<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MTI Technology Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
<PAGE> 2
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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2
<PAGE> 3
MTI LOGO
MTI TECHNOLOGY CORPORATION
4905 EAST LA PALMA AVENUE
ANAHEIM, CALIFORNIA 92807
August 24, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of MTI Technology Corporation, to be held on Thursday, September 28, 2000, at
the Company's offices, 4905 East La Palma Avenue, Anaheim, California 92807,
beginning at 10:00 a.m. local time.
The business to be conducted at the meeting includes the election of two
directors, ratification of the selection of independent auditors, approval of an
amendment to the 1996 Stock Incentive Plan to increase the number of shares
subject to the Stock Incentive Plan and consideration of any other matters that
may properly come before the meeting and any adjournment thereof.
It is important that your shares be represented, so, even if you presently
plan to attend the meeting, please complete, sign, date and promptly return the
enclosed proxy card. If you do attend the meeting and wish to vote in person,
you may withdraw your proxy at that time.
Sincerely,
/s/ THOMAS P. RAIMONDI, JR.
Thomas P. Raimondi, Jr.
President and Chief Executive Officer
<PAGE> 4
MTI TECHNOLOGY CORPORATION
4905 EAST LA PALMA AVENUE
ANAHEIM, CALIFORNIA 92807
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 28, 2000
The Annual Meeting of Stockholders of MTI Technology Corporation, a
Delaware corporation (the "Company"), will be held at the Company's offices,
4905 East La Palma Avenue, Anaheim, California 92807, on Thursday, September 28,
2000 at 10:00 a.m., local time, for the following purposes:
(1) To elect two members of the Board of Directors each to serve for a
term of 3 years or until his successor is elected and qualified;
(2) To consider and act upon the ratification of the selection of KPMG
Peat Marwick LLP as the Company's independent auditors for fiscal
year 2001;
(3) To approve an amendment to the 1996 Stock Incentive Plan to increase
the number of shares subject to the Stock Incentive Plan from
7,631,126 to 10,631,126, plus annual adjustments; and
(4) To transact any such other business as may properly come before the
Annual Meeting or any adjournment thereof.
A copy of the Company's Annual Report for the fiscal year ended April 1,
2000, containing consolidated financial statements, is included with this
mailing.
The Board of Directors has fixed the close of business on July 31, 2000 as
the record date for determining stockholders entitled to receive notice of and
to vote at the Annual Meeting and at any adjournment thereof. A list of such
stockholders will be available for examination by any stockholder at the Annual
Meeting and, for any purpose germane to the Annual Meeting, at the office of the
Secretary of the Company, 4905 East La Palma Avenue, Anaheim, California for a
period of ten days prior to the Annual Meeting. The officers and directors of
the Company cordially invite you to attend the Annual Meeting.
By Order of the Board of Directors
/s/ PAUL W. EMERY, II
Paul W. Emery, II
Chief Operating Officer and Secretary
Anaheim, California
August 24, 2000
--------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE,
SIGN AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN PROMPTLY MAILING IN YOUR PROXY CARD.
--------------------------------------------------------------------------------
<PAGE> 5
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MTI Technology Corporation ("MTI" or the
"Company") for use at the Company's Annual Meeting of Stockholders to be held on
Thursday, September 28, 2000 (the "Annual Meeting"), at 10:00 a.m., local time,
at the Company's offices, 4905 East La Palma Avenue, Anaheim, California 92807
and at any adjournment thereof. This Proxy Statement and the accompanying proxy
are first being sent to stockholders entitled to vote at the Annual Meeting on
or about August 24, 2000.
THE PROXY
The persons named as proxyholders, Thomas P. Raimondi, Jr. and Paul W.
Emery, II, were selected by the Board of Directors of the Company. Mr. Raimondi
is a director and officer of the Company and Mr. Emery is an executive officer
of the Company.
All shares represented by each properly executed, unrevoked proxy received
in time for the Annual Meeting will be voted in the manner specified therein. If
no specification is made on the proxy as to any one or more of the proposals,
the Common Stock of the Company represented by the proxy will be voted for the
election of the directors named in the Proxy Statement, for the ratification of
the selection of KPMG Peat Marwick LLP as the Company's independent auditors for
the 2001 fiscal year, for approval of the amendment to the 1996 Stock Incentive
Plan to increase the number of shares available for grant, and, with respect to
any other matters that may come before the Annual Meeting, at the discretion of
the proxyholders. The Company does not presently know of any other such
business. An executed proxy may be revoked at any time before its exercise by
filing with the Secretary of the Company a written notice of revocation or a
duly executed proxy bearing a later date. The execution of the enclosed proxy
will not affect a stockholder's right to vote in person should such stockholder
find it convenient to attend the Annual Meeting and desire to vote in person.
VOTING AT THE ANNUAL MEETING
The only issued and outstanding voting securities of the Company are its
shares of Common Stock, $.001 par value (the "Common Stock"), of which
32,223,167 shares were outstanding at the close of business on July 31, 2000.
Only holders of record at the close of business on July 31, 2000 are entitled to
receive notice of and to vote at the Annual Meeting and any adjournment thereof.
Except as described below, the holders of the Common Stock of the Company are
entitled to one vote per share on each matter submitted to a vote of the
stockholders. The Company's Bylaws do not provide for cumulative voting by
stockholders.
The holders of a majority of the Company's outstanding Common Stock,
present in person or by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting or any adjournment thereof. While there is no
definitive statutory or case law authority in Delaware as to the proper
treatment of abstentions (also referred to as withheld votes), the Company
believes that abstentions should be counted for purposes of determining if a
quorum is present at the Annual Meeting for the transaction of business. With
respect to broker nominee votes, the Delaware Supreme Court has held that broker
nominee votes may be counted as present or represented for purposes of
determining the presence of a quorum. Abstentions are included in determining
the number of shares voted on the proposals submitted to stockholders (other
than the election of directors) and will have the same effect as a vote against
such proposals. Broker "non-votes" are included in determining the number of
shares voted on for the proposal to ratify the selection of KPMG Peat Marwick
LLP as the Company's independent auditors and will have the same effect as a
vote against such proposal. However, broker non-votes will not be counted for
the other proposals submitted to stockholders. Directors are elected by
plurality of the votes of the shares of Common Stock represented and voted at
the meeting and abstentions and broker non-votes will have no effect on the
outcome of the election of directors. The affirmative vote of a majority of the
shares of Common Stock represented and voted at the meeting is required for
approval of Proposal Two and Proposal Three.
SOLICITATION
The expense of soliciting proxies will be borne by the Company. Proxies
will be solicited principally through the use of the mail, but directors,
officers and regular employees of the Company may solicit proxies personally or
by telephone or special letter without any additional compensation. The Company
also will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for any reasonable expenses in forwarding proxy materials to
beneficial owners. The Company has engaged Corporate Investor Communications,
Inc. to supplement the Company's solicitation efforts, and the Company will pay
the customary fee, estimated to be approximately $5,000.
2
<PAGE> 6
PROPOSAL ONE
ELECTION OF DIRECTORS
At the Annual Meeting, two individuals will be elected as directors for
three year terms and until his successor is elected. The Board of Directors has
nominated Al Melrose and John Repp for election at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE NOMINEES FOR
ELECTION AS MEMBERS OF THE BOARD OF DIRECTORS.
The proxies given to the proxyholders will be voted or not voted as
directed thereon, and if no direction is given, will be voted FOR approval of
the nominees. The Board of Directors knows of no reason why the nominees should
be unable or unwilling to serve, but if the nominees should, for any reason, be
unable or unwilling to serve, the proxies will be voted for the election of such
other persons to the office of director as the Board of Directors may recommend
in the place of such nominees.
NOMINEES FOR DIRECTOR
The following table sets forth the names, ages and positions of all
directors and the nominees as of August 9, 2000. A summary of the background and
experience of each of these individuals is set forth after the table.
Information regarding MTI's executive officers is set forth in Part I of its
Annual Report on Form 10-K under the heading "Executive Officers of the
Registrant."
DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION(S) COMMITTEE(S)
---- --- ----------- ------------
<S> <C> <C> <C>
Raymond J. Noorda.................... 76 Chairman of the Board of Audit and Compensation
Directors
Val Kreidel.......................... 45 Director Audit and Compensation
Thomas P. Raimondi, Jr............... 43 President and Chief Executive Nominating
Officer and Director
John Repp............................ 61 Director, Nominee Audit and Compensation
Al Melrose........................... 74 Director, Nominee Audit and Nominating
Ralph J. Yarro III................... 36 Director Nominating
</TABLE>
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: Ms. Kreidel, 2002; Mr. Raimondi, 2002; Mr.
Noorda, 2001; Mr. Yarro, 2001; Mr. Repp, 2000; and Mr. Melrose, 2000.
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 currently serves as the Chairman of Board for The
Canopy Group, Inc., our largest stockholder. Mr. Noorda also serves as a member
of the Board of Directors of Caldera Systems, Inc., a Linux-based software
company. 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. a
manufacturer of power supplies and System Industries, Inc. a manufacturer of
storage subsystems.
Val Kreidel was elected a Director of the Company in January 1994. Ms.
Kreidel has served as a financial analyst for NFT Ventures, Inc. and DSC
Ventures, Inc., private investment companies, since May 1989. From May 1985 to
May 1989, Ms. Kreidel served as a Vice President of Atlantic Financial Savings
Bank in its Real Estate Loan Department.
3
<PAGE> 7
Thomas P. Raimondi, Jr. was named President and Chief Executive Officer of
the Company in December 1999. From July 1998 to December 1999, Mr. Raimondi was
the Company's Chief Operating Officer. Mr. Raimondi was our Senior Vice
President and General Manager since May 1996 and was our Vice President,
Strategic Planning, Product Marketing, and Director of Marketing from 1987 until
May 1996. Mr. Raimondi joined the Company in 1987. Mr. Raimondi is also a member
of the Board of Directors of Caldera Systems, Inc.
John Repp has been a director of the Company since January 1998. Mr. Repp
has been a consultant to several technology firms beginning in 1995. From 1989
to 1995, Mr. Repp was the Vice President of Sales for Seagate Technology, Inc.,
a software developer and manufacturer of disk drives. 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 1994, he worked in the investor relations and marketing of
various companies for approximately 30 years.
Ralph Yarro III was appointed a director of the Company in March 2000. Mr.
Yarro has been the President, Chief Executive Officer and a director of The
Canopy Group, Inc. since April 1995. Mr. Yarro is also the Chairman of the Board
of Directors of Caldera Systems, Inc.
DIRECTORS' FEES AND OPTIONS
Each non-employee director received meeting fees of $2,500 per Board
meeting attended during the fiscal year ended April 1, 2000, 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 1, 2000, 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 2000, the Company paid
$0, $3,597, $6,201, $0 and $0 for medical expenses not otherwise covered by
insurance for Mr. Noorda, Ms. Kreidel, Mr. Repp, Mr. Melrose and Mr. Yarro,
respectively.
The Company paid Mr. Repp $8,496 during the year ended April 1, 2000 for
consulting services related to the development and implementation of the
Company's Fiscal 2000 Sales Commission Plan. The Company paid Mr. Melrose
$171,679 during the year ended April 1, 2000 for consulting services related to
various aspects of the Company's operations, including investor relations,
marketing, public relations, and strategic planning and positioning of the
Company.
Since March 2000, the Company has included each non-employee director with
the named executives of the Company in the Company's investment and tax planning
program. During fiscal 2000, no expenses were reimbursed to or fees incurred on
behalf of any director under this program.
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. Yarro, Ms. Kreidel and Mr. Repp and Mr. Melrose,
in the event they are re-elected) will be granted an option to purchase 2,500
shares of Common Stock, provided that such director has served as such for at
least one year. Mr. Noorda, Ms. Kreidel and Mr. Repp each received options to
purchase 2,500 shares of Common Stock with an exercise price of $22.375 per
share following the Company's 1999 Annual Meeting. Mr. Melrose received an
option to purchase 10,000 shares of Common Stock with an exercise price of $5.50
per share following his appointment as director, and Mr. Yarro received an
option to purchase 10,000 shares of Common Stock with an exercise price of
$45.875 per share following his appointment as director. Each option granted
under the Directors' Plan has an exercise price equal to the fair market value
of the Common Stock on the date of the grant and vests monthly over a 12-month
period. In addition, on March 13, 2000 the Company granted Mr. Yarro an option
to purchase 50,000 shares of Common Stock with an exercise price of $45.875 per
share and which vest on March 13, 2001.
4
<PAGE> 8
COMMITTEES OF THE BOARD
The Company currently has three committees, the Audit Committee, the
Compensation Committee and the Nominating Committee. The Company does not have
an executive 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 Compensation Committee, currently consisting of Mr. Noorda, 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.
On June 22, 2000, the Board of Directors established a Nominating
Committee. The Nominating Committee, currently consisting of Mr. Melrose, Mr.
Yarro and Mr. Raimondi, recommends nominees for positions on the Board of
Directors, reviews nominations recommended by stockholders in accordance with
the Bylaws and monitors the procedures set forth in the Bylaws for such
nominations.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2000, the Compensation Committee consisted of Mr.
Noorda, Mr. Melrose, Ms. Kreidel and Mr. Repp. None of these persons is or has
been an officer or employee of the Company or any of its subsidiaries. In
addition, there are no Compensation Committee interlocks between MTI and other
entities involving MTI executive officers and Board members who serve as
executive officers of such entities. During fiscal year 2000, Mr. Melrose
provided investor relations consulting services to the Company for which he was
paid an aggregate of $171,679 for his services. On July 27, 1999, the Company
entered into an agreement with Caldera Systems, Inc. ("Caldera"), a provider of
Linux-based operating systems for businesses, to purchase 5,333,333 shares of
common stock of Caldera, approximately 25% of the then outstanding capital
stock, for a purchase price of $6,000,000. The Canopy Group, Inc., a major
stockholder of the Company, currently owns substantially all of the remaining
issued and outstanding shares of Caldera. Raymond J. Noorda, Chairman of the
Board of Directors of the Company, is the Chairman of the Board of Directors of
The Canopy Group, Inc., and a member of the Board of Directors of Caldera.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During the fiscal year ended April 1, 2000, the Board of Directors met five
times. In addition, the Audit Committee and Compensation Committee met one and
five times, respectively. There have been no meetings of the Nominating
Committee. No director attended fewer than 75% of the aggregate number of
meetings held by the Board of Directors and all committees of the Board on which
such director served.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires that the Company's executive officers and directors file reports of
beneficial ownership on Form 3 and changes in beneficial ownership on Forms 4
and 5 with the Securities and Exchange Commission ("SEC"). Executive officers
and directors are also required by the SEC rules to furnish the Company with
copies of all Section 16(a) reports they file. As part of a Section 16
compliance program established by the Company for its executive officers and
directors, the Company undertakes to file these reports on behalf of such
individuals. Based solely on its review of the Forms 3, 4 and 5 filed on behalf
of its executive officers and directors, as well as written representations from
certain individuals that no Forms 5 are required by such individuals, the
Company believes that, during the fiscal year ended April 1, 2000, all Section
16(a) filing requirements applicable to its executive officers and directors
were complied with pursuant to the SEC rules, except for the following late
5
<PAGE> 9
Form 4 filings: John Repp (August 1998, September 1998 and December 1998),
Thomas P. Raimondi, Jr. (September 1999), Richard L. Ruskin (September 1999),
Stephanie Braun (November 1999), Al Melrose (February 2000), Gary Scott
(February 2000) and Frank Yoshino (February 2000). Ralph Yarro amended his March
2000 Form 3 to include the grant of an option that he received under the
Directors' Plan upon his appointment to the Board of Directors. The following
individuals failed to timely file their Form 5s to report the grant of stock
options they received from the Company: Thomas P. Raimondi, Jr., Gary Scott,
Dale R. Boyd, Richard L. Ruskin, Venki Venkataraman, Frank Yoshino, Stephanie
Braun, Chuck Sitzman and Dan Brown.
6
<PAGE> 10
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 9, 2000 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
1, 2000, and (iv) all directors and executive officers as a group. As of July 9,
2000, there were 32,172,489 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.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
---------------------
NAME NUMBER PERCENT
---- ---------- -------
<S> <C> <C>
The Canopy Group, Inc....................................... 14,463,285 44.96%
240 West Center Street
Orem, Utah 84057
FMR Corp.(2)................................................ 3,777,600 11.74%
82 Devonshire Street Boston,
Massachusetts 02109
Raymond J. Noorda(3)........................................ 14,535,577 45.16%
Val Kreidel(4).............................................. 72,292 *
Ralph Yarro(5).............................................. 164,167 *
John Repp(6)................................................ 2,292 *
Al Melrose(7)............................................... 34,750 *
Thomas P. Raimondi, Jr.(8).................................. 133,663 *
Earl M. Pearlman(9)......................................... 0 *
Dale R. Boyd(10)............................................ 119,000 *
Gary Scott(11).............................................. 428,175 1.33%
Richard L. Ruskin(12)....................................... 64,075 *
Dan Brown(13)............................................... 37,836 *
All directors and officers as a group (15 persons)(14)...... 15,794,411 47.63%
</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 this table have sole voting and investment power with respect to
all shares.
(2) FMR Corp. is the parent holding company of, among others, Fidelity
Management & Research Company ("Fidelity Management"), a registered
investment adviser which acts as investment adviser to various registered
investment companies within the Fidelity family of investment funds,
including Fidelity Limited International ("Fidelity International"). FMR
Corp., Edward C. Johnson 3d, the Chairman of FMR, Abigail P. Johnson, a
director of FMR and Fidelity International are deemed to beneficially own
shares of the Company held by those funds over which they exercise control.
Information with respect to FMR Corp.'s beneficial ownership was derived
from Fidelity Management's July 14, 2000 letter to the Company.
(3) 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"), 14,792 shares issuable to Mr. Noorda upon
exercise of options exercisable within 60 days of July 9, 2000. 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.
(4) Includes 72,292 shares issuable upon exercise of options exercisable within
60 days of July 9, 2000.
(5) Includes 154,167 shares issuable upon exercise of options and warrants
exercisable within 60 days of July 9, 2000.
(6) Includes 2,292 shares issuable upon exercise of options exercisable within
60 days of July 9, 2000.
(7) Includes 34,750 shares issuable upon exercise of options exercisable within
60 days of July 9, 2000.
(8) Includes 123,663 shares issuable upon exercise of options exercisable
within 60 days of July 9, 2000.
(9) Mr. Pearlman resigned as the Company's President and Chief Executive
Officer in December 1999.
(10) Includes 119,000 shares issuable upon exercise of options exercisable
within 60 days of July 9, 2000. Mr. Boyd resigned as an officer of the
Company on July 10, 2000.
(11) Includes 175,625 shares issuable upon exercise of options exercisable
within 60 days of July 9, 2000.
(12) Includes 60,075 shares issuable upon exercise of options exercisable within
60 days of July 9, 2000.
(13) Includes 37,500 shares issuable upon exercise of options exercisable within
60 days of July 9, 2000.
(14) Includes shares held by entities affiliated with directors and executive
officers of the Company as described above, including 991,219 shares
issuable upon exercise of stock options and warrants exercisable within 60
days of July 9, 2000.
7
<PAGE> 11
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS AND OTHER INFORMATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth for each of the Company's last three
completed fiscal years the compensation of Thomas P. Raimondi, Jr., the
Company's President and Chief Executive Officer, Earl M. Pearlman, the Company's
former President and Chief Executive Officer and the four most highly
compensated executive officers other than Mr. Raimondi 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 OPTIONS(#) COMPENSATION(6)
--------------------------- ---- --------- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Raimondi, Jr.(1)........ 2000 303,654 0 * 425,000 4,558
President, Chief Executive 1999 243,978 0 * 125,000 853
Officer 1998 207,343 90,522 * 0 3,020
Earl M. Pearlman(2)............... 2000 301,585 0 * 150,000 637,237
President, Chief Executive 1999 285,577 0 * 75,000 0
Officer 1998 260,577 202,070 * 285,000 0
Gary M. Scott..................... 2000 265,649 0 * 125,000 1,718
Senior Vice President, 1999 261,990 0 * 50,000 1,443
European Operations 1998 254,609 103,022 * 80,000 2,584
Dale R. Boyd(3)................... 2000 258,654 0 * 300,000 4,209
Senior Vice President, 1999 218,846 0 * 90,000 936
Chief Financial Officer 1998 189,750 91,522 * 0 2,864
Rick Ruskin(4).................... 2000 243,654 49,999 * 150,000 3,831
Senior Vice President, Marketing
Dan Brown(5)...................... 2000 219,615 0 * 200,000 4,018
Senior Vice President,
Chief Technology Officer
</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) Mr. Raimondi was appointed President and Chief Executive Officer on December
9, 1999. Mr. Raimondi cancelled options to purchase 300,000 shares of Common
Stock on July 5th, 2000.
(2) Mr. Pearlman resigned as President and Chief Executive Officer on December
9, 1999.
(3) Mr. Boyd resigned as an officer of the Company on July 10, 2000.
(4) Mr. Ruskin was elected as an officer of the Company on July 20, 1999.
(5) Mr. Brown was elected as an officer of the Company on July 20, 1999.
(6) Amounts presented include 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 in the amount of $213 for Mr.
Raimondi, $289 for Mr. Scott, and $192 for Mr. Ruskin. In addition, the
amounts presented include the Company's dollar contribution to the Named
Executive Officer's 401(k) plan in the amount of $4,345 for Mr. Raimondi,
$60 for Mr. Pearlman, $1,429 for Mr. Scott, $4,209 for Mr. Boyd, $3,639 for
Mr. Ruskin, and $4,018 for Mr. Brown. The amount presented for Mr. Pearlman
also includes $637,177 for severance payments.
8
<PAGE> 12
SUMMARY OF OPTION GRANTS
The following table sets forth the individual grants of stock options made
by the Company during the fiscal year ended April 1, 2000 to each of the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION ----------------------
NAME (#) YEAR(1) ($/SH)(1) DATE 5%($) 10%($)
---- ---------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Raimondi, Jr............ 125,000 3% $ 5.06 4/7/2009 397,972 1,008,540
181,500 4% $30.06 12/15/2009 3,431,465 8,696,007
118,500 3% $36.88 1/1/2010 2,748,073 6,964,157
Earl M. Pearlman.................. 150,000 3% $ 5.06 4/7/2009 477,567 1,210,248
Gary Scott........................ 50,000 1% $ 5.06 4/7/2009 159,189 403,416
75,000 2% $30.06 12/15/2009 1,417,961 3,593,391
Dale R. Boyd...................... 100,000 2% $ 5.06 4/7/2009 318,378 806,832
121,000 3% $30.06 12/15/2009 2,287,644 5,797,338
79,000 2% $36.88 1/1/2010 1,832,049 4,642,771
Rick Ruskin....................... 50,000 1% $ 5.06 4/7/2009 159,189 403,416
100,000 2% $30.06 12/15/2009 1,890,614 4,791,188
Dan Brown......................... 50,000 1% $ 5.06 4/7/2009 159,189 403,416
100,000 2% $14.69 10/15/2009 923,689 2,340,809
50,000 1% $30.06 12/15/2009 945,307 2,395,594
</TABLE>
---------------
(1) Based on an aggregate of 4,423,500 options granted to directors and
employees of the Company in fiscal year 2000, including the Named Executive
Officers.
(2) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated by assuming that the
stock price appreciates at the indicated annual rate compounded annually for
the entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated stock price. No gain to the
option holder is possible unless the stock price increases over the option
term.
Mr. Raimondi's option grant to purchase 125,000 shares at $5.06, which
expires April 7, 2009, 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 cancelled his option
grant to purchase 181,500 shares of Common Stock and his option grant to
purchase 118,500 shares of Common Stock on July 5, 2000.
Mr. Pearlman's option grant to purchase 150,000 shares at $5.06, which
expires April 7, 2009, vests 100% on April 7, 2000.
Mr. Scott's option grant to purchase 50,000 shares at $5.06, which expires
April 7, 2009, 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
75,000 shares at $30.06, which expires December 15, 2009, 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. Boyd's option grant to purchase 100,000 shares at $5.06, which expires
April 7, 2009, 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. Boyd's option grant to purchase 121,000
shares at $30.06, which expires December 15, 2009, vests 50% one year after
the commencement date of the grant, and the remaining unvested shares
subject to the option grant vests two years after the commencement
9
<PAGE> 13
date. Mr. Boyd's option grant to purchase 79,000 shares at $36.88, which
expires January 1, 2010, vests 50% one year after the commencement date of
the grant, and the remaining unvested shares subject to the option grant
vests two years after the commencement date.
Mr. Ruskin's option grant to purchase 50,000 shares at $5.06, which expires
April 7, 2009, 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. Ruskin's option grant to purchase
100,000 shares at $30.06, which expires December 15, 2009, 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. Brown's option grant to purchase 50,000 shares at $5.06, which expires
April 7, 2009, 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. Brown's option grant to purchase
100,000 shares at $14.69, which expires October 15, 2009, 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. Brown's option grant to purchase 50,000 shares at $30.06,
which expires December 15, 2009, vests 25% one year after the commencement
date of the grant, and one-twelfth of the remaining unvested shares subject
to the option grant shall vest each quarter thereafter.
All options grants presented within this table have provisions accelerating
the vesting in the event of a change in control.
10
<PAGE> 14
SUMMARY OF OPTIONS EXERCISED
The following table sets forth information concerning exercises of stock
options during the year ended April 1, 2000 by each of the Named Executive
Officers and the value of unexercised options at April 1, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR END(#) AT FISCAL YEAR END($)
ACQUIRED ON VALUE ---------------------- ---------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
---- ----------- ----------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Thomas P. Raimondi, Jr........ 252,500 $ 5,645,801 66,475/521,775 1,319,530/4,527,539
Earl M. Pearlman.............. 511,668 $11,132,543 0/0 0/0
Gary Scott.................... 235,000 $ 4,705,313 383,750/186,250 8,770,297/2,024,928
Dale R. Boyd.................. 115,000 $ 2,852,297 52,750/386,250 1,040,624/3,853,016
Rick Ruskin................... 121,300 $ 2,344,993 34,450/201,250 565,222/1,957,109
Dan Brown..................... 0 $ -- 18,750/231,250 413,672/2,923,828
</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 1,
2000 ($26.38) minus the exercise price.
SEVERANCE AGREEMENTS
The Company has entered into Severance Agreements with the following Named
Executive Officers: Earl Pearlman, Dale Boyd, Thomas Raimondi, Gary Scott, Rick
Ruskin and Dan Brown. 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), the
executive 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, after a change in control 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.
In connection with Earl Pearlman's resignation as President, the Company
entered into a Severance and Release Agreement with him on November 30, 1999
(the "Severance Agreement"). Pursuant to the terms of the Severance Agreement,
Mr. Pearlman received a one-time payment equivalent to eighteen months of his
current base salary which includes car allowance and a base bonus as calculated
under the Company's executive bonus plan. Mr. Pearlman entered into a consulting
agreement with the Company on December 1, 1999 to provide general corporate
management services to the Company. Mr. Pearlman's stock option awards for the
Company's Common Stock continued to vest and remained in full force and effect
until May 15, 2000, when Mr. Pearlman terminated the consulting agreement. Mr.
Pearlman remains eligible to obtain continuing coverage under the Company's
medical, vision and dental (the "Health Plans"). Pursuant to the terms of the
Severance Agreement, the Company will make the required premium payments for any
continuation coverage that Mr. Pearlman elects to obtain under the Health Plans
until March 31, 2001.
11
<PAGE> 15
In connection with Dale Boyd's resignation as Chief Financial Officer, the
Company entered into a Severance and Release Agreement with him on July 10, 2000
(the "Severance Agreement"). Pursuant to the terms of the Severance Agreement,
Mr. Boyd will receive a one-time payment equivalent to one year of his current
base salary and one years' car allowance. Mr. Boyd will remain available to the
Company for one year pursuant to a consulting agreement to perform general
financial management or other such services as the Company may direct. Mr.
Boyd's stock option awards for the Company's Common Stock will continue to vest
and will remain in full force and effect during such one-year period. Mr. Boyd
remains eligible to obtain continuing coverage under the Health Plans. Pursuant
to the terms of the Severance Agreement, the Company will make the premium
payments for any continuation coverage that Mr. Boyd elects to obtain under the
Health Plans until August 31, 2001.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During the fiscal year ended April 1, 2000, the Compensation Committee,
consisting of Mr. Noorda, Ms. Kreidel, Mr. Repp and Mr. Melrose, 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 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 2000, the Committee reviewed the
recommendations of the Chief Executive Officer as to proposed base salaries for
all executives other than the Chief Executive Officer. Increases in base
salaries generally reflect increased responsibilities over the prior fiscal year
or strong individual performance in the prior fiscal year.
The Committee performed an annual review of the base salary of each of the
executive officers with reference to the executive's performance, level of
responsibility and experience to determine whether the current base salary is
appropriate and competitive. The Committee evaluated the reasonableness of the
base salary based upon the median salary range paid to executive officers with
comparable duties at companies of similar size in the same geographic area in
the computer technology industry. No specific quantitative weight was given to
any particular performance measurement.
Cash Bonuses. The Company's Board of Directors approved and implemented a
senior management bonus plan ("Bonus Plan") for fiscal 2000. 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 2000 ("Actual
Net Income") being equal to or greater than the consolidated net income as set
forth in the Company's fiscal 2000 annual operating plan as approved by the
Company's Board of Directors ("AOP Net Income"), with the exception of Mr. Scott
and Mr. Sitzman. The criterion for Mr. Scott's bonus was based solely on the
Company's actual audited net income for its
12
<PAGE> 16
consolidated European operating subsidiary for fiscal 2000 being equal or
greater than that as set forth in the Company's annual operating plan for fiscal
2000. The criterion for Mr. Sitzman's bonus was as follows: 50% of Mr. Sitzman's
bonus was based on the Company's actual audited net income for its U.S. domestic
operating unit for fiscal 2000 being equal or greater than that as set forth in
the Company's annual operating plan for fiscal 2000; and the other 50% of Mr.
Sitzman's bonus was based on the Company's actual net contribution margin for
the Company's U.S. Field Service operating unit for fiscal 2000 being equal to
or greater than that as set forth in the Company's fiscal 2000 annual operating
plan.
Bonus Plan participants were divided into two groups. The first group
consisted of the Chief Operating Officer, those senior managers who directly
reported to the Chief Operating Officer and the Chief Financial Officer
(collectively referred to as, the "Direct Reporting Senior Managers"). The
second group was comprised of senior managers who reported to someone other than
either the President and Chief Executive Officer or the Chief Operating Officer
(collectively referred to as, the "Second 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 with the exception of Mr. Sitzman and Mr. Scott, as noted above. The Base
Bonus for each Direct Reporting Senior Manager was 15% of his respective annual
salary. The Base Bonus for each Secondary Senior Manager was 10% 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 $1,000,000 of Actual Net Income that
was in excess of the AOP Net Income, 20% of every dollar greater than $1,000,000
up to $5,000,000 and 25% of every dollar greater than $5,000,000. The bonus pool
was divided between the Bonus Plan participant groups based on the following
matrix: 9.0% paid to both the Chief Operating Officer and Chief Financial
Officer, 7.0% paid to each of the other Direct Reporting Senior Managers, and
5.0% paid to each of the Secondary Senior Managers. However, there were no
distributions made from the bonus pool as no bonuses were paid during fiscal
2000.
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. Raimondi and 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. Neither Mr. Raimondi nor Mr. Pearlman
received cash bonuses for fiscal 2000. Mr. Pearlman was awarded options to
purchase 150,000 shares of the Company's Common Stock during fiscal 2000, and
Mr. Raimondi was awarded options to purchase 425,000 shares of the Company's
Common Stock during fiscal 2000.
13
<PAGE> 17
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 1, 2000, 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 2001 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
John Repp
14
<PAGE> 18
COMPANY STOCK PRICE PERFORMANCE
The following performance graph assumes an investment of $100 on March 31,
1995 (the date the Company became subject to Section 12 of the Exchange Act) and
compares the change to March 31, 2000 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 TECHNOLOGY NASDAQ STOCK MARKET - NASDAQ COMPUTER
CORPORATION U.S. MANUFACTURER INDEX
-------------- --------------------- ------------------
<S> <C> <C> <C>
3/31/1995 100.00 100.00 100.00
3/96 57.69 135.80 153.72
3/97 115.38 150.95 167.92
3/98 530.77 228.88 297.18
3/99 170.19 309.19 589.61
3/00 811.54 574.04 1392.13
</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.
15
<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 27, 1999, the Company entered into an agreement with Caldera, a
provider of Linux-based operating systems for businesses, to purchase 5,333,333
shares of common stock of Caldera, approximately 25% of the then outstanding
capital stock, for a purchase price of $6,000,000. The Canopy Group, Inc., a
major stockholder of the Company, currently owns substantially all of the
remaining issued and outstanding shares of Caldera. Raymond J. Noorda, Chairman
of the Board of Directors of the Company, is the Chairman of the Board of
Directors of The Canopy Group, Inc., and a member of the Board of Directors of
Caldera. In addition, Thomas P. Raimondi, Jr., our President and Chief Executive
Officer is also a member of the Board of Directors of Caldera.
On November 30, 1999, the Company entered into a Severance and Release
Agreement (the "Severance Agreement") with Earl Pearlman in connection with his
resignation as President from the Company. Pursuant to the terms of the
Severance Agreement, Mr. Pearlman received a one-time payment of $322,800 which
is equivalent to eighteen months of his current base salary which includes car
allowance and his base bonus as calculated under the Company's executive bonus
plan. Mr. Pearlman entered into a consulting agreement with the Company to
provide general corporate management services to the Company. Mr. Pearlman's
stock option awards for the Company's Common Stock continued to vest and
remained in full force and effect until May 15, 2000, when Mr. Pearlman
terminated the consulting agreement. Mr. Pearlman remains eligible to obtain
continuing coverage under the Company's medical, vision and dental (the "Health
Plans"). Pursuant to the terms of the Severance Agreement, the Company will make
the required premium payments for any continuation coverage that Mr. Pearlman
elects to obtain under the Health Plans until March 31, 2001.
During Fiscal 2000, the Company sold goods and services totaling $4,920,000
to Center 7, Inc., a subsidiary of The Canopy Group, Inc. These sales were made
in the ordinary course of business on the Company's standard terms and
conditions.
Al Melrose, a director of the Company, provided investor relations
consulting services to the Company during the fiscal year ended April 1, 2000.
Mr. Melrose was paid an aggregate of $171,679 for his services.
On July 10, 2000, the Company entered into a Severance and Release
Agreement (the "Severance Agreement") with Dale Boyd in connection with his
resignation as Chief Financial Officer from the Company. Pursuant to the terms
of the Severance Agreement, Mr. Boyd will receive a one-time payment of $274,400
which is equivalent to one year of his current base salary and one years' car
allowance of $1,200 per month. Mr. Boyd will remain available to the Company for
one year pursuant to a consulting agreement to perform general financial
management or other such services as the Company may direct. Mr. Boyd's stock
option awards for the Company's Common Stock will continue to vest and will
remain in full force and effect during such one-year period. Mr. Boyd remains
eligible to obtain continuing coverage under the Company's medical, vision and
dental (the "Health Plans"). Pursuant to the terms of the Severance Agreement,
the Company will make the premium payments for any continuation coverage that
Mr. Boyd elects to obtain under the Health Plans until August 31, 2001.
PROPOSAL TWO
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has recommended that the stockholders ratify the
selection of KPMG Peat Marwick LLP to serve as independent auditors for the
Company for the fiscal year ending April 7, 2001, or until a successor is
appointed.
KPMG Peat Marwick LLP has been the principal certified public accounting
firm utilized by the Company since March 1986. During this time, KPMG has
examined the Company's consolidated financial statements, made limited reviews
of the interim financial reports, reviewed filings with the Securities and
Exchange Commission and provided general advice regarding related accounting
matters.
The matter is being submitted to the stockholders for approval by the
affirmative vote of the holders of record of a majority of the shares
represented and voting, in person or by proxy, at the Annual Meeting.
16
<PAGE> 20
THE BOARD OF DIRECTORS RECOMMENDS THE ADOPTION OF THE FOLLOWING RESOLUTION,
WHICH WILL BE PRESENTED TO THE MEETING:
RESOLVED, that the stockholders of MTI Technology Corporation hereby ratify
the selection of KPMG Peat Marwick LLP as independent auditors of the Company
for the fiscal year ending April 7, 2001.
The persons designated in the enclosed proxy will vote your shares FOR
ratification of the selection unless instructions to the contrary are indicated
in the enclosed proxy.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting of Stockholders to respond to appropriate questions and to make
statements should they desire to do so.
PROPOSAL THREE
AMENDMENT OF 1996 STOCK INCENTIVE PLAN
At the Annual Meeting, the Company's stockholders will be asked to vote on
a proposal to approve an amendment to the 1996 Stock Incentive Plan (the "Plan")
to increase the number of shares subject to the Plan from 7,631,126 to
10,631,126, plus annual adjustments.
The Board of Directors has concluded that the number of shares authorized
and remaining available for issuance under the Plan as currently in effect will
not be sufficient to achieve the Company's objectives and that an amendment to
the Plan is in the best interests of the Company.
The Plan was originally adopted by the Board in June 1996 and by its
stockholders in October 1996. As of July 31, 2000, options to purchase 5,740,120
shares of Common Stock were outstanding under the Plan, and 181,083 shares
remained available for issuance under the Plan. In order to have sufficient
shares available for future grants, the number of shares of Common Stock that
can be issued under the Plan is proposed to be increased to 10,631,126, plus
annual adjustments. The Plan also provides that in January of each year the
number of shares available for grant increases by a number equal to 3% of the
number of shares outstanding as of December 31st of the immediately preceding
year (the "annual adjustment").
The essential features of the Plan are discussed below.
Purposes. The purposes of the Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees, directors and consultants of the Company and
its subsidiaries and to promote the success of the Company's business.
Administration. With respect to grants of awards to employees who are also
officers or directors of the Company, the Plan will be administered by either
the Board of Directors or a Committee (as applicable, the "Administrator")
designated by the Board. The Administrator will be constituted so as to satisfy
applicable laws and to permit grants and related transactions, for directors and
officers under the Plan to be exempt from Section 16(b) of the Exchange Act and
which, in the case of "covered employees" is intended to constitute
performance-based compensation is made up solely of two or more "outside
directors" as such term is defined under Section 162(m) of the Internal Revenue
Code. With respect to grants of awards to employees or consultants who are
neither directors nor officers of the Company, the Administrator may authorize
any officer(s) to grant awards, and may condition such authority by requiring
that all grants are ratified by the Board within 6 months of the grant date.
Subject to the provisions of the Plan, the Administrator has the final power to
construe and interpret the Plan and the awards granted under it, and to
determine, among other matters, the persons to whom stock awards will be granted
and the number of shares with respect to which awards shall be granted.
Types of Awards. The Administrator may issue any type of arrangement to a
director, employee or consultant that is not inconsistent with the provisions of
the Plan and that by its terms involves or might involve the issuance of (i)
shares of Common Stock of the Company, (ii) on option, SAR or similar right with
an exercise or conversion privilege at a fixed or variable price related to the
Common Stock or the passage of time, the occurrence of one or more events, or
the satisfaction of performance criteria or other conditions, or (iii) any other
security with the value derived from the value of the Common Stock. Performance
criteria may
17
<PAGE> 21
be based on any one of, or combination of, an increase in share price, earnings
per share, total stockholder return, return on equity, return on assets, return
on investment, net operating income, cash flow, revenue, economic value added,
personal management objectives, or other measure of performance selected by the
Administrator.
In the case of stock options, each option will be either an incentive stock
option or a non-qualified stock option. If the aggregate fair market value of
shares subject to incentive stock options which become exercisable for the first
time by an individual during any calendar year under any Company plan exceeds
$100,000, such excess options will be treated as non-qualified stock options.
Stock options may not be transferred, but all other awards may be transferred in
accordance with the terms of the grant. The exercise price of any incentive
stock option may not be less than 100% of the fair market value per share on the
date of grant (110% in the case of a stockholder ("10% Holder") holding 10% or
more of the voting power of the Company's and its subsidiaries' stock). The
exercise price of non-qualified stock options may not be less than 85% of the
fair market value on the date of grant, or 100% in the case of options intended
to qualify performance-based compensation.
The Administrator may accept the following types of consideration for
shares issued under the Plan: (i) cash; (ii) check; (iii) surrender of shares of
Common Stock (including the withholding of shares otherwise deliverable upon
exercise) with a fair market value equal to the aggregate exercise price; (iv)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, require to
effect an exercise of the award and delivery to the Company of the sale or loan
proceeds required to pay the exercise price; or (v) any combination of the
foregoing.
The Administrator may establish programs to permit grantees to defer
receipt of consideration upon exercise of an award, satisfaction of performance
criteria, or other event that absent the election would entitle the grantee to
payment or receipt of shares or other consideration.
No shares of Common Stock may be issued under the Plan until the grantee
has made arrangements satisfactory to the Administrator for the satisfaction of
federal, state and local income and employment tax withholding obligations.
The term of each Award will be stated in the Award agreement, provided that
the term of an Incentive Stock Option may not exceed 10 years from the date of
grant or 5 years from the date of grant if the grantee is a 10% Holder.
In the event of any actual or anticipated Corporate Transaction, Change in
Control or Subsidiary Disposition (all as described below), the Administrator
may cause each outstanding award automatically to become fully vested and
exercisable and be released from any restrictions on transfer and repurchase or
forfeiture rights immediately prior to the date of such transaction. The
Administrator may also condition any such acceleration or termination of
restriction on termination of the employee or consultant within a specified time
of the transaction. Effective upon the consummation of the Corporate
Transaction, all outstanding awards under the Plan terminate unless assumed by
the successor company or its parent. A "Corporate Transaction" means any of the
following stockholder-approved transactions to which the Company is a party: (i)
a merger or consolidation in which the Company is not the surviving entity
(other than for a change in domicile); (ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company in
connection with complete liquidation or dissolution of the Company; or (iii) any
reverse merger in which the Company is the surviving entity, but in which
securities possessing more than 50% of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from those who held such securities immediately prior to such merger.
A "Change in Control" means a change in ownership or control of the Company
effected through either of the following transactions: (i) the direct or
indirect acquisition of beneficial ownership of securities with more than 50% of
the total combined voting power of the Company's outstanding securities pursuant
to a tender or exchange offer made directly to the Company's stockholders which
a majority of the disinterested directors did not approve (other than by the
Company, a Company-sponsored benefit plan, or any current beneficial owner or
group holding in excess of 50% of the combined voting power of such securities);
or (ii) a change in the composition of the board over 36 months or less such
that the majority of Board members ceases, by reason of one or more contested
18
<PAGE> 22
elections for Board membership, to be comprised of individuals who have been
Board members for at least 36 months or were elected or nominated by such Board
members. A "Subsidiary Disposition" means the disposition by the Company of its
equity holdings in any subsidiary corporation effected by a merger or
consolidation involving that subsidiary, the sale of all or substantially all of
the assets of that subsidiary, or the Company's sale or distribution of
substantially all of the outstanding capital stock of such subsidiary
corporation.
The portion of any incentive stock option accelerated under the Stock
Incentive Plan in connection with a Corporate Transaction, Change in Control or
Subsidiary Disposition remains exercisable as an incentive stock option under
the Code only to the extent the $100,000 limitation of Section 422(d) of the
Code is not exceeded. Any excess portion will be exercisable as a non-qualified
stock option.
Available Shares. Subject to approval of the proposed amendment of the
Plan, the maximum aggregate number of shares of Common Stock which may be issued
under the Stock Incentive Plan initially is 10,631,126 shares, increased by a
number equal to 3% of the number of shares of Common Stock outstanding as of
December 31st of the immediately preceding fiscal year, beginning on the first
business day of 2001. Notwithstanding the foregoing, the maximum aggregate
number of shares available for granting incentive stock options is 4,250,000 and
is not subject to any annual adjustment. The maximum number of shares with
respect to which options and stock appreciation rights may be granted to any
employee during a fiscal year is 500,000.
Eligible Individuals. Awards other than incentive stock options, which may
only be granted to employees, may be granted to employees (including officers
and directors) and consultants of the Company or any parent or subsidiary.
Amendment. The Board may amend the Plan at any time and for any reason,
subject to certain restrictions on the ability to adversely affect awards
previously granted thereunder and to any legal requirement to obtain stockholder
approval.
Term. The Plan is effective from June 27, 1996, the date of adoption by the
Board, for a term of 10 years unless sooner terminated.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE 1996 STOCK INCENTIVE PLAN
The following is a brief summary of the current United States federal
income tax rules generally applicable to the awards under the Stock Incentive
Plan.
Incentive Stock Options. There are generally no federal income tax
consequences to the optionee or the Company by reason of the grant or exercise
of an incentive stock option.
If an optionee holds stock for more than two years from the date on which
the option is granted and more than one year from the date on which the shares
are transferred to the optionee upon exercise of the incentive stock option, any
gain or loss on a disposition of such stock will be a long term capital gain or
loss. Generally, if the optionee disposes of the stock before the expiration of
either of these holdings periods (a "disqualifying disposition"), at the time of
disposition the optionee will realize taxable ordinary income equal to the
excess of the fair market value on the date of exercise over the exercise price.
If the optionee disposes of the stock in a disqualifying disposition involving a
sale or exchange, however, the optionee will realize taxable ordinary income
equal to the optionee's actual gain, if any, on the sale or exchange, but no
more than the excess of the fair market value on the date of exercise over the
exercise price. The optionee's additional gain or any loss upon the
disqualifying disposition will be a capital gain or loss which will be long-term
or short-term depending on the period of time the stock was held. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
Upon exercise of an incentive stock option, the excess of the stock's fair
market value on the date of exercise over the option exercise price will
constitute an adjustment in calculating the optionee's alternative minimum tax
liability, if any.
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<PAGE> 23
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will be entitled (subject to the
requirement of reasonableness and perhaps, in the future, the satisfaction of a
withholding obligation) to a corresponding business expense deduction in the tax
year in which the disposition occurs.
Non-Qualified Stock Options. There generally are no tax consequences to the
optionee or the Company by reason of the grant of a non-qualified stock option.
Upon exercise of a non-qualified stock option normally the optionee will
recognize taxable ordinary income equal to the exercise of the stock's fair
market value on the date of exercise over the exercise price. Subject to the
requirement of reasonableness and the satisfaction of any withholding
obligation, the Company will be entitled to a business expense deduction equal
to the taxable ordinary income realized by the optionee. Upon disposition of
stock, the optionee will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock plus any amount recognized as ordinary income upon exercise of the option.
Such gain or loss will be long or short-term depending on the period of time the
stock was held. Slightly different rules may apply to optionees who acquire
stock subject to certain repurchase options or who are subject to Section 16(b)
of the Exchange Act.
Stock Grants, Restricted Stock Grants and Restricted Stock
Purchases. Generally, a recipient of stock under the Stock Incentive Plan would
recognize ordinary income equal to the difference between the fair market value
of the stock on the grant or purchase date and any amount paid or required to be
paid for the stock. If the stock is restricted and subject to vesting, then the
recipient of the stock would recognize ordinary income as the restrictions are
removed and the stock vests. On each vesting date, the recipient would recognize
ordinary income equal to the difference between the fair market value of the
shares of stock that have vested on such date and any amount paid or required to
be paid for the shares of stock. The recipient of the stock would not recognize
any income to the extent the rights to the stock have not vested. A recipient of
stock under the Stock Incentive Plan, however, may make an election under
Section 83(b) of the Code within 30 days of the stock award to be taxed at the
grant date at ordinary income rates on the difference between the fair market
value of the stock on the grant or purchase date and any amount paid by the
recipient for the stock. If a Section 83(b) election is made, the recipient will
not recognize income on subsequent vesting of the award. However, no loss or
deduction will be permitted the recipient if the restricted stock is forfeited.
Subject to the requirement of reasonableness and the satisfaction of any
withholding obligation, the Company will be entitled to a business expense
deduction equal to the taxable ordinary income realized by the recipient.
Upon disposition of stock, the recipient will recognize a capital gain or
loss equal to the difference between the selling price and the sum of the amount
paid for such stock plus any amount recognized as ordinary income. Such gain or
loss will be long or short term depending on the period of time the stock was
held.
Other Tax Consequences. The foregoing discussion is not a complete
description of the federal income tax aspects of stock awards under the Plan. In
addition, administrative and judicial interpretations of the application of the
federal income tax laws are subject to change. Furthermore, no information is
given with respect to state or local taxes that may be applicable. Participants
in the Plan who are residents or are employed in a country other than the United
States may be subject to taxation in accordance with the tax laws of that
particular country in addition to or in lieu of United States federal income
taxes.
NEW PLAN BENEFITS
Because stock awards under the Plan are discretionary, the benefits to be
received under the stock incentive plan by any director, officer or employee of
the Company cannot presently be determined.
The matter is being submitted to the stockholders for approval by the
affirmative vote of the holders of record of a majority of the shares
represented and voting, in person or by proxy, at the Annual Meeting.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ADOPTION OF THE
AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN AND UNANIMOUSLY RECOMMENDS
20
<PAGE> 24
THAT HOLDERS OF SHARES OF COMMON STOCK VOTE "FOR" APPROVAL OF THE FOLLOWING
RESOLUTION, WHICH WILL BE PRESENTED TO THE MEETING:
RESOLVED, that the stockholders of MTI Technology Corporation hereby
approve the adoption of the amendment to Section 3(a) of the 1996 Stock
Incentive Plan to read as follows: "Subject to the provisions of Section 10,
below, the maximum aggregate number of Shares which may be issued pursuant to
Awards initially shall be 10,631,126 Shares, and commencing with the first
business day of each calendar year thereafter beginning with 2001, such maximum
aggregate number of Shares shall be increased by a number equal to three percent
(3%) of the number of Shares outstanding as of December 31st of the immediately
preceding calendar year. Notwithstanding the foregoing, the maximum aggregate
number of Shares available for grant of Incentive Stock Options shall be
4,250,000 Shares, and such number shall not be subject to annual adjustments as
described above. The Shares to be issued pursuant to Awards may be authorized,
but unissued, or reacquired Common Stock."
The persons designated in the enclosed proxy will vote your shares FOR
approval unless instructions to the contrary are indicated in the enclosed
proxy.
OTHER BUSINESS
The Board of Directors is not aware of any other matters to come before the
Annual Meeting. If any matter not mentioned herein is properly brought before
the meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED APRIL
1, 2000 AS FILED WITH THE SEC WILL BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE
UPON WRITTEN REQUEST TO INVESTOR RELATIONS, MTI TECHNOLOGY CORPORATION, 4905
EAST LA PALMA AVENUE, ANAHEIM, CALIFORNIA 92807.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Stockholders who may wish to present proposals for inclusion in the
Company's proxy materials in connection with the 2001 Annual Meeting of
Stockholders must submit such proposals in writing to the Secretary at the
address shown at the top of page one not later than April 26, 2001. In addition,
to be properly considered at the 2001 Annual Meeting of Stockholders, notice of
any stockholder proposals must be given to the Company's Secretary in writing
not less than 30 nor more than 60 days prior to the meeting; provided, that in
the event that less than 40 days notice of the meeting date is given to
stockholders, proposals must be received not later than the close of business on
the tenth day following the day on which notice of the annual meeting date was
mailed or publicly disclosed. A stockholder's notice to the Secretary must set
forth for each matter proposed to be brought before the annual meeting (a) a
brief description of the matter the stockholder proposes to bring before the
annual meeting, (b) the name and home address of the stockholder proposing such
business, (c) the class and number of shares of Common Stock beneficially owned
by such stockholder, and (d) any material interest of such stockholder in such
business.
By Order of the Board of Directors
/s/ THOMAS P. RAIMONDI, JR.
Thomas P. Raimondi, Jr.
President and Chief Executive Officer
Anaheim, California
August 24, 2000
21
<PAGE> 25
APPENDIX "A"
PROXY
MTI TECHNOLOGY CORPORATION
4905 EAST LA PALMA AVENUE, ANAHEIM, CALIFORNIA 92807
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
MTI TECHNOLOGY CORPORATION TO BE HELD ON SEPTEMBER 28, 2000
The undersigned hereby appoints Thomas P. Raimondi, Jr. and Paul W. Emery,
II, each with full power of substitution, as proxies of the undersigned, to
attend the Annual Meeting of Stockholders of MTI Technology Corporation (the
"Company") to be held at the Company's offices, 4905 East La Palma Avenue,
Anaheim, California 92807, on September 28, 2000, at 10:00 a.m. local time, and
at any and all adjournments thereof, and to vote all Common Stock of the
Company, as designated on the reverse side of this proxy card, with all the
powers the undersigned would possess if personally present at the meeting.
See reverse side (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) See reverse side
<PAGE> 26
[X] Please mark
your votes as
in this example
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SPECIFIED. WHERE
NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED AND FOR
APPROVAL OF PROPOSALS 2 AND 3. THIS PROXY CONFERS AUTHORITY FOR THE PERSONS
NAMED ON THE REVERSE SIDE, OR ANY ONE OF THEM, TO VOTE IN HIS DISCRETION WITH
RESPECT TO ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. ELECTION OF DIRECTORS: Nominees: Al Melrose and John Repp
[ ] ___________________________ FOR WITHHELD
For all nominees except as [ ] [ ]
noted above
2. Ratification of Selection of FOR AGAINST ABSTAIN
KPMG Peat Marwick LLP as the [ ] [ ] [ ]
Company's independent auditors for
fiscal year 2001.
3. Approval of an amendment to the FOR AGAINST ABSTAIN
1996 Stock Incentive Plan. [ ] [ ] [ ]
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT FOR THE 2000 ANNUAL MEETING.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
NOTE: Please sign exactly as name(s) appear(s). When signing as executor,
administrator, attorney, trustee or guardian, please give your full title as
such. If a corporation, please sign in full corporation name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person. If a joint tenancy, please have both tenants sign.
Signature:___________________________________ Date:____________
Signature:___________________________________ Date:____________
[TO BE REVISED ON RECEIPT OF FINAL FORM OF PROXY CARD]
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<PAGE> 27
APPENDIX "B"
MTI TECHNOLOGY CORPORATION
1996 STOCK INCENTIVE PLAN
(AMENDED AND RESTATED AS OF JULY 1997, AMENDED AUGUST 1999,
AMENDED SEPTEMBER 2000)
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.
(c) "Applicable Laws" means the legal requirements relating to
the administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, and
the rules of any applicable stock exchange or national market system.
(d) "Award" means the grant of an Option, SAR, Dividend
Equivalent Right, Restricted Stock, Performance Unit, Performance Share, or
other right or benefit under the Plan.
(e) "Award Agreement" means the written agreement evidencing the
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Change in Control" means a change in ownership or control of
the Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by (A) the Company
or by a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company or (B) any current beneficial stockholder or group, as defined by Rule
13d-5 of the Securities Exchange Act of 1934, holding in excess of 50% of the
combined voting power of the Company's outstanding securities, including the
heirs, assigns and successors thereof) of beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made directly to
the Company's stockholders which a majority of the Continuing Directors who are
not Affiliates or Associates of the offeror do not recommend such stockholders
to accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of
<PAGE> 28
one or more contested elections for Board membership, to be comprised of
individuals who are Continuing Directors.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means any committee appointed by the Board to
administer the Plan.
(j) "Common Stock" means the common stock of the Company, as
adjusted in accordance with the provisions of Section 10, below.
(k) "Company" means MTI Technology Corporation, a Delaware
corporation.
(l) "Consultant" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services.
(m) "Continuing Directors" means members of the Board who either
(i) have been Board members continuously for a period of at least thirty-six
(36) months or (ii) have been Board members for less than thirty-six (36) months
and were elected or nominated for election as Board members by at least a
majority of the Board members described in clause (i) who were still in office
at the time such election or nomination was approved by the Board.
(n) "Continuous Status as an Employee, Director or Consultant"
means that the employment, director or consulting relationship with the Company,
any Parent, or Subsidiary, is not interrupted or terminated. Continuous Status
as an Employee, Director or Consultant shall not be considered interrupted in
the case of (i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. A leave of absence approved by the Company shall
include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.
(o) "Corporate Transaction" means any of the following
stockholder-approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose of which is
to change the state in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with complete liquidation
or dissolution of the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger.
(p) "Covered Employee" means an Employee who is a "covered
employee" under Section 162(m)(3) of the Code.
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<PAGE> 29
(q) "Director" means a member of the Board.
(r) "Dividend Equivalent Right" means a right entitling the
Grantee to compensation measured by dividends paid with respect to Common Stock.
(s) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(t) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(u) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) Where there exists a public market for the Common
Stock, the Fair Market Value shall be (A) the closing sales price for a Share
for the last market trading day prior to the time of the determination (or, if
no sales were reported on that date, on the last trading date on which sales
were reported) on the New York Stock Exchange, the NASDAQ National Market or the
principal securities exchange on which the Common Stock is listed for trading,
whichever is applicable or (B) if the Common Stock is not traded on any such
exchange or national market system, the average of the closing bid and asked
prices of a Share on the NASDAQ Small Cap Market, in each case, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable; or
(ii) In the absence of an established market of the type
described in (i), above, for the Common Stock, the Fair Market Value thereof
shall be determined by the Administrator in good faith, and such determination
shall be conclusive and binding on all persons. Determinations of Fair Market
Value pursuant to this subsection (ii) shall be made in accordance with Section
260.140.50 of Title 10 of the California Code of Regulations.
(v) "Grantee" means an Employee, Director or Consultant who
receives an Award under the Plan.
(w) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(x) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(y) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(z) "Option" means a stock option granted pursuant to the Plan.
(aa) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(bb) "Performance - Based Compensation" means compensation
qualifying as "performance-based compensation" under Section 162(m) of the Code.
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<PAGE> 30
(cc) "Performance Shares" means Shares or an award denominated in
Shares which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.
(dd) "Performance Units" means an award which may be earned in
whole or in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, securities or a combination or
cash or securities as determined by the Administrator.
(ee) "Plan" means this 1996 Stock Incentive Plan, as amended and
restated.
(ff) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.
(gg) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor thereto.
(hh) "SAR" means a stock appreciation right entitling the Grantee
to Shares or cash compensation measured by appreciation in the value of Common
Stock.
(ii) "Share" means a share of the Common Stock.
(jj) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
(kk) "Subsidiary Disposition" means the disposition by the
Company of its equity holdings in any subsidiary corporation effected by a
merger or consolidation involving that subsidiary corporation, the sale of all
or substantially all of the assets of that subsidiary corporation or the
Company's sale or distribution of substantially all of the outstanding capital
stock of such subsidiary corporation.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to Awards initially
shall be 10,631,126 Shares, and commencing with the first business day of each
calendar year thereafter beginning with 2001, such maximum aggregate number of
Shares shall be increased by a number equal to three percent (3%) of the number
of Shares outstanding as of December 31st of the immediately preceding calendar
year. Notwithstanding the foregoing, the maximum aggregate number of Shares
available for grant of Incentive Stock Options shall be 4,250,000 Shares, and
such number shall not be subject to annual adjustment as described above. The
Shares to be issued pursuant to Awards may be authorized, but unissued, or
reacquired Common Stock.
(b) If an Award expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Award exchange program,
or if any unissued Shares are retained by the Company upon exercise of an Award
in order to satisfy the exercise price for such Award or any withholding taxes
due with respect to such Award, such unissued or retained Shares shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that actually have been issued under the Plan pursuant to an
Award shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if unvested Shares are
forfeited, or repurchased by the Company at their original purchase price, such
Shares shall become available for future grant under the Plan.
4
<PAGE> 31
4. Administration of the Plan.
(a) Plan Administrator.
(i) Administration with Respect to Directors and Officers.
With respect to grants of Awards to Directors or Employees who are also Officers
or Directors of the Company, the Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board.
(ii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Awards to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. The Board may authorize one or more
Officers to grant such Awards and may limit such authority by requiring that
such Awards must be reported to and ratified by the Board or a Committee within
six (6) months of the grant date, and if so ratified, shall be effective as of
the grant date.
(iii) Administration With Respect to Covered Employees.
Notwithstanding the foregoing, grants of Awards to any Covered Employee intended
to qualify as Performance-Based Compensation shall be made only by a Committee
(or subcommittee of a Committee) which is composed solely of two or more
Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to Covered
Employees, references to the "Administrator" or to a "Committee" shall be deemed
to be references to such Committee or subcommittee.
(b) Powers of the Administrator. Subject to Applicable Laws, the
provisions of the Plan (including any other powers given to the Administrator
hereunder) and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to
whom Awards may from time to time be granted hereunder;
(ii) to determine whether and to what extent Awards are
granted hereunder;
(iii) to determine the number of Shares to be covered by
each Award granted hereunder;
(iv) to approve forms of Award Agreement for use under the
Plan;
(v) to determine the terms and conditions of any Award
granted hereunder;
(vi) to amend the terms of any outstanding Award granted
under the Plan including a reduction in the exercise price (or base amount on
which appreciation is measured) of any Award to reflect a reduction in the Fair
Market Value of the Common Stock since the grant date of the Award, provided
that any
5
<PAGE> 32
amendment that would adversely affect the Grantee's rights under an outstanding
Award shall not be made without the Grantee's written consent;
(vii) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan; and
(viii) to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on the Grantees and any other holders of Awards intended by the
Administrator to be affected thereby.
5. Eligibility. Awards other than Incentive Stock Options may be granted
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee, Director or Consultant who has been granted an
Award may, if otherwise eligible, be granted additional Awards. Awards may be
granted to such Employees of the Company and its subsidiaries who are residing
in foreign jurisdictions as the Administrator in its sole discretion may
determine from time to time. The Administrator may establish additional terms,
conditions, rules or procedures to accommodate the rules or laws of applicable
foreign jurisdictions and to afford Grantees favorable treatment under such
laws; provided, however, that no Award shall be granted under any such
additional terms, conditions, rules or procedures with terms or conditions which
are inconsistent with the provisions of the Plan.
6. Terms and Conditions of Awards.
(a) Type of Awards. The Administrator is authorized under the
Plan to award any type of arrangement to an Employee, Director or Consultant
that is not inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of (i) Shares, (ii) an Option, a SAR or
similar right with an exercise or conversion privilege at a fixed or variable
price related to the Common Stock and/or the passage of time, the occurrence of
one or more events, or the satisfaction of performance criteria or other
conditions, or (iii) any other security with the value derived from the value of
the Common Stock. Such awards include, without limitation, Options, SARs, sales
or bonuses of Restricted Stock, Dividend Equivalent Rights, Performance Units or
Performance Shares, and an Award may consist of one such security or benefit, or
two or more of them in any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the
Award Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options, to the extent of the Shares covered thereby in excess of
the foregoing limitation, shall be treated as Non-Qualified Stock Options. For
this purpose, Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other
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consideration) upon settlement of the Award, payment contingencies, and
satisfaction of any performance criteria. The performance criteria established
by the Administrator may be based on any one of, or combination of, increase in
share price, earnings per share, total stockholder return, return on equity,
return on assets, return on investment, net operating income, cash flow,
revenue, economic value added, personal management objectives, or other measure
of performance selected by the Administrator. Partial achievement of the
specified criteria may result in a payment or vesting corresponding to the
degree of achievement as specified in the Award Agreement.
(d) Deferral of Award Payment. The Administrator may establish
one or more programs under the Plan to permit selected Grantees the opportunity
to elect to defer receipt of consideration upon exercise of an Award,
satisfaction of performance criteria, or other event that absent the election
would entitle the Grantee to payment or receipt of Shares or other consideration
under an Award. The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts or Shares so deferred, and such
other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.
(e) Term of Award. The term of each Award shall be the term
stated in the Award Agreement, provided, however, that the term of an Incentive
Stock Option shall be no more than ten (10) years from the date of grant
thereof. However, in the case of an Incentive Stock Option granted to a Grantee
who, at the time the Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Award Agreement.
(f) Transferability of Awards. Incentive Stock Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee.
Non-Qualified Stock Options may not be transferred other than by will or the
laws of descent or distribution, or as otherwise permitted by Rules
260.140.41(d) and 260.140.42(c) of Title 10 of the California Code of
Regulations. Other Awards shall be transferable to the extent provided in the
Award Agreement.
(g) Time of Granting Awards. The date of grant of an Award shall
for all purposes be the date on which the Administrator makes the determination
to grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
(h) Vesting Period. Incentive Stock Options and Non-Qualified
Stock Options shall vest and be exercisable at the rate of at least twenty
percent (20%) per year over five (5) years from the date the option is granted,
or as otherwise permitted under Rule 260.140.41(f) of Title 10 of the California
Code of Regulations.
(i) Individual Option and SAR Limit. The maximum number of Shares
with respect to which Options and SARs may be granted to any Employee in any
fiscal year of the Company shall be 500,000. The foregoing limitation shall be
adjusted proportionately in connection with any change in the Company's
capitalization pursuant to Section 10, below. To the extent required by Section
162(m) of the Code or the regulations thereunder, in applying the foregoing
limitation with respect to an Employee, if any Option or SAR is canceled, the
canceled Option or SAR shall continue to count against the maximum number of
Shares with respect to which Options and SARs may be granted to the Employee.
For this purpose, the repricing of an Option (or in the case of a SAR, the base
amount on which the stock appreciation is calculated is reduced to
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reflect a reduction in the Fair Market Value of the Common Stock) shall be
treated as the cancellation of the existing Option or SAR and the grant of a new
Option or SAR.
7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.
(a) Exercise or Purchase Price. The exercise or purchase price,
if any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be not less than one
hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per
Share exercise price shall be not less than eighty-five percent (85%) of the
Fair Market Value per Share on the date of grant unless otherwise determined by
the Administrator.
(iii) In the case of Awards intended to qualify as
Performance-Based Compensation, the exercise or purchase price, if any, shall be
not less than one hundred percent (100%) of the Fair Market Value per Share on
the date of grant.
(iv) In the case of other Awards, such price as is
determined by the Administrator.
(b) Consideration. Subject to Applicable Laws, the consideration
to be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
under the Plan the following:
(i) cash;
(ii) check;
(iii) surrender of Shares (including withholding of Shares
otherwise deliverable upon exercise of the Award) which have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Award shall be exercised (but only to the extent that such
exercise of the Award would not result in an accounting compensation charge with
respect to the Shares used to pay the exercise price unless otherwise determined
by the Administrator);
(iv) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Award and delivery to the
Company of the sale or loan proceeds required to pay the exercise price; or
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(v) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of federal, state, and
local income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Incentive Stock Option. Upon
exercise of an Award, the Company shall withhold from Grantee an amount
sufficient to satisfy such tax obligations.
(d) Reload Options. In the event the exercise price or tax
withholding of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the Administrator may
issue the Grantee an additional Option, with terms identical to the Award
Agreement under which the Option was exercised, but at an exercise price as
determined by the Administrator in accordance with the Plan.
8. Exercise of Award.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Award granted hereunder shall be exercisable at
such times and under such conditions as determined by the Administrator under
the terms of the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised has been received by
the Company. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to
Shares subject to an Award, notwithstanding the exercise of an Option or other
Award. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Award. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in the Award Agreement or Section 10,
below.
(b) Exercise of Award Following Termination of Employment,
Director or Consulting Relationship.
(i) An Award may not be exercised after the termination
date of such Award set forth in the Award Agreement and may be exercised
following the termination of a Grantee's Continuous Status as an Employee,
Director or Consultant only to the extent provided in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to
exercise an Award following the termination of the Grantee's Continuous Status
as an Employee, Director or Consultant for a specified period, the Award shall
terminate to the extent not exercised on the last day of the specified period or
the last day of the original term of the Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to
the extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a
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Grantee's Continuous Status as an Employee, Director or Consultant shall convert
automatically to a Non-Qualified Stock Option and thereafter shall be
exercisable as such to the extent exercisable by its terms for the period
specified in the Award Agreement.
(c) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Award previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Grantee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, as well as the price per share of Common Stock
covered by each such outstanding Award, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common Stock. Such
adjustment shall be made by the Administrator, and its determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason hereof shall be made with respect to, the number or price
of Shares subject to an Award.
11. Corporate Transactions/Changes in Control/Subsidiary Dispositions.
(a) The Administrator shall have the authority exercisable either
in advance of any actual or anticipated Corporate Transaction or at the time of
an actual Corporate Transaction and either at the time of the grant of any Award
or at any time while an Award remains outstanding to provide for the automatic
full vesting and exercisability of one or more outstanding unvested Awards under
the Plan and the termination of restrictions on transfer and repurchase or
forfeiture rights on such Awards, in connection with a Corporate Transaction.
The Administrator also shall have the authority to condition any such Award
vesting and exercisability or release from such limitations upon the subsequent
termination of the Continuous Status of an Employee or Consultant of the Grantee
within a specified period following the effective date of the Corporate
Transaction. The Administrator may provide that any Awards so vested or released
from such limitations in connection with a Corporate Transaction, shall remain
fully exercisable until the expiration or sooner termination of the Award.
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(b) Effective upon the consummation of the Corporate Transaction,
all outstanding Awards under the Plan shall terminate and cease to remain
outstanding, except to the extent assumed by the successor company or its
Parent.
(c) The Administrator shall have the authority, exercisable
either in advance of any actual or anticipated Change in Control (other than a
Change in Control which is also a Corporate Transaction) or at the time of an
actual Change in Control and either at the time of the grant of an Award or at
any time while an Award remains outstanding, to provide for the automatic full
vesting and exercisability of one or more outstanding unvested Awards under the
Plan and the termination of restrictions on transfer and repurchase or
forfeiture rights on such Awards, in connection with a Change in Control. The
Administrator also shall have the authority to condition any such Award vesting
and exercisability or release from such limitations upon the subsequent
termination of the Continuous Status as an Employee or Consultant of the Grantee
within a specified period following the effective date of the Change in Control.
The Administrator may provide that any Awards so vested or released from such
limitations in connection with a Change in Control, shall remain fully
exercisable until the expiration or sooner termination of the Award.
(d) The Administrator shall have the authority, exercisable
either in advance of any actual or anticipated Subsidiary Disposition or at the
time of an actual Subsidiary Disposition and either at the time of the grant of
an Award or at any time while an Award remains outstanding, to provide for the
automatic full vesting and exercisability of one or more outstanding unvested
Awards under the Plan and the termination of restrictions on transfer and
repurchase or forfeiture rights on such Awards, in connection with a Subsidiary
Disposition, but only with respect to those Grantees who are at the time engaged
primarily in Continuous Service as an Employee or Consultant with the subsidiary
corporation involved in such Subsidiary Disposition. The Administrator also
shall have the authority to condition any such Award vesting and exercisability
or release from such limitations upon the subsequent termination of the affected
Grantee's Continuous Service as an Employee or Consultant with that subsidiary
corporation within a specified period following the effective date of the
Subsidiary Disposition. The Administrator may provide that any Awards so vested
or released from such limitations in connection with a Subsidiary Disposition,
shall remain fully exercisable until the expiration or sooner termination of the
Award.
(e) The portion of any Incentive Stock Option accelerated under
this Section 11 in connection with a Corporate Transaction, Change in Control or
Subsidiary Disposition shall remain exercisable as an Incentive Stock Option
under the Code only to the extent the $100,000 dollar limitation of Section
422(d) of the Code is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.
12. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of ten (10) years unless sooner
terminated.
13. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the
Plan. To the extent necessary and desirable to comply with Applicable Laws, the
Company shall obtain stockholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) No Award may be granted during any suspension or after
termination of the Plan.
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(c) Any amendment, suspension or termination of the Plan shall
not affect Awards already granted, and such Awards shall remain in full force
and effect as if the Plan had not been amended, suspended or terminated, unless
mutually agreed otherwise between the Grantee and the Administrator, which
agreement must be in writing and signed by the Grantee and the Company.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment. The Plan shall not confer upon any
Grantee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
16. Stockholder Approval. The Plan became effective when adopted by the
Board on June 27, 1996, and was approved by the Company's shareholders on
October 3, 1996. On July 10, 1997, the Board adopted and approved an amendment
and restatement of the Plan to adopt a limit on the number of Shares with
respect to which Options and SARs may be granted to any Employee in any fiscal
year of the Company to enable Options and SARs to qualify as Performance-Based
Compensation (the "Amendment"), subject to shareholder approval of the
Amendment.
17. Information. Pursuant to Rules 260.140.41(j) and 260.140.46 of the
California Code of Regulations, Grantees shall receive financial statements of
the Company at least annually.
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