive Stock Option Agreement under the Stock
Incentive Plan.(1)
*10.20 MTI Technology Corporation 1994 Employee Stock Purchase
Plan, as amended.(2)
*10.21 MTI Technology Corporation Directors' Non-Qualified Stock
Option Plan.(1)
10.22 Asset Purchase Agreement, dated February 9, 1996, between
EMC Corporation and Registrant, dated as of February 9,
1996. (Confidential treatment granted pursuant to Rule
24b-2)(3)
10.23 [Intentionally omitted]
10.24 1996 Stock Incentive Plan(4)
10.25 Amendment No. 2 to Stock Purchase Agreement and Senior
Promissory Notes dated as of October 3, 1996 between Earl M.
Pearlman, William E. Decker, the William E. Decker Trust and
Registrant.(4)
*10.26 Employment Agreement dated August 1, 1997, between Chuck
Sitzman and Registrant.(5)
10.27 Loan and Security Agreement between Company and Silicon
Valley Bank and General Electric Capital Corporation, as
co-lenders, and Schedule thereto.(7)
*10.28 Severance Agreement dated as of July 15, 1998, between Earl
Pearlman and Registrant.
*10.29 Severance Agreement dated as of July 15, 1998, between Dale
Boyd and Registrant.
*10.30 Severance Agreement dated as of July 15, 1998, between Tom
Raimondi and Registrant.
*10.31 Severance Agreement dated as of July 15, 1998, between Gary
Scott and Registrant.
*10.32 Severance Agreement dated as of July 15, 1998, between Chuck
Sitzman and Registrant.
*10.33 Severance Agreement dated as of July 15, 1998, between Venki
Venkataraman and Registrant.
21.1 Subsidiaries of the Company.(8)
23.1 Consent of KPMG LLP.(8)
24 Power of Attorney.(8)
27 Financial Data Schedule.(8)
</TABLE>
- ---------------
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form S-1
(No. 33-75180).
(2) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended April 2, 1994.
(3) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended December 30, 1995.
(4) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended October 6, 1995.
(5) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended October 4, 1997.
(6) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended January 3, 1998.
(7) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended July 4, 1998.
(8) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended April 3, 1999.
* Management or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 10.28
SEVERANCE AGREEMENT
This Agreement, (the "Agreement") is made and entered into as of July
15, 1998, is entered into between MTI Technology Corporation, a corporation
organized under the laws of the State of Delaware (the "Company"), and Earl
Pearlman (the "Executive").
RECITALS
A. Executive is currently serving as an officer of the Company.
B. The Board of Directors of the Company (the "Board") recognizes that
the possibility of a Change in Control (as hereinafter defined) exists and that
the threat or the occurrence of a Change in Control can result in significant
distractions to its key management personnel because of the uncertainties
inherent in such a situation;
C. The Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and
D. In order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event that the Executive's
employment is terminated as a result of, or in connection with, a Change in
Control.
AGREEMENT
In consideration of the respective agreements of the parties contained
herein, it is agreed as follows:
1. Term Of Agreement. This Agreement shall commence as of the date
first set forth above and shall continue in effect until July 15, 2000;
provided, however, that commencing on July 15, 2000 and on each July 15
thereafter, the term of this Agreement shall automatically be extended for one
(1) year unless the Company or the Executive shall have given written notice to
the other at least ninety (90) days prior thereto that the term of this
Agreement shall not be so extended; and provided, further, however, that
notwithstanding any such notice by the Company not to extend, the term of this
Agreement shall not expire prior to the expiration of twelve (I 2) months after
the occurrence of a Change in Control.
2. Definitions.
2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date,
<PAGE> 2
including (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay and (iv) bonuses and
incentive compensation (other than the "Pro Rata Bonus" (as hereinafter
defined)).
2.2. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean the greater of the Executive's annual base salary (a) at the rate in
effect on the Termination Date or (b) at the highest rate in effect at any time
during the ninety (90) day period prior to the Change in Control, and shall
include all amounts of base salary that are deferred under the Executive benefit
plans of the Company or any other agreement or arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount"
shall mean the greatest of: (a) 100% of the annual bonus payable to the
Executive under the Company's Executive Management Bonus Plan for the fiscal
year in which the Termination Date occurs; (b) the annual bonus paid or payable
to the Executive under the Company's Executive Management Bonus Plan for the
full fiscal year ended prior to the fiscal year during which the Termination
Date occurred; (c) the annual bonus paid or payable to the Executive under the
Company's Executive Management Bonus Plan for the full fiscal year ended prior
to the fiscal year during which a Change in Control occurred; (d) the average of
the annual bonuses paid or payable to the Executive under the Company's
Executive Management Bonus Plan during the three full fiscal years ended prior
to the fiscal year during which the Termination Date occurred; or (e) the
average of the annual bonuses paid or payable to the Executive under the
Company's Executive Management Bonus Plan during the three full fiscal years
ended prior to the fiscal year during which the Change in Control occurred.
2.4. Cause. The Company may terminate this Agreement and discharge
Executive for Cause (as defined) at any time upon written notice. For purposes
of this Agreement, the term "Cause" shall mean: (i) a material breach of any
term of this Agreement and failure to cure such breach within ten (10) days
after written notice thereof from the Company; (ii) the willful and continued
failure by Executive substantially to perform his duties for the Company (other
than any such failure resulting from his incapacity due to death or physical or
mental illness), after written demand for substantial performance is delivered
to Executive by the Company, which specifically identifies the manner in which
the Company believes that Executive has not substantially performed his duties;
(iii) the failure by Executive to follow the reasonable instructions of the
Board of Directors; (iv) the willful engaging by Executive in misconduct that is
materially injurious to the Company, monetarily or otherwise; (v) Executive's
final conviction for fraud or of any felony; or (vi) Executive's habitual use of
illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol
abuse, Executive shall be given notice and a thirty (30) day opportunity to
remedy the problem. For purposes of this paragraph, no act, or failure to act,
on Executive's part shall be considered "willful" unless done, or omitted to be
done, by Executive other than in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the Company.
2
<PAGE> 3
2.5. Change In Control.
(a) For purposes of this Agreement, "Change of Control" shall
mean:
(i) any "person" as such term is defined in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than (1) a trustee or other fiduciary holding
securities under an Executive benefit plan of the Company, (2) a
corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership
of stock of the Company, or (3) any current beneficial stockholder
or group, as defined by Rule 13d-5 of the Exchange Act, of
securities possessing more than [TWENTY-FIVE] percent (25%) of the
total combined voting power of the Company's outstanding securities,
hereafter becomes the "beneficial owner," as defined in Rule 13d-3
under of the Exchange Act, directly or indirectly, of securities of
the Company representing [TWENTY-FIVE] percent (25%) or more of the
total combined voting power of the Company's then outstanding
securities, or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least
eighty percent (80%) of the total voting power represented by the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company, in one transaction or a series of transactions, of all or
substantially all of the Company's assets; or
(iv) the sale of substantially all of the Company's assets.
2.6. Company. For purposes of this Agreement, the "Company" shall mean
MTI Incorporated and its Subsidiaries and shall include MTI's Successors and
Assigns (as hereinafter defined).
2.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a total period
of ninety (90) days and the Executive has not returned to full time employment
prior to the Termination Date as stated in the "Notice of Termination."
3
<PAGE> 4
2.8. Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the events or conditions
described in subsections (1) through (8) hereof:
(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in
the Executive's reasonable judgment, represents an adverse change
from the Executive's status, title, position or responsibilities as
in effect at any time within ninety (90) days preceding the date of
a Change in Control or at any time thereafter; the assignment to the
Executive of any duties or responsibilities which, in the
Executive's reasonable judgment, are inconsistent with the
Executive's status, title, position or responsibilities as in effect
at any time within ninety (90) days preceding the date of a Change
in Control or at any time thereafter; or any removal of the
Executive from or failure to reappoint or reelect the Executive to
any of such offices or positions, except in connection with the
termination of the Executive's employment for Disability, Cause, as
a result of the Executive's death or by the Executive;
(ii) a reduction in the Executive's base salary or any
failure to pay the Executive any compensation or benefits to which
the Executive is entitled within ten (10) days of the date due after
receipt of written notice from Executive;
(iii) the Company's requiring the Executive to be based at
any place outside a 25-mile radius from MTI's Westmont Office,
located at 1111 Pasquinelli Drive, Ste. 400, Westmont, Illinois
60556, except for reasonably required travel on the Company's
business which is not materially greater than such travel
requirements prior to the Change in Control;
(iv) the failure by the Company to (A) continue in effect
(without reduction in benefit level and/or reward opportunities) any
material compensation or Executive benefit plan in which the
Executive was participating at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter
unless such plan is replaced with a plan that provides substantially
equivalent compensation or benefits to the Executive, or (B) provide
the Executive with compensation and benefits, in the aggregate, at
least equal (in terms of benefit levels and/or reward opportunities)
to those provided for under each other Executive benefit plan,
program and practice in which the Executive was participating at any
time within ninety (90) days preceding the date of a Change in
Control or at any time thereafter;
(v) the insolvency or the filing (by any party, including
the Company) of a petition for bankruptcy of the Company, which
petition is not dismissed within sixty (60) days;
(vi) any material breach by the Company of any provision of
this Agreement;
4
<PAGE> 5
(vii) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the
terms of Section 2,4; or
(viii) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to
assume and agree to perform this Agreement, as contemplated in
Section 6 hereof.
(b) The Executive's right to terminate the Executive's
employment pursuant to this Section 2.8 shall not be affected by the Executive's
incapacity due to physical or mental illness.
2.9. Notice Of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment from the Company, which
notice indicates the date on which termination is to be effective, the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.11. Successors And Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.12. Termination Date. For purposes of this Agreement, "Termination
Date" shall mean in, the case of the Executive's death, the Executive's date of
death, in the case of Good Reason, the last day of the Executive's employment
and, in all other cases, the date specified in the Notice of Termination;
provided, however, that if the Executive's employment is terminated by the
Company for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Executive, provided that, in the case of Disability,
the Executive shall not have returned to the full-time performance of the
Executive's duties during such period of at least thirty (30) days.
3. Termination Of Employment.
3.1. If, during the term of this Agreement, the Executive's
employment with the Company shall be terminated within twelve (12) months
following a Change in Control, the Executive shall be entitled to the following
compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death or (3) by the Executive other than for Good Reason, the
Company shall pay to the Executive the Accrued Compensation
5
<PAGE> 6
and, if such termination is other than by the Company for Cause, the Company
shall also pay the Executive a Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1 (a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro Rata Bonus;
(ii) the Company shall pay the Executive as severance pay
and in lieu of any further compensation for periods subsequent to
the Termination Date, in a single payment, an amount in cash equal
to the sum of (A) the Base Amount and (B) the Bonus Amount; and
(iii) for a number of months equal to twelve (12) (the
"Continuation Period"), the Company shall, at its expense, continue
on behalf of the Executive and the Executive's dependents and
beneficiaries the life insurance, disability, medical, dental and
hospitalization benefits provided (A) to the Executive at any time
during the 90-day period prior to the Change in Control or at any
time thereafter or (B) to other similarly situated executives who
continue in the employ of the Company during the Continuation
Period. The coverage and benefits (including deductibles and costs)
provided in this Section 3.1 (b)(iii) during the Continuation Period
shall be no less favorable to the Executive and the Executive's
dependents and beneficiaries, than the most favorable of such
coverages and benefits during any of the periods referred to in
clauses (A) and (B) above. The Company's obligation hereunder with
respect to the foregoing benefits shall be limited to the extent
that the Executive obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may
reduce the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and benefits
of the combined benefit plans are no less favorable to the Executive
than the coverages and benefits required to be provided hereunder.
This subsection (iii) shall not be interpreted so as to limit any
benefits to which the Executive or the Executive's dependents or
beneficiaries may be entitled under any of the Company's Executive
benefit plans, programs or practices following the Executive's
termination of employment, including without limitation, retiree
medical and life insurance benefits.
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i)
and (ii) shall be paid in a single lump sum cash payment within forty-five (45)
days after the Executive's Termination Date (or earlier, if required by
applicable law).
(d) The Executive shall not be required to mitigate the amount
of any payment for in this Agreement by seeking other employment or otherwise,
and no such payment provided shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent employment
except as provided in Section 3.1(b)(iii).
6
<PAGE> 7
3.2. (a) The severance pay and benefits provided for in this Section
3 shall be in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement.
(b) The Executive's entitlement to any other compensation or
benefits shall be determined in accordance with the Company's Executive benefit
plans and other applicable programs, policies and practices then in effect,
4. Notice Of Termination. Following a Change in Control, any purported
termination of the Executive's employment shall be communicated by Notice of
Termination to the Executive. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. Excise Tax Limitation.
(a) Notwithstanding anything in this Agreement to the contrary,
if any portion of any payments to Executive by the Company under this Agreement
and any other present or future plan of the Company or other present or future
agreement between Executive and the Company would not be deductible by the
Company (collectively, "Payments") for federal income tax purposes by reason of
application of Section 162(m) of the Internal Revenue Code (the "Code"), then
payment of that portion to Executive shall be deferred until the earliest date
upon which payment thereof can be made to Executive without being non-deductible
pursuant to Section 162(m) of the Code. In the event of such deferral, the
Company shall pay interest to Executive on the deferred amount at 120% of the
applicable federal rate provided for in Section 1274(d)(1) of the Code. In
addition, notwithstanding any provision of this Agreement to the contrary, the
aggregate present value of the payments and benefits (excluding those payments
and benefits not treated as parachute payments under Code Section 28OG(b)) to be
made or provided to the Executive by the Company (whether pursuant to this
Agreement or otherwise) shall not exceed three times the Executive's annualized
includible compensation for the base period, as defined in Code Section 28OG(d)
of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any
excess payments or benefits shall be forfeited; provided, however, that the
forfeiture provision of this sentence shall apply only if such forfeiture
provision results in larger aggregate after-tax payments and benefits to the
Executive than if the forfeiture provision did not apply. The of this portion of
this subsection 5(a) is to prevent any payment or benefit to the Executive from
being subject to the excise tax imposed by Code Section 4999 and to prevent any
item of expense or deduction of the Company from being disallowed as a result of
the application of Code Section 280G, but only if the after-tax payments and
benefits payable or provided to the Executive are greater after application of
the forfeiture provision than if the forfeiture provision did not apply. The
interpretation of this subsection 5(a), its application to any occurrence or
event, the determination of whether any payment or benefit would not be treated
as a parachute payment, the determination of the aggregate present value of all
payments and benefits to be made or provided to the Executive, the determination
of the value of the payments and benefits payable or to be provided to the
Executive after reduction for all applicable taxes, and what specific payments
or benefits otherwise available to the Executive
7
<PAGE> 8
shall be limited or eliminated by operation of this subsection 5(a) shall be
reasonably made by the Company and shall be binding on all persons.
(b) An initial determination as to whether the Payments shall
be reduced to the Limited Payment Amount and the amount of such Limited Payment
Amount shall be made, at the Company's expense, by the accounting firm that is
the Company's independent accounting firm as of the date of the Change in
Control (the "Accounting Firm"). The Accounting Finn shall provide its
determination (the "Determination", together with detailed supporting
calculations and documentation, to the Company and the Executive within twenty
(20) days of the Termination Date if applicable, or such other time as requested
by the Company or by the Executive (provided the Executive reasonably believes
that any of the Payments may be subject to the Excise Tax), and if the
Accounting Firm determines that there is substantial authority (within the
meaning of Section 6662 of the Code) that no Excise Tax is payable by the
Executive with respect to a Payment or Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such Payment or Payments. Within ten (I 0) days
of the delivery of the Determination to the Executive, the Executive shall have
the night to dispute the Determination (the "Dispute"). If there is no Dispute,
the Determination shall be binding, final and conclusive upon the Company and
the Executive.
6. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive or the Executive's beneficiaries
or legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal personal representative.
7. Confidential Information. The Company and Executive acknowledge that
Executive, in performing the terms and conditions of Executive's employment, has
and will continue to directly or indirectly gain access to information about
Company and its operations, including, but not limited to, its modes and methods
of conducting its business and producing and marketing its products, its
employee, customer, vendor and referral source lists, its trade secrets, its
copyrighted and non-copyrighted or non-protected computer software programs, its
techniques of operation, its financial structure, and its weakness, if any. As
part of this Agreement, Executive agrees to execute, and be bound by, the
Company's "Employee/ Consultant Proprietary Information Agreement," a copy of
which is attached hereto as Exhibit "A."
8. Notice. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be delivered in person, by facsimile,
or by certified or registered mail with
8
<PAGE> 9
return receipt requested. Each such notice, request, demand, or other
communication shall be effective (a) if delivered by hand, when delivered at the
address specified in this Section; (b) if given by facsimile, when such
facsimile is transmitted to the telefacsimile number specified in this Section
and confirmation is received; or (c) if given by certified or registered mail,
three days after the mailing thereof. Notices shall be delivered as follows:
If to the Company:
MTI Technology Corporation
4905 E. La Palma Avenue
Anaheim, California 92807
Attention: Chief Financial Officer
Fax: (714) 693-2202
With a copy to:
Morrison & Foerster LLP
19900 MacArthur Boulevard
12th Floor
Irvine, California 92612
Attention: Tamara Powell Tate
Fax: (714) 251-0900
If to the Executive:
Earl Pearlman
9 Knollwood
Flossmoor, Illinois 60422
Any party may change its address by notice giving notice to the other party of a
new address in accordance with the foregoing provisions.
9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company (except for
any severance or termination policies, plans, programs or practices) and for
which the Executive may qualify, nor shall anything herein limit or reduce such
rights as the Executive may have under any other agreements with the Company
(except for any severance or termination agreement). Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company shall be payable in accordance with such plan or
program, except as explicitly modified by this Agreement.
10. Settlement Of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Executive or others.
9
<PAGE> 10
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged, unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time, No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
12. Governing Law. This Agreement has been negotiated and exactitude in
the State of California and is to be performed in Orange County, California.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of California, including all matters of construction, validity,
performance, and enforcement, without giving effect to principles of conflict of
laws. Any dispute, action, litigation, or other proceeding concerning this
Agreement shall be instituted, maintained, heard, and decided in Orange County,
California.
13. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
15. Remedies. All rights, remedies, undertakings, obligations, options,
covenants, conditions, and agreements contained in this Agreement shall be
cumulative and no one of them shall be exclusive of any other.
16. Interpretation. The language in all parts of this Agreement shall
be in all cases construed simply according to its fair meaning and not strictly
for or against any party. Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa. The
descriptive headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not control or affect the interpretation
or construction of any of the provisions herein.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
18. Further Documents and Acts. Each of the parties hereto agrees to
cooperate in good faith with the other and to execute and deliver such further
instruments and perform such other acts as may be reasonably necessary or
appropriate to consummate and carry into effect the transactions contemplated
under this Agreement.
10
<PAGE> 11
19. Consultation with Counsel. Executive acknowledges (a) that he has
been given the opportunity to consult with counsel of his own choice concerning
this Agreement, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based upon his own
judgment with or without the advice of such counsel.
EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS
CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS
RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT.
BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF
THE TERMS AND CONDITIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
MTI TECHNOLOGY CORPORATION
By: /s/ DALE R BOYD
--------------------------------
Title: Sr. V.P. & CFO
--------------------------
/s/ EARL M. PEARLMAN
------------------------------------
Earl M. Pearlman
11
<PAGE> 12
EXHIBIT "A"
<PAGE> 13
STATEMENT REGARDING EMPLOYEE/CONSULTANT
PROPRIETARY INFORMATION AGREEMENT
Attached to this statement is your Employee/Consultant Proprietary Information
Agreement (the "Agreement") with MTI Technology Corporation (together with its
subsidiaries, the "Company").
Please take the time to review the Agreement carefully. It contains material
restrictions on your right to disclose or use, during or after your employment,
certain information and technology learned or developed by you during your
employment with the Company. The Company considers this Agreement to be very
important to the protection of its business.
If you have any questions concerning the Agreement, you may wish to consult an
attorney. Managers, legal counsel, and others in the Company are not authorized
to give you legal advice concerning the Agreement.
If you have read and understand the Agreement, and if you agree to its terms and
conditions, please return a fully executed copy of it to the Company, retaining
one copy for yourself.
I HAVE READ AND UNDERSTAND
THE ATTACHED AGREEMENT:
Executive Name: EARL PEARLMAN
-----------------------------
Executive Signature: /s/ EARL PEARLMAN
------------------------
Title:
-----------------------------
Date:
------------------------------
A-1
<PAGE> 14
EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT
In consideration of my present and future employment by MTI Technology
Corporation (together with its subsidiaries, the "Company"), I agree to the
following:
1. Proprietary Information.
(a) I understand and acknowledge that my work as an employee of the
Company has involved and will continue to involve access to and creation of
confidential, proprietary, and trade secret information of the Company and its
affiliates, consultants, customers, clients, and business associates
(collectively, as defined more extensively below, "Proprietary Information"). I
further understand and acknowledge that the Company and its clients have
developed, compiled, and otherwise obtained this Proprietary Information often
at great expense, and that such information has great value to their respective
businesses. I agree to hold in strict confidence and in trust for the sole
benefit of the Company and its clients all Proprietary Information. I further
agree that I shall treat all Proprietary Information as private, privileged, and
confidential, and that I shall not use, disclose, or release any Proprietary
Information in any way to any person, firm, or institution at any time, even
after termination of my employment, except to the extent necessary to carry out
my responsibilities as an Executive of the Company. I further understand and
agree that the publication of Proprietary Information through literature or
speeches must be approved in advance in writing by a duly authorized officer of
the Company.
(b) I understand and acknowledge that, for purposes of this
Agreement, "Proprietary Information" means all confidential, proprietary, or
trade secret information and ideas in whatever form, tangible or intangible,
whether disclosed to or learned or developed by me, prior or subsequent to the
date hereof, pertaining in any manner to the business of the Company or to the
Company's affiliates, consultants, clients, or business associates, unless: (i)
the information is or becomes publicly known through lawful means; (ii) the
information was rightfully in my possession or part of my general knowledge
prior to my employment by the Company; or (iii) the information is disclosed to
me without confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.
(c) Without limiting the generality of the foregoing, I understand
and acknowledge that "Proprietary Information" includes all: (i) inventions,
computer codes, computer programs, formulas, schematics, techniques, algorithms,
employee suggestions, development tools and processes, computer printouts,
design drawings and manuals, and improvements or modification to any of the
foregoing; (ii) information about costs, profits, markets, and sales; (iii)
plans for future development and new product concepts; and (iv) all documents,
books, papers, drawings, models, sketches, and other data of any kind and
description, including electronic data recorded or retrieved by any means, that
have been or will be given to me by the Company (or any present or future
affiliates, consultants, customers, clients, and business associates of the
Company), as well as written or verbal instructions or comments.
A-2
<PAGE> 15
1. Use Of Proprietary Information.
I agree that I will maintain at my work station or in other places
under my control only such Proprietary Information that I have a current "need
to know," and that I will return to the appropriate person or location, or
otherwise dispose of, Proprietary Information once my need to know no longer
exists. I agree that I will not make copies of information unless I have a
legitimate need for such copies in connection with my work.
2. Third-Party Information.
I recognize that the Company has received and in the future will
receive from third parties their confidential or proprietary information subject
to a duty on the Company's part to maintain the confidentiality of such
information and to use it only for certain limited purposes. I agree that I owe
the Company and such third parties, during the term of my employment and
thereafter, a duty to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm, or
corporation (except as necessary in carrying out my work for the Company
consistent with the Company's agreement with such third party) or to use it for
the benefit of anyone other than for the Company or such third party (consistent
with the Company's agreement with such third party) without the express written
authorization of a duly authorized officer of the Company.
3. Inventions.
(a) Subject to Section 9 below, I hereby assign to the Company,
without additional consideration, all right, title and interest (throughout the
United States and in all foreign countries) in all ideas, processes, inventions,
technology, writings, computer programs, designs, formulas, discoveries,
patents, copyrights, trademarks, service marks, original works of authorship,
any claims or rights, and any improvements or modifications to the foregoing
(collectively, "Inventions"), whether or not subject to patent or copyright
protection, relating to any activities of the Company that have been or will be
conceived, developed, or reduced to practice by me alone or with others (i)
during the term of my employment, whether or not conceived or developed during
regular business hours, and whether or not conceived before, on, or after the
date hereof or (ii) if based on Proprietary Information, after termination of my
employment. Such Inventions shall be the sole property of the Company and, to
the maximum extent permitted by applicable law, shall be deemed works made for
hire.
(b) I will, whether during or after my employment by the Company,
execute such written instruments and do other such acts as may be necessary in
the opinion of the Company to obtain a patent, register a copyright, or
otherwise enforce the Company's rights in such Inventions (and I hereby
irrevocably appoint the Company and any of its officers as my attorney in fact
to undertake such acts in my name).
(c) I understand that the assignment by me to the Company does not
apply to Inventions that qualify fully under Section 2870(a) of the California
Labor Code, which is set forth on Schedule "A." I understand that nothing in
this Agreement is intended to expand the scope of protection provided by
Sections 2870 through 2872 of the California Labor Code. Except as disclosed in
Schedule "B", there are no ideas, inventions, technology, computer
A-3
<PAGE> 16
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing that I wish to exclude from
the operation of this Agreement.
(d) To the best of my knowledge, there is no existing contract in
conflict with this Agreement or any other contract in existence between me and
any other person or entity to assign ideas, inventions, technology, computer
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing.
1. Termination of Employment.
(a) I hereby acknowledge and agree that nothing in this Agreement
shall be construed to imply that the term of my employment is of any definite
duration. I further acknowledge and agree that I am employed on an "at-will"
basis, which means that I may quit at any time with or without cause, and the
Company may terminate my employment at any time with or without cause.
(b) I acknowledge that, because of my responsibilities at the
Company, I have helped and will continue to help to develop and have been and
will be exposed to the Company's research and, development, products, business
strategies, information on customers and clients, and other valuable Proprietary
Information, and that use or disclosure of such Proprietary Information in
breach of this Agreement would be extremely difficult to detect or prove. I also
acknowledge that the Company's relationships with its employees, affiliates,
consultants, customers, clients, business associates, and other persons are
valuable business assets. To forestall any use or disclosure of Proprietary
Information in breach of this Agreement, I agree that for the term of this
Agreement and for a period of one (1) year after termination of my employment
with the Company, I shall not, for myself or any third party, directly or
indirectly:
(i) divert or attempt to divert from the Company any
business of any kind in which it is engaged, including, without
limitation, the solicitation of or interference with any of its
suppliers or customer; or
(ii) employ, solicit for employment, or recommend for
employment any person employed by the Company.
Furthermore, I agree that during the period of my employment with the
Company I shall not engage in any business activity that is or may be
competitive with the Company. I understand that none of my activities will be
prohibited under this section if I can prove that the action was taken without
the use in any way of Proprietary Information.
(c) I acknowledge that, because of the difficulty of establishing
when any Invention is first conceived or developed by me, or whether it results
from access to Proprietary Information or the Company's equipment, facilities,
and data, I agree that any ideas, inventions, technology, computer programs,
processes, trademarks, service marks, original works of authorship, designs,
formulas, discoveries, patents, copyrights, any claims or rights, and any
improvements or modifications to the foregoing shall be presumed to be an
Invention if
A-4
<PAGE> 17
conceived, developed, used, sold, exploited, or reduced to practice by me or
with my aid within one (1) year after my termination of employment with the
Company. I can rebut the above presumption if I prove that the invention, idea,
process, etc., is not an Invention as defined in paragraph 4(a).
(d) I hereby acknowledge and agree that all personal property
including, without limitation, all books, manuals, records, models, drawings,
reports, notes, contracts, lists, files, computer software, computer tapes or
disks, blueprints, and other documents or materials (or copies thereof),
Proprietary Information, and equipment furnished to or prepared by me in the
course of or incident to my employment, belong to the Company and shall be
promptly returned to the Company once my employment with the Company is
terminated, for any reason. I will not retain any written or other tangible
information pertaining to any Invention. In the event of the termination of my
employment, I agree to sign and deliver the Termination Certificate attached as
Schedule "C" to this Agreement.
(e) I understand that my obligations contained in this Agreement
will survive the termination of my employment with the Company, and that I will
continue to make all disclosures required of me by Paragraph 6.
1. Disclosure.
I agree to maintain adequate and current written records on the
development of all Inventions and to disclose promptly to the Company all
Inventions and relevant records, which records will remain the sole property of
the Company. I further agree that all information and records pertaining to any
Inventions conceived, developed, or reduced to practice by me (alone or with
others) during my period of employment or during the one-year period following
termination of my employment, shall be promptly disclosed to the Company (any
such disclosures made after the termination of my employment shall be received
by the Company in confidence for the purpose of determining if they have been
based on any Proprietary Information). The Company shall examine such
information to determine if in fact such information are Inventions subject to
this Agreement.
2. Former or Conflicting Agreements.
During my employment with the Company, I will not disclose to the
Company, or use, or induce the Company to use, any confidential, proprietary, or
trade secret information of others. I represent and warrant that I have returned
all property and confidential, proprietary and trade secret information
belonging to all prior employers, if any. I further represent and warrant that
my performance of the terms of this Agreement will not breach any agreement to
keep in confidence confidential proprietary and trade secret information
acquired by me in confidence or in trust prior to my employment by the Company.
I have not entered into, and I agree I will not enter into, any oral or written
agreement in conflict herewith.
3. Information on Company Premises.
I acknowledge that all information generated, received, or maintained
by or for me on the premises or equipment of the Company (including, without
limitation, computer systems and
A-5
<PAGE> 18
electronic-mail or voicemail systems) is the property of the Company, and I
hereby waive any property or privacy rights that I may have with respect to such
information.
4. Reserved Inventions.
To avoid future confusion, I have listed on Schedule "B" a description
of all Inventions, if any, developed or conceived by me in which I claim any
ownership or other right. I understand that, by not listing an Invention, I am
acknowledging that the Invention was not developed or conceived before
commencement of my employment.
10. Choice of Law.
The validity, interpretation, enforceability, and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of California without giving effect to its conflict of law rules. Any
dispute, action, litigation, or other proceeding concerning this Agreement shall
be instituted, maintained, heard, and decided in Orange County, California.
11. Remedies.
I recognize that nothing in this Agreement is intended to limit any
remedy of the Company under the California Uniform Trade Secrets Act and that I
could face possible criminal and civil actions, resulting in imprisonment and
substantial monetary liability, if I misappropriate the Company's or its
clients' trade secrets. In addition, I recognize that my violation of this
Agreement could cause the Company irreparable harm and significant injury, the
amount of which may be extremely difficult to estimate, thus, making any remedy
at law or in damages inadequate. Therefore, I agree that, in the event of a
breach or threatened breach that involves Proprietary Information of the Company
or its clients, the Company shall have the right to apply to any court of
competent jurisdiction for an order restraining any breach or threatened breach
of this Agreement and for any other relief the Company deems appropriate. This
right shall be in addition to any other remedy available to the Company in law
or equity.
12. Successors and Assigns.
(a) I understand and agree that the Company may assign to another
person or entity any of its rights under this Agreement.
(b) I further understand and agree that this Agreement shall be
binding upon me and my heirs, executors, administrators, and successors, and
shall inure to the benefit of the Company's successors and assigns.
12. Severability.
If any provision of this Agreement is determined to be invalid, illegal
or unenforceable, the validity or enforceability of the other provisions shall
not be affected.
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<PAGE> 19
13. Entire Agreement.
The terms of this Agreement are the final expression of my agreement
with respect to the subject matter hereof and may not be contradicted by
evidence of any prior or contemporaneous agreement. This Agreement shall
constitute the complete and exclusive statement of its terms and no extrinsic
evidence whatsoever may be introduced in any judicial, administrative, or other
legal proceeding involving this Agreement. No modification or amendment of this
Agreement shall be binding unless executed in writing by me and a duly
authorized officer of the Company.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS,
PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR
TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS,
RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS
AGREEMENT.
This Agreement is made and entered into as of July 15, 1998.
MTI TECHNOLOGY CORPORATION
By: /s/ Dale R. Boyd
--------------------------------
Title: Sr. V.P. & CFO
--------------------------
Executive: EARL PEARLMAN
-------------------------
Signature: /s/ EARL PEARLMAN
-------------------------
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<PAGE> 20
SCHEDULE A
California Labor Code Section 2870(a)
Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information, except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
Schedule A
<PAGE> 21
SCHEDULE B
1. Proprietary Information. Except as set forth below, I acknowledge that
at this time I know nothing about the business or Proprietary
Information of the Company, other than information I have learned from
the Company in the course of being hired:
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2. Reserved Inventions. Except as set forth below, there are no ideas,
processes, inventions, technology, writings, programs, designs,
formulas, discoveries, patents, copyrights, or trademarks, or any
claims, rights, or improvements to the foregoing, that I wish to
exclude from the operation of this Agreement:
N/A
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Name: EARL PEARLMAN
--------------------------------
Signature: /s/ EARL PEARLMAN
---------------------------
Date: 9-1-98
--------------------------------
Schedule B
<PAGE> 22
SCHEDULE C
TERMINATION CERTIFICATE
This is to certify that I have returned all personal property of the
Company, including, without limitation, all books, manuals, records, models,
drawings, reports, notes, contracts, lists, blueprints, and other documents and
materials, Proprietary Information, and equipment furnished to or prepared by me
in the course of or incident to my employment with the Company, and that I did
not make or distribute any copies of the foregoing.
I further certify that I have reviewed the Employee/Consultant
Proprietary Information Agreement signed by me and that I have complied with and
will continue to comply with all of its terms including, without limitation: (i)
the reporting of any invention, process, idea, etc. conceived or developed by me
and covered by the Agreement; and (ii) the preservation as confidential of all
Proprietary Information pertaining to the Company. This certificate in no way
limits my responsibilities or the Company's rights under the Agreement.
On termination of my employment with the Company, I will be employed by
[NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will
be working in connection with the following projects:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name:
-----------------------------------
Signature:
------------------------------
Date:
-----------------------------------
Schedule C
<PAGE> 1
EXHIBIT 10.29
SEVERANCE AGREEMENT
This Agreement, (the "Agreement") is made and entered into as of July
15, 1998, is entered into between MTI Technology Corporation, a corporation
organized under the laws of the State of Delaware (the "Company"), and Dale Boyd
(the "Executive").
RECITALS
A. Executive is currently serving as an officer of the Company.
B. The Board of Directors of the Company (the "Board") recognizes that
the possibility of a Change in Control (as hereinafter defined) exists and that
the threat or the occurrence of a Change in Control can result in significant
distractions to its key management personnel because of the uncertainties
inherent in such a situation;
C. The Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and
D. In order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event that the Executive's
employment is terminated as a result of, or in connection with, a Change in
Control.
AGREEMENT
In consideration of the respective agreements of the parties contained
herein, it is agreed as follows:
1. Term Of Agreement. This Agreement shall commence as of the date
first set forth above and shall continue in effect until July 15, 2000;
provided, however, that commencing on July 15, 2000 and on each July 15
thereafter, the term of this Agreement shall automatically be extended for one
(1) year unless the Company or the Executive shall have given written notice to
the other at least ninety (90) days prior thereto that the term of this
Agreement shall not be so extended; and provided, further, however, that
notwithstanding any such notice by the Company not to extend, the term of this
Agreement shall not expire prior to the expiration of twelve (12) months after
the occurrence of a Change in Control.
2. Definitions.
2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date,
<PAGE> 2
including (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay and (iv) bonuses and
incentive compensation (other than the "Pro Rata Bonus" (as hereinafter
defined)).
2.2. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean the greater of the Executive's annual base salary (a) at the rate in
effect on the Termination Date or (b) at the highest rate in effect at any time
during the ninety (90) day period prior to the Change in Control, and shall
include all amounts of base salary that are deferred under the Executive benefit
plans of the Company or any other agreement or arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount"
shall mean the greatest of: (a) 100% of the annual bonus payable to the
Executive under the Company's Executive Management Bonus Plan for the fiscal
year in which the Termination Date occurs; (b) the annual bonus paid or payable
to the Executive under the Company's Executive Management Bonus Plan for the
full fiscal year ended prior to the fiscal year during which the Termination
Date occurred; (c) the annual bonus paid or payable to the Executive under the
Company's Executive Management Bonus Plan for the full fiscal year ended prior
to the fiscal year during which a Change in Control occurred; (d) the average of
the annual bonuses paid or payable to the Executive under the Company's
Executive Management Bonus Plan during the three full fiscal years ended prior
to the fiscal year during which the Termination Date occurred; or (e) the
average of the annual bonuses paid or payable to the Executive under the
Company's Executive Management Bonus Plan during the three full fiscal years
ended prior to the fiscal year during which the Change in Control occurred.
2.4. Cause. The Company may terminate this Agreement and discharge
Executive for Cause (as defined) at any time upon written notice. For purposes
of this Agreement, the term "Cause" shall mean: (i) a material breach of any
term of this Agreement and failure to cure such breach within ten (10) days
after written notice thereof from the Company; (ii) the willful and continued
failure by Executive substantially to perform his duties for the Company (other
than any such failure resulting from his incapacity due to death or physical or
mental illness), after written demand for substantial performance is delivered
to Executive by the Company, which specifically identifies the manner in which
the Company believes that Executive has not substantially performed his duties;
(iii) the failure by Executive to follow the reasonable instructions of the
Board of Directors; (iv) the willful engaging by Executive in misconduct that is
materially injurious to the Company, monetarily or otherwise; (v) Executive's
final conviction for fraud or of any felony; or (vi) Executive's habitual use of
illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol
abuse, Executive shall be given notice and a thirty (30) day opportunity to
remedy the problem. For purposes of this paragraph, no act, or failure to act,
on Executive's part shall be considered "willful" unless done, or omitted to be
done, by Executive other than in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the Company.
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<PAGE> 3
2.5. Change In Control.
(a) For purposes of this Agreement, "Change of Control" shall
mean:
(i) any "person" as such term is defined in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than (1) a trustee or other fiduciary holding
securities under an Executive benefit plan of the Company, (2) a
corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership
of stock of the Company, or (3) any current beneficial stockholder
or group, as defined by Rule 13d-5 of the Exchange Act, of
securities possessing more than [TWENTY-FIVE] percent (25%) of the
total combined voting power of the Company's outstanding securities,
hereafter becomes the "beneficial owner," as defined in Rule 13d-3
under of the Exchange Act, directly or indirectly, of securities of
the Company representing [TWENTY-FIVE] percent (25%) or more of the
total combined voting power of the Company's then outstanding
securities, or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least
eighty percent (80%) of the total voting power represented by the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company, in one transaction or a series of transactions, of all or
substantially all of the Company's assets; or
(iv) the sale of substantially all of the Company's assets.
2.6. Company. For purposes of this Agreement, the "Company" shall
mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors
and Assigns (as hereinafter defined).
2.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a total period
of ninety (90) days and the Executive has not returned to full time employment
prior to the Termination Date as stated in the "Notice of Termination."
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<PAGE> 4
2.8. Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the events or conditions
described in subsections (1) through (8) hereof:
(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in
the Executive's reasonable judgment, represents an adverse change
from the Executive's status, title, position or responsibilities as
in effect at any time within ninety (90) days preceding the date of
a Change in Control or at any time thereafter; the assignment to the
Executive of any duties or responsibilities which, in the
Executive's reasonable judgment, are inconsistent with the
Executive's status, title, position or responsibilities as in effect
at any time within ninety (90) days preceding the date of a Change
in Control or at any time thereafter; or any removal of the
Executive from or failure to reappoint or reelect the Executive to
any of such offices or positions, except in connection with the
termination of the Executive's employment for Disability, Cause, as
a result of the Executive's death or by the Executive;
(ii) a reduction in the Executive's base salary or any
failure to pay the Executive any compensation or benefits to which
the Executive is entitled within ten (10) days of the date due after
receipt of written notice from Executive;
(iii) the Company's requiring the Executive to be based at
any place outside a 25-mile radius from MTI's Corporate Offices,
located at 4905 E. LaPalma Avenue, Anaheim, CA 92807, except for
reasonably required travel on the Company's business which is not
materially greater than such travel requirements prior to the Change
in Control;
(iv) the failure by the Company to (A) continue in effect
(without reduction in benefit level and/or reward opportunities) any
material compensation or Executive benefit plan in which the
Executive was participating at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter
unless such plan is replaced with a plan that provides substantially
equivalent compensation or benefits to the Executive, or (B) provide
the Executive with compensation and benefits, in the aggregate, at
least equal (in terms of benefit levels and/or reward opportunities)
to those provided for under each other Executive benefit plan,
program and practice in which the Executive was participating at any
time within ninety (90) days preceding the date of a Change in
Control or at any time thereafter;
(v) the insolvency or the filing (by any party, including
the Company) of a petition for bankruptcy of the Company, which
petition is not dismissed within sixty (60) days;
(vi) any material breach by the Company of any provision of
this Agreement;
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<PAGE> 5
(vii) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the
terms of Section 2.4; or
(viii) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to
assume and agree to perform this Agreement, as contemplated in
Section 6 hereof.
(b) The Executive's right to terminate the Executive's
employment pursuant to this Section 2.8 shall not be affected by the Executive's
incapacity due to physical or mental illness.
2.9. Notice Of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment from the Company, which
notice indicates the date on which termination is to be effective, the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
2.10 Pro Rata Bonus. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.11. Successors And Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.12. Termination Date. For purposes of this Agreement, "Termination
Date" shall mean in, the case of the Executive's death, the Executive's date of
death, in the case of Good Reason, the last day of the Executive's employment
and, in all other cases, the date specified in the Notice of Termination;
provided, however, that if the Executive's employment is terminated by the
Company for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Executive, provided that, in the case of Disability,
the Executive shall not have returned to the full-time performance of the
Executive's duties during such period of at least thirty (30) days.
3. Termination Of Employment.
3.1. If, during the term of this Agreement, the Executive's
employment with the Company shall be terminated within twelve (12) months
following a Change in Control, the Executive shall be entitled to the following
compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death or (3) by the Executive other than for Good Reason, the
Company shall pay to the Executive the Accrued Compensation
5
<PAGE> 6
and, if such termination is other than by the Company for Cause, the Company
shall also pay the Executive a Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1(a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro Rata Bonus;
(ii) the Company shall pay the Executive as severance pay
and in lieu of any further compensation for periods subsequent to
the Termination Date, in a single payment, an amount in cash equal
to the sum of (A) the Base Amount and (B) the Bonus Amount; and
(iii) for a number of months equal to twelve (12) (the
"Continuation Period"), the Company shall, at its expense, continue
on behalf of the Executive and the Executive's dependents and
beneficiaries the life insurance, disability, medical, dental and
hospitalization benefits provided (A) to the Executive at any time
during the 90-day period prior to the Change in Control or at any
time thereafter or (B) to other similarly situated executives who
continue in the employ of the Company during the Continuation
Period. The coverage and benefits (including deductibles and costs)
provided in this Section 3.1(b)(iii) during the Continuation
Period shall be no less favorable to the Executive and the
Executive's dependents and beneficiaries, than the most favorable of
such coverages and benefits during any of the periods referred to in
clauses (A) and (B) above. The Company's obligation hereunder with
respect to the foregoing benefits shall be limited to the extent
that the Executive obtains any such benefits pursuant to a
subsequent employer's benefit plans, in which case the Company may
reduce the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and benefits
of the combined benefit plans are no less favorable to the Executive
than the coverages and benefits required to be provided hereunder.
This subsection (iii) shall not be interpreted so as to limit any
benefits to which the Executive or the Executive's dependents or
beneficiaries may be entitled under any of the Company's Executive
benefit plans, programs or practices following the Executive's
termination of employment, including without limitation, retiree
medical and life insurance benefits.
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i)
and (ii) shall be paid in a single lump sum cash payment within forty-five (45)
days after the Executive's Termination Date (or earlier, if required by
applicable law).
(d) The Executive shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise, and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent employment
except as provided in Section 3.1(b)(iii).
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<PAGE> 7
3.2. (a) The severance pay and benefits provided for in this Section
3 shall be in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement.
(b) The Executive's entitlement to any other compensation or
benefits shall be determined in accordance with the Company's Executive benefit
plans and other applicable programs, policies and practices then in effect.
4. Notice Of Termination. Following a Change in Control, any purported
termination of the Executive's employment shall be communicated by Notice of
Termination to the Executive. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. Exercise Tax Limitation.
(a) Notwithstanding anything in this Agreement to the contrary, if
any portion of any payments to Executive by the Company under this Agreement and
any other present or future plan of the Company or other present or future
agreement between Executive and the Company would not be deductible by the
Company (collectively, "Payments") for federal income tax purposes by reason of
application of Section 162(m) of the Internal Revenue Code (the "Code"), then
payment of that portion to Executive shall be deferred until the earliest date
upon which payment thereof can be made to Executive without being non-deductible
pursuant to Section 162(m) of the Code. In the event of such deferral, the
Company shall pay interest to Executive on the deferred amount at 120% of the
applicable federal rate provided for in Section 1274(d)(1) of the Code. In
addition, notwithstanding any provision of this Agreement to the contrary, the
aggregate present value of the payments and benefits (excluding those payments
and benefits not treated as parachute payments under Code Section 28OG(b)) to be
made or provided to the Executive by the Company (whether pursuant to this
Agreement or otherwise) shall not exceed three times the Executive's annualized
includible compensation for the base period, as defined in Code Section 280G(d)
of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any
excess payments or benefits shall be forfeited; provided, however, that the
forfeiture provision of this sentence shall apply only if such forfeiture
provision results in larger aggregate after-tax payments and benefits to the
Executive than if the forfeiture provision did not apply. The intent of this
portion of this subsection 5(a) is to prevent any payment or benefit to the
Executive from being subject to the excise tax imposed by Code Section 4999 and
to prevent any item of expense or deduction of the Company from being disallowed
as a result of the application of Code Section 280G, but only if the after-tax
payments and benefits payable or provided to the Executive are greater after
application of the forfeiture provision than if the forfeiture provision did not
apply. The interpretation of this subsection 5(a), its application to any
occurrence or event, the determination of whether any payment or benefit would
not be treated as a parachute payment, the determination of the aggregate
present value of all payments and benefits to be made or provided to the
Executive, the determination of the value of the payments and benefits payable
or to be provided to the Executive after reduction for all applicable taxes, and
what specific payments or benefits otherwise available to the Executive
7
<PAGE> 8
shall be limited or eliminated by operation of this subsection 5(a) shall be
reasonably made by the Company and shall be binding on all persons.
(b) An initial determination as to whether the Payments shall
be reduced to the Limited Payment Amount and the amount of such Limited Payment
Amount shall be made, at the Company's expense, by the accounting firm that is
the Company's independent accounting firm as of the date of the Change in
Control (the "Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination", together with detailed supporting
calculations and documentation, to the Company and the Executive within twenty
(20) days of the Termination Date if applicable, or such other time as requested
by the Company or by the Executive (provided the Executive reasonably believes
that any of the Payments may be subject to the Excise Tax), and if the
Accounting Firm determines that there is substantial authority (within the
meaning of Section 6662 of the Code) that no Excise Tax is payable by the
Executive with respect to a Payment or Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such Payment or Payments. Within ten (10) days of
the delivery of the Determination to the Executive, the Executive shall have the
right to dispute the Determination (the "Dispute"). If there is no Dispute, the
Determination shall be binding, final and conclusive upon the Company and the
Executive.
6. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive or the Executive's beneficiaries
or legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal personal representative.
7. Confidential Information. The Company and Executive acknowledge that
Executive, in performing the terms and conditions of Executive's employment, has
and will continue to directly or indirectly gain access to information about
Company and its operations, including, but not limited to, its modes and methods
of conducting its business and producing and marketing its products, its
employee, customer, vendor and referral source lists, its trade secrets, its
copyrighted and non-copyrighted or non-protected computer software programs, its
techniques of operation, its financial structure, and its weakness, if any. As
part of this Agreement, Executive agrees to execute, and be bound by, the
Company's "Employee/ Consultant Proprietary Information Agreement," a copy of
which is attached hereto as Exhibit "A."
8. Notice. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be delivered in person, by facsimile,
or by certified or registered mail with
8
<PAGE> 9
return receipt requested. Each such notice, request, demand, or other
communication shall be effective (a) if delivered by hand, when delivered at the
address specified in this Section; (b) if given by facsimile, when such
facsimile is transmitted to the telefacsimile number specified in this Section
and confirmation is received; or (c) if given by certified or registered mail,
three days after the mailing thereof. Notices shall be delivered as follows:
If to the Company:
MTI Technology Corporation
4905 E. La Palma Avenue
Anaheim, California 92807
Attention: Chief Financial Officer
Fax: (714) 693-2202
With a copy to:
Morrison & Foerster LLP
19900 MacArthur Boulevard
12th Floor
Irvine, California 92612
Attention: Tamara Powell Tate
Fax: (714) 251-0900
If to the Executive:
Dale Boyd
27800 Mount Shasta Way
Yorba Linda, CA 92887
Any party may change its address by notice giving notice to the other party of a
new address in accordance with the foregoing provisions.
9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company (except for
any severance or termination policies, plans, programs or practices) and for
which the Executive may qualify, nor shall anything herein limit or reduce such
rights as the Executive may have under any other agreements with the Company
(except for any severance or termination agreement). Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company shall be payable in accordance with such plan or
program, except as explicitly modified by this Agreement.
10. Settlement Of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Executive or others.
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<PAGE> 10
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged, unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
12. Governing Law. This Agreement has been negotiated and exactitude in
the State of California and is to be performed in Orange County, California.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of California, including all matters of construction, validity,
performance, and enforcement, without giving effect to principles of conflict of
laws. Any dispute, action, litigation, or other proceeding concerning this
Agreement shall be instituted, maintained, heard, and decided in Orange County,
California.
13. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
15. Remedies. All rights, remedies, undertakings, obligations, options,
covenants, conditions, and agreements contained in this Agreement shall be
cumulative and no one of them shall be exclusive of any other.
16. Interpretation. The language in all parts of this Agreement shall
be in all cases construed simply according to its fair meaning and not strictly
for or against any party. Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa. The
descriptive headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not control or affect the interpretation
or construction of any of the provisions herein.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
18. Further Documents and Acts. Each of the parties hereto agrees to
cooperate in good faith with the other and to execute and deliver such further
instruments and perform such other acts as may be reasonably necessary or
appropriate to consummate and carry into effect the transactions contemplated
under this Agreement.
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19. Consultation with Counsel. Executive acknowledges (a) that he has
been given the opportunity to consult with counsel of his own choice concerning
this Agreement, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based upon his own
judgment with or without the advice of such counsel.
EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS
CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS
RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT.
BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF
THE TERMS AND CONDITIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
MTI TECHNOLOGY CORPORATION
By: /s/ Earl M Pearlman
------------------------------
Title: PRESIDENT
---------------------------
/s/ Dale Boyd
---------------------------------
Dale Boyd
11
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EXHIBIT "A"
Exhibit "A"
<PAGE> 13
STATEMENT REGARDING EMPLOYEE/CONSULTANT
PROPRIETARY INFORMATION AGREEMENT
Attached to this statement is your Employee/Consultant Proprietary Information
Agreement (the "Agreement") with MTI Technology Corporation (together with its
subsidiaries, the "Company").
Please take the time to review the Agreement carefully. It contains material
restrictions on your right to disclose or use, during or after your employment,
certain information and technology learned or developed by you during your
employment with the Company. The Company considers this Agreement to be very
important to the protection of its business.
If you have any questions concerning the Agreement, you may wish to consult an
attorney. Managers, legal counsel, and others in the Company are not authorized
to give you legal advice concerning the Agreement.
If you have read and understand the Agreement, and if you agree to its terms and
conditions, please return a fully executed copy of it to the Company, retaining
one copy for yourself.
I HAVE READ AND UNDERSTAND
THE ATTACHED AGREEMENT:
Executive Name: Dale R. Boyd
-----------------------
Executive Signature: /s/ DALE R. BOYD
-------------------
Title: Sr. V.P. & CEO
--------------------------------
Date: July 15, 1998
---------------------------------
A-1
<PAGE> 14
EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT
In consideration of my present and future employment by MTI Technology
Corporation (together with its subsidiaries, the "Company"), I agree to the
following:
1. Proprietary Information
(a) I understand and acknowledge that my work as an employee of the
Company has involved and will continue to involve access to and creation of
confidential, proprietary, and trade secret information of the Company and its
affiliates, consultants, customers, clients, and business associates
(collectively, as defined more extensively below, "Proprietary Information"). I
further understand and acknowledge that the Company and its clients have
developed, compiled, and otherwise obtained this Proprietary Information often
at great expense, and that such information has great value to their respective
businesses. I agree to hold in strict confidence and in trust for the sole
benefit of the Company and its clients all Proprietary Information. I further
agree that I shall treat all Proprietary Information as private, privileged, and
confidential, and that I shall not use, disclose, or release any Proprietary
Information in any way to any person, firm, or institution at any time, even
after termination of my employment, except to the extent necessary to carry out
my responsibilities as an Executive of the Company. I further understand and
agree that the publication of Proprietary Information through literature or
speeches must be approved in advance in writing by a duly authorized officer of
the Company.
(b) I understand and acknowledge that, for purposes of this
Agreement, "Proprietary Information" means all confidential, proprietary, or
trade secret information and ideas in whatever form, tangible or intangible,
whether disclosed to or learned or developed by me, prior or subsequent to the
date hereof, pertaining in any manner to the business of the Company or to the
Company's affiliates, consultants, clients, or business associates, unless: (i)
the information is or becomes publicly known through lawful means; (ii) the
information was rightfully in my possession or part of my general knowledge
prior to my employment by the Company; or (iii) the information is disclosed to
me without confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.
(c) Without limiting the generality of the foregoing, I understand
and acknowledge that "Proprietary Information" includes all: (i) inventions,
computer codes, computer programs, formulas, schematics, techniques, algorithms,
employee suggestions, development tools and processes, computer printouts,
design drawings and manuals, and improvements or modification to any of the
foregoing; (ii) information about costs, profits, markets, and sales; (iii)
plans for future development and new product concepts; and (iv) all documents,
books, papers, drawings, models, sketches, and other data of any kind and
description, including electronic data recorded or retrieved by any means, that
have been or will be given to me by the Company (or any present or future
affiliates, consultants, customers, clients, and business associates of the
Company), as well as written or verbal instructions or comments.
A-2
<PAGE> 15
1. Use Of Proprietary Information.
I agree that I will maintain at my work station or in other places
under my control only such Proprietary Information that I have a current "need
to know," and that I will return to the appropriate person or location, or
otherwise dispose of, Proprietary Information once my need to know no longer
exists. I agree that I will not make copies of information unless I have a
legitimate need for such copies in connection with my work.
2. Third-Party Information.
I recognize that the Company has received and in the future will
receive from third parties their confidential or proprietary information subject
to a duty on the Company's part to maintain the confidentiality of such
information and to use it only for certain limited purposes. I agree that I owe
the Company and such third parties, during the term of my employment and
thereafter, a duty to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm, or
corporation (except as necessary in carrying out my work for the Company
consistent with the Company's agreement with such third party) or to use it for
the benefit of anyone other than for the Company or such third party (consistent
with the Company's agreement with such third party) without the express written
authorization of a duly authorized officer of the Company.
3. Inventions.
(a) Subject to Section 9 below, I hereby assign to the Company,
without additional consideration, all right, title and interest (throughout the
United States and in all foreign countries) in all ideas, processes, inventions,
technology, writings, computer programs, designs, formulas, discoveries,
patents, copyrights, trademarks, service marks, original works of authorship,
any claims or rights, and any improvements or modifications to the foregoing
(collectively, "Inventions"), whether or not subject to patent or copyright
protection, relating to any activities of the Company that have been or will be
conceived, developed, or reduced to practice by me alone or with others (i)
during the term of my employment, whether or not conceived or developed during
regular business hours, and whether or not conceived before, on, or after the
date hereof or (ii) if based on Proprietary Information, after termination of my
employment. Such Inventions shall be the sole property of the Company and, to
the maximum extent permitted by applicable law, shall be deemed works made for
hire.
(b) I will, whether during or after my employment by the Company,
execute such written instruments and do other such acts as may be necessary in
the opinion of the Company to obtain a patent, register a copyright, or
otherwise enforce the Company's rights in such Inventions (and I hereby
irrevocably appoint the Company and any of its officers as my attorney in fact
to undertake such acts in my name).
(c) I understand that the assignment by me to the Company does not
apply to Inventions that qualify fully under Section 2870(a) of the California
Labor Code, which is set forth on Schedule "A." I understand that nothing in
this Agreement is intended to expand the scope of protection provided by
Sections 2870 through 2872 of the California Labor Code. Except as disclosed in
Schedule "B", there are no ideas, inventions, technology, computer
A-3
<PAGE> 16
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing that I wish to exclude from
the operation of this Agreement.
(d) To the best of my knowledge, there is no existing contract in
conflict with this Agreement or any other contract in existence between me and
any other person or entity to assign ideas, inventions, technology, computer
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing.
1. Termination of Employment.
(a) I hereby acknowledge and agree that nothing in this Agreement
shall be construed to imply that the term of my employment is of any definite
duration. I further acknowledge and agree that I am employed on an "at-will"
basis, which means that I may quit at any time with or without cause, and the
Company may terminate my employment at any time with or without cause.
(b) I acknowledge that, because of my responsibilities at the
Company, I have helped and will continue to help to develop and have been and
will be exposed to the Company's research and development, products, business
strategies, information on customers and clients, and other valuable Proprietary
Information, and that use or disclosure of such Proprietary Information in
breach of this Agreement would be extremely difficult to detect or prove. I also
acknowledge that the Company's relationships with its employees, affiliates,
consultants, customers, clients, business associates, and other persons are
valuable business assets. To forestall any, use or disclosure of Proprietary
Information in breach of this Agreement, I agree that for the term of this
Agreement and for a period of one (1) year after termination of my employment
with the Company, I shall not, for myself or any third party, directly or
indirectly:
(i) divert or attempt to divert from the Company any
business of any kind in which it is engaged, including, without
limitation, the solicitation of or interference with any of its
suppliers or customer; or
(ii) employ, solicit for employment, or recommend for
employment any person employed by the Company.
Furthermore, I agree that during the period of my employment with the
Company I shall not engage in any business activity that is or may be
competitive with the Company. I understand that none of my activities will be
prohibited under this section if I can prove that the action was taken without
the use in any way of Proprietary Information.
(c) I acknowledge that, because of the difficulty of establishing
when any Invention is first conceived or developed by me, or whether it results
from access to Proprietary Information or the Company's equipment, facilities,
and data, I agree that any ideas, inventions, technology, computer programs,
processes, trademarks, service marks, original works of authorship, designs,
formulas, discoveries, patents, copyrights, any claims or rights, and any
improvements or modifications to the foregoing shall be presumed to be an
Invention if
A-4
<PAGE> 17
conceived, developed, used, sold, exploited, or reduced to practice by me or
with my aid within one (1) year after my termination of employment with the
Company. I can rebut the above presumption if I prove that the invention, idea,
process, etc., is not an Invention as defined in paragraph 4(a).
(d) I hereby acknowledge and agree that all personal property
including, without limitation, all books, manuals, records, models, drawings,
reports, notes, contracts, lists, files, computer software, computer tapes or
disks, blueprints, and other documents or materials (or copies thereof),
Proprietary Information, and equipment furnished to or prepared by me in the
course of or incident to my employment, belong to the Company and shall be
promptly returned to the Company once my employment with the Company is
terminated, for any reason. I will not retain any written or other tangible
information pertaining to any Invention. In the event of the termination of my
employment, I agree to sign and deliver the Termination Certificate attached as
Schedule "C" to this Agreement.
(e) I understand that my obligations contained in this Agreement
will survive the termination of my employment with the Company, and that I will
continue to make all disclosures required of me by Paragraph 6.
1. Disclosure.
I agree to maintain adequate and current written records on the
development of all Inventions and to disclose promptly to the Company all
Inventions and relevant records, which records will remain the sole property of
the Company. I further agree that all information and records pertaining to any
Inventions conceived, developed, or reduced to practice by me (alone or with
others) during my period of employment or during the one-year period following
termination of my employment, shall be promptly disclosed to the Company (any
such disclosures made after the termination of my employment shall be received
by the Company in confidence for the purpose of determining if they have been
based on any Proprietary Information). The Company shall examine such
information to determine if in fact such information are Inventions subject to
this Agreement.
2. Former or Conflicting Agreements.
During my employment with the Company, I will not disclose to the
Company, or use, or induce the Company to use, any confidential, proprietary, or
trade secret information of others. I represent and warrant that I have returned
all property and confidential, proprietary and trade secret information
belonging to all prior employers, if any. I further represent and warrant that
my performance of the terms of this Agreement will not breach any agreement to
keep in confidence confidential proprietary and trade secret information
acquired by me in confidence or in trust prior to my employment by the Company.
I have not entered into, and I agree I will not enter into, any oral or written
agreement in conflict herewith.
3. Information on Company Premises.
I acknowledge that all information generated, received, or maintained
by or for me on the premises or equipment of the Company (including, without
limitation, computer systems and
A-5
<PAGE> 18
electronic-mail or voicemail systems) is the property of the Company, and I
hereby waive any property or privacy rights that I may have with respect to such
information.
4. Reserved Inventions.
To avoid future confusion, I have listed on Schedule "B" a description
of all Inventions, if any, developed or conceived by me in which I claim any
ownership or other right. I understand that, by not listing an Invention, I am
acknowledging that the Invention was not developed or conceived before
commencement of my employment.
10. Choice of Law.
The validity, interpretation, enforceability, and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of California without giving effect to its conflict of law rules. Any
dispute, action, litigation, or other proceeding concerning this Agreement shall
be instituted, maintained, heard, and decided in Orange County, California.
11. Remedies.
I recognize that nothing in this Agreement is intended to limit any
remedy of the Company under the California Uniform Trade Secrets Act and that I
could face possible criminal and civil actions, resulting in imprisonment and
substantial monetary liability, if I misappropriate the Company's or its
clients' trade secrets. In addition, I recognize that my violation of this
Agreement could cause the Company irreparable harm and significant injury, the
amount of which may be extremely difficult to estimate, thus, making any remedy
at law or in damages inadequate. Therefore, I agree that, in the event of a
breach or threatened breach that involves Proprietary Information of the Company
or its clients, the Company shall have the right to apply to any court of
competent Jurisdiction for an order restraining any breach or threatened breach
of this Agreement and for any other relief the Company deems appropriate. This
right shall be in addition to any other remedy available to the Company in law
or equity.
12. Successors and Assigns.
(a) I understand and agree that the Company may assign to another
person or entity any of its rights under this Agreement.
(b) I further understand and agree that this Agreement shall be
binding upon me and my heirs, executors, administrators, and successors, and
shall inure to the benefit of the Company's successors and assigns.
12. Severability.
If any provision of this Agreement is determined to be invalid, illegal
or unenforceable, the validity or enforceability of the other provisions shall
not be affected.
A-6
<PAGE> 19
13. Entire Agreement.
The terms of this Agreement are the final expression of my agreement
with respect to the subject matter hereof and may not be contradicted by
evidence of any prior or contemporaneous agreement. This Agreement shall
constitute the complete and exclusive statement of its terms and no extrinsic
evidence whatsoever may be introduced in any judicial, administrative, or other
legal proceeding involving this Agreement. No modification or amendment of this
Agreement shall be binding unless executed in writing by me and a duly
authorized officer of the Company.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS,
PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR
TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS,
RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS
AGREEMENT.
This Agreement is made and entered into as of July 15, 1998.
MTI TECHNOLOGY CORPORATION
By: /s/ EARL M PEARLMAN
----------------------------------
Title: PRESIDENT
---------------------------
Executive: DALE R. BOYD
--------------------------
Signature: /s/ Dale R. Boyd
--------------------------
A-7
<PAGE> 20
SCHEDULE A
California Labor Code Section 2870(a)
Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
Invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information, except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
Schedule A
<PAGE> 21
SCHEDULE B
1. Proprietary Information. Except as set forth below, I acknowledge that
at this time I know nothing about the business or Proprietary
Information of the Company, other than information I have learned from
the Company in the course of being hired:
-----------------------------------------------------------------------
N/A
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
2. Reserved Inventions. Except as set forth below, there are no ideas,
processes, inventions, technology, writings, programs, designs,
formulas, discoveries, patents, copyrights, or trademarks, or any
claims, rights, or improvements to the foregoing, that I wish to
exclude from the operation of this Agreement:
-----------------------------------------------------------------------
N/A
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Name: DALE R. BOYD
-----------------------------
Signature: /s/ DALE R. BOYD
-------------------------
Date: July 15, 1998
-----------------------------
Schedule B
<PAGE> 22
SCHEDULE C
TERMINATION CERTIFICATE
This is to certify that I have returned all personal property of the
Company, including, without limitation, all books, manuals, records, models,
drawings, reports, notes, contracts, lists, blueprints, and other documents and
materials, Proprietary Information, and equipment furnished to or prepared by me
in the course of or incident to my employment with the Company, and that I did
not make or distribute any copies of the foregoing.
I further certify that I have reviewed the Employee/Consultant
Proprietary Information Agreement signed by me and that I have complied with and
will continue to comply with all of its terms including, without limitation: (i)
the reporting of any invention, process, idea, etc. conceived or developed by me
and covered by the Agreement; and (ii) the preservation as confidential of all
Proprietary Information pertaining to the Company. This certificate in no way
limits my responsibilities or the Company's rights under the Agreement.
On termination of my employment with the Company, I will be employed by
[NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will
be working in connection with the following projects:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name:
----------------------------
Signature:
-----------------------
Date:
----------------------------
Schedule C
<PAGE> 1
EXHIBIT 10.30
SEVERANCE AGREEMENT
This Agreement, (the "Agreement") is made and entered into as of July 15,
1998, is entered into between MTI Technology Corporation, a corporation
organized under the laws of the State of Delaware (the "Company"), and Tom
Raimondi (the "Executive").
RECITALS
A. Executive is currently serving as an officer of the Company.
B. The Board of Directors of the Company (the "Board") recognizes that the
possibility of a Change in Control (as hereinafter defined) exists and that the
threat or the occurrence of a Change in Control can result in significant
distractions to its key management personnel because of the uncertainties
inherent in such a situation;
C. The Board has determined that it is essential and in the best interest
of the Company and its stockholders to retain the services of the Executive in
the event of a threat or occurrence of a Change in Control and to ensure the
Executive's continued dedication and efforts in such event without undue concern
for the Executive's personal, financial and employment security; and
D. In order to induce the Executive to remain in the employ of the Company,
particularly in the event of a threat or the occurrence of a Change in Control,
the Company desires to enter into this Agreement with the Executive to provide
the Executive with certain benefits in the event that the Executive's employment
is terminated as a result of, or in connection with, a Change in Control.
AGREEMENT
In consideration of the respective agreements of the parties contained
herein, it is agreed as follows:
1. Term Of Agreement. This Agreement shall commence as of the date first
set forth above and shall continue in effect until July 15, 2000; provided,
however, that commencing on July 15, 2000 and on each July 15 thereafter, the
term of this Agreement shall automatically be extended for one (1) year unless
the Company or the Executive shall have given written notice to the other at
least ninety (90) days prior thereto that the term of this Agreement shall not
be so extended; and provided, further, however, that notwithstanding any such
notice by the Company not to extend, the term of this Agreement shall not expire
prior to the expiration of twelve (12) months after the occurrence of a Change
in Control.
2. Definitions.
2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date,
<PAGE> 2
including (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay and (iv) bonuses and
incentive compensation (other than the "Pro Rata Bonus" (as hereinafter
defined)).
2.2. Base Amount. For purposes of this Agreement, "Base Amount" shall mean
the greater of the Executive's annual base salary (a) at the rate in effect on
the Termination Date or (b) at the highest rate in effect at any time during the
ninety (90) day period prior to the Change in Control, and shall include all
amounts of base salary that are deferred under the Executive benefit plans of
the Company or any other agreement or arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount" shall
mean the greatest of: (a) 100% of the annual bonus payable to the Executive
under the Company's Executive Management Bonus Plan for the fiscal year in which
the Termination Date occurs; (b) the annual bonus paid or payable to the
Executive under the Company's Executive Management Bonus Plan for the full
fiscal year ended prior to the fiscal year during which the Termination Date
occurred; (c) the annual bonus paid or payable to the Executive under the
Company's Executive Management Bonus Plan for the full fiscal year ended prior
to the fiscal year during which a Change in Control occurred; (d) the average of
the annual bonuses paid or payable to the Executive under the Company's
Executive Management Bonus Plan during the three full fiscal years ended prior
to the fiscal year during which the Termination Date occurred; or (e) the
average of the annual bonuses paid or payable to the Executive under the
Company's Executive Management Bonus Plan during the three full fiscal years
ended prior to the fiscal year during which the Change in Control occurred.
2.4. Cause. The Company may terminate this Agreement and discharge
Executive for Cause (as defined) at any time upon written notice. For purposes
of this Agreement, the term "Cause" shall mean: (i) a material breach of any
term of this Agreement and failure to cure such breach within ten (10) days
after written notice thereof from the Company; (ii) the willful and continued
failure by Executive substantially to perform his duties for the Company (other
than any such failure resulting from his incapacity due to death or physical or
mental illness), after written demand for substantial performance is delivered
to Executive by the Company, which specifically identifies the manner in which
the Company believes that Executive has not substantially performed his duties;
(iii) the failure by Executive to follow the reasonable instructions of the
Board of Directors; (iv) the willful engaging by Executive in misconduct that is
materially injurious to the Company, monetarily or otherwise; (v) Executive's
final conviction for fraud or of any felony; or (vi) Executive's habitual use of
illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol
abuse, Executive shall be given notice and a thirty (30) day opportunity to
remedy the problem. For purposes of this paragraph, no act, or failure to act,
on Executive's part shall be considered "willful" unless done, or omitted to be
done, by Executive other than in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the Company.
2
<PAGE> 3
2.5. Change In Control.
(a) For purposes of this Agreement, "Change of Control" shall mean:
(i) any "person" as such term is defined in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
other than (1) a trustee or other fiduciary holding securities under an
Executive benefit plan of the Company, (2) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, or (3) any current
beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange
Act, of securities possessing more than [TWENTY-FIVE] percent (25%) of the
total combined voting power of the Company's outstanding securities,
hereafter becomes the "beneficial owner," as defined in Rule 13d-3 under of
the Exchange Act, directly or indirectly, of securities of the Company
representing [TWENTY-FIVE] percent (25%) or more of the total combined
voting power of the Company's then outstanding securities, or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any reason
to constitute a majority thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty percent (80%) of the
total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company, in one transaction or a series of transactions,
of all or substantially all of the Company's assets; or
(iv) the sale of substantially all of the Company's assets.
2.6. Company. For purposes of this Agreement, the "Company" shall mean MTI
Incorporated and its Subsidiaries and shall include MTI's Successors and Assigns
(as hereinafter defined).
2.7. Disability. For purposes of this Agreement, "Disability" shall mean a
physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a total period
of ninety (90) days and the Executive has not returned to full time employment
prior to the Termination Date as stated in the "Notice of Termination."
3
<PAGE> 4
2.8. Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean the
occurrence after a Change in Control of any of the events or conditions
described in subsections (1) through (8) hereof:
(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from the
Executive's status, title, position or responsibilities as in effect at any
time within ninety (90) days preceding the date of a Change in Control or
at any time thereafter; the assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable judgment, are
inconsistent with the Executive's status, title, position or
responsibilities as in effect at any time within ninety (90) days preceding
the date of a Change in Control or at any time thereafter; or any removal
of the Executive from or failure to reappoint or reelect the Executive to
any of such offices or positions, except in connection with the termination
of the Executive's employment for Disability, Cause, as a result of the
Executive's death or by the Executive;
(ii) a reduction in the Executive's base salary or any failure to pay
the Executive any compensation or benefits to which the Executive is
entitled within ten (10) days of the (date due after receipt of written
notice from Executive;
(iii) the Company's requiring the Executive to be based at any place
outside a 25-mile radius from MTI's Corporate Offices, located at 4905 E.
LaPalma Avenue, Anaheim, CA 92807, except for reasonably required travel on
the Company's business which is not materially greater than such travel
requirements prior to the Change in Control;
(iv) the failure by the Company to (A) continue in effect (without
reduction in benefit level and/or reward opportunities) any material
compensation or Executive benefit plan in which the Executive was
participating at any time within ninety (90) days preceding the date of a
Change in Control or at any time thereafter unless such plan is replaced
with a plan that provides substantially equivalent compensation or benefits
to the Executive, or (B) provide the Executive with compensation and
benefits, in the aggregate, at least equal (in terms of benefit levels
and/or reward opportunities) to those provided for under each other
Executive benefit plan, program and practice in which the Executive was
participating at any time within ninety (90) days preceding the date of a
Change in Control or at any time thereafter;
(v) the insolvency or the filing (by any party, including the Company)
of a petition for bankruptcy of the Company, which petition is not
dismissed within sixty (60) days;
(vi) any material breach by the Company of any provision of this
Agreement;
4
<PAGE> 5
(vii) any purported termination of the Executive's employment for
Cause by the Company which does not comply with the terms of Section 2.4;
or
(viii) the failure of the Company to obtain an agreement, satisfactory
to the Executive, from any Successors and Assigns to assume and agree to
perform this Agreement, as contemplated in Section 6 hereof.
(b) The Executive's right to terminate the Executive's employment
pursuant to this Section 2.8 shall not be affected by the Executive's incapacity
due to physical or mental illness.
2.9. Notice Of Termination. For purposes of this Agreement, following a
Change in Control, "Notice of Termination" shall mean a written notice of
termination of the Executive's employment from the Company, which notice
indicates the date on which termination is to be effective, the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata Bonus"
shall mean an amount equal to the Bonus Amount multiplied by a fraction the
numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.11. Successors And Assigns. For purposes of this Agreement, "Successors
and Assigns" shall mean a corporation or other entity acquiring all or
substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.12. "Termination Date. For purposes of this Agreement, "Termination Date"
shall mean in, the case of the Executive's death, the Executive's date of death,
in the case of Good Reason, the last day of the Executive's employment and, in
all other cases, the date specified in the Notice of Termination; provided,
however, that if the Executive's employment is terminated by the Company for
Cause or due to Disability, the date specified in the Notice of Termination
shall be at least thirty (30) days from the date the Notice of Termination is
given to the Executive, provided that, in the case of Disability, the Executive
shall not have returned to the full-time performance of the Executive's duties
during such period of at least thirty (30) days.
3. Termination Of Employment.
3.1. If, during the term of this Agreement, the Executive's employment with
the Company shall be terminated within twelve (12) months following a Change in
Control, the Executive shall be entitled to the following compensation and
benefits:
(a) If the Executive's employment with the Company shall be terminated
(1) by the Company for Cause or Disability, (2) by reason of the Executive's
death or (3) by the Executive other than for Good Reason, the Company shall pay
to the Executive the Accrued Compensation
5
<PAGE> 6
and, if such termination is other than by the Company for Cause, the Company
shall also pay the Executive a Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be terminated
for any reason other than as specified in Section 3.1(a), the Executive shall
be entitled to the following:
(i) the Company shall pay the Executive all Accrued Compensation and a
Pro Rata Bonus;
(ii) the Company shall pay the Executive as severance pay and in lieu
of any further compensation for periods subsequent to the Termination Date,
in a single payment, an amount in cash equal to the sum of (A) the Base
Amount and (B) the Bonus Amount; and
(iii) for a number of months equal to twelve (12) (the "Continuation
Period"), the Company shall, at its expense, continue on behalf of the
Executive and the Executive's dependents and beneficiaries the life
insurance, disability, medical, dental and hospitalization benefits
provided (A) to the Executive at any time during the 90-day period prior to
the Change in Control or at any time thereafter or (B) to other similarly
situated executives who continue in the employ of the Company during the
Continuation Period. The coverage and benefits (including deductibles and
costs) provided in this Section 3.1(b)(iii) during the Continuation
Period shall be no less favorable to the Executive and the Executive's
dependents and beneficiaries, than the most favorable of such coverages and
benefits during any of the periods referred to in clauses (A) and (B)
above. The Company's obligation hereunder with respect to the foregoing
benefits shall be limited to the extent that the Executive obtains any such
benefits pursuant to a subsequent employer's benefit plans, in which case
the Company may reduce the coverage of any benefits it is required to
provide the Executive hereunder as long as the aggregate coverages and
benefits of the combined benefit plans are no less favorable to the
Executive than the coverages and benefits required to be provided
hereunder. This subsection (iii) shall not be interpreted so as to limit
any benefits to which the Executive or the Executive's dependents or
beneficiaries may be entitled under any of the Company's Executive benefit
plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life
insurance benefits.
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and (ii)
shall be paid in a single lump sum cash payment within forty-five (45) days
after the Executive's Termination Date (or earlier, if required by applicable
law).
(d) The Executive shall not be required to mitigate the amount of any
payment for in this Agreement by seeking other employment or otherwise, and no
such payment prove shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment except as
provided in Section 3.1(b)(iii).
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<PAGE> 7
3.2. (a) The severance pay and benefits provided for in this Section 3
shall be in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement.
(b) The Executive's entitlement to any other compensation or benefits
shall be determined in accordance with the Company's Executive benefit plans and
other applicable programs, policies and practices then in effect,
4. Notice Of Termination. Following a Change in Control, any purported
termination of the Executive's employment shall be communicated by Notice of
Termination to the Executive. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. Excise Tax Limitation.
(a) Notwithstanding anything in this Agreement to the contrary, if any
portion of any payments to Executive by the Company under this Agreement and any
other present or future plan of the Company or other present or future agreement
between Executive and the Company would not be deductible by the Company
(collectively, "Payments") for federal income tax purposes by reason of
application of Section 162(m) of the Internal Revenue Code (the "Code"), then
payment of that portion to Executive shall be deferred until the earliest date
upon which payment thereof can be made to Executive without being non-deductible
pursuant to Section 162(m) of the Code. In the event of such deferral, the
Company shall pay interest to Executive on the deferred amount at 120% of the
applicable federal rate provided for in Section 1274(d)(1) of the Code. In
addition, notwithstanding any provision of this Agreement to the contrary, the
aggregate present value of the payments and benefits (excluding those payments
and benefits not treated as parachute payments under Code Section 28OG(b)) to be
made or provided to the Executive by the Company (whether pursuant to this
Agreement or otherwise) shall not exceed three times the Executive's annualized
includible compensation for the base period, as defined in Code Section 280G(d)
of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any
excess payments or benefits shall be forfeited; provided, however, that the
forfeiture provision of this sentence shall apply only if such forfeiture
provision results in larger aggregate after-tax payments and benefits to the
Executive than if the forfeiture provision did not apply. The intent of this
portion of this subsection 5(a) is to prevent any payment or benefit to the
Executive from being subject to the excise tax imposed by Code Section 4999 and
to prevent any item of expense or deduction of the Company from being disallowed
as a result of the application of Code Section 280G, but only if the after-tax
payments and benefits payable or provided to the Executive are greater after
application of the forfeiture provision than if the forfeiture provision did not
apply. The interpretation of this subsection 5(a), its application to any
occurrence or event, the determination of whether any payment or benefit would
not be treated as a parachute payment, the determination of the aggregate
present value of all payments and benefits to be made or provided to the
Executive, the determination of the value of the payments and benefits payable
or to be provided to the Executive after reduction for all applicable taxes, and
what specific payments or benefits otherwise available to the Executive
7
<PAGE> 8
shall be limited or eliminated by operation of this subsection 5(a) shall be
reasonably made by the Company and shall be binding on all persons.
(b) An initial determination as to whether the Payments shall be reduced
to the Limited Payment Amount and the amount of such Limited Payment Amount
shall be made, at the Company's expense, by the accounting firm that is the
Company's independent accounting firm as of the date of the Change in Control
(the "Accounting Firm"). The Accounting Firm shall provide its determination
(the "Determination", together with detailed supporting calculations and
documentation, to the Company and the Executive within twenty (20) days of the
Termination Date if applicable, or such other time as requested by the Company
or by the Executive (provided the Executive reasonably believes that any of the
Payments may be subject to the Excise Tax), and if the Accounting Firm
determines that there is substantial authority (within the meaning of Section
6662 of the Code) that no Excise Tax is payable by the Executive with respect to
a Payment or Payments, it shall furnish the Executive with an opinion reasonably
acceptable to the Executive that no Excise Tax will be imposed with respect to
any such Payment or Payments. Within ten (10) days of the delivery of the
Determination to the Executive, the Executive shall have the night to dispute
the Determination (the "Dispute"). If there is no Dispute, the Determination
shall be binding, final and conclusive upon the Company and the Executive.
6. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the benefit
of the Company, its Successors and Assigns and the Company shall require any
Successors and Assigns to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive or the Executive's beneficiaries or
legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal personal representative.
7. Confidential Information. The Company and Executive acknowledge that
Executive, in performing the terms and conditions of Executive's employment, has
and will continue to directly or indirectly gain access to information about
Company and its operations, including, but not limited to, its modes and methods
of conducting its business and producing and marketing its products, its
employee customer, vendor and referral source lists, its trade secrets, its
copyrighted and non-copyrighted or non-protected computer software programs, its
techniques of operation, its financial structure, and its weakness, if any. As
part of this Agreement, Executive agrees to execute, and be bound by, the
Company's "Employee/ Consultant Proprietary Information Agreement," a copy of
which is attached hereto as Exhibit "A."
8. Notice. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be delivered in person, by facsimile,
or by certified or registered mail with
8
<PAGE> 9
return receipt requested. Each such notice, request, demand, or other
communication shall be effective (a) if delivered by hand, when delivered at the
address specified in this Section; (b) if given by facsimile, when such
facsimile is transmitted to the telefacsimile number specified in this Section
and confirmation is received; or (c) if given by certified or registered mail,
three days after the mailing thereof. Notices shall be delivered as follows:
If to the Company:
MTI Technology Corporation
4905 E. La Palma Avenue
Anaheim, California 92807
Attention: Chief Financial Officer
Fax: (714) 693-2202
With a copy to:
Morrison & Foerster LLP
19900 MacArthur Boulevard
12th Floor
Irvine, California 92612
Attention: Tamara Powell Tate
Fax: (714) 251-0900
If to the Executive:
Tom Raimondi
10232 Camden Circle
Villa Park, CA 92861
Any party may change its address by notice giving notice to the other party of a
new address in accordance with the foregoing provisions.
9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination policies, plans, programs or practices) and for which
the Executive may qualify, nor shall anything herein limit or reduce such rights
as the Executive may have under any other agreements with the Company (except
for any severance or termination agreement). Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company shall be payable in accordance with such plan or program,
except as explicitly modified by this Agreement.
1O. Settlement Of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Executive or others.
9
<PAGE> 10
11. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged, unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
12. Governing Law. This Agreement has been negotiated and exactitude in the
State of California and is to be performed in Orange County, California. This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of California, including all matters of construction, validity,
performance, and enforcement, without giving effect to principles of conflict of
laws. Any dispute, action, litigation, or other proceeding concerning this
Agreement shall be instituted, maintained, heard, and decided in Orange County,
California.
13. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
15. Remedies. All fights, remedies, undertakings, obligations, options,
covenants, conditions, and agreements contained in this Agreement shall be
cumulative and no one of them shall be exclusive of any other.
16. Interpretation. The language in all parts of this Agreement shall be in
all cases construed simply according to its fair meaning and not strictly for or
against any party. Whenever the context requires, all words used in the singular
will be construed to have been used in the plural, and vice versa. The
descriptive headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not control or affect the interpretation
or construction of any of the provisions herein.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument,
18. Further Documents and Acts. Each of the parties hereto agrees to
cooperate in good faith with the other and to execute and deliver such further
instruments and perform such other acts as may be reasonably necessary or
appropriate to consummate and carry into effect the transactions contemplated
under this Agreement.
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<PAGE> 11
19. Consultation with Counsel. Executive acknowledges (a) that he has been
given the opportunity to consult with counsel of his own choice concerning this
Agreement, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based upon his own
judgment with or without the advice of such counsel.
EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS
CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS
RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT.
BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF
THE TERMS AND CONDITIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.
MTI TECHNOLOGY CORPORATION
By: /s/ DALE R. BOYD
-------------------------------------
Title: Sr. Vice President & CFO
-------------------------------
/s/ TOM RAIMONDI COO
-----------------------------------------
Tom Raimondi
11
<PAGE> 12
EXHIBIT "A"
Exhibit "A"
<PAGE> 13
STATEMENT REGARDING EMPLOYEE/CONSULTANT
PROPRIETARY INFORMATION AGREEMENT
Attached to this statement is your Employee/Consultant Proprietary Information
Agreement (the "Agreement") with MTI Technology Corporation (together with its
subsidiaries, the "Company").
Please take the time to review the Agreement carefully. It contains material
restrictions on your right to disclose or use, during or after your employment,
certain information and technology learned or developed by you during your
employment with the Company. The Company considers this Agreement to be very
important to the protection of its business.
If you have any questions concerning the Agreement, you may wish to consult an
attorney. Managers, legal counsel, and others in the Company are not authorized
to give you legal advice concerning the Agreement.
If you have read and understand the Agreement, and if you agree to its terms and
conditions, please return a fully executed copy of it to the Company, retaining
one copy for yourself.
I HAVE READ AND UNDERSTAND
THE ATTACHED AGREEMENT:
Executive Name: Tom Raimondi
----------------
Executive Signature: /s/ THOMAS RAIMONDI
-------------------
Title: COO
--------
Date: 8/10/98
---------
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<PAGE> 14
EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT
In consideration of my present and future employment by MTI Technology
Corporation (together with its subsidiaries, the "Company"), I agree to the
following:
1. Proprietary Information.
(a) I understand and acknowledge that my work as an employee of
the Company has involved and will continue to involve access to and creation of
confidential, proprietary, and trade secret information of the Company and its
affiliates, consultants, customers, clients, and business associates
(collectively, as defined more extensively below, "Proprietary Information"). I
further understand and acknowledge that the Company and its clients have
developed, compiled, and otherwise obtained this Proprietary Information often
at great expense, and that such information has great value to their respective
businesses. I agree to hold in strict confidence and in trust for the sole
benefit of the Company and its clients all Proprietary Information. I further
agree that I shall treat all Proprietary Information as private, privileged, and
confidential, and that I shall not use, disclose, or release any Proprietary
Information in any way to any person, firm, or institution at any time, even
after termination of my employment, except to the extent necessary to carry out
my responsibilities as an Executive of the Company. I further understand and
agree that the publication of Proprietary Information through literature or
speeches must be approved in advance in writing by a duly authorized officer of
the Company.
(b) I understand and acknowledge that, for purposes of this
Agreement, "Proprietary Information" means all confidential, proprietary, or
trade secret information and ideas in whatever form, tangible or intangible,
whether disclosed to or learned or developed by me, prior or subsequent to the
date hereof, pertaining in any manner to the business of the Company or to the
Company's affiliates, consultants, clients, or business associates, unless: (i)
the information is or becomes publicly known through lawful means; (ii) the
information was rightfully in my possession or part of my general knowledge
prior to my employment by the Company; or (iii) the information is disclosed to
me without confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.
(c) Without limiting the generality of the foregoing, I
understand and acknowledge that "Proprietary Information" includes all: (i)
inventions, computer codes, computer programs, formulas, schematics, techniques,
algorithms, employee suggestions, development tools and processes, computer
printouts, design drawings and manuals, and improvements or modification to any
of the foregoing; (ii) information about costs, profits, markets, and sales;
(iii) plans for future development and new product concepts; and (iv) all
documents, books, papers, drawings, models, sketches, and other data of any kind
and description, including electronic data recorded or retrieved by any means,
that have been or will be given to me by the Company (or any present or future
affiliates, consultants, customers, clients, and business associates of the
Company), as well as written or verbal instructions or comments.
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<PAGE> 15
1. Use Of Proprietary Information.
I agree that I will maintain at my work station or in other places under
my control only such Proprietary Information that I have a current "need to
know," and that I will return to the appropriate person or location, or
otherwise dispose of, Proprietary Information once my need to know no longer
exists. I agree that I will not make copies of information unless I have a
legitimate need for such copies in connection with my work.
2. Third-Party Information
I recognize that the Company has received and in the future will receive
from third parties their confidential or proprietary information subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. I agree that I owe the Company
and such third parties, during the term of my employment and thereafter, a duty
to hold all such confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm, or corporation (except as
necessary in carrying out my work for the Company consistent with the Company's
agreement with such third party) or to use it for the benefit of anyone other
than for the Company or such third party (consistent with the Company's
agreement with such third party) without the express written authorization of a
duly authorized officer of the Company.
3. Inventions.
(a) Subject to Section 9 below, I hereby assign to the Company,
without additional consideration, all right, title and interest (throughout the
United States and in all foreign countries) in all ideas, processes, inventions,
technology, writings, computer programs, designs, formulas, discoveries,
patents, copyrights, trademarks, service marks, original works of authorship,
any claims or rights, and any improvements or modifications to the foregoing
(collectively, "Inventions"), whether or not subject to patent or copyright
protection, relating to any activities of the Company that have been or will be
conceived, developed, or reduced to practice by me alone or with others (i)
during the term of my employment, whether or not conceived or developed during
regular business hours, and whether or not conceived before, on, or after the
date hereof or (ii) if based on Proprietary Information, after termination of my
employment. Such Inventions shall be the sole property of the Company and, to
the maximum extent permitted by applicable law, shall be deemed works made for
hire.
(b) I will, whether during or after my employment by the Company,
execute such written instruments and do other such acts as may be necessary in
the opinion of the Company to obtain a patent, register a copyright, or
otherwise enforce the Company's rights in such Inventions (and I hereby
irrevocably appoint the Company and any of its officers as my attorney in fact
to undertake such acts in my name).
(c) I understand that the assignment by me to the Company does
not apply to Inventions that qualify fully under Section 2870(a) of the
California Labor Code, which is set forth on Schedule "A." I understand that
nothing in this Agreement is intended to expand the scope of protection provided
by Sections 2870 through 2872 of the California Labor Code. Except as disclosed
in Schedule "B", there are no ideas, inventions, technology, computer
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<PAGE> 16
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing that I wish to exclude from
the operation of this Agreement.
(d) To the best of my knowledge, there is no existing contract in
conflict with this Agreement or any other contract in existence between me and
any other person or entity to assign ideas, inventions, technology, computer
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing.
1. Termination of Employment.
(a) I hereby acknowledge and agree that nothing in this Agreement
shall be construed to imply that the term of my employment is of any definite
duration. I further acknowledge and agree that I am employed on an "at-will"
basis, which means that I may quit at any time with or without cause, and the
Company may terminate my employment at any time with or without cause.
(b) I acknowledge that, because of my responsibilities at the
Company, I have helped and will continue to help to develop and have been and
will be exposed to the Company's research and development, products, business
strategies, information on customers and clients, and other valuable Proprietary
Information, and that use or disclosure of such Proprietary Information in
breach of this Agreement would be extremely difficult to detect or prove. I also
acknowledge that the Company's relationships with its employees, affiliates,
consultants, customers, clients, business associates, and other persons are
valuable business assets. To forestall any use or disclosure of Proprietary
Information in breach of this Agreement, I agree that for the term of this
Agreement and for a period of one (1) year after termination of my employment
with the Company, I shall not, for myself or any third party, directly or
indirectly:
(i) divert or attempt to divert from the Company any business
of any kind in which it is engaged, including, without limitation,
the solicitation of or interference with any of its suppliers or
customer; or
(ii) employ, solicit for employment, or recommend for
employment any person employed by the Company.
Furthermore, I agree that during the period of my employment with the
Company I shall not engage in any business activity that is or may be
competitive with the Company, I understand that none of my activities will be
prohibited under this section if I can prove that the action was taken without
the use in any way of Proprietary Information.
(c) I acknowledge that, because of the difficulty of establishing when any
Invention is first conceived or developed by me, or whether it results from
access to Proprietary Information or the Company's equipment, facilities, and
data, I agree that any ideas, inventions, technology, computer programs,
processes, trademarks, service marks, original works of authorship, designs,
formulas, discoveries, patents, copyrights, any claims or rights, and any
improvements or modifications to the foregoing shall be presumed to be an
Invention if
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<PAGE> 17
conceived, developed, used, sold, exploited, or reduced to practice by me or
with my aid within one (1) year after my termination of employment with the
Company. I can rebut the above presumption if I prove that the invention, idea,
process, etc., is not an Invention as defined in paragraph 4(a).
(d) I hereby acknowledge and agree that all personal property
including, without limitation, all books, manuals, records, models, drawings,
reports, notes, contracts, lists, files, computer software, computer tapes or
disks, blueprints, and other documents or materials (or copies thereof),
Proprietary Information, and equipment furnished to or prepared by me in the
course of or incident to my employment, belong to the Company and shall be
promptly returned to the Company once my employment with the Company is
terminated, for any reason. I will not retain any written or other tangible
information pertaining to any Invention. In the event of the termination of my
employment, I agree to sign and deliver the Termination Certificate attached as
Schedule "C" to this Agreement.
(e) I understand that my obligations contained in this Agreement
will survive the termination of my employment with the Company, and that I will
continue to make all disclosures required of me by Paragraph 6.
1. Disclosure.
I agree to maintain adequate and current written records on the
development of all Inventions and to disclose promptly to the Company all
Inventions and relevant records, which records will remain the sole property of
the Company. I further agree that all information and records pertaining to any
Inventions conceived, developed, or reduced to practice by me (alone or with
others) during my period of employment or during the one-year period following
termination of my employment, shall be promptly disclosed to the Company (any
such disclosures made after the termination of my employment shall be received
by the Company in confidence for the purpose of determining if they have been
based on any Proprietary Information). The Company shall examine such
information to determine if in fact such information are Inventions subject to
this Agreement.
2. Former or Conflicting Agreements.
During my employment with the Company, I will not disclose to the Company,
or use, or induce the Company to use, any confidential, proprietary, or trade
secret information of others. I represent and warrant that I have returned all
property and confidential, proprietary and trade secret information belonging to
all prior employers, if any. I further represent and warrant that my performance
of the terms of this Agreement will not breach any agreement to keep in
confidence confidential proprietary and trade secret information acquired by me
in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
3. Information on Company Premises.
I acknowledge that all information generated, received, or maintained by
or for me on the premises or equipment of the Company (including, without
limitation, computer systems and
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<PAGE> 18
electronic-mail or voicemail systems) is the property of the Company, and I
hereby waive any property or privacy rights that I may have with respect to such
information.
4. Reserved Inventions.
To avoid future confusion, I have listed on Schedule "B" a description of
all Inventions, if any, developed or conceived by me in which I claim any
ownership or other right. I understand that, by not listing an Invention, I am
acknowledging that the Invention was not developed or conceived before
commencement of my employment.
10. Choice of Law.
The validity, interpretation, enforceability, and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of California without giving effect to its conflict of law rules. Any
dispute, action, litigation, or other proceeding concerning this Agreement shall
be instituted, maintained, heard, and decided in Orange County, California.
11. Remedies.
I recognize that nothing in this Agreement is intended to limit any remedy
of the Company under the California Uniform Trade Secrets Act and that I could
face possible criminal and civil actions, resulting in imprisonment and
substantial monetary liability, if I misappropriate the Company's or its
clients' trade secrets. In addition, I recognize that my violation of this
Agreement could cause the Company irreparable harm and significant injury, the
amount of which may be extremely difficult to estimate, thus, making any remedy
at law or in damages inadequate. Therefore, I agree that, in the event of a
breach or threatened breach that involves Proprietary Information of the Company
or its clients, the Company shall have the right to apply to any court of
competent jurisdiction for an order restraining any breach or threatened breach
of this Agreement and for any other relief the Company deems appropriate. This
fight shall be in addition to any other remedy available to the Company in law
or equity.
12. Successors and Assigns.
(a) I understand and agree that the Company may assign to another
person or entity any of its rights under this Agreement.
(b) I further understand and agree that this Agreement shall be
binding upon me and my heirs, executors, administrators, and successors,
and shall inure to the benefit of the Company's successors and assigns.
12. Severability.
If any provision of this Agreement is determined to be invalid, illegal or
unenforceable, the validity or enforceability of the other provisions shall not
be affected.
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13. Entire Agreement
The terms of this Agreement are the final expression of my agreement with
respect to the subject matter hereof and may not be contradicted by evidence of
any prior or contemporaneous agreement. This Agreement shall constitute the
complete and exclusive statement of its terms and no extrinsic evidence
whatsoever may be introduced in any judicial, administrative, or other legal
proceeding involving this Agreement. No modification or amendment of this
Agreement shall be binding unless executed in writing by me and a duly
authorized officer of the Company.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS,
PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR
TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS,
RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS
AGREEMENT.
This Agreement is made and entered into as of July 15, 1998.
MTI TECHNOLOGY CORPORATION
By: /s/ DALE R. BOYD
-------------------------------------
Title: Sr. Vice President & CFO
------------------------------
Executive: Tom Raimondi Jr.
------------------------------
Signature: /s/ TOM RAIMONDI
------------------------------
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SCHEDULE A
California Labor Code Section 2870(a)
Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information, except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
Schedule A
<PAGE> 21
SCHEDULE B
1. Proprietary Information. Except as set forth below, I acknowledge
that at this time I know nothing about the business or Proprietary
Information of the Company, other than information I have learned from the
Company in the course of being hired:
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2. Reserved Inventions. Except as set forth below, there are no ideas,
processes, inventions, technology, writings, programs, designs, formulas,
discoveries, patents, copyrights, or trademarks, or any claims, rights, or
improvements to the foregoing, that I wish to exclude from the operation
of this Agreement:
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Name: Thomas P. Raimondi Jr.
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Signature: /s/ THOMAS P. RAIMONDI
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Date: 8/10/98
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Schedule B
<PAGE> 22
SCHEDULE C
TERMINATION CERTIFICATE
This is to certify that I have returned all personal property of the
Company, including, without limitation, all books, manuals, records, models,
drawings, reports, notes, contracts, lists, blueprints, and other documents and
materials, Proprietary Information, and equipment furnished to or prepared by me
in the course of or incident to my employment with the Company, and that I did
not make or distribute any copies of the foregoing.
I further certify that I have reviewed the Employee/Consultant
Proprietary Information Agreement signed by me and that I have complied with and
will continue to comply with all of its terms including, without limitation: (i)
the reporting of any invention, process, idea, etc. conceived or developed by me
and covered by the Agreement; and (ii) the preservation as confidential of all
Proprietary Information pertaining to the Company. This certificate in no way
limits my responsibilities or the Company's rights under the Agreement.
On termination of my employment with the Company, I will be employed by
[NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will
be working in connection with the following projects:
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Name:
--------------------
Signature:
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Date:
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Schedule C
<PAGE> 1
EXHIBIT 10.31
SEVERANCE AGREEMENT
This Agreement, (the "Agreement") is made and entered into as of July 15,
1998, is entered into between MTI Technology Corporation, a corporation
organized under the laws of the State of Delaware (the "Company"), and Gary
Scott (the "Executive").
RECITALS
A. Executive is currently serving as an officer of the Company.
B. The Board of Directors of the Company (the "Board") recognizes that
the possibility of a Change in Control (as hereinafter defined) exists and that
the threat or the occurrence of a Change in Control can result in significant
distractions to its key management personnel because of the uncertainties
inherent in such a situation;
C. The Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and
D. In order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event that the Executive's
employment is terminated as a result of, or in connection with, a Change in
Control.
AGREEMENT
In consideration of the respective agreements of the parties contained
herein, it is agreed as follows:
1. Term Of Agreement. This Agreement shall commence as of the date
first set forth above and shall continue in effect until July 15, 2000;
provided, however, that commencing on July 15, 2000 and on each July 15
thereafter, the term of this Agreement shall automatically be extended for one
(1) year unless the Company or the Executive shall have given written notice to
the other at least ninety (90) days prior thereto that the term of this
Agreement shall not be so extended; and provided, further, however, that
notwithstanding any such notice by the Company not to extend, the term of this
Agreement shall not expire prior to the expiration of twelve (12) months after
the occurrence of a Change in Control.
2. Definitions.
2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date,
<PAGE> 2
including (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay and (iv) bonuses and
incentive compensation (other than the "Pro Rata Bonus" (as hereinafter
defined)).
2.2. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean the greater of the Executive's annual base salary (a) at the rate in
effect on the Termination Date or (b) at the highest rate in effect at any time
during the ninety (90) day period prior to the Change in Control, and shall
include all amounts of base salary that are deferred under the Executive benefit
plans of the Company or any other agreement or arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount"
shall mean the greatest of: (a) 100% of the annual bonus payable to the
Executive under the Company's Executive Management Bonus Plan for the fiscal
year in which the Termination Date occurs; (b) the annual bonus paid or payable
to the Executive under the Company's Executive Management Bonus Plan for the
full fiscal year ended prior to the fiscal year during which the Termination
Date occurred; (c) the annual bonus paid or payable to the Executive under the
Company's Executive Management Bonus Plan for the full fiscal year ended prior
to the fiscal year during which a Change in Control occurred; (d) the average of
the annual bonuses paid or payable to the Executive under the Company's
Executive Management Bonus Plan during the three full fiscal years ended prior
to the fiscal year during which the Termination Date occurred; or (e) the
average of the annual bonuses paid or payable to the Executive under the
Company's Executive Management Bonus Plan during the three full fiscal years
ended prior to the fiscal year during which the Change in Control occurred.
2.4. Cause. The Company may terminate this Agreement and discharge
Executive for Cause (as defined) at any time upon written notice. For purposes
of this Agreement, the term "Cause" shall mean: (i) a material breach of any
term of this Agreement and failure to cure such breach within ten (10) days
after written notice thereof from the Company; (ii) the willful and continued
failure by Executive substantially to perform his duties for the Company (other
than any such failure resulting from his incapacity due to death or physical or
mental illness), after written demand for substantial performance is delivered
to Executive by the Company, which specifically identifies the manner in which
the Company believes that Executive has not substantially performed his duties;
(iii) the failure by Executive to follow the reasonable instructions of the
Board of Directors; (iv) the willful engaging by Executive in misconduct that is
materially injurious to the Company, monetarily or otherwise; (v) Executive's
final conviction for fraud or of any felony; or (vi) Executive's habitual use of
illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol
abuse, Executive shall be given notice and a thirty (30) day opportunity to
remedy the problem. For purposes of this paragraph, no act, or failure to act,
on Executive's part shall be considered "willful" unless done, or omitted to be
done, by Executive other than in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the Company.
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<PAGE> 3
2.5. Change In Control.
(a) For purposes of this Agreement, "Change of Control"
shall mean:
(i) any "person" as such term is defined in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than (1) a trustee or other fiduciary holding
securities under an Executive benefit plan of the Company, (2) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
of the Company, or (3) any current beneficial stockholder or group, as
defined by Rule 13d-5 of the Exchange Act, of securities possessing more
than [TWENTY-FIVE] percent (25%) of the total combined voting power of the
Company's outstanding securities, hereafter becomes the "beneficial
owner," as defined in Rule 13d-3 under of the Exchange Act, directly or
indirectly, of securities of the Company representing [TWENTY-FIVE]
percent (25%) or more of the total combined voting power of the Company's
then outstanding securities, or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board
of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, or
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty percent (80%) of the
total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company, in one transaction or a series of
transactions, of all or substantially all of the Company's assets; or
(iv) the sale of substantially all of the Company's
assets.
2.6. Company. For purposes of this Agreement, the "Company" shall
mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors
and Assigns (as hereinafter defined).
2.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a total period
of ninety (90) days and the Executive has not returned to full time employment
prior to the Termination Date as stated in the "Notice of Termination."
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<PAGE> 4
2.8. Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the events or conditions
described in subsections (1) through (8) hereof:
(i) a change in the Executive's status, title,
position or responsibilities (including reporting responsibilities) which,
in the Executive's reasonable judgment, represents an adverse change from
the Executive's status, title, position or responsibilities as in effect
at any time within ninety (90) days preceding the date of a Change in
Control or at any time thereafter; the assignment to the Executive of any
duties or responsibilities which, in the Executive's reasonable judgment,
are inconsistent with the Executive's status, title, position or
responsibilities as in effect at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter; or
any removal of the Executive from or failure to reappoint or reelect the
Executive to any of such offices or positions, except in connection with
the termination of the Executive's employment for Disability, Cause, as a
result of the Executive's death or by the Executive;
(ii) a reduction in the Executive's base salary or any
failure to pay the Executive any compensation or benefits to which the
Executive is entitled within ten (10) days of the date due after receipt
of written notice from Executive;
(iii) the Company's requiring the Executive to be based
at any place outside a 25-mile radius from MTI's Germany Office, located
at Otto-Von-Guericke, Ring15, 65205 Wiesbaden, Germany except for
reasonably required travel on the Company's business which is not
materially greater than such travel requirements prior to the Change in
Control;
(iv) the failure by the Company to (A) continue in
effect (without reduction in benefit level and/or reward opportunities)
any material compensation or Executive benefit plan in which the Executive
was participating at any time within ninety (90) days preceding the date
of a Change in Control or at any time thereafter unless such plan is
replaced with a plan that provides substantially equivalent compensation
or benefits to the Executive, or (B) provide the Executive with
compensation and benefits, in the aggregate, at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for under
each other Executive benefit plan, program and practice in which the
Executive was participating at any time within ninety (90) days preceding
the date of a Change in Control or at any time thereafter;
(v) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the Company, which
petition is not dismissed within sixty (60) days;
(vi) any material breach by the Company of any
provision of this Agreement;
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<PAGE> 5
(vii) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the terms
of Section 2.4; or
(viii) the failure of the Company to obtain an
agreement, satisfactory to the Executive, from any Successors and Assigns
to assume and agree to perform this Agreement, as contemplated in Section
6 hereof.
(b) The Executive's right to terminate the Executive's
employment pursuant to this Section 2.8 shall not be affected by the Executive's
incapacity due to physical or mental illness.
2.9. Notice Of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment from the Company, which
notice indicates the date on which termination is to be effective, the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.11. Successors And Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.12. Termination Date. For purposes of this Agreement, "Termination
Date" shall mean in, the case of the Executive's death, the Executive's date of
death, in the case of Good Reason, the last day of the Executive's employment
and, in all other cases, the date specified in the Notice of Termination;
provided, however, that if the Executive's employment is terminated by the
Company for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Executive, provided that, in the case of Disability,
the Executive shall not have returned to the full-time performance of the
Executive's duties during such period of at least thirty (30) days.
3. Termination Of Employment.
3.1. If, during the term of this Agreement, the Executive's
employment with the Company shall be terminated within twelve (12) months
following a Change in Control, the Executive shall be entitled to the following
compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death or (3) by the Executive other than for Good Reason, the
Company shall pay to the Executive the Accrued Compensation
5
<PAGE> 6
and, if such termination is other than by the Company for Cause, the Company
shall also pay the Executive a Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1(a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro Rata Bonus;
(ii) the Company shall pay the Executive as severance
pay and in lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment, an amount in cash equal to the sum
of (A) the Base Amount and (B) the Bonus Amount; and
(iii) for a number of months equal to twelve (12) (the
"Continuation Period"), the Company shall, at its expense, continue on
behalf of the Executive and the Executive's dependents and beneficiaries
the life insurance, disability, medical, dental and hospitalization
benefits provided (A) to the Executive at any time during the 90-day
period prior to the Change in Control or at any time thereafter or (B) to
other similarly situated executives who continue in the employ of the
Company during the Continuation Period. The coverage and benefits
(including deductibles and costs) provided in this Section 3.1(b)(iii)
during the Continuation Period shall be no less favorable to the Executive
and the Executive's dependents and beneficiaries, than the most favorable
of such coverages and benefits during any of the periods referred to in
clauses (A) and (B) above. The Company's obligation hereunder with respect
to the foregoing benefits shall be limited to the extent that the
Executive obtains any such benefits pursuant to a subsequent employer's
benefit plans, in which case the Company may reduce the coverage of any
benefits it is required to provide the Executive hereunder as long as the
aggregate coverages and benefits of the combined benefit plans are no less
favorable to the Executive than the coverages and benefits required to be
provided hereunder. This subsection (iii) shall not be interpreted so as
to limit any benefits to which the Executive or the Executive's dependents
or beneficiaries may be entitled under any of the Company's Executive
benefit plans, programs or practices following the Executive's termination
of employment, including without limitation, retiree medical and life
insurance benefits.
(c) The amounts provided for in Sections 3.1(a) and
3.1(b)(i) and (ii) shall be paid in a single lump sum cash payment within
forty-five (45) days after the Executive's Termination Date (or earlier, if
required by applicable law).
(d) The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to the Executive in any subsequent
employment except as provided in Section 3.1(b)(iii).
6
<PAGE> 7
3.2. (a) The severance pay and benefits provided for in this
Section 3 shall be in lieu of any other severance or termination pay to which
the Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement.
(b) The Executive's entitlement to any other compensation or
benefits shall be determined in accordance with the Company's Executive benefit
plans and other applicable programs, policies and practices then in effect.
4. Notice Of Termination. Following a Change in Control, any purported
termination of the Executive's employment shall be communicated by Notice of
Termination to the Executive. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. Excise Tax Limitation.
(a) Notwithstanding anything in this Agreement to the
contrary, if any portion of any payments to Executive by the Company under this
Agreement and any other present or future plan of the Company or other present
or future agreement between Executive and the Company would not be deductible by
the Company (collectively, "Payments") for federal income tax purposes by reason
of application of Section 162(m) of the Internal Revenue Code (the "Code"), then
payment of that portion to Executive shall be deferred until the earliest date
upon which payment thereof can be made to Executive without being non-deductible
pursuant to Section 162(m) of the Code. In the event of such deferral, the
Company shall pay interest to Executive on the deferred amount at 120% of the
applicable federal rate provided for in Section 1274(d)(1) of the Code. In
addition, notwithstanding any provision of this Agreement to the contrary, the
aggregate present value of the payments and benefits (excluding those payments
and benefits not treated as parachute payments under Code Section 280G(b)) to be
made or provided to the Executive by the Company (whether pursuant to this
Agreement or otherwise) shall not exceed three times the Executive's annualized
includible compensation for the base period, as defined in Code Section 280G(d)
of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any
excess payments or benefits shall be forfeited; provided, however, that the
forfeiture provision of this sentence shall apply only if such forfeiture
provision results in larger aggregate after-tax payments and benefits to the
Executive than if the forfeiture provision did not apply. The intent of this
portion of this subsection 5(a) is to prevent any payment or benefit to the
Executive from being subject to the excise tax imposed by Code Section 4999 and
to prevent any item of expense or deduction of the Company from being disallowed
as a result of the application of Code Section 280G, but only if the after-tax
payments and benefits payable or provided to the Executive are greater after
application of the forfeiture provision than if the forfeiture provision did not
apply. The interpretation of this subsection 5(a), its application to any
occurrence or event, the determination of whether any payment or benefit would
not be treated as a parachute payment, the determination of the aggregate
present value of all payments and benefits to be made or provided to the
Executive, the determination of the value of the payments and benefits payable
or to be provided to the Executive after reduction for all applicable taxes, and
what specific payments or benefits otherwise available to the Executive
7
<PAGE> 8
shall be limited or eliminated by operation of this subsection 5(a) shall be
reasonably made by the Company and shall be binding on all persons.
(b) An initial determination as to whether the Payments
shall be reduced to the Limited Payment Amount and the amount of such Limited
Payment Amount shall be made, at the Company's expense, by the accounting firm
that is the Company's independent accounting firm as of the date of the Change
in Control (the "Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination", together with detailed supporting
calculations and documentation, to the Company and the Executive within twenty
(20) days of the Termination Date if applicable, or such other time as requested
by the Company or by the Executive (provided the Executive reasonably believes
that any of the Payments may be subject to the Excise Tax), and if the
Accounting Firm determines that there is substantial authority (within the
meaning of Section 6662 of the Code) that no Excise Tax is payable by the
Executive with respect to a Payment or Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such Payment or Payments. Within ten (10) days of
the delivery of the Determination to the Executive, the Executive shall have the
right to dispute the Determination (the "Dispute"). If there is no Dispute, the
Determination shall be binding, final and conclusive upon the Company and the
Executive.
6. Successors, Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its Successors and Assigns and the Company shall
require any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive or the
Executive's beneficiaries or legal representatives, except by will or by the
laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal personal representative.
7. Confidential Information. The Company and Executive acknowledge that
Executive, in performing the terms and conditions of Executive's employment, has
and will continue to directly or indirectly gain access to information about
Company and its operations, including, but not limited to, its modes and methods
of conducting its business and producing and marketing its products, its
employee, customer, vendor and referral source lists, its trade secrets, its
copyrighted and non-copyrighted or non-protected computer software programs, its
techniques of operation, its financial structure, and its weakness, if any. As
part of this Agreement, Executive agrees to execute, and be bound by, the
Company's "Employee/ Consultant Proprietary Information Agreement," a copy of
which is attached hereto as Exhibit "A."
8. Notice. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be delivered in person, by facsimile,
or by certified or registered mail with
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<PAGE> 9
return receipt requested. Each such notice, request, demand, or other
communication shall be effective (a) if delivered by hand, when delivered at the
address specified in this Section; (b) if given by facsimile, when such
facsimile is transmitted to the telefacsimile number specified in this Section
and confirmation is received; or (c) if given by certified or registered mail,
three days after the mailing thereof Notices shall be delivered as follows:
If to the Company:
MTI Technology Corporation
4905 E. La Palma Avenue
Anaheim, California 92807
Attention: Chief Financial Officer
Fax: (714) 693-2202
With a copy to:
Morrison & Foerster LLP
19900 MacArthur Boulevard
12th Floor
Irvine, California 92612
Attention: Tamara Powell Tate
Fax: (714) 251-0900
If to the Executive:
Gary Scott
Kufsteiner Platz 3
81679 Munich
Germany
Any party may change its address by notice giving notice to the other party of a
new address in accordance with the foregoing provisions.
9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company (except for
any severance or termination policies, plans, programs or practices) and for
which the Executive may qualify, nor shall anything herein limit or reduce such
rights as the Executive may have under any other agreements with the Company
(except for any severance or termination agreement). Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company shall be payable in accordance with such plan or
program, except as explicitly modified by this Agreement.
10. Settlement Of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Executive or others.
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<PAGE> 10
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged, unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
12. Governing Law. This Agreement has been negotiated and exactitude in
the State of California and is to be performed in Orange County, California.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of California, including all matters of construction, validity,
performance, and enforcement, without giving effect to principles of conflict of
laws. Any dispute, action, litigation, or other proceeding concerning this
Agreement shall be instituted, maintained, heard, and decided in Orange County,
California.
13. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
15. Remedies. All rights, remedies, undertakings, obligations, options,
covenants, conditions, and agreements contained in this Agreement shall be
cumulative and no one of them shall be exclusive of any other.
16. Interpretation. The language in all parts of this Agreement shall be
in all cases construed simply according to its fair meaning and not strictly for
or against any party. Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa. The
descriptive headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not control or affect the interpretation
or construction of any of the provisions herein.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
18. Further Documents and Acts. Each of the parties hereto agrees to
cooperate in good faith with the other and to execute and deliver such further
instruments and perform such other acts as may be reasonably necessary or
appropriate to consummate and carry into effect the transactions contemplated
under this Agreement.
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19. Consultation with Counsel. Executive acknowledges (a) that he has
been given the opportunity to consult with counsel of his own choice concerning
this Agreement, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based upon his own
judgment with or without the advice of such counsel.
EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS
CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS
RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT.
BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF
THE TERMS AND CONDITIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has executed this Agreement as of
the day and year first above written.
MTI TECHNOLOGY CORPORATION
By: /s/ DALE R. BOYD
----------------------------------
Title: Sr. V.P. & CFO
/s/ GARY SCOTT
-------------------------------------
Gary Scott
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EXHIBIT "A"
Exhibit "A"
<PAGE> 13
STATEMENT REGARDING EMPLOYEE/CONSULTANT
PROPRIETARY INFORMATION AGREEMENT
Attached to this statement is your Employee/Consultant Proprietary Information
Agreement (the "Agreement") with MTI Technology Corporation (together with its
subsidiaries, the "Company").
Please take the time to review the Agreement carefully. It contains material
restrictions on your right to disclose or use, during or after your employment,
certain information and technology learned or developed by you during your
employment with the Company. The Company considers this Agreement to be very
important to the protection of its business.
If you have any questions concerning the Agreement, you may wish to consult an
attorney. Managers, legal counsel, and others in the Company are not authorized
to give you legal advice concerning the Agreement.
If you have read and understand the Agreement, and if you agree to its terms and
conditions, please return a fully executed copy of it to the Company, retaining
one copy for yourself.
I HAVE READ AND UNDERSTAND
THE ATTACHED AGREEMENT:
Executive Name: Gary M. Scott
----------------------------
Executive Signature: /s/ GARY M. SCOTT
-----------------------
Title: Sr. V.P. Europe
-------------------------------------
Date: July 15, 1998
--------------------------------------
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<PAGE> 14
EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT
In consideration of my present and future employment by MTI Technology
Corporation (together with its subsidiaries, the "Company"), I agree to the
following:
1. Proprietary Information.
(a) I understand and acknowledge that my work as an employee
of the Company has involved and will continue to involve access to and creation
of confidential, proprietary, and trade secret information of the Company and
its affiliates, consultants, customers, clients, and business associates
(collectively, as defined more extensively below, "Proprietary Information"). I
further understand and acknowledge that the Company and its clients have
developed, compiled, and otherwise obtained this Proprietary Information often
at great expense, and that such information has great value to their respective
businesses. I agree to hold in strict confidence and in trust for the sole
benefit of the Company and its clients all Proprietary Information. I further
agree that I shall treat all Proprietary Information as private, privileged, and
confidential, and that I shall not use, disclose, or release any Proprietary
Information in any way to any person, firm, or institution at any time, even
after termination of my employment, except to the extent necessary to carry out
my responsibilities as an Executive of the Company. I further understand and
agree that the publication of Proprietary Information through literature or
speeches must be approved in advance in writing by a duly authorized officer of
the Company.
(b) I understand and acknowledge that, for purposes of this
Agreement, "Proprietary Information" means all confidential, proprietary, or
trade secret information and ideas in whatever form, tangible or intangible,
whether disclosed to or learned or developed by me, prior or subsequent to the
date hereof, pertaining in any manner to the business of the Company or to the
Company's affiliates, consultants, clients, or business associates, unless: (i)
the information is or becomes publicly known through lawful means; (ii) the
information was rightfully in my possession or part of my general knowledge
prior to my employment by the Company; or (iii) the information is disclosed to
me without confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.
(c) Without limiting the generality of the foregoing, I
understand and acknowledge that "Proprietary Information" includes all: (i)
inventions, computer codes, computer programs, formulas, schematics, techniques,
algorithms, employee suggestions, development tools and processes, computer
printouts, design drawings and manuals, and improvements or modification to any
of the foregoing; (ii) information about costs, profits, markets, and sales;
(iii) plans for future development and new product concepts; and (iv) all
documents, books, papers, drawings, models, sketches, and other data of any kind
and description, including electronic data recorded or retrieved by any means,
that have been or will be given to me by the Company (or any present or future
affiliates, consultants, customers, clients, and business associates of the
Company), as well as written or verbal instructions or comments.
A-2
<PAGE> 15
1. Use Of Proprietary Information.
I agree that I will maintain at my work station or in other places under
my control only such Proprietary Information that I have a current "need to
know," and that I will return to the appropriate person or location, or
otherwise dispose of, Proprietary Information once my need to know no longer
exists. I agree that I will not make copies of information unless I have a
legitimate need for such copies in connection with my work.
2. Third-Party Information.
I recognize that the Company has received and in the future will receive
from third parties their confidential or proprietary information subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. I agree that I owe the Company
and such third parties, during the term of my employment and thereafter, a duty
to hold all such confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm, or corporation (except as
necessary in carrying out my work for the Company consistent with the Company's
agreement with such third party) or to use it for the benefit of anyone other
than for the Company or such third party (consistent with the Company's
agreement with such third party) without the express written authorization of a
duly authorized officer of the Company.
3. Inventions.
(a) Subject to Section 9 below, I hereby assign to the
Company, without additional consideration, all right, title and interest
(throughout the United States and in all foreign countries) in all ideas,
processes, inventions, technology, writings, computer programs, designs,
formulas, discoveries, patents, copyrights, trademarks, service marks, original
works of authorship, any claims or rights, and any improvements or modifications
to the foregoing (collectively, "Inventions"), whether or not subject to patent
or copyright protection, relating to any activities of the Company that have
been or will be conceived, developed, or reduced to practice by me alone or with
others (i) during the term of my employment, whether or not conceived or
developed during regular business hours, and whether or not conceived before,
on, or after the date hereof or (ii) if based on Proprietary Information, after
termination of my employment. Such Inventions shall be the sole property of the
Company and, to the maximum extent permitted by applicable law, shall be deemed
works made for hire.
(b) I will, whether during or after my employment by the
Company, execute such written instruments and do other such acts as may be
necessary in the opinion of the Company to obtain a patent, register a
copyright, or otherwise enforce the Company's rights in such Inventions (and I
hereby irrevocably appoint the Company and any of its officers as my attorney in
fact to undertake such acts in my name).
(c) I understand that the assignment by me to the Company
does not apply to Inventions that qualify fully under Section 2870(a) of the
California Labor Code, which is set forth on Schedule "A." I understand that
nothing in this Agreement is intended to expand the scope of protection provided
by Sections 2870 through 2872 of the California Labor Code. Except as disclosed
in Schedule "B", there are no ideas, inventions, technology, computer
A-3
<PAGE> 16
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing that I wish to exclude from
the operation of this Agreement.
(d) To the best of my knowledge, there is no existing
contract in conflict with this Agreement or any other contract in existence
between me and any other person or entity to assign ideas, inventions,
technology, computer programs, processes, trademarks, service marks, original
works of authorship, designs, formulas, discoveries, patents, copyrights, any
claims or rights, and any improvements or modifications to the foregoing.
1. Termination of Employment.
(a) I hereby acknowledge and agree that nothing in this
Agreement shall be construed to imply that the term of my employment is of any
definite duration. I further acknowledge and agree that I am employed on an
"at-will" basis, which means that I may quit at any time with or without cause,
and the Company may terminate my employment at any time with or without cause.
(b) I acknowledge that, because of my responsibilities at
the Company, I have helped and will continue to help to develop and have been
and will be exposed to the Company's research and development, products,
business strategies, information on customers and clients, and other valuable
Proprietary Information, and that use or disclosure of such Proprietary
Information in breach of this Agreement would be extremely difficult to detect
or prove. I also acknowledge that the Company's relationships with its
employees, affiliates, consultants, customers, clients, business associates, and
other persons are valuable business assets. To forestall any use or disclosure
of Proprietary Information in breach of this Agreement, I agree that for the
term of this Agreement and for a period of one (1) year after termination of my
employment with the Company, I shall not, for myself or any third party,
directly or indirectly:
(i) divert or attempt to divert from the Company any
business of any kind in which it is engaged, including, without
limitation, the solicitation of or interference with any of its
suppliers or customer; or
(ii) employ, solicit for employment, or recommend for
employment any person employed by the Company.
Furthermore, I agree that during the period of my employment with the
Company I shall not engage in any business activity that is or may be
competitive with the Company. I understand that none of my activities will be
prohibited under this section if I can prove that the action was taken without
the use in any way of Proprietary Information.
(c) I acknowledge that, because of the difficulty of
establishing when any Invention is first conceived or developed by me, or
whether it results from access to Proprietary Information or the Company's
equipment, facilities, and data, I agree that any ideas, inventions, technology,
computer programs, processes, trademarks, service marks, original works of
authorship, designs, formulas, discoveries, patents, copyrights, any claims or
rights, and any improvements or modifications to the foregoing shall be presumed
to be an Invention if
A-4
<PAGE> 17
conceived, developed, used, sold, exploited, or reduced to practice by me or
with my aid within one (1) year after my termination of employment with the
Company. I can rebut the above presumption if I prove that the invention, idea,
process, etc., is not an Invention as defined in paragraph 4(a).
(d) I hereby acknowledge and agree that all personal property
including, without limitation, all books, manuals, records, models, drawings,
reports, notes, contracts, lists, files, computer software, computer tapes or
disks, blueprints, and other documents or materials (or copies thereof),
Proprietary Information, and equipment furnished to or prepared by me in the
course of or incident to my employment, belong to the Company and shall be
promptly returned to the Company once my employment with the Company is
terminated, for any reason. I will not retain any written or other tangible
information pertaining to any Invention. In the event of the termination of my
employment, I agree to sign and deliver the Termination Certificate attached as
Schedule "C" to this Agreement.
(e) I understand that my obligations contained in this Agreement
will survive the termination of my employment with the Company, and that I will
continue to make all disclosures required of me by Paragraph 6.
1. Disclosure.
I agree to maintain adequate and current written records on the
development of all Inventions and to disclose promptly to the Company all
Inventions and relevant records, which records will remain the sole property of
the Company. I further agree that all information and records pertaining to any
Inventions conceived, developed, or reduced to practice by me (alone or with
others) during my period of employment or during the one-year period following
termination of my employment, shall be promptly disclosed to the Company (any
such disclosures made after the termination of my employment shall be received
by the Company in confidence for the purpose of determining if they have been
based on any Proprietary Information). The Company shall examine such
information to determine if in fact such information are Inventions subject to
this Agreement.
2. Former or Conflicting Agreements.
During my employment with the Company, I will not disclose to the Company,
or use, or induce the Company to use, any confidential, proprietary, or trade
secret information of others. I represent and warrant that I have returned all
property and confidential, proprietary and trade secret information belonging to
all prior employers, if any. I further represent and warrant that my performance
of the terms of this Agreement will not breach any agreement to keep in
confidence confidential proprietary and trade secret information acquired by me
in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
3. Information on Company Premises.
I acknowledge that all information generated, received, or maintained by
or for me on the premises or equipment of the Company (including, without
limitation, computer systems and
A-5
<PAGE> 18
electronic-mail or voicemail systems) is the property of the Company, and I
hereby waive any property or privacy rights that I may have with respect to such
information.
4. Reserved Inventions.
To avoid future confusion, I have listed on Schedule "B" a description of
all Inventions, if any, developed or conceived by me in which I claim any
ownership or other right. I understand that, by not listing an Invention, I am
acknowledging that the Invention was not developed or conceived before
commencement of my employment.
10. Choice of Law.
The validity, interpretation, enforceability, and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of California without giving effect to its conflict of law rules. Any
dispute, action, litigation, or other proceeding concerning this Agreement shall
be instituted, maintained, heard, and decided in Orange County, California.
11. Remedies.
I recognize that nothing in this Agreement is intended to limit any remedy
of the Company under the California Uniform Trade Secrets Act and that I could
face possible criminal and civil actions, resulting in imprisonment and
substantial monetary liability, if I misappropriate the Company's or its
clients' trade secrets. In addition, I recognize that my violation of this
Agreement could cause the Company irreparable harm and significant injury, the
amount of which may be extremely difficult to estimate, thus, making any remedy
at law or in damages inadequate. Therefore, I agree that, in the event of a
breach or threatened breach that involves Proprietary Information of the Company
or its clients, the Company shall have the right to apply to any court of
competent jurisdiction for an order restraining any breach or threatened breach
of this Agreement and for any other relief the Company deems appropriate. This
right shall be in addition to any other remedy available to the Company in law
or equity.
12. Successors and Assigns.
(a) I understand and agree that the Company may assign to another
person or entity any of its rights under this Agreement.
(b) I further understand and agree that this Agreement shall be
binding upon me and my heirs, executors, administrators, and successors,
and shall inure to the benefit of the Company's successors and assigns.
12. Severability.
If any provision of this Agreement is determined to be invalid, illegal or
unenforceable, the validity or enforceability of the other provisions shall not
be affected.
A-6
<PAGE> 19
13. Entire Agreement.
The terms of this Agreement are the final expression of my agreement
with respect to the subject matter hereof and may not be contradicted by
evidence of any prior or contemporaneous agreement. This Agreement shall
constitute the complete and exclusive statement of its terms and no extrinsic
evidence whatsoever may be introduced in any judicial, administrative, or other
legal proceeding involving this Agreement. No modification or amendment of this
Agreement shall be binding unless executed in writing by me and a duly
authorized officer of the Company.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS,
PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR
TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS,
RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS
AGREEMENT.
This Agreement is made and entered into as of July 15, 1998.
MTI TECHNOLOGY CORPORATION
By: /s/ DALE R. BOYD
----------------------------------------
Title: Sr. V.P. & CFO
----------------------------------
Executive: Gary M. Scott
---------------------------------
Signature: /s/ GARY M. SCOTT
---------------------------------
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<PAGE> 20
SCHEDULE A
California Labor Code Section 2870(a)
Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information, except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
Schedule A
<PAGE> 21
SCHEDULE B
1. Proprietary Information. Except as set forth below, I acknowledge
that at this time I know nothing about the business or Proprietary
Information of the Company, other than information I have learned
from the Company in the course of being hired:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Reserved Inventions. Except as set forth below, there are no ideas,
processes, inventions, technology, writings, programs, designs,
formulas, discoveries, patents, copyrights, or trademarks, or any
claims, rights, or improvements to the foregoing, that I wish to exclude
from the operation of this Agreement:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name: Gary M. Scott
------------------------------
Signature: /s/ GARY M. SCOTT
-------------------------
Date: July 15, 1998
------------------------------
Schedule B
<PAGE> 22
SCHEDULE C
TERMINATION CERTIFICATE
This is to certify that I have returned all personal property of the
Company, including, without limitation, all books, manuals, records, models,
drawings, reports, notes, contracts, lists, blueprints, and other documents and
materials, Proprietary Information, and equipment furnished to or prepared by me
in the course of or incident to my employment with the Company, and that I did
not make or distribute any copies of the foregoing.
I further certify that I have reviewed the Employee/Consultant Proprietary
Information Agreement signed by me and that I have complied with and will
continue to comply with all of its terms including, without limitation: (i) the
reporting of any invention, process, idea, etc. conceived or developed by me and
covered by the Agreement; and (ii) the preservation as confidential of all
Proprietary Information pertaining to the Company. This certificate in no way
limits my responsibilities or the Company's rights under the Agreement.
On termination of my employment with the Company, I will be employed by
[NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will
be working in connection with the following projects:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name:
------------------------------
Signature:
-------------------------
Date:
------------------------------
Schedule C
<PAGE> 1
EXHIBIT 10.32
SEVERANCE AGREEMENT
This Agreement, (the "Agreement") is made and entered into as of July 15,
1998, is entered into between MTI Technology Corporation, a corporation
organized under the laws of the State of Delaware (the "Company"), and Chuck
Sitzman (the "Executive").
RECITALS
A. Executive is currently serving as an officer of the Company.
B. The Board of Directors of the Company (the "Board") recognizes that the
possibility of a Change in Control (as hereinafter defined) exists and that the
threat or the occurrence of a Change in Control can result in significant
distractions to its key management personnel because of the uncertainties
inherent in such a situation;
C. The Board has determined that it is essential and in the best interest
of the Company and its stockholders to retain the services of the Executive in
the event of a threat or occurrence of a Change in Control and to ensure the
Executive's continued dedication and efforts in such event without undue concern
for the Executive's personal, financial and employment security; and
D. In order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event that the Executive's
employment is terminated as a result of, or in connection with, a Change in
Control.
AGREEMENT
In consideration of the respective agreements of the parties contained
herein, it is agreed as follows:
1. Term Of Agreement. This Agreement shall commence as of the date first
set forth above and shall continue in effect until July 15, 2000; provided,
however, that commencing on July 15, 2000 and on each July 15 thereafter, the
term of this Agreement shall automatically be extended for one (1) year unless
the Company or the Executive shall have given written notice to the other at
least ninety (90) days prior thereto that the term of this Agreement shall not
be so extended; and provided, further, however, that notwithstanding any such
notice by the Company not to extend, the term of this Agreement shall not expire
prior to the expiration of twelve (12) months after the occurrence of a Change
in Control.
2. Definitions.
2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date,
<PAGE> 2
including (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay and (iv) bonuses and
incentive compensation (other than the "Pro Rata Bonus" (as hereinafter
defined)).
2.2. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean the greater of the Executive's annual base salary (a) at the rate in
effect on the Termination Date or (b) at the highest rate in effect at any time
during the ninety (90) day period prior to the Change in Control, and shall
include all amounts of base salary that are deferred under the Executive benefit
plans of the Company or any other agreement or arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount"
shall mean the greatest of: (a) 100% of the annual bonus payable to the
Executive under the Company's Executive Management Bonus Plan for the fiscal
year in which the Termination Date occurs; (b) the annual bonus paid or payable
to the Executive under the Company's Executive Management Bonus Plan for the
full fiscal year ended prior to the fiscal year during which the Termination
Date occurred; (c) the annual bonus paid or payable to the Executive under the
Company's Executive Management Bonus Plan for the full fiscal year ended prior
to the fiscal year during which a Change in Control occurred; (d) the average of
the annual bonuses paid or payable to the Executive under the Company's
Executive Management Bonus Plan during the three full fiscal years ended prior
to the fiscal year during which the Termination Date occurred; or (e) the
average of the annual bonuses paid or payable to the Executive under the
Company's Executive Management Bonus Plan during the three full fiscal years
ended prior to the fiscal year during which the Change in Control occurred.
2.4. Cause. The Company may terminate this Agreement and discharge
Executive for Cause (as defined) at any time upon written notice. For purposes
of this Agreement, the term "Cause" shall mean: (i) a material breach of any
term of this Agreement and failure to cure such breach within ten (10) days
after written notice thereof from the Company; (ii) the willful and continued
failure by Executive substantially to perform his duties for the Company (other
than any such failure resulting from his incapacity due to death or physical or
mental illness), after written demand for substantial performance is delivered
to Executive by the Company, which specifically identifies the manner in which
the Company believes that Executive has not substantially performed his duties;
(iii) the failure by Executive to follow the reasonable instructions of the
Board of Directors; (iv) the willful engaging by Executive in misconduct that is
materially injurious to the Company, monetarily or otherwise; (v) Executive's
final conviction for fraud or of any felony; or (vi) Executive's habitual use of
illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol
abuse, Executive shall be given notice and a thirty (30) day opportunity to
remedy the problem. For purposes of this paragraph, no act, or failure to act,
on Executive's part shall be considered "willful" unless done, or omitted to be
done, by Executive other than in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the Company.
2
<PAGE> 3
2.5. Change In Control.
(a) For purposes of this Agreement, "Change of Control" shall
mean:
(i) any "person" as such term is defined in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than (1) a trustee or other fiduciary holding
securities under an Executive benefit plan of the Company, (2) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
of the Company, or (3) any current beneficial stockholder or group, as
defined by Rule 13d-5 of the Exchange Act, of securities possessing more
than [TWENTY-FIVE] percent (25%) of the total combined voting power of the
Company's outstanding securities, hereafter becomes the "beneficial
owner," as defined in Rule 13d-3 under of the Exchange Act, directly or
indirectly, of securities of the Company representing [TWENTY-FIVE]
percent (25%) or more of the total combined voting power of the Company's
then outstanding securities, or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board
of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty percent (80%) of the
total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company, in one transaction or a series of
transactions, of all or substantially all of the Company's assets; or
(iv) the sale of substantially all of the Company's
assets.
2.6. Company. For purposes of this Agreement, the "Company" shall
mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors
and Assigns (as hereinafter defined).
2.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a total period
of ninety (90) days and the Executive has not returned to full time employment
prior to the Termination Date as stated in the "Notice of Termination."
3
<PAGE> 4
2.8. Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the events or
conditions described in subsections (1) through (8) hereof:
(i) a change in the Executive's status, title, position
or responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from the
Executive's status, title, position or responsibilities as in effect at
any time within ninety (90) days preceding the date of a Change in Control
or at any time thereafter; the assignment to the Executive of any duties
or responsibilities which, in the Executive's reasonable judgment, are
inconsistent with the Executive's status, title, position or
responsibilities as in effect at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter; or
any removal of the Executive from or failure to reappoint or reelect the
Executive to any of such offices or positions, except in connection with
the termination of the Executive's employment for Disability, Cause, as a
result of the Executive's death or by the Executive;
(ii) a reduction in the Executive's base salary or any
failure to pay the Executive any compensation or benefits to which the
Executive is entitled within ten (10) days of the date due after receipt
of written notice from Executive;
(iii) the Company's requiring the Executive to be based
at any place outside a 25-mile radius from MTI's Corporate Offices,
located at 4905 E. LaPalma Avenue, Anaheim, CA 92807, except for
reasonably required travel on the Company's business which is not
materially greater than such travel requirements prior to the Change in
Control;
(iv) the failure by the Company to (A) continue in
effect (without reduction in benefit level and/or reward opportunities)
any material compensation or Executive benefit plan in which the Executive
was participating at any time within ninety (90) days preceding the date
of a Change in Control or at any time thereafter unless such plan is
replaced with a plan that provides substantially equivalent compensation
or benefits to the Executive, or (B) provide the Executive with
compensation and benefits, in the aggregate, at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for under
each other Executive benefit plan, program and practice in which the
Executive was participating at any time within ninety (90) days preceding
the date of a Change in Control or at any time thereafter;
(v) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the Company, which
petition is not dismissed within sixty (60) days;
(vi) any material breach by the Company of any provision
of this Agreement;
4
<PAGE> 5
(vii) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the terms
of Section 2.4; or
(viii) the failure of the Company to obtain an
agreement, satisfactory to the Executive, from any Successors and Assigns
to assume and agree to perform this Agreement, as contemplated in Section
6 hereof.
(b) The Executive's right to terminate the Executive's
employment pursuant to this Section 2.8 shall not be affected by the Executive's
incapacity due to physical or mental illness.
2.9. Notice Of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment from the Company, which
notice indicates the date on which termination is to be effective, the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.11. Successors And Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.12. Termination Date. For purposes of this Agreement, "Termination
Date" shall mean in, the case of the Executive's death, the Executive's date of
death, in the case of Good Reason, the last day of the Executive's employment
and, in all other cases, the date specified in the Notice of Termination;
provided, however, that if the Executive's employment is terminated by the
Company for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Executive, provided that, in the case of Disability,
the Executive shall not have returned to the full-time performance of the
Executive's duties during such period of at least thirty (30) days.
3. Termination Of Employment.
3.1. If, during the term of this Agreement, the Executive's
employment with the Company shall be terminated within twelve (12) months
following a Change in Control, the Executive shall be entitled to the following
compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death or (3) by the Executive other than for Good Reason, the
Company shall pay to the Executive the Accrued Compensation
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<PAGE> 6
and, if such termination is other than by the Company for Cause, the Company
shall also pay the Executive a Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1 (a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro Rata Bonus;
(ii) the Company shall pay the Executive as severance
pay and in lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment, an amount in cash equal to the sum
of (A) the Base Amount and (B) the Bonus Amount; and
(iii) for a number of months equal to twelve (12) (the
"Continuation Period"), the Company shall, at its expense, continue on
behalf of the Executive and the Executive's dependents and beneficiaries
the life insurance, disability, medical, dental and hospitalization
benefits provided (A) to the Executive at any time during the 90-day
period prior to the Change in Control or at any time thereafter or (B) to
other similarly situated executives who continue in the employ of the
Company during the Continuation Period. The coverage and benefits
(including deductibles and costs) provided in this Section 3.1(b)(iii)
during the Continuation Period shall be no less favorable to the Executive
and the Executive's dependents and beneficiaries, than the most favorable
of such coverages and benefits during any of the periods referred to in
clauses (A) and (B) above. The Company's obligation hereunder with respect
to the foregoing benefits shall be limited to the extent that the
Executive obtains any such benefits pursuant to a subsequent employer's
benefit plans, in which case the Company may reduce the coverage of any
benefits it is required to provide the Executive hereunder as long as the
aggregate coverages and benefits of the combined benefit plans are no less
favorable to the Executive than the coverages and benefits required to be
provided hereunder. This subsection (iii) shall not be interpreted so as
to limit any benefits to which the Executive or the Executive's dependents
or beneficiaries may be entitled under any of the Company's Executive
benefit plans, programs or practices following the Executive's termination
of employment, including without limitation, retiree medical and life
insurance benefits.
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i)
and (ii) shall be paid in a single lump sum cash payment within forty-five (45)
days after the Executive's Termination Date (or earlier, if required by
applicable law).
(d) The Executive shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise, and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent employment
except as provided in Section 3.1 (b)(iii).
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<PAGE> 7
3.2. (a) The severance pay and benefits provided for in this Section
3 shall be in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement.
(b) The Executive's entitlement to any other compensation or
benefits shall be determined in accordance with the Company's Executive benefit
plans and other applicable programs, policies and practices then in effect.
4. Notice Of Termination. Following a Change in Control, any purported
termination of the Executive's employment shall be communicated by Notice of
Termination to the Executive. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. Excise Tax Limitation.
(a) Notwithstanding anything in this Agreement to the
contrary, if any portion of any payments to Executive by the Company under this
Agreement and any other present or future plan of the Company or other present
or future agreement between Executive and the Company would not be deductible by
the Company (collectively, "Payments") for federal income tax purposes by reason
of application of Section 162(m) of the Internal Revenue Code (the "Code"), then
payment of that portion to Executive shall be deferred until the earliest date
upon which payment thereof can be made to Executive without being non-deductible
pursuant to Section 162(m) of the Code. In the event of such deferral, the
Company shall pay interest to Executive on the deferred amount at 120% of the
applicable federal rate provided for in Section 1274(d)(1) of the Code. In
addition, notwithstanding any provision of this Agreement to the contrary, the
aggregate present value of the payments and benefits (excluding those payments
and benefits not treated as parachute payments under Code Section 280G(b)) to be
made or provided to the Executive by the Company (whether pursuant to this
Agreement or otherwise) shall not exceed three times the Executive's annualized
includible compensation for the base period, as defined in Code Section 280G(d)
of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any
excess payments or benefits shall be forfeited; provided, however, that the
forfeiture provision of this sentence shall apply only if such forfeiture
provision results in larger aggregate after-tax payments and benefits to the
Executive than if the forfeiture provision did not apply. The intent of this
portion of this subsection 5(a) is to prevent any payment or benefit to the
Executive from being subject to the excise tax imposed by Code Section 4999 and
to prevent any item of expense or deduction of the Company from being disallowed
as a result of the application of Code Section 280G, but only if the after-tax
payments and benefits payable or provided to the Executive are greater after
application of the forfeiture provision than if the forfeiture provision did not
apply. The interpretation of this subsection 5(a) its application to any
occurrence or event, the determination of whether any payment or benefit would
not be treated as a parachute payment, the determination of the aggregate
present value of all payments and benefits to be made or provided to the
Executive, the determination of the value of the payments and benefits payable
or to be provided to the Executive after reduction for all applicable taxes, and
what specific payments or benefits otherwise available to the Executive
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<PAGE> 8
shall be limited or eliminated by operation of this subsection 5(a) shall be
reasonably made by the Company and shall be binding on all persons.
(b) An initial determination as to whether the Payments shall
be reduced to the Limited Payment Amount and the amount of such Limited Payment
Amount shall be made, at the Company's expense, by the accounting firm that is
the Company's independent accounting firm as of the date of the Change in
Control (the "Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination", together with detailed supporting
calculations and documentation, to the Company and the Executive within twenty
(20) days of the Termination Date if applicable, or such other time as requested
by the Company or by the Executive (provided the Executive reasonably believes
that any of the Payments may be subject to the Excise Tax), and if the
Accounting Firm determines that there is substantial authority (within the
meaning of Section 6662 of the Code) that no Excise Tax is payable by the
Executive with respect to a Payment or Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such Payment or Payments. Within ten (10) days
of the delivery of the Determination to the Executive, the Executive shall have
the right to dispute the Determination (the "Dispute"). If there is no Dispute,
the Determination shall be binding, final and conclusive upon the Company and
the Executive.
6. Successors, Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive or the Executive's beneficiaries
or legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal personal representative.
7. Confidential Information. The Company and Executive acknowledge that
Executive, in performing the terms and conditions of Executive's employment, has
and will continue to directly or indirectly gain access to information about
Company and its operations, including, but not limited to, its modes and methods
of conducting its business and producing and marketing its products, its
employee, customer, vendor and referral source lists, its trade secrets, its
copyrighted and non-copyrighted or non-protected computer software programs, its
techniques of operation, its financial structure, and its weakness, if any. As
part of this Agreement, Executive agrees to execute, and be bound by, the
Company's "Employee/ Consultant Proprietary Information Agreement," a copy of
which is attached hereto as Exhibit "A."
8. Notice. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be delivered in person, by facsimile,
or by certified or registered mail with
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<PAGE> 9
return receipt requested. Each such notice, request, demand, or other
communication shall be effective (a) if delivered by hand, when delivered at the
address specified in this Section; (b) if given by facsimile, when such
facsimile is transmitted to the telefacsimile number specified in this Section
and confirmation is received; or (c) if given by certified or registered mail,
three days after the mailing thereof Notices shall be delivered as follows:
If to the Company:
MTI Technology Corporation
4905 E. La Palma Avenue
Anaheim, California 92807
Attention: Chief Financial Officer
Fax: (714) 693-2202
With a copy to:
Morrison & Foerster LLP
19900 MacArthur Boulevard
12th Floor
Irvine, California 92612
Attention: Tamara Powell Tate
Fax: (714) 251-0900
If to the Executive:
Chuck Sitzman
5445 Los Monteros
Yorba Linda, CA 92887
Any party may change its address by notice giving notice to the other party of a
new address in accordance with the foregoing provisions.
9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination policies, plans, programs or practices) and for which
the Executive may qualify, nor shall anything herein limit or reduce such rights
as the Executive may have under any other agreements with the Company (except
for any severance or termination agreement). Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan or
program of the Company shall be payable in accordance with such plan or program,
except as explicitly modified by this Agreement.
10. Settlement Of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Executive or others.
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<PAGE> 10
11. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged, unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
12. Governing Law. This Agreement has been negotiated and exactitude in
the State of California and is to be performed in Orange County, California.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of California, including all matters of construction, validity,
performance, and enforcement, without giving effect to principles of conflict of
laws. Any dispute, action, litigation, or other proceeding concerning this
Agreement shall be instituted, maintained, heard, and decided in Orange County,
California.
13. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
15. Remedies. All rights, remedies, undertakings, obligations, options,
covenants, conditions, and agreements contained in this Agreement shall be
cumulative and no one of them shall be exclusive of any other.
16. Interpretation. The language in all parts of this Agreement shall be
in all cases construed simply according to its fair meaning and not strictly for
or against any party. Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa The
descriptive headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not control or affect the interpretation
or construction of any of the provisions herein.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
18. Further Documents and Acts. Each of the parties hereto agrees to
cooperate in good faith with the other and to execute and deliver such further
instruments and perform such other acts as may be reasonably necessary or
appropriate to consummate and carry into effect the transactions contemplated
under this Agreement.
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<PAGE> 11
19. Consultation with Counsel. Executive acknowledges (a) that he has been
given the opportunity to consult with counsel of his own choice concerning this
Agreement, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based upon his own
judgment with or without the advice of such counsel.
EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS
CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS
RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT.
BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF
THE TERMS AND CONDITIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and the Executive has executed this Agreement as
of the day and year first above written.
MTI TECHNOLOGY CORPORATION
By: /s/ Dale R. Boyd
------------------------------
Title: Sr. V.P. & CFO
/s/ Charles J. Sitzman
----------------------------------
Chuck Sitzman
11
<PAGE> 12
EXHIBIT "A"
Exhibit "A"
<PAGE> 13
STATEMENT REGARDING EMPLOYEE/CONSULTANT
PROPRIETARY INFORMATION AGREEMENT
Attached to this statement is your Employee/Consultant Proprietary Information
Agreement (the "Agreement") with MTI Technology Corporation (together with its
subsidiaries, the "Company").
Please take the time to review the Agreement carefully. It contains material
restrictions on your right to disclose or use, during or after your employment,
certain information and technology learned or developed by you during your
employment with the Company. The Company considers this Agreement to be very
important to the protection of its business.
If you have any questions concerning the Agreement, you may wish to consult an
attorney. Managers, legal counsel, and others in the Company are not authorized
to give you legal advice concerning the Agreement.
If you have read and understand the Agreement, and if you agree to its terms and
conditions, please return a fully executed copy of it to the Company, retaining
one copy for yourself.
I HAVE READ AND UNDERSTAND
THE ATTACHED AGREEMENT:
Executive Name: Charles J. Sitzman
----------------------------
Executive Signature: /s/ Charles J. Sitzman
-----------------------
Title:
---------------------------------------
Date:
---------------------------------------
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EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT
In consideration of my present and future employment by MTI Technology
Corporation (together with its subsidiaries, the "Company"), I agree to the
following:
1. Proprietary Information.
(a) I understand and acknowledge that my work as an employee
of the Company has involved and will continue to involve access to and creation
of confidential, proprietary, and trade secret information of the Company and
its affiliates, consultants, customers, clients, and business associates
(collectively, as defined more extensively below, "Proprietary Information"). I
further understand and acknowledge that the Company and its clients have
developed, compiled, and otherwise obtained this Proprietary Information often
at great expense, and that such information has great value to their respective
businesses. I agree to hold in strict confidence and in trust for the sole
benefit of the Company and its clients all Proprietary Information. I further
agree that I shall treat all Proprietary Information as private, privileged, and
confidential, and that I shall not use, disclose, or release any Proprietary
Information in any way to any person, firm, or Institution at any time, even
after termination of my employment, except to the extent necessary to carry out
my responsibilities as an Executive of the Company. I further understand and
agree that the publication of Proprietary Information through literature or
speeches must be approved in advance in writing by a duly authorized officer of
the Company.
(b) I understand and acknowledge that, for purposes of this
Agreement, "Proprietary Information" means all confidential, proprietary, or
trade secret information and ideas in whatever form, tangible or intangible,
whether disclosed to or learned or developed by me, prior or subsequent to the
date hereof, pertaining in any manner to the business of the Company or to the
Company's affiliates, consultants, clients, or business associates, unless: (i)
the information is or becomes publicly known through lawful means; (ii) the
information was rightfully in my possession or part of my general knowledge
prior to my employment by the Company; or (iii) the information is disclosed to
me without confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or proprietary
restriction) and did not team of it, directly or indirectly, from the Company.
(c) Without limiting the generality of the foregoing, I
understand and acknowledge that "Proprietary Information" includes all: (i)
inventions, computer codes, computer programs, formulas, schematics, techniques,
algorithms, employee suggestions, development tools and processes, computer
printouts, design drawings and manuals, and improvements or modification to any
of the foregoing; (ii) information about costs, profits, markets, and sales;
(iii) plans for future development and new product concepts; and (iv) all
documents, books, papers, drawings, models, sketches, and other data of any kind
and description, including electronic data recorded or retrieved by any means,
that have been or will be given to me by the Company (or any present or future
affiliates, consultants, customers, clients, and business associates of the
Company), as well as written or verbal instructions or comments.
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1. Use Of Proprietary Information.
I agree that I will maintain at my work station or in other places under
my control only such Proprietary Information that I have a current "need to
know," and that I will return to the appropriate person or location, or
otherwise dispose of, Proprietary Information once my need to know no longer
exists. I agree that I will not make copies of information unless I have a
legitimate need for such copies in connection with my work.
2. Third-Party Information.
I recognize that the Company has received and in the future will receive
from third parties their confidential or proprietary information subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. I agree that I owe the Company
and such third parties, during the term of my employment and thereafter, a duty
to hold all such confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm, or corporation (except as
necessary in carrying out my work for the Company consistent with the Company's
agreement with such third party) or to use it for the benefit of anyone other
than for the Company or such third party (consistent with the Company's
agreement with such third party) without the express written authorization of a
duly authorized officer of the Company.
3. Inventions.
(a) Subject to Section 9 below, I hereby assign to the Company,
without additional consideration, all right, title and interest (throughout the
United States and in all foreign countries) in all ideas, processes, inventions,
technology, writings, computer programs, designs, formulas, discoveries,
patents, copyrights, trademarks, service marks, original works of authorship,
any claims or rights, and any improvements or modifications to the foregoing
(collectively, "Inventions"), whether or not subject to patent or copyright
protection, relating to any activities of the Company that have been or will be
conceived, developed, or reduced to practice by me alone or with others (i)
during the term of my employment, whether or not conceived or developed during
regular business hours, and whether or not conceived before, on, or after the
date hereof or (ii) if based on Proprietary Information, after termination of my
employment. Such Inventions shall be the sole property of the Company and, to
the maximum extent permitted by applicable law, shall be deemed works made for
hire.
(b) I will, whether during or after my employment by the Company,
execute such written instruments and do other such acts as may be necessary in
the opinion of the Company to obtain a patent, register a copyright, or
otherwise enforce the Company's rights in such Inventions (and I hereby
irrevocably appoint the Company and any of its officers as my attorney in fact
to undertake such acts in my name).
(c) I understand that the assignment by me to the Company does not
apply to Inventions that qualify fully under Section 2870(a) of the California
Labor Code, which is set forth on Schedule "A." I understand that nothing in
this Agreement is intended to expand the scope of protection provided by
Sections 2870 through 2872 of the California Labor Code. Except as disclosed in
Schedule "B", there are no ideas, inventions, technology, computer
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programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing that I wish to exclude from
the operation of this Agreement.
(d) To the best of my knowledge, there is no existing contract in
conflict with this Agreement or any other contract in existence between me and
any other person or entity to assign ideas, inventions, technology, computer
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing.
1. Termination of Employment.
(a) I hereby acknowledge and agree that nothing in this Agreement
shall be construed to imply that the term of my employment is of any definite
duration. I further acknowledge and agree that I am employed on an "at-will"
basis, which means that I may quit at any time with or without cause, and the
Company may terminate my employment at any time with or without cause.
(b) I acknowledge that, because of my responsibilities at the
Company, I have helped and will continue to help to develop and have been and
will be exposed to the Company's research and development, products, business
strategies, information on customers and clients, and other valuable Proprietary
Information, and that use or disclosure of such Proprietary Information in
breach of this Agreement would be extremely difficult to detect or prove. I also
acknowledge that the Company's relationships with its employees, affiliates,
consultants, customers, clients, business associates, and other persons are
valuable business assets. To forestall any use or disclosure of Proprietary
Information in breach of this Agreement, I agree that for the term of this
Agreement and for a period of one (1) year after termination of my employment
with the Company, I shall not, for myself or any third party, directly or
indirectly:
(i) divert or attempt to divert from the Company any business
of any kind in which it is engaged, including, without limitation, the
solicitation of or interference with any of its suppliers or customer; or
(ii) employ, solicit for employment, or recommend for
employment any person employed by the Company.
Furthermore, I agree that during the period of my employment with the
Company I shall not engage in any business activity that is or may be
competitive with the Company. I understand that none of my activities will be
prohibited under this section if I can prove that the action was taken without
the use in any way of Proprietary Information.
(c) I acknowledge that, because of the difficulty of establishing
when any Invention is first conceived or developed by me, or whether it results
from access to Proprietary Information or the Company's equipment, facilities,
and data, I agree that any ideas, inventions, technology, computer programs,
processes, trademarks, service marks, original works of authorship, designs,
formulas, discoveries, patents, copyrights, any claims or rights, and any
improvements or modifications to the foregoing shall be presumed to be an
Invention if
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conceived, developed, used, sold, exploited, or reduced to practice by me or
with my aid within one (1) year after my termination of employment with the
Company. I can rebut the above presumption if I prove that the invention, idea,
process, etc., is not an Invention as defined in paragraph 4(a).
(d) I hereby acknowledge and agree that all personal property
including, without limitation, all books, manuals, records, models, drawings,
reports, notes, contracts, lists, files, computer software, computer tapes or
disks, blueprints, and other documents or materials (or copies thereof),
Proprietary Information, and equipment furnished to or prepared by me in the
course of or incident to my employment, belong to the Company and shall be
promptly returned to the Company once my employment with the Company is
terminated, for any reason. I will not retain any written or other tangible
information pertaining to any Invention. In the event of the termination of my
employment, I agree to sign and deliver the Termination Certificate attached as
Schedule "C" to this Agreement.
(e) I understand that my obligations contained in this Agreement
will survive the termination of my employment with the Company, and that I will
continue to make all disclosures required of me by Paragraph 6.
1. Disclosure.
I agree to maintain adequate and current written records on the
development of all Inventions and to disclose promptly to the Company all
Inventions and relevant records, which records will remain the sole property of
the Company. I further agree that all information and records pertaining to any
Inventions conceived, developed, or reduced to practice by me (alone or with
others) during my period of employment or during the one-year period following
termination of my employment, shall be promptly disclosed to the Company (any
such disclosures made after the termination of my employment shall be received
by the Company in confidence for the purpose of determining if they have been
based on any Proprietary Information). The Company shall examine such
information to determine if in fact such information are Inventions subject to
this Agreement.
2. Former or Conflicting Agreements.
During my employment with the Company, I will not disclose to the Company,
or use, or induce the Company to use, any confidential, proprietary, or trade
secret information of others. I represent and warrant that I have returned all
property and confidential, proprietary and trade secret information belonging to
all prior employers, if any. I further represent and warrant that my performance
of the terms of this Agreement will not breach any agreement to keep in
confidence confidential proprietary and trade secret information acquired by me
in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
3. Information on Company Premises.
I acknowledge that all information generated, received, or maintained by
or for me on the premises or equipment of the Company (including, without
limitation, computer systems and
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electronic-mail or voicemail systems) is the property of the Company, and I
hereby waive any property or privacy rights that I may have with respect to such
information.
4. Reserved Inventions.
To avoid future confusion, I have listed on Schedule "B" a description of
all Inventions, if any, developed or conceived by me in which I claim any
ownership or other right. I understand that, by not listing an Invention, I am
acknowledging that the Invention was not developed or conceived before
commencement of my employment.
10. Choice of Law.
The validity, interpretation, enforceability, and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of California without giving effect to its conflict of law rules. Any
dispute, action, litigation, or other proceeding concerning this Agreement shall
be instituted, maintained, heard, and decided in Orange County, California.
11. Remedies.
I recognize that nothing in this Agreement is intended to limit any remedy
of the Company under the California Uniform Trade Secrets Act and that I could
face possible criminal and civil actions, resulting in imprisonment and
substantial monetary liability, if I misappropriate the Company's or its
clients' trade secrets. In addition, I recognize that my violation of this
Agreement could cause the Company irreparable harm and significant injury, the
amount of which may be extremely difficult to estimate, thus, making any remedy
at law or in damages inadequate. Therefore, I agree that, in the event of a
breach or threatened breach that involves Proprietary Information of the Company
or its clients, the Company shall have the right to apply to any court of
competent jurisdiction for an order restraining any breach or threatened breach
of this Agreement and for any other relief the Company deems appropriate. This
right shall be in addition to any other remedy available to the Company in law
or equity.
12. Successors and Assigns.
(a) I understand and agree that the Company may assign to another
person or entity any of its rights under this Agreement.
(b) I further understand and agree that this Agreement shall be
binding upon me and my heirs, executors, administrators, and successors, and
shall inure to the benefit of the Company's successors and assigns.
12. Severability.
If any provision of this Agreement is determined to be invalid, illegal or
unenforceable, the validity or enforceability of the other provisions shall not
be affected.
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13. Entire Agreement
The terms of this Agreement are the final expression of my agreement with
respect to the subject matter hereof and may not be contradicted by evidence of
any prior or contemporaneous agreement. This Agreement shall constitute the
complete and exclusive statement of its terms and no extrinsic evidence
whatsoever may be introduced in any judicial, administrative, or other legal
proceeding involving this Agreement. No modification or amendment of this
Agreement shall be binding unless executed in writing by me and a duly
authorized officer of the Company.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS,
PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR
TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS,
RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS
AGREEMENT.
This Agreement is made and entered into as of July 15, 1998.
MTI TECHNOLOGY CORPORATION
By: /s/ DALE R. BOYD
------------------------------
Title: Sr. V.P. & C.F.O.
Executive: Charles J. Sitzman
Signature: /s/ CHARLES J. SITZMAN
A-7
<PAGE> 20
SCHEDULE A
California Labor Code Section 2870(a)
Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information, except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
Schedule A
<PAGE> 21
SCHEDULE B
1. Proprietary Information. Except as set forth below, I acknowledge that at
this time I know nothing about the business or Proprietary Information of
the Company, other than information I have learned from the Company in the
course of being hired:
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2. Reserved Inventions. Except as set forth below, there are no ideas,
processes, inventions, technology, writings, programs, designs, formulas,
discoveries, patents, copyrights, or trademarks, or any claims, rights, or
improvements to the foregoing, that I wish to exclude from the operation
of this Agreement:
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Name: Charles J. Sitzman
------------------------------
Signature: /s/ Charles J. Sitzman
------------------------------
Date: July 15, 1998
------------------------------
Schedule B
<PAGE> 22
SCHEDULE C
TERMINATION CERTIFICATE
This is to certify that I have returned all personal property of the
Company, including, without limitation, all books, manuals, records, models,
drawings, reports, notes, contracts, lists, blueprints, and other documents and
materials, Proprietary Information, and equipment furnished to or prepared by me
in the course of or incident to my employment with the Company, and that I did
not make or distribute any copies of the foregoing.
I further certify that I have reviewed the Employee/Consultant Proprietary
Information Agreement signed by me and that I have complied with and will
continue to comply with all of its terms including, without limitation: (i) the
reporting of any invention, process, idea, etc. conceived or developed by me and
covered by the Agreement; and (ii) the preservation as confidential of all
Proprietary Information pertaining to the Company. This certificate in no way
limits my responsibilities or the Company's rights under the Agreement.
On termination of my employment with the Company, I will be employed by
[NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will
be working in connection with the following projects:
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- -------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------
Name:
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Signature:
------------------------------
Date:
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Schedule C
<PAGE> 1
EXHIBIT 10.33
SEVERANCE AGREEMENT
This Agreement, (the "Agreement") is made and entered into as of July 15,
1998, is entered into between MTI Technology Corporation, a corporation
organized under the laws of the State of Delaware (the "Company"), and Venki
Venkataraman (the "Executive").
RECITALS
A. Executive is currently serving as an officer of the Company.
B. The Board of Directors of the Company (the "Board") recognizes that
the possibility of a Change in Control (as hereinafter defined) exists and that
the threat or the occurrence of a Change in Control can result in significant
distractions to its key management personnel because of the uncertainties
inherent in such a situation;
C. The Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure the Executive's continued dedication and efforts in such event without
undue concern for the Executive's personal, financial and employment security;
and
D. In order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event that the Executive's
employment is terminated as a result of, or in connection with, a Change in
Control.
AGREEMENT
In consideration of the respective agreements of the parties contained
herein, it is agreed as follows:
1. Term Of Agreement. This Agreement shall commence as of the date
first set forth above and shall continue in effect until July 15, 2000;
provided, however, that commencing on July 15, 2000 and on each July 15
thereafter, the term of this Agreement shall automatically be extended for one
(1) year unless the Company or the Executive shall have given written notice to
the other at least ninety (90) days prior thereto that the term of this
Agreement shall not be so extended; and provided, further, however, that
notwithstanding any such notice by the Company not to extend, the term of this
Agreement shall not expire prior to the expiration of twelve (12) months after
the occurrence of a Change in Control.
2. Definitions.
2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" (as hereinafter defined) but not paid as
of the Termination Date,
<PAGE> 2
including (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay and (iv) bonuses and
incentive compensation (other than the "Pro Rata Bonus" (as hereinafter
defined)).
2.2. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean the greater of the Executive's annual base salary (a) at the rate in
effect on the Termination Date or (b) at the highest rate in effect at any time
during the ninety (90) day period prior to the Change in Control, and shall
include all amounts of base salary that are deferred under the Executive benefit
plans of the Company or any other agreement or arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount"
shall mean the greatest of: (a) 100% of the annual bonus payable to the
Executive under the Company's Executive Management Bonus Plan for the fiscal
year in which the Termination Date occurs; (b) the annual bonus paid or payable
to the Executive under the Company's Executive Management Bonus Plan for the
full fiscal year ended prior to the fiscal year during which the Termination
Date occurred; (c) the annual bonus paid or payable to the Executive under the
Company's Executive Management Bonus Plan for the full fiscal year ended prior
to the fiscal year during which a Change in Control occurred; (d) the average of
the annual bonuses paid or payable to the Executive under the Company's
Executive Management Bonus Plan during the three full fiscal years ended prior
to the fiscal year during which the Termination Date occurred; or (e) the
average of the annual bonuses paid or payable to the Executive under the
Company's Executive Management Bonus Plan during the three full fiscal years
ended prior to the fiscal year during which the Change in Control occurred.
2.4. Cause. The Company may terminate this Agreement and discharge
Executive for Cause (as defined) at any time upon written notice. For purposes
of this Agreement, the term "Cause" shall mean: (i) a material breach of any
term of this Agreement and failure to cure such breach within ten (10) days
after written notice thereof from the Company; (ii) the willful and continued
failure by Executive substantially to perform his duties for the Company (other
than any such failure resulting from his incapacity due to death or physical or
mental illness), after written demand for substantial performance is delivered
to Executive by the Company, which specifically identifies the manner in which
the Company believes that Executive has not substantially performed his duties;
(iii) the failure by Executive to follow the reasonable instructions of the
Board of Directors; (iv) the willful engaging by Executive in misconduct that is
materially injurious to the Company, monetarily or otherwise; (v) Executive's
final conviction for fraud or of any felony; or (vi) Executive's habitual use of
illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol
abuse, Executive shall be given notice and a thirty (30) day opportunity to
remedy the problem. For purposes of this paragraph, no act, or failure to act,
on Executive's part shall be considered "willful" unless done, or omitted to be
done, by Executive other than in good faith and without reasonable belief that
Executive's action or omission was in the best interest of the Company.
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<PAGE> 3
2.5. Change In Control.
(a) For purposes of this Agreement, "Change of Control"
shall mean:
(i) any "person" as such term is defined in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than (1) a trustee or other fiduciary holding securities
under an Executive benefit plan of the Company, (2) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, or (3) any current
beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange Act,
of securities possessing more than [TWENTY-FIVE] percent (25%) of the total
combined voting power of the Company's outstanding securities, hereafter becomes
the "beneficial owner," as defined in Rule 13d-3 under of the Exchange Act,
directly or indirectly, of securities of the Company representing [TWENTY-FIVE]
percent (25%) or more of the total combined voting power of the Company's then
outstanding securities, or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least eighty percent (80%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company, in one transaction or a
series of transactions, of all or substantially all of the Company's assets; or
(iv) the sale of substantially all of the Company's
assets.
2.6. Company. For purposes of this Agreement, the "Company" shall
mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors
and Assigns (as hereinafter defined).
2.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability to
substantially perform the Executive's duties with the Company for a total period
of ninety (90) days and the Executive has not returned to full time employment
prior to the Termination Date as stated in the "Notice of Termination."
3
<PAGE> 4
2.8. Good Reason.
(a) For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control of any of the events or conditions
described in subsections (1) through (8) hereof:
(i) a change in the Executive's status, title,
position or responsibilities (including reporting responsibilities)
which, in the Executive's reasonable judgment, represents an adverse
change from the Executive's status, title, position or
responsibilities as in effect at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter;
the assignment to the Executive of any duties or responsibilities
which, in the Executive's reasonable judgment, are inconsistent with
the Executive's status, title, position or responsibilities as in
effect at any time within ninety (90) days preceding the date of a
Change in Control or at any time thereafter; or any removal of the
Executive from or failure to reappoint or reelect the Executive to
any of such offices or positions, except in connection with the
termination of the Executive's employment for Disability, Cause, as
a result of the Executive's death or by the Executive;
(ii) a reduction in the Executive's base salary or any
failure to pay the Executive any compensation or benefits to which
the Executive is entitled within ten (10) days of the date due after
receipt of written notice from Executive;
(iii) the Company's requiring the Executive to be based
at any place outside a 25-mile radius from MTI's Corporate Offices,
located at 4905 E. LaPalma Avenue, Anaheim, CA 92807, except for
reasonably required travel on the Company's business which is not
materially greater than such travel requirements prior to the Change
in Control;
(iv) the failure by the Company to (A) continue in
effect (without reduction in benefit level and/or reward
opportunities) any material compensation or Executive benefit plan
in which the Executive was participating at any time within ninety
(90) days preceding the date of a Change in Control or at any time
thereafter unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to the Executive,
or (B) provide the Executive with compensation and benefits, in the
aggregate, at least equal (in terms of benefit levels and/or reward
opportunities) to those provided for under each other Executive
benefit plan, program and practice in which the Executive was
participating at any time within ninety (90) days preceding the date
of a Change in Control or at any time thereafter;
(v) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the Company,
which petition is not dismissed within sixty (60) days;
(vi) any material breach by the Company of any
provision of this Agreement;
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<PAGE> 5
(vii) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the
terms of Section 2.4; or
(viii) the failure of the Company to obtain an
agreement, satisfactory to the Executive, from any Successors and
Assigns to assume and agree to perform this Agreement, as
contemplated in Section 6 hereof.
(b) The Executive's right to terminate the Executive's
employment pursuant to this Section 2.8 shall not be affected by the Executive's
incapacity due to physical or mental illness.
2.9. Notice Of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a written
notice of termination of the Executive's employment from the Company, which
notice indicates the date on which termination is to be effective, the specific
termination provision in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the fiscal year through the
Termination Date and the denominator of which is 365.
2.11. Successors And Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity acquiring all
or substantially all of the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.12. Termination Date. For purposes of this Agreement, "Termination
Date" shall mean in, the case of the Executive's death, the Executive's date of
death, in the case of Good Reason, the last day of the Executive's employment
and, in all other cases, the date specified in the Notice of Termination;
provided, however, that if the Executive's employment is terminated by the
Company for Cause or due to Disability, the date specified in the Notice of
Termination shall be at least thirty (30) days from the date the Notice of
Termination is given to the Executive, provided that, in the case of Disability,
the Executive shall not have returned to the full-time performance of the
Executive's duties during such period of at least thirty (30) days.
3. Termination Of Employment.
3.1. If, during the term of this Agreement, the Executive's
employment with the Company shall be terminated within twelve (12) months
following a Change in Control, the Executive shall be entitled to the following
compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death or (3) by the Executive other than for Good Reason, the
Company shall pay to the Executive the Accrued Compensation
5
<PAGE> 6
and, if such termination is other than by the Company for Cause, the Company
shall also pay the Executive a Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1(a), the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive all Accrued
Compensation and a Pro Rata Bonus;
(ii) the Company shall pay the Executive as severance
pay and in lieu of any further compensation for periods
subsequent to the Termination Date, in a single payment, an
amount in cash equal to the sum of (A) the Base Amount and (B)
the Bonus Amount; and
(iii) for a number of months equal to twelve (12) (the
"Continuation Period"), the Company shall, at its expense,
continue on behalf of the Executive and the Executive's
dependents and beneficiaries the life insurance, disability,
medical, dental and hospitalization benefits provided (A) to
the Executive at any time during the 90-day period prior to
the Change in Control or at any time thereafter or (B) to
other similarly situated executives who continue in the employ
of the Company during the Continuation Period. The coverage
and benefits (including deductibles and costs) provided in
this Section 3.1(b)(iii) during the Continuation Period shall
be no less favorable to the Executive and the Executive's
dependents and beneficiaries, than the most favorable of such
coverages and benefits during any of the periods referred to
in clauses (A) and (B) above. The Company's obligation
hereunder with respect to the foregoing benefits shall be
limited to the extent that the Executive obtains any such
benefits pursuant to a subsequent employer's benefit plans, in
which case the Company may reduce the coverage of any benefits
it is required to provide the Executive hereunder as long as
the aggregate coverages and benefits of the combined benefit
plans are no less favorable to the Executive than the
coverages and benefits required to be provided hereunder. This
subsection (iii) shall not be interpreted so as to limit any
benefits to which the Executive or the Executive's dependents
or beneficiaries may be entitled under any of the Company's
Executive benefit plans, programs or practices following the
Executive's termination of employment, including without
limitation, retiree medical and life insurance benefits.
(c) The amounts provided for in Sections 3.1(a) and
3.1(b)(i) and (ii) shall be paid in a single lump sum cash payment within
forty-five (45) days after the Executive's Termination Date (or earlier, if
required by applicable law).
(d) The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to the Executive in any subsequent
employment except as provided in Section 3.1(b)(iii).
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<PAGE> 7
3.2. (a) The severance pay and benefits provided for in this
Section 3 shall be in lieu of any other severance or termination pay to which
the Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement.
(b) The Executive's entitlement to any other compensation or
benefits shall be determined in accordance with the Company's Executive benefit
plans and other applicable programs, policies and practices then in effect,
4. Notice Of Termination. Following a Change in Control, any purported
termination of the Executive's employment shall be communicated by Notice of
Termination to the Executive. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. Excise Tax Limitation.
(a) Notwithstanding anything in this Agreement to the
contrary, if any portion of any payments to Executive by the Company under this
Agreement and any other present or future plan of the Company or other present
or future agreement between Executive and the Company would not be deductible by
the Company (collectively, "Payments") for federal income tax purposes by reason
of application of Section 162(m) of the Internal Revenue Code (the "Code"),
then payment of that portion to Executive shall be deferred until the earliest
date upon which payment thereof can be made to Executive without being
non-deductible pursuant to Section 162(m) of the Code. In the event of such
deferral, the Company shall pay interest to Executive on the deferred amount at
120% of the applicable federal rate provided for in Section 1274(d)(1) of the
Code. In addition, notwithstanding any provision of this Agreement to the
contrary, the aggregate present value of the payments and benefits (excluding
those payments and benefits not treated as parachute payments under Code Section
280G(b)) to be made or provided to the Executive by the Company (whether
pursuant to this Agreement or otherwise) shall not exceed three times the
Executive's annualized includible compensation for the base period, as defined
in Code Section 280G(d) of the Code, minus one dollar ($1.00) (the "Limited
Payment Amount"), and any excess payments or benefits shall be forfeited;
provided, however, that the forfeiture provision of this sentence shall apply
only if such forfeiture provision results in larger aggregate after-tax payments
and benefits to the Executive than if the forfeiture provision did not apply.
The intent of this portion of this subsection 5(a) is to prevent any payment or
benefit to the Executive from being subject to the excise tax imposed by Code
Section 4999 and to prevent any item of expense or deduction of the Company from
being disallowed as a result of the application of Code Section 280G, but only
if the after-tax payments and benefits payable or provided to the Executive are
greater after application of the forfeiture provision than if the forfeiture
provision did not apply. The interpretation of this subsection 5(a), its
application to any occurrence or event, the determination of whether any payment
or benefit would not be treated as a parachute payment, the determination of the
aggregate present value of all payments and benefits to be made or provided to
the Executive, the determination of the value of the payments and benefits
payable or to be provided to the Executive after reduction for all applicable
taxes, and what specific payments or benefits otherwise available to the
Executive
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<PAGE> 8
shall be limited or eliminated by operation of this subsection 5(a) shall be
reasonably made by the Company and shall be binding on all persons.
(b) An initial determination as to whether the Payments
shall be reduced to the Limited Payment Amount and the amount of such Limited
Payment Amount shall be made, at the Company's expense, by the accounting firm
that is the Company's independent accounting firm as of the date of the Change
in Control (the "Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination", together with detailed supporting
calculations and documentation, to the Company and the Executive within twenty
(20) days of the Termination Date if applicable, or such other time as requested
by the Company or by the Executive (provided the Executive reasonably believes
that any of the Payments may be subject to the Excise Tax), and if the
Accounting Firm determines that there is substantial authority (within the
meaning of Section 6662 of the Code) that no Excise Tax is payable by the
Executive with respect to a Payment or Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such Payment or Payments. Within ten (10) days
of the delivery of the Determination to the Executive, the Executive shall have
the right to dispute the Determination (the "Dispute"). If there is no Dispute,
the Determination shall be binding, final and conclusive upon the Company and
the Executive.
6. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its Successors and Assigns and the Company shall
require any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
(b) Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive or the
Executive's beneficiaries or legal representatives, except by will or by the
laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal personal representative.
7. Confidential Information. The Company and Executive acknowledge that
Executive, in performing the terms and conditions of Executive's employment, has
and will continue to directly or indirectly gain access to information about
Company and its operations, including, but not limited to, its modes and methods
of conducting its business and producing and marketing its products, its
employee, customer, vendor and referral source lists, its trade secrets, its
copyrighted and non-copyrighted or non-protected computer software programs, its
techniques of operation, its financial structure, and its weakness, if any. As
part of this Agreement, Executive agrees to execute, and be bound by, the
Company's "Employee/ Consultant Proprietary Information Agreement," a copy of
which is attached hereto as Exhibit "A."
8. Notice. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be delivered in person, by facsimile,
or by certified or registered mail with
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<PAGE> 9
return receipt requested. Each such notice, request, demand, or other
communication shall be effective (a) if delivered by hand, when delivered at the
address specified in this Section; (b) if given by facsimile, when such
facsimile is transmitted to the telefacsimile number specified in this Section
and confirmation is received; or (c) if given by certified or registered mail,
three days after the mailing thereof Notices shall be delivered as follows:
If to the Company:
MTI Technology Corporation
4905 E. La Palma Avenue
Anaheim, California 92807
Attention: Chief Financial Officer
Fax: (714) 693-2202
With a copy to:
Morrison & Foerster LLP
19900 MacArthur Boulevard
12th Floor
Irvine, California 92612
Attention: Tamara Powell Tate
Fax: (714) 251-0900
If to the Executive:
Venki Venkataraman
P.O. Box 17127
Anaheim, CA 92817-7127
Any party may change its address by notice giving notice to the other party of a
new address in accordance with the foregoing provisions.
9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company (except for
any severance or termination policies, plans, programs or practices) and for
which the Executive may qualify, nor shall anything herein limit or reduce such
rights as the Executive may have under any other agreements with the Company
(except for any severance or termination agreement). Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company shall be payable in accordance with such plan or
program, except as explicitly modified by this Agreement.
10. Settlement Of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against an Executive or others.
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11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged, unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
12. Governing Law. This Agreement has been negotiated and exactitude in
the State of California and is to be performed in Orange County, California.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of California, including all matters of construction, validity,
performance, and enforcement, without giving effect to principles of conflict of
laws. Any dispute, action, litigation, or other proceeding concerning this
Agreement shall be instituted, maintained, heard, and decided in Orange County,
California.
13. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
15. Remedies. All rights, remedies, undertakings, obligations, options,
covenants, conditions, and agreements contained in this Agreement shall be
cumulative and no one of them shall be exclusive of any other.
16. Interpretation. The language in all parts of this Agreement shall be
in all cases construed simply according to its fair meaning and not strictly for
or against any party. Whenever the context requires, all words used in the
singular will be construed to have been used in the plural, and vice versa. The
descriptive headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not control or affect the interpretation
or construction of any of the provisions herein.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
18. Further Documents and Acts. Each of the parties hereto agrees to
cooperate in good faith with the other and to execute and deliver such further
instruments and perform such other acts as may be reasonably necessary or
appropriate to consummate and carry into effect the transactions contemplated
under this Agreement.
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19. Consultation with Counsel. Executive acknowledges (a) that he has
been given the opportunity to consult with counsel of his own choice concerning
this Agreement, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based upon his own
judgment with or without the advice of such counsel.
EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS
CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS
RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT.
BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF
THE TERMS AND CONDITIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and the Executive has executed this Agreement as
of the day and year first above written.
MTI TECHNOLOGY CORPORATION
By: /s/ DALE R. BOYD
-----------------------------------------
Title: Sr. V.P. & CFO
-----------------------------------
/s/ VENKI VENKATARAMAN
--------------------------------------------
Venki Venkataraman
(V.S. Venkataraman)
11
<PAGE> 12
EXHIBIT "A"
Exhibit "A"
<PAGE> 13
STATEMENT REGARDING EMPLOYEE/CONSULTANT
PROPRIETARY INFORMATION AGREEMENT
Attached to this statement is your Employee/Consultant Proprietary Information
Agreement (the "Agreement") with MTI Technology Corporation (together with its
subsidiaries, the "Company").
Please take the time to review the Agreement carefully. It contains material
restrictions on your right to disclose or use, during or after your employment,
certain information and technology learned or developed by you during your
employment with the Company. The Company considers this Agreement to be very
important to the protection of its business.
If you have any questions concerning the Agreement, you may wish to consult an
attorney. Managers, legal counsel, and others in the Company are not authorized
to give you legal advice concerning the Agreement.
If you have read and understand the Agreement, and if you agree to its terms and
conditions, please return a fully executed copy of it to the Company, retaining
one copy for yourself.
I HAVE READ AND UNDERSTAND
THE ATTACHED AGREEMENT:
Executive Name: V. S. Venkataraman
------------------------------------
Executive Signature: /s/ V. S. VENKATARAMAN
-------------------------------
Title: Sr. V.P. Mfg.
---------------------------------------------
Date: August 11, 1998
----------------------------------------------
A-1
<PAGE> 14
EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT
In consideration of my present and future employment by MTI Technology
Corporation (together with its subsidiaries, the "Company"), I agree to the
following:
1. Proprietary Information.
(a) I understand and acknowledge that my work as an employee of
the Company has involved and will continue to involve access to and creation of
confidential, proprietary, and trade secret information of the Company and its
affiliates, consultants, customers, clients, and business associates
(collectively, as defined more extensively below, "Proprietary Information"). I
further understand and acknowledge that the Company and its clients have
developed, compiled, and otherwise obtained this Proprietary Information often
at great expense, and that such information has great value to their respective
businesses. I agree to hold in strict confidence and in trust for the sole
benefit of the Company and its clients all Proprietary Information. I further
agree that I shall treat all Proprietary Information as private, privileged, and
confidential, and that I shall not use, disclose, or release any Proprietary
Information in any way to any person, firm, or institution at any time, even
after termination of my employment, except to the extent necessary to carry out
my responsibilities as an Executive of the Company. I further understand and
agree that the publication of Proprietary Information through literature or
speeches must be approved in advance in writing by a duly authorized officer of
the Company.
(b) I understand and acknowledge that, for purposes of this
Agreement, "Proprietary Information" means all confidential, proprietary, or
trade secret information and ideas in whatever form, tangible or intangible,
whether disclosed to or learned or developed by me, prior or subsequent to the
date hereof, pertaining in any manner to the business of the Company or to the
Company's affiliates, consultants, clients, or business associates, unless: (i)
the information is or becomes publicly known through lawful means; (ii) the
information was rightfully in my possession or part of my general knowledge
prior to my employment by the Company; or (iii) the information is disclosed to
me without confidential or proprietary restriction by a third party who
rightfully possesses the information (without confidential or proprietary
restriction) and did not learn of it, directly or indirectly, from the Company.
(c) Without limiting the generality of the foregoing, I understand
and acknowledge that "Proprietary Information" includes all: (i) inventions,
computer codes, computer programs, formulas, schematics, techniques, algorithms,
employee suggestions, development tools and processes, computer printouts,
design drawings and manuals, and improvements or modification to any of the
foregoing; (ii) information about costs, profits, markets, and sales; (iii)
plans for future development and new product concepts; and (iv) all documents,
books, papers, drawings, models, sketches, and other data of any kind and
description, including electronic data recorded or retrieved by any means, that
have been or will be given to me by the Company (or any present or future
affiliates, consultants, customers, clients, and business associates of the
Company), as well as written or verbal instructions or comments.
A-2
<PAGE> 15
1. Use Of Proprietary Information.
I agree that I will maintain at my work station or in other places under
my control only such Proprietary Information that I have a current "need to
know," and that I will return to the appropriate person or location, or
otherwise dispose of, Proprietary Information once my need to know no longer
exists. I agree that I will not make copies of information unless I have a
legitimate need for such copies in connection with my work.
2. Third-Party Information.
I recognize that the Company has received and in the future will receive
from third parties their confidential or proprietary information subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. I agree that I owe the Company
and such third parties, during the term of my employment and thereafter, a duty
to hold all such confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm, or corporation (except as
necessary in carrying out my work for the Company consistent with the Company's
agreement with such third party) or to use it for the benefit of anyone other
than for the Company or such third party (consistent with the Company's
agreement with such third party) without the express written authorization of a
duly authorized officer of the Company.
3. Inventions.
(a) Subject to Section 9 below, I hereby assign to the Company,
without additional consideration, all right, title and interest (throughout the
United States and in all foreign countries) in all ideas, processes, inventions,
technology, writings, computer programs, designs, formulas, discoveries,
patents, copyrights, trademarks, service marks, original works of authorship,
any claims or rights, and any improvements or modifications to the foregoing
(collectively, "Inventions"), whether or not subject to patent or copyright
protection, relating to any activities of the Company that have been or will be
conceived, developed, or reduced to practice by me alone or with others (i)
during the term of my employment, whether or not conceived or developed during
regular business hours, and whether or not conceived before, on, or after the
date hereof or (ii) if based on Proprietary Information, after termination of my
employment. Such Inventions shall be the sole property of the Company and, to
the maximum extent permitted by applicable law, shall be deemed works made for
hire.
(b) I will, whether during or after my employment by the
Company, execute such written instruments and do other such acts as may be
necessary in the opinion of the Company to obtain a patent, register a
copyright, or otherwise enforce the Company's rights in such Inventions (and I
hereby irrevocably appoint the Company and any of its officers as my attorney in
fact to undertake such acts in my name).
(c) I understand that the assignment by me to the Company does
not apply to Inventions that qualify fully under Section 2870(a) of the
California Labor Code, which is set forth on Schedule "A." I understand that
nothing in this Agreement is intended to expand the scope of protection provided
by Sections 2870 through 2872 of the California Labor Code. Except as disclosed
in Schedule "B", there are no ideas, inventions, technology, computer
A-3
<PAGE> 16
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing that I wish to exclude from
the operation of this Agreement.
(d) To the best of my knowledge, there is no existing contract in
conflict with this Agreement or any other contract in existence between me and
any other person or entity to assign ideas, inventions, technology, computer
programs, processes, trademarks, service marks, original works of authorship,
designs, formulas, discoveries, patents, copyrights, any claims or rights, and
any improvements or modifications to the foregoing.
1. Termination of Employment.
(a) I hereby acknowledge and agree that nothing in this Agreement
shall be construed to imply that the term of my employment is of any definite
duration. I further acknowledge and agree that I am employed on an "at-will"
basis, which means that I may quit at any time with or without cause, and the
Company may terminate my employment at any time with or without cause.
(b) I acknowledge that, because of my responsibilities at the
Company, I have helped and will continue to help to develop and have been and
will be exposed to the Company's research and development, products, business
strategies, information on customers and clients, and other valuable Proprietary
Information, and that use or disclosure of such Proprietary Information in
breach of this Agreement would be extremely difficult to detect or prove. I also
acknowledge that the Company's relationships with its employees, affiliates,
consultants, customers, clients, business associates, and other persons are
valuable business assets. To forestall any use or disclosure of Proprietary
Information in breach of this Agreement, I agree that for the term of this
Agreement and for a period of one (1) year after termination of my employment
with the Company, I shall not, for myself or any third party, directly or
indirectly:
(i) divert or attempt to divert from the Company any
business of any kind in which it is engaged, including, without
limitation, the solicitation of or interference with any of its
suppliers or customer; or
(ii) employ, solicit for employment, or recommend for
employment any person employed by the Company.
Furthermore, I agree that during the period of my employment with the
Company I shall not engage in any business activity that is or may be
competitive with the Company. I understand that none of my activities will be
prohibited under this section if I can prove that the action was taken without
the use in any way of Proprietary Information.
(c) I acknowledge that, because of the difficulty of establishing
when any Invention is first conceived or developed by me, or whether it results
from access to Proprietary Information or the Company's equipment, facilities,
and data, I agree that any ideas, inventions, technology, computer programs,
processes, trademarks, service marks, original works of authorship, designs,
formulas, discoveries, patents, copyrights, any claims or rights, and any
improvements or modifications to the foregoing shall be presumed to be an
Invention if
A-4
<PAGE> 17
conceived, developed, used, sold, exploited, or reduced to practice by me or
with my aid within one (1) year after my termination of employment with the
Company. I can rebut the above presumption if I prove that the invention, idea,
process, etc., is not an Invention as defined in paragraph 4(a).
(d) I hereby acknowledge and agree that all personal property
including, without limitation, all books, manuals, records, models, drawings,
reports, notes, contracts, lists, files, computer software, computer tapes or
disks, blueprints, and other documents or materials (or copies thereof),
Proprietary Information, and equipment furnished to or prepared by me in the
course of or incident to my employment, belong to the Company and shall be
promptly returned to the Company once my employment with the Company is
terminated, for any reason. I will not retain any written or other tangible
information pertaining to any Invention. In the event of the termination of my
employment, I agree to sign and deliver the Termination Certificate attached as
Schedule "C" to this Agreement.
(e) I understand that my obligations contained in this Agreement
will survive the termination of my employment with the Company, and that I will
continue to make all disclosures required of me by Paragraph 6.
1. Disclosure.
I agree to maintain adequate and current written records on the
development of all Inventions and to disclose promptly to the Company all
Inventions and relevant records, which records will remain the sole property of
the Company. I further agree that all information and records pertaining to any
Inventions conceived, developed, or reduced to practice by me (alone or with
others) during my period of employment or during the one-year period following
termination of my employment, shall be promptly disclosed to the Company (any
such disclosures made after the termination of my employment shall be received
by the Company in confidence for the purpose of determining if they have been
based on any Proprietary Information). The Company shall examine such
information to determine if in fact such information are Inventions subject to
this Agreement.
2. Former or Conflicting Agreements.
During my employment with the Company, I will not disclose to the Company,
or use, or induce the Company to use, any confidential, proprietary, or trade
secret information of others. I represent and warrant that I have returned all
property and confidential, proprietary and trade secret information belonging to
all prior employers, if any. I further represent and warrant that my performance
of the terms of this Agreement will not breach any agreement to keep in
confidence confidential proprietary and trade secret information acquired by me
in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
3. Information on Company Premises.
I acknowledge that all information generated, received, or maintained by
or for me on the premises or equipment of the Company (including, without
limitation, computer systems and
A-5
<PAGE> 18
electronic-mail or voicemail systems) is the property of the Company, and I
hereby waive any property or privacy rights that I may have with respect to such
information.
4. Reserved Inventions.
To avoid future confusion, I have listed on Schedule "B" a description of
all Inventions, if any, developed or conceived by me in which I claim any
ownership or other right. I understand that, by not listing an Invention, I am
acknowledging that the Invention was not developed or conceived before
commencement of my employment.
10. Choice of Law.
The validity, interpretation, enforceability, and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of California without giving effect to its conflict of law rules. Any
dispute, action, litigation, or other proceeding concerning this Agreement shall
be instituted, maintained, heard, and decided in Orange County, California.
11. Remedies.
I recognize that nothing in this Agreement is intended to limit any remedy
of the Company under the California Uniform Trade Secrets Act and that I could
face possible criminal and civil actions, resulting in imprisonment and
substantial monetary liability, if I misappropriate the Company's or its
clients' trade secrets. In addition, I recognize that my violation of this
Agreement could cause the Company irreparable harm and significant injury, the
amount of which may be extremely difficult to estimate, thus, making any remedy
at law or in damages inadequate. Therefore, I agree that, in the event of a
breach or threatened breach that involves Proprietary Information of the Company
or its clients, the Company shall have the right to apply to any court of
competent jurisdiction for an order restraining any breach or threatened breach
of this Agreement and for any other relief the Company deems appropriate. This
right shall be in addition to any other remedy available to the Company in law
or equity.
12. Successors and Assigns.
(a) I understand and agree that the Company may assign to another
person or entity any of its rights under this Agreement.
(b) I further understand and agree that this Agreement shall be
binding upon me and my heirs, executors, administrators, and successors, and
shall inure to the benefit of the Company's successors and assigns.
12. Severability.
If any provision of this Agreement is determined to be invalid, illegal or
unenforceable, the validity or enforceability of the other provisions shall not
be affected.
A-6
<PAGE> 19
13. Entire Agreement.
The terms of this Agreement are the final expression of my agreement with
respect to the subject matter hereof and may not be contradicted by evidence of
any prior or contemporaneous agreement. This Agreement shall constitute the
complete and exclusive statement of its terms and no extrinsic evidence
whatsoever may be introduced in any judicial, administrative, or other legal
proceeding involving this Agreement. No modification or amendment of this
Agreement shall be binding unless executed in writing by me and a duly
authorized officer of the Company.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS,
PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR
TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS,
RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS
AGREEMENT.
This Agreement is made and entered into as of July 15, 1998.
MTI TECHNOLOGY CORPORATION
By: /s/ DALE R. BOYD
------------------------------------------
Title: Sr. V.P. & C.F.O.
------------------------------------
Executive: V.S. Venkataraman
-----------------------------------
Signature:
-----------------------------------
A-7
<PAGE> 20
Schedule A
California Labor Code Section 2870(a)
Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information, except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
Schedule A
<PAGE> 21
SCHEDULE B
1. Proprietary Information. Except as set forth below, I acknowledge that at
this time I know nothing about the business or Proprietary Information of
the Company, other than information I have learned from the Company in the
course of being hired:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Reserved Inventions. Except as set forth below, there are no ideas,
processes, inventions, technology, writings, programs, designs, formulas,
discoveries, patents, copyrights, or trademarks, or any claims, rights, or
improvements to the foregoing, that I wish to exclude from the operation
of this Agreement:
N/A.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name: V.S. Venkataraman
---------------------------------
Signature: /s/ V.S. VENKATARAMAN
----------------------------
Date: July 15, 1998
---------------------------------
Schedule B
<PAGE> 22
SCHEDULE C
TERMINATION CERTIFICATE
This is to certify that I have returned all personal property of the
Company, including, without limitation, all books, manuals, records, models,
drawings, reports, notes, contracts, lists, blueprints, and other documents and
materials, Proprietary Information, and equipment furnished to or prepared by me
in the course of or incident to my employment with the Company, and that I did
not make or distribute any copies of the foregoing.
I further certify that I have reviewed the Employee/Consultant Proprietary
Information Agreement signed by me and that I have complied with and will
continue to comply with all of its terms including, without limitation: (i) the
reporting of any invention, process, idea, etc. conceived or developed by me and
covered by the Agreement; and (ii) the preservation as confidential of all
Proprietary Information pertaining to the Company. This certificate in no way
limits my responsibilities or the Company's rights under the Agreement.
On termination of my employment with the Company, I will be employed by
[NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will
be working in connection with the following projects:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name:
---------------------------------
Signature:
----------------------------
Date:
---------------------------------
Schedule C
