-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F7aggNky6+otwUpx0LdrP5rPsokkrQRrQFkdf+Gw454uXFubjXgDXUKwBpOpnL8U h7/w1tsPj0UPXdEwUyikdg== 0000892569-99-002045.txt : 19990809 0000892569-99-002045.hdr.sgml : 19990809 ACCESSION NUMBER: 0000892569-99-002045 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MTI TECHNOLOGY CORP CENTRAL INDEX KEY: 0000901696 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 953601802 STATE OF INCORPORATION: DE FISCAL YEAR END: 0403 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-23418 FILM NUMBER: 99676071 BUSINESS ADDRESS: STREET 1: 4905 E LA PALMA AVE CITY: ANAHEIM STATE: CA ZIP: 92807 BUSINESS PHONE: 7149700300 MAIL ADDRESS: STREET 1: 4905 E LA PALMA AVE CITY: ANAHEIM STATE: CA ZIP: 92807 10-K/A 1 AMENDMENT TO FORM 10-K FOR PERIOD ENDED 4-3-1999 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 3, 1999 OR [ ] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from _________ to _________. Commission file number 0-23418 MTI TECHNOLOGY CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 95-3601802 - ------------------------------- ------------------- (State or other jurisdiction of I.R.S. Employer incorporation or organization Identification No.) 4905 East La Palma Avenue Anaheim, California 92807 - -------------------------------------------------------------------------------- (Address of principal executive offices, zip code) Registrant's telephone number, including area code: (714) 970-0300 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value - -------------------------------------------------------------------------------- (Title of Class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant was $227,617,758 on July 23, 1999, based on the closing sale price of such stock on The Nasdaq National Market. The number of shares outstanding of Registrant's Common Stock, $0.001 par value, was 29,079,007 on July 23, 1999. 2 PART II ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT: Information with respect to the Company's executive officers is set forth in Part I, above, under the caption "Executive Officers of the Registrant." DIRECTORS
NAME AGE POSITION(S) - ---- --- ----------- *Raymond J. Noorda 75 Chairman of the Board of Directors *Val Kreidel 44 Director, Nominee Earl Pearlman 55 President and Chief Executive Officer, Director, Nominee *John Repp 60 Director *Al Melrose 73 Director
- ------------------- * Member of Audit Committee and Compensation Committee. MTI's Bylaws provide for the Board of Directors to be divided into three classes, with each class to be as nearly equal in number of directors as possible. At each annual meeting of stockholders, the successors to the class of directors whose term expires at that time are elected to hold office for a term of three years until their respective successors are elected and qualified, so that the term of one class of directors expires at each such annual meeting. The terms of office expire as follows: Mr. Noorda, 2001; Mr. Repp, 2000; Mr. Melrose, 2000; Ms. Kreidel, 1999; and Mr. Pearlman, 1999. Ms. Kreidel is the daughter of Mr. Noorda. There are no other family relationships among the directors or executive officers of MTI. Raymond J. Noorda has been Chairman of the Board of Directors of the Company since 1987. Mr. Noorda previously served as the President, Chief Executive Officer and Chairman of the Board of Directors of Novell, Inc. Prior to joining Novell, Inc., Mr. Noorda served as Chief Executive Officer of Boschert, Inc. and System Industries, Inc. Val Kreidel was elected a Director of the Company in January 1994. Ms. Kreidel has served as a financial analyst for NFT Ventures, Inc. and DSC Ventures, Inc., private investment companies, since May 1989. From May 1985 to May 1989, Ms. Kreidel served as a Vice President of Atlantic Financial Savings Bank in its Real Estate Loan Department. Earl Pearlman was named President and Chief Executive Officer of the Company in April 1996. From April 1995 to March 1996, Mr. Pearlman was Vice President, U.S. Sales for the Company. Prior to joining the Company, Mr. Pearlman was the President and Chief Executive Officer of National Peripherals, Inc., a supplier of cross-platform RAID-based storage products, which he founded in 1980, acquired by the Company in 1995. John Repp has been a Director of the Company since January 1998. Mr. Repp has been a consultant to several high technology firms beginning in 1995. Prior to this time, Mr. Repp was the Vice President of Sales for Seagate Technology from 1989 until 1995. Prior to joining Seagate, Mr. Repp spent 22 years with Control Data Corporation in various positions in sales and operations. Al Melrose has been a director of the Company since April 1999. Mr. Melrose has been a marketing and investor relations consultant to numerous companies since 1994. Prior to this, he worked in the investor relations and marketing for various companies for approximately 30 years. DIRECTORS' FEES Each non-employee director received meeting fees of $2,500 per Board meeting attended during the fiscal year ended April 3, 1999, and was reimbursed for expenses incurred in attending Board meetings. The Company's employee directors did not receive cash compensation for serving on the Board of Directors for the fiscal year ended April 3, 1999, 2 3 but they were reimbursed for expenses incurred in attending Board meetings. Since February 1999, the Company has included each non-employee director with the named executives of the Company in the Company's executive medical plan. During fiscal 1999, the Company paid $0, $0 and $1,504 for medical expenses not otherwise covered by insurance for Mr. Noorda, Ms. Kreidel and Mr. Repp, respectively. Each non-employee director of the Company is granted a nonqualified option to purchase 10,000 shares of Common Stock under the Directors' Non-Qualified Stock Option Plan (the "Directors' Plan") upon election or appointment to the Board of Directors. In addition, the Directors' Plan provides that each non-employee director who is a director immediately prior to an annual meeting of the Company's stockholders and who continues to be a director after such meeting (i.e., Mr. Noorda, Mr. Repp, Mr. Melrose and Ms. Kreidel in the event he or she is re-elected) will be granted an option to purchase 2,500 shares of Common Stock, provided that such director has served as such for at least one year. Mr. Noorda and Ms. Kreidel each received options to purchase 2,500 shares of Common Stock with an exercise price of $4.3125 per share following the Company's 1998 Annual Meeting. Each option granted upon the Directors' Plan has an exercise price equal to the fair market value of the Common Stock on the date of grant and vests monthly over a 12-month period. In addition, on February 4, 1999 the Company granted an option to purchase 50,000 shares of Common Stock with an exercise price of $5.6875 per share, which options vest on February 4, 2000, to each of Mr. Noorda and Ms. Kreidel. COMMITTEES OF THE BOARD The Company currently has two committees, the Audit Committee and the Compensation Committee. The Audit Committee, currently consisting of Mr. Noorda, Mr. Melrose, Ms. Kreidel and Mr. Repp, recommends the appointment of the independent public accountants of the Company, reviews and approves the scope of the annual audit and reviews the results thereof with the Company's independent accountants. The Audit Committee also assists the Board in fulfilling its fiduciary responsibilities relating to accounting and reporting policies, practices and procedures, and reviews the continuing effectiveness of the Company's business ethics and conflicts of interest policies. The Company does not have an executive committee. The Compensation Committee, currently consisting of Mr. Noorda, Mr. Melrose, Ms. Kreidel and Mr. Repp, recommends to the Board of Directors the salaries, bonuses and stock awards received by the officers of the Company. The Compensation Committee is also responsible for administering the Company's Stock Incentive Plan. The Compensation Committee determines the recipients of awards, sets the exercise price of shares granted, and determines the terms, provisions and conditions of all rights granted. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During fiscal year 1999, the Compensation Committee consisted of Mr. Noorda, Ms. Kreidel, Mr. Repp and Mr. Proctor (who resigned prior to the end of the 1999 fiscal year). None of these persons is or has been an officer or employee of the Company or any of its subsidiaries. In addition, there are no Compensation Committee interlocks between MTI and other entities involving MTI executive officers and Board members who serve as executive officers of such entities. ATTENDANCE AT BOARD AND COMMITTEE MEETINGS During the fiscal year ended April 3, 1999, the Board of Directors met four times. In addition, the Audit Committee and Compensation Committee met one and four times, respectively. No director attended fewer than 75% of the aggregate number of meetings held by the Board of Directors and all committees of the Board on which such director served. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires that the Company's executive officers and directors file reports of beneficial ownership on Form 3 and changes in beneficial ownership on Forms 4 and 5 with the Securities and Exchange Commission ("SEC"). Executive officers and directors are also required by the 3 4 SEC rules to furnish the Company with copies of all Section 16(a) reports they file. As part of a Section 16 compliance program established by the Company for its executive officers and directors, the Company undertakes to file these reports on behalf of such individuals. Based solely on its review of the Forms 3, 4 and 5 filed on behalf of its executive officers and directors, as well as written representations from certain individuals that no Forms 5 are required by such individuals, the Company believes that, during the fiscal year ended April 3, 1999, all Section 16(a) filing requirements applicable to its executive officers and directors were complied with pursuant to the SEC rules, except that one of Earl Pearlman's filings on Form 4 was filed 5 days late, the Company has no record of a Form 4 filing for a option to purchase 125,000 shares of Common Stock with an exercise price of $8.31 per share granted to David Proctor (a former director of the Company) in August 1998 and the February 1999 Form 4 filings for Ray Noorda, Val Kreidel and John Repp were filed one day late. ITEM 11. EXECUTIVE COMPENSATION: SUMMARY OF EXECUTIVE COMPENSATION The following table sets forth for each of the Company's last three completed fiscal years the compensation of Earl M. Pearlman, the Company's President and Chief Executive Officer, and the four most highly compensated executive officers other than Mr. Pearlman whose total annual salary and bonus for the last fiscal year exceeded $100,000 (collectively, the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
Long Term Compensation Awards ------------ Annual Compensation Number of ----------------------------------------- Securities Other Annual Underlying All Other Name and Principal Position Year Salary($) Bonus($) Compensation($)(1) Options(#) Compensation($) - --------------------------- ---- --------- -------- ------------------ ------------ --------------- Earl M. Pearlman 1999 285,577 0 * 75,000 0 President and Chief Executive 1998 260,577 202,070 * 285,000 0 Officer 1997 213,846 0 * 250,000 0 Dale R. Boyd 1999 218,846 0 * 90,000 936 Senior Vice President, Finance 1998 189,750 91,522 * 0 2,864 and Administration, Chief 1997 175,048 11,250 * 120,000 1,300 Financial Officer and Secretary Thomas P. Raimondi, Jr. 1999 243,978 0 * 125,000 853 Chief Operating Officer 1998 207,343 90,522 * 0 3,020 1997 200,000 10,000 * 100,000 1,875 Gary M. Scott 1999 261,990 0 * 50,000 1,443 Senior Vice President, European 1998 254,609 103,022 * 80,000 2,584 Operations 1997 210,098 0 24,650 0 1,130 Chuck Sitzman (3) 1999 210,000 0 * 40,000 5,907 Senior Vice President, 1998 89,423 88,000 * 50,000 21,085 Customer Service
- ------------------------ * Amount does not exceed the lesser of $50,000 or ten percent of the total annual salary and bonus reported for the individual. (1) 1997 amount for Mr. Scott includes $6,898 for tax services, and $17,752 for an automobile allowance. 4 5 (2) Amounts represent the dollar value of insurance premiums paid by the Company during the fiscal year with respect to term life insurance for the benefit of the Named Executive Officer, with the exception of the 1998 amount for Mr. Sitzman, which also includes $20,215 for reimbursement of relocation expenses. (3) Mr. Sitzman joined the Company on August 18, 1997. SUMMARY OF OPTION GRANTS The following table sets forth the individual grants of stock options made by the Company during the fiscal year ended April 3, 1999 to each of the Named Executive Officers. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE - --------------------------------------------------------------------------------------------------- VALUE AT ASSUMED NUMBER OF % TOTAL ANNUAL RATES OF SECURITIES OPTIONS STOCK UNDERLYING GRANTED TO PRICE APPRECIATION OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM (2) GRANTED IN FISCAL PRICE EXPIRATION --------------------- NAME (#) YEAR (1) ($/SH) (1) DATE 5%($) 10%($) ---- ------- -------- ---------- ---- -------- --------- Earl M. Pearlman 75,000 4% $4.31 09/10/08 203,289 515,176 Dale R. Boyd 90,000 4% $8.31 07/08/08 470,347 1,191,958 Thomas P. Raimondi, Jr. 125,000 6% $8.31 07/08/08 653,259 1,655,497 Gary Scott 50,000 2% $8.31 07/08/08 261,304 662,199 Chuck Sitzman 40,000 2% $8.31 07/08/08 209,043 529,759
- ----------------------- (1) Based on an aggregate of 2,020,000 options granted to directors and employees of the Company in fiscal year 1999, including the Named Executive Officers. (2) The potential realizable value is calculated based on the term of the option at its time of grant (ten years). It is calculated by assuming that the stock price appreciates at the indicated annual rate compounded annually for the entire term of the option and that the option is exercised and sold on the last day of its term for the appreciated stock price. No gain to the option holder is possible unless the stock price increases over the option term. 5 6 Mr. Pearlman's option grant to purchase 75,000 shares at $4.31, which expires September 10, 2008, vests 100% on September 10, 1999. Mr. Boyd's option grant to purchase 90,000 shares at $8.31, which expires July 8, 2008, vests 25% one year after the commencement date of the grant, and one-twelfth of the remaining unvested shares subject to the option grant vest each quarter thereafter. Mr. Raimondi's option grant to purchase 125,000 shares at $8.31, which expires July 8, 2008, vests 25% one year after the commencement date of the grant, and one-twelfth of the remaining unvested shares subject to the option grant shall vest each quarter thereafter. Mr. Scott's option grant to purchase 50,000 shares at $8.31, which expires July 8, 2008, vests 25% one year after the commencement date of the grant, and one-twelfth of the remaining unvested shares subject to the option grant vest each quarter thereafter. Mr. Sitzman's option grant to purchase 40,000 shares at $8.31, which expires July 8, 2008, vests 25% on year after the commencement date of the grant, and one-twelfth of the remaining unvested shares subject to the option grant shall vest each quarter thereafter. All such options have provisions accelerating the vesting in the event of a change in control. SUMMARY OF OPTIONS EXERCISED The following table sets forth information concerning exercises of stock options during the year ended April 3, 1999 by each of the Named Executive Officers and the value of unexercised options at April 3, 1999. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS AT FISCAL YEAR FISCAL YEAR SHARES END (#) END ($) ACQUIRED ON VALUE --------------- ----------------- EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/ NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE (2) ---- ----------- ---------- --------------- ----------------- Earl M. Pearlman 140,000 $1,537,884 294,168/217,500 483,442/84,375 Dale R. Boyd 2,000 $ 16,625 97,750/156,250 271,516/170,484 Thomas P. Raimondi, Jr. 23,000 $ 153,200 222,100/193,750 790,869/231,641 Gary Scott 0 $ - 313,750/131,250 1,046,328/115,234 Chuck Sitzman 0 $ - 18,750/71,250 16,453/27,422
- ----------------------- (1) Value realized is based on estimated fair market value of Common Stock on the date of exercise minus the exercise price. (2) Value is based on estimated fair market value of Common Stock as of April 3, 1999 ($5.44) minus the exercise price. 6 7 SEVERANCE AGREEMENTS The Board of Directors has entered into Severance Agreements with the following executive officers: Earl Pearlman, Dale Boyd, Thomas Raimondi, Gary Scott, Chuck Sitzman and Venki Venkataraman. These agreements have two year terms and are automatically renewable for successive one year terms thereafter. Pursuant to the terms, if the executive's employment with the Company is terminated within twelve months of a change in control of the Company (as defined in the agreement), he will receive benefits at the level determined by the reason for such termination. If the termination is for cause (as defined in the agreement), by reason of the executive's disability or death, or by the employee for other than "good reason" (as defined in the agreement), the Company will pay the employee all accrued, unpaid compensation, and, except where terminated by the Company for cause, a pro rata portion of the annual bonus under the bonus plan. If the executive is terminated for any other reason by the Company or the executive terminates his employment with good reason, the Company will pay to the executive (i) all accrued, unpaid compensation, (ii) a pro rata portion of the annual bonus under the bonus plan and (iii) an amount equal to one year of annual base salary and annual bonus under the bonus plan, and, for a period of twelve months following termination, will provide the executive and his dependents medical insurance benefits. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION During the fiscal year ended April 3, 1999, the Compensation Committee, consisting of Mr. Noorda, Ms. Kreidel, Mr. Repp and Mr. Proctor (who resigned prior to the end of the 1999 fiscal year), was responsible for establishing and administering the policies that govern the compensation of executive officers, including the Named Executive Officers. The Compensation Committee has furnished the following report on executive compensation: COMPENSATION COMMITTEE REPORT The Compensation Committee ("Committee") of the Board of Directors is composed of independent outside directors. The Committee reviews and administers the Company's various incentive plans, including the cash compensation levels of members of management, the Company's bonus plan and the Company's stock incentive plans. General Compensation Policy. The Committee's fundamental compensation policy is to make a substantial portion of an executive's total potential compensation contingent upon the financial performance of the Company. Accordingly, in addition to each executive's base salary, the Company offers the opportunity for an annual cash bonus which is tied to the Company's achievement of financial performance goals, and stock option awards to provide incentives to the executive officers through an equity interest of the Company. The Committee believes that the stockholders benefit by aligning the long-term interests of stockholders and employees. Base Salary. For the fiscal year 1999, the Committee reviewed the recommendations of the Chief Executive Officer as to proposed base salaries for all executives other than the Chief Executive Officer. Increases in base salaries generally reflect increased responsibilities over the prior fiscal year or strong individual performance in the prior fiscal year. The Committee performed an annual review of the base salary of each of the executive officers with reference to the executive's performance, level of responsibility and experience to determine whether the current base salary is appropriate and competitive. The Committee evaluated the reasonableness of the base salary based upon the median salary range paid to executive officers with comparable duties at companies of similar size in the same geographic area in the computer technology industry. No specific quantitative weight was given to any particular performance measurement. 7 8 Cash Bonuses. The Company's Board of Directors approved and implemented a senior management bonus plan ("Bonus Plan") for fiscal 1999. The purpose of this Bonus Plan was to provide an incentive to certain designated senior managers to maximize stockholder value by maximizing operational performance of the Company. Bonus Plan participants included all executive officers of the Company and certain other key senior managers. Pursuant to the terms of the Bonus Plan, the criterion for earning a bonus was based solely on the Company's reported net income for fiscal 1999 ("Actual Net Income") being equal to or greater than the consolidated net income as set forth in the Company's fiscal 1999 annual operating plan as approved by the Company's Board of Directors ("AOP Net Income"). Bonus Plan participants were divided into two groups: senior managers who reported directly to the President and Chief Executive Officer ("Direct Reporting Senior Managers") and those who reported to a position other than the President and Chief Executive Officer ("Secondary Senior Managers"). The Bonus Plan provided for two levels of bonus award categories: a base bonus award ("Base Bonus") and an over-achievement bonus award ("Over-Achievement Bonus"). Base Bonuses were earned if the Company's Actual Net Income, inclusive of all calculated Base Bonus amounts, was equal to the AOP Net Income. The Base Bonus for each Direct Reporting Senior Managers was 25% of his respective annual salary. The Base Bonus for each Secondary Senior Manager was 15% of his respective annual salary. In the event that Actual Net Income, inclusive of the accrued costs of all Base Bonuses, was in excess of the AOP Net Income, a bonus pool was created based on 15% of the first $1,500,000 of Actual Net Income that was in excess of the AOP Net Income and 20% of every dollar greater than $1,500,000. The bonus pool was divided between the two Bonus Plan participant groups based on each of the respective group's cumulative Base Bonuses as a percentage of the total Base Bonuses for both groups. Within each group, the bonus pool was divided equally among group members. Stock Option Awards. The Company has granted stock options under its various stock option plans generally at prices equal to the fair market value of the Company's Common Stock at the date of grant. Grants to executive officers are based on their responsibilities and relative positions in the Company and are considered an integral component of total compensation. The Committee believes the granting of options to be beneficial to stockholders, because it increases management's incentive to enhance stockholder value. Grants were proposed by the Chief Executive Officer and reviewed by the Committee based on the individual's overall performance. No specific quantitative weight was given to any particular performance measure. The Committee believes that stock option grants are necessary to retain and motivate key employees of the Company. Chief Executive Officer Compensation. The base salary of the Chief Executive Officer was recommended by the Committee and approved by the Board. The Committee reviewed the salaries of comparable executive officers at companies of similar size and in the same geographic area as the Company and in the computer industry. Mr. Pearlman participated in the same executive compensation plans as those described above for the other executive officers. As is true of the other executive officers, the Committee's policy is to have a large portion of the Chief Executive Officer's compensation based on the Company's financial performance. Mr. Pearlman received no cash bonus for fiscal 1999. Mr. Pearlman was awarded options to purchase 75,000 shares of the Company's Common Stock during fiscal 1999. Policy Regarding Deductibility of Compensation. Section 162(m) of the Internal Revenue Code ("Section 162(m)") provides that for federal income tax purposes, the otherwise allowable deduction for compensation paid or accrued to a covered employee of a publicly held corporation is limited to no more than $1 million per year. The Company is not presently affected by Section 162(m) because, for the fiscal year ended April 3, 1999, no executive officer's compensation exceeded $1 million, and the Company does not believe that the compensation of any executive officer will exceed $1 million for the 2000 fiscal year. Options granted under the Company's 1996 Stock Incentive Plan will be considered performance-based compensation. As performance-based compensation, compensation attributable to options granted under the Plan and awarded to covered employees will not be subject to the compensation deduction limitations of Section 162(m). COMPENSATION COMMITTEE Raymond J. Noorda Val Kreidel Al Melrose John Repp 8 9 COMPANY STOCK PRICE PERFORMANCE The following performance graph assumes an investment of $100 on April 7, 1994 (the date the Company became subject to Section 12 of the Exchange Act) and compares the change to April 3, 1999 in the market prices of the Common Stock with a broad market index (Nasdaq Stock Market - U.S.) and an industry index (Nasdaq Computer Manufacturer Index). The Company paid no dividends during the periods shown; the performance of the indexes is shown on a total return (dividend reinvestment) basis. The graph lines merely connect the prices on the dates indicated and do not reflect fluctuations between those dates. COMPARISON OF 60 MONTH CUMULATIVE TOTAL RETURN AMONG MTI TECHNOLOGY CORPORATION, THE NASDAQ STOCK MARKET -- U.S. INDEX AND THE NASDAQ COMPUTER MANUFACTURER INDEX [PERFORMANCE GRAPH]
MTI NASDAQ MEASUREMENT PERIOD TECHNOLOGY NASDAQ STOCK COMPUTER (FISCAL YEAR COVERED) CORPORATION MARKET (U.S.) MANUFACTURER --------------------- ----------- ------------- ------------ 4/7/94 100 100 100 Mar-95 36 109 116 Mar-96 21 149 179 Mar-97 42 165 196 Mar-98 192 251 348 Mar-99 61 337 688
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. 9 10 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT: The following table sets forth certain information regarding the beneficial ownership of Common Stock as of July 9, 1999 by (i) each person known by the Company to own more than 5% of such shares, (ii) each of the Company's directors, (iii) the Company's Chief Executive Officer and each of its four most highly compensated executive officers who served as executive officers at April 3, 1999, and (iv) all directors and executive officers as a group. As of July 9, 1999, there were 28,930,660 issued and outstanding shares of Common Stock of the Company, not including treasury shares or shares issuable upon exercise of options or warrants. Ownership information has been supplied by the person concerned. SECURITY OWNERSHIP TABLE
SHARES BENEFICIALLY OWNED (1) -------------------------------- NAME NUMBER PERCENT ---- ---------- ------- The Canopy Group, Inc. 14,463,285 49.99% 240 West Center Street Orem, Utah 84057 Raymond J. Noorda (2) 14,483,077 50.03% Val Kreidel (3) 19,792 * Al Melrose (4) 8,333 * John Repp (5) 10,000 * Earl M. Pearlman (6) 294,168 1.01% Dale R. Boyd (7) 144,000 * Gary M. Scott (8) 614,500 2.10% Chuck Sitzman (9) 15,000 * Thomas P. Raimondi, Jr. (10) 288,350 * All directors and officers as a group (13 persons) (11) 16,072,278 53.08%
- ------------------- * Less than 1% (1) Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the Company believes that the persons named in the table have sole voting and investment power with respect to all shares. (2) The address for Mr. Noorda is c/o MTI Technology Corporation, 4905 East La Palma Avenue, Anaheim, California 92807. Represents shares owned by The Canopy Group, Inc. ("Canopy"), and 19,792 shares issuable to Mr. Noorda upon exercise of options exercisable within 60 days of July 9, 1999. Mr. Noorda, Chairman of the Board of Directors of the Company, is Chairman of the Board of Canopy. Mr. Noorda disclaims beneficial ownership of all shares held by Canopy. (3) Includes 19,792 shares issuable upon exercise of options exercisable within 60 days of July 9, 1999. (4) Includes 8,333 shares issuable upon exercise of options exercisable within 60 days of July 9, 1999. (5) Includes 10,000 shares issuable upon exercise of options exercisable within 60 days of July 9, 1999. (6) Includes 294,168 shares issuable upon exercise of options exercisable within 60 days of July 9, 1999. 10 11 (7) Includes 144,000 shares issuable upon exercise of options exercisable within 60 days of July 9, 1999. (8) Includes 362,500 shares issuable upon exercise of options exercisable within 60 days of July 9, 1999. (9) Includes 15,000 shares issuable upon exercise of options exercisable within 60 days of July 9, 1999. (10) Includes 278,350 shares issuable upon exercise of options exercisable within 60 days of July 9, 1999. (11) Includes shares held by entities affiliated with directors and executive officers of the Company as described above, including 1,349,310 shares issuable upon exercise of stock options and warrants exercisable within 60 days of July 9, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: On July 27, 1999, the Company entered into an agreement with Caldera Systems, Inc. ("Caldera"), a provider of LINUX-based operating systems for businesses, to purchase 5,333,333 shares of common stock of Caldera for a purchase price of $6,000,000. Upon completion of the transaction, the Company will own approximately 25% of the outstanding capital stock of Caldera. The Canopy Group, Inc., a major stockholder of the Company, currently owns all of the issued and outstanding shares of Caldera. Raymond J. Noorda, Chairman of the Board of Directors of the Company, is the Chairman of the Board of Directors of The Canopy Group, Inc. Consummation of this transaction remains subject to customary closing conditions, including satisfactory completion of the Company's due diligence review of Caldera. There can be no assurance that the proposed equity investment in Caldera will be consummated. John Repp, a director of the Company, provided sales and marketing consulting services to the Company during the fiscal year ended April 3, 1999. Mr. Repp was paid an aggregate of $36,800 for his services. Al Melrose, a director of the Company, provided investor relations consulting services to the Company during the fiscal year ended April 3, 1999. Mr. Melrose was paid an aggregate of $127,396 for his services. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The following Consolidated Financial Statements of the Company are attached to the Company's Annual Report on Form 10-K for the fiscal year ended April 3, 1999. (a)(1) Consolidated Financial Statements: Independent Auditors' Report Consolidated Balance Sheets as of April 3, 1999 and April 4, 1998 Consolidated Statements of Income for fiscal years 1999, 1998 and 1997 Consolidated Statements of Stockholders' Equity for fiscal years 1999, 1998 and 1997 Consolidated Statements of Cash Flows for fiscal years 1999, 1998 and 1997 Notes to Consolidated Financial Statements (2) The following financial statement schedule for fiscal years 1999, 1998 and 1997 is submitted herewith: Schedule II -- Valuation and Qualifying Accounts (See page S-1) All other schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or notes thereto. 11 12 (3) Exhibits included herewith (numbered in accordance with Item 601 of Regulation S-K):
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.1 Restated Certificate of Incorporation of the Company.(1) 3.2 Restated By-laws of the Company.(6) 4.1 Form of Registration Rights Agreement between the Company and certain Purchasers, and schedule of such Purchasers.(1) 4.2 Registration Rights Agreement among the Company, Dialogic System Corporation and NFT Ventures, Inc., dated June 15, 1992, as amended as of April 1, 1993 and as of February 11, 1994.(1) 4.3 Registration Rights Agreement between the Company and NFT Ventures, Inc., dated November 30, 1992.(1) 4.4 [Intentionally omitted] 4.5 [Intentionally omitted] 4.6 Registration Rights Agreement between the Company and Dialogic Systems Corporation, dated November 30, 1992.(1) 4.7 Specimen Stock Certificate.(1) 10.1 [Intentionally omitted] 10.2 Triple Net Lease between the Company and Catellus Development Corporation effective December 20, 1991.(1) 10.3 Owner Participation Agreement between the Company, Catellus Development Corporation and Anaheim Redevelopment Agency, dated as of January 7, 1992, including exhibits.(1) 10.4 [Intentionally omitted] 10.5 [Intentionally omitted] 10.6 [Intentionally omitted] *10.7 Form of Nonqualified Stock Option Agreement under the Stock Incentive Plan.(1) *10.8 Form of Indemnification Agreement.(1) 10.9 [Intentionally omitted] 10.10 [Intentionally omitted] *10.11 Micro Technology, Inc. Incentive Stock Option Plan -- 1985.(1) *10.12 1987 Incentive Stock Option and Nonqualified Stock Option Plan of the Company (the "1987 Stock Option Plan").(1) *10.13 Form of Incentive Common Stock Option Agreement under the 1987 Stock Option Plan.(1) *10.14 Form of Nonqualified Common Stock Option Agreement under the 1987 Stock Option Plan.(1) *10.15 Stock Incentive Plan of the Company.(1) *10.16 1988 Stock Option Plan, as amended August 12, 1991, of SF2 Corporation.(1) 10.17 Form of Consultant/Employee Confidentiality Agreement.(1) 10.18 Lease between Oak Creek Delaware, Inc., and the Company, dated December 18, 1993.(1) *10.19 Form of Incentive Stock Option Agreement under the Stock Incentive Plan.(1) *10.20 MTI Technology Corporation 1994 Employee Stock Purchase Plan, as amended.(2) *10.21 MTI Technology Corporation Directors' Non-Qualified Stock Option Plan.(1) 10.22 Asset Purchase Agreement, dated February 9, 1996, between EMC Corporation and Registrant, dated as of February 9, 1996. (Confidential treatment granted pursuant to Rule 24b-2)(3) 10.23 [Intentionally omitted] 10.24 1996 Stock Incentive Plan(4) 10.25 Amendment No. 2 to Stock Purchase Agreement and Senior Promissory Notes dated as of October 3, 1996 between Earl M. Pearlman, William E. Decker, the William E. Decker Trust and Registrant.(4) *10.26 Employment Agreement dated August 1, 1997, between Chuck Sitzman and Registrant.(5) 10.27 Loan and Security Agreement between Company and Silicon Valley Bank and General Electric Capital Corporation, as co-lenders, and Schedule thereto.(7) *10.28 Severance Agreement dated as of July 15, 1998, between Earl Pearlman and Registrant. *10.29 Severance Agreement dated as of July 15, 1998, between Dale Boyd and Registrant. *10.30 Severance Agreement dated as of July 15, 1998, between Tom Raimondi and Registrant. *10.31 Severance Agreement dated as of July 15, 1998, between Gary Scott and Registrant. *10.32 Severance Agreement dated as of July 15, 1998, between Chuck Sitzman and Registrant. *10.33 Severance Agreement dated as of July 15, 1998, between Venki Venkataraman and Registrant. 21.1 Subsidiaries of the Company.(8) 23.1 Consent of KPMG LLP.(8) 24 Power of Attorney.(8) 27 Financial Data Schedule.(8)
- --------------- (1) Filed as an Exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-75180). (2) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 2, 1994. (3) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 30, 1995. (4) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 6, 1995. (5) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 4, 1997. (6) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 3, 1998. (7) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 4, 1998. (8) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 3, 1999. * Management or compensatory plan or arrangement. (b) Reports on Form 8-K Form 8-K, dated May 14, 1999, regarding the Company's right to receive an additional $10 million under the Asset Purchase Agreement, dated February 9, 1996, between EMC Corporation and Registrant. Form 8-K, dated May 24, 1999, regarding the preliminary approval of the Company's settlement of its stockholders lawsuit. 12 13 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 30th day of July 1999. MTI TECHNOLOGY CORPORATION By: /s/ Earl M. Pearlman --------------------------------------- Earl M. Pearlman (President and Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Earl M. Pearlman President and Chief Executive July 30, 1999 - ------------------------------------ Officer (Earl M. Pearlman) /s/ Dale R. Boyd Vice President, Chief Financial July 30, 1999 - ------------------------------------ Officer (Principal Financial and (Dale R. Boyd) Accounting Officer) /s/ Stephanie M. Braun Corporate Controller, Chief July 30, 1999 - ------------------------------------ Accounting Officer (Stephanie M. Braun) /s/ Raymond J. Noorda Chairman of the Board July 30, 1999 - ------------------------------------ (Raymond J. Noorda) /s/ Val Kreidel Director July 30, 1999 - ------------------------------------ (Val Kreidel) /s/ Al Melrose Director July 30, 1999 - ------------------------------------ (Al Melrose) /s/ John Repp Director July 30, 1999 - ------------------------------------ (John Repp)
13 14 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.1 Restated Certificate of Incorporation of the Company.(1) 3.2 Restated By-laws of the Company.(6) 4.1 Form of Registration Rights Agreement between the Company and certain Purchasers, and schedule of such Purchasers.(1) 4.2 Registration Rights Agreement among the Company, Dialogic System Corporation and NFT Ventures, Inc., dated June 15, 1992, as amended as of April 1, 1993 and as of February 11, 1994.(1) 4.3 Registration Rights Agreement between the Company and NFT Ventures, Inc., dated November 30, 1992.(1) 4.4 [Intentionally omitted] 4.5 [Intentionally omitted] 4.6 Registration Rights Agreement between the Company and Dialogic Systems Corporation, dated November 30, 1992.(1) 4.7 Specimen Stock Certificate.(1) 10.1 [Intentionally omitted] 10.2 Triple Net Lease between the Company and Catellus Development Corporation effective December 20, 1991.(1) 10.3 Owner Participation Agreement between the Company, Catellus Development Corporation and Anaheim Redevelopment Agency, dated as of January 7, 1992, including exhibits.(1) 10.4 [Intentionally omitted] 10.5 [Intentionally omitted] 10.6 [Intentionally omitted] *10.7 Form of Nonqualified Stock Option Agreement under the Stock Incentive Plan.(1) *10.8 Form of Indemnification Agreement.(1) 10.9 [Intentionally omitted] 10.10 [Intentionally omitted] *10.11 Micro Technology, Inc. Incentive Stock Option Plan -- 1985.(1) *10.12 1987 Incentive Stock Option and Nonqualified Stock Option Plan of the Company (the "1987 Stock Option Plan").(1) *10.13 Form of Incentive Common Stock Option Agreement under the 1987 Stock Option Plan.(1) *10.14 Form of Nonqualified Common Stock Option Agreement under the 1987 Stock Option Plan.(1) *10.15 Stock Incentive Plan of the Company.(1) *10.16 1988 Stock Option Plan, as amended August 12, 1991, of SF2 Corporation.(1) 10.17 Form of Consultant/Employee Confidentiality Agreement.(1) 10.18 Lease between Oak Creek Delaware, Inc., and the Company, dated December 18, 1993.(1) *10.19 Form of Incentive Stock Option Agreement under the Stock Incentive Plan.(1) *10.20 MTI Technology Corporation 1994 Employee Stock Purchase Plan, as amended.(2) *10.21 MTI Technology Corporation Directors' Non-Qualified Stock Option Plan.(1) 10.22 Asset Purchase Agreement, dated February 9, 1996, between EMC Corporation and Registrant, dated as of February 9, 1996. (Confidential treatment granted pursuant to Rule 24b-2)(3) 10.23 [Intentionally omitted] 10.24 1996 Stock Incentive Plan(4) 10.25 Amendment No. 2 to Stock Purchase Agreement and Senior Promissory Notes dated as of October 3, 1996 between Earl M. Pearlman, William E. Decker, the William E. Decker Trust and Registrant.(4) *10.26 Employment Agreement dated August 1, 1997, between Chuck Sitzman and Registrant.(5) 10.27 Loan and Security Agreement between Company and Silicon Valley Bank and General Electric Capital Corporation, as co-lenders, and Schedule thereto.(7) *10.28 Severance Agreement dated as of July 15, 1998, between Earl Pearlman and Registrant. *10.29 Severance Agreement dated as of July 15, 1998, between Dale Boyd and Registrant. *10.30 Severance Agreement dated as of July 15, 1998, between Tom Raimondi and Registrant. *10.31 Severance Agreement dated as of July 15, 1998, between Gary Scott and Registrant. *10.32 Severance Agreement dated as of July 15, 1998, between Chuck Sitzman and Registrant. *10.33 Severance Agreement dated as of July 15, 1998, between Venki Venkataraman and Registrant. 21.1 Subsidiaries of the Company.(8) 23.1 Consent of KPMG LLP.(8) 24 Power of Attorney.(8) 27 Financial Data Schedule.(8)
- --------------- (1) Filed as an Exhibit to the Registrant's Registration Statement on Form S-1 (No. 33-75180). (2) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 2, 1994. (3) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 30, 1995. (4) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 6, 1995. (5) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 4, 1997. (6) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended January 3, 1998. (7) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 4, 1998. (8) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 3, 1999. * Management or compensatory plan or arrangement.
EX-10.28 2 SEVERANCE AGREEMENT - EARL PEARLMAN 1 EXHIBIT 10.28 SEVERANCE AGREEMENT This Agreement, (the "Agreement") is made and entered into as of July 15, 1998, is entered into between MTI Technology Corporation, a corporation organized under the laws of the State of Delaware (the "Company"), and Earl Pearlman (the "Executive"). RECITALS A. Executive is currently serving as an officer of the Company. B. The Board of Directors of the Company (the "Board") recognizes that the possibility of a Change in Control (as hereinafter defined) exists and that the threat or the occurrence of a Change in Control can result in significant distractions to its key management personnel because of the uncertainties inherent in such a situation; C. The Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Executive in the event of a threat or occurrence of a Change in Control and to ensure the Executive's continued dedication and efforts in such event without undue concern for the Executive's personal, financial and employment security; and D. In order to induce the Executive to remain in the employ of the Company, particularly in the event of a threat or the occurrence of a Change in Control, the Company desires to enter into this Agreement with the Executive to provide the Executive with certain benefits in the event that the Executive's employment is terminated as a result of, or in connection with, a Change in Control. AGREEMENT In consideration of the respective agreements of the parties contained herein, it is agreed as follows: 1. Term Of Agreement. This Agreement shall commence as of the date first set forth above and shall continue in effect until July 15, 2000; provided, however, that commencing on July 15, 2000 and on each July 15 thereafter, the term of this Agreement shall automatically be extended for one (1) year unless the Company or the Executive shall have given written notice to the other at least ninety (90) days prior thereto that the term of this Agreement shall not be so extended; and provided, further, however, that notwithstanding any such notice by the Company not to extend, the term of this Agreement shall not expire prior to the expiration of twelve (I 2) months after the occurrence of a Change in Control. 2. Definitions. 2.1. Accrued Compensation. For purposes of this Agreement, "Accrued Compensation" shall mean an amount which shall include all amounts earned or accrued through the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, 2 including (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date, (iii) vacation pay and (iv) bonuses and incentive compensation (other than the "Pro Rata Bonus" (as hereinafter defined)). 2.2. Base Amount. For purposes of this Agreement, "Base Amount" shall mean the greater of the Executive's annual base salary (a) at the rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the Change in Control, and shall include all amounts of base salary that are deferred under the Executive benefit plans of the Company or any other agreement or arrangement. 2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount" shall mean the greatest of: (a) 100% of the annual bonus payable to the Executive under the Company's Executive Management Bonus Plan for the fiscal year in which the Termination Date occurs; (b) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which the Termination Date occurred; (c) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which a Change in Control occurred; (d) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Termination Date occurred; or (e) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Change in Control occurred. 2.4. Cause. The Company may terminate this Agreement and discharge Executive for Cause (as defined) at any time upon written notice. For purposes of this Agreement, the term "Cause" shall mean: (i) a material breach of any term of this Agreement and failure to cure such breach within ten (10) days after written notice thereof from the Company; (ii) the willful and continued failure by Executive substantially to perform his duties for the Company (other than any such failure resulting from his incapacity due to death or physical or mental illness), after written demand for substantial performance is delivered to Executive by the Company, which specifically identifies the manner in which the Company believes that Executive has not substantially performed his duties; (iii) the failure by Executive to follow the reasonable instructions of the Board of Directors; (iv) the willful engaging by Executive in misconduct that is materially injurious to the Company, monetarily or otherwise; (v) Executive's final conviction for fraud or of any felony; or (vi) Executive's habitual use of illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol abuse, Executive shall be given notice and a thirty (30) day opportunity to remedy the problem. For purposes of this paragraph, no act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive other than in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company. 2 3 2.5. Change In Control. (a) For purposes of this Agreement, "Change of Control" shall mean: (i) any "person" as such term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than (1) a trustee or other fiduciary holding securities under an Executive benefit plan of the Company, (2) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (3) any current beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange Act, of securities possessing more than [TWENTY-FIVE] percent (25%) of the total combined voting power of the Company's outstanding securities, hereafter becomes the "beneficial owner," as defined in Rule 13d-3 under of the Exchange Act, directly or indirectly, of securities of the Company representing [TWENTY-FIVE] percent (25%) or more of the total combined voting power of the Company's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company, in one transaction or a series of transactions, of all or substantially all of the Company's assets; or (iv) the sale of substantially all of the Company's assets. 2.6. Company. For purposes of this Agreement, the "Company" shall mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors and Assigns (as hereinafter defined). 2.7. Disability. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs the Executive's ability to substantially perform the Executive's duties with the Company for a total period of ninety (90) days and the Executive has not returned to full time employment prior to the Termination Date as stated in the "Notice of Termination." 3 4 2.8. Good Reason. (a) For purposes of this Agreement, "Good Reason" shall mean the occurrence after a Change in Control of any of the events or conditions described in subsections (1) through (8) hereof: (i) a change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, represents an adverse change from the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; or any removal of the Executive from or failure to reappoint or reelect the Executive to any of such offices or positions, except in connection with the termination of the Executive's employment for Disability, Cause, as a result of the Executive's death or by the Executive; (ii) a reduction in the Executive's base salary or any failure to pay the Executive any compensation or benefits to which the Executive is entitled within ten (10) days of the date due after receipt of written notice from Executive; (iii) the Company's requiring the Executive to be based at any place outside a 25-mile radius from MTI's Westmont Office, located at 1111 Pasquinelli Drive, Ste. 400, Westmont, Illinois 60556, except for reasonably required travel on the Company's business which is not materially greater than such travel requirements prior to the Change in Control; (iv) the failure by the Company to (A) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or Executive benefit plan in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the Executive, or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other Executive benefit plan, program and practice in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; (v) the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty (60) days; (vi) any material breach by the Company of any provision of this Agreement; 4 5 (vii) any purported termination of the Executive's employment for Cause by the Company which does not comply with the terms of Section 2,4; or (viii) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any Successors and Assigns to assume and agree to perform this Agreement, as contemplated in Section 6 hereof. (b) The Executive's right to terminate the Executive's employment pursuant to this Section 2.8 shall not be affected by the Executive's incapacity due to physical or mental illness. 2.9. Notice Of Termination. For purposes of this Agreement, following a Change in Control, "Notice of Termination" shall mean a written notice of termination of the Executive's employment from the Company, which notice indicates the date on which termination is to be effective, the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction the numerator of which is the number of days in the fiscal year through the Termination Date and the denominator of which is 365. 2.11. Successors And Assigns. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or other entity acquiring all or substantially all of the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. 2.12. Termination Date. For purposes of this Agreement, "Termination Date" shall mean in, the case of the Executive's death, the Executive's date of death, in the case of Good Reason, the last day of the Executive's employment and, in all other cases, the date specified in the Notice of Termination; provided, however, that if the Executive's employment is terminated by the Company for Cause or due to Disability, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to the Executive, provided that, in the case of Disability, the Executive shall not have returned to the full-time performance of the Executive's duties during such period of at least thirty (30) days. 3. Termination Of Employment. 3.1. If, during the term of this Agreement, the Executive's employment with the Company shall be terminated within twelve (12) months following a Change in Control, the Executive shall be entitled to the following compensation and benefits: (a) If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by reason of the Executive's death or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued Compensation 5 6 and, if such termination is other than by the Company for Cause, the Company shall also pay the Executive a Pro Rata Bonus. (b) If the Executive's employment with the Company shall be terminated for any reason other than as specified in Section 3.1 (a), the Executive shall be entitled to the following: (i) the Company shall pay the Executive all Accrued Compensation and a Pro Rata Bonus; (ii) the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment, an amount in cash equal to the sum of (A) the Base Amount and (B) the Bonus Amount; and (iii) for a number of months equal to twelve (12) (the "Continuation Period"), the Company shall, at its expense, continue on behalf of the Executive and the Executive's dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (A) to the Executive at any time during the 90-day period prior to the Change in Control or at any time thereafter or (B) to other similarly situated executives who continue in the employ of the Company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section 3.1 (b)(iii) during the Continuation Period shall be no less favorable to the Executive and the Executive's dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (A) and (B) above. The Company's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iii) shall not be interpreted so as to limit any benefits to which the Executive or the Executive's dependents or beneficiaries may be entitled under any of the Company's Executive benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits. (c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and (ii) shall be paid in a single lump sum cash payment within forty-five (45) days after the Executive's Termination Date (or earlier, if required by applicable law). (d) The Executive shall not be required to mitigate the amount of any payment for in this Agreement by seeking other employment or otherwise, and no such payment provided shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in Section 3.1(b)(iii). 6 7 3.2. (a) The severance pay and benefits provided for in this Section 3 shall be in lieu of any other severance or termination pay to which the Executive may be entitled under any Company severance or termination plan, program, practice or arrangement. (b) The Executive's entitlement to any other compensation or benefits shall be determined in accordance with the Company's Executive benefit plans and other applicable programs, policies and practices then in effect, 4. Notice Of Termination. Following a Change in Control, any purported termination of the Executive's employment shall be communicated by Notice of Termination to the Executive. For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination. 5. Excise Tax Limitation. (a) Notwithstanding anything in this Agreement to the contrary, if any portion of any payments to Executive by the Company under this Agreement and any other present or future plan of the Company or other present or future agreement between Executive and the Company would not be deductible by the Company (collectively, "Payments") for federal income tax purposes by reason of application of Section 162(m) of the Internal Revenue Code (the "Code"), then payment of that portion to Executive shall be deferred until the earliest date upon which payment thereof can be made to Executive without being non-deductible pursuant to Section 162(m) of the Code. In the event of such deferral, the Company shall pay interest to Executive on the deferred amount at 120% of the applicable federal rate provided for in Section 1274(d)(1) of the Code. In addition, notwithstanding any provision of this Agreement to the contrary, the aggregate present value of the payments and benefits (excluding those payments and benefits not treated as parachute payments under Code Section 28OG(b)) to be made or provided to the Executive by the Company (whether pursuant to this Agreement or otherwise) shall not exceed three times the Executive's annualized includible compensation for the base period, as defined in Code Section 28OG(d) of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any excess payments or benefits shall be forfeited; provided, however, that the forfeiture provision of this sentence shall apply only if such forfeiture provision results in larger aggregate after-tax payments and benefits to the Executive than if the forfeiture provision did not apply. The of this portion of this subsection 5(a) is to prevent any payment or benefit to the Executive from being subject to the excise tax imposed by Code Section 4999 and to prevent any item of expense or deduction of the Company from being disallowed as a result of the application of Code Section 280G, but only if the after-tax payments and benefits payable or provided to the Executive are greater after application of the forfeiture provision than if the forfeiture provision did not apply. The interpretation of this subsection 5(a), its application to any occurrence or event, the determination of whether any payment or benefit would not be treated as a parachute payment, the determination of the aggregate present value of all payments and benefits to be made or provided to the Executive, the determination of the value of the payments and benefits payable or to be provided to the Executive after reduction for all applicable taxes, and what specific payments or benefits otherwise available to the Executive 7 8 shall be limited or eliminated by operation of this subsection 5(a) shall be reasonably made by the Company and shall be binding on all persons. (b) An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount and the amount of such Limited Payment Amount shall be made, at the Company's expense, by the accounting firm that is the Company's independent accounting firm as of the date of the Change in Control (the "Accounting Firm"). The Accounting Finn shall provide its determination (the "Determination", together with detailed supporting calculations and documentation, to the Company and the Executive within twenty (20) days of the Termination Date if applicable, or such other time as requested by the Company or by the Executive (provided the Executive reasonably believes that any of the Payments may be subject to the Excise Tax), and if the Accounting Firm determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (I 0) days of the delivery of the Determination to the Executive, the Executive shall have the night to dispute the Determination (the "Dispute"). If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and the Executive. 6. Successors; Binding Agreement. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its Successors and Assigns and the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive or the Executive's beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative. 7. Confidential Information. The Company and Executive acknowledge that Executive, in performing the terms and conditions of Executive's employment, has and will continue to directly or indirectly gain access to information about Company and its operations, including, but not limited to, its modes and methods of conducting its business and producing and marketing its products, its employee, customer, vendor and referral source lists, its trade secrets, its copyrighted and non-copyrighted or non-protected computer software programs, its techniques of operation, its financial structure, and its weakness, if any. As part of this Agreement, Executive agrees to execute, and be bound by, the Company's "Employee/ Consultant Proprietary Information Agreement," a copy of which is attached hereto as Exhibit "A." 8. Notice. All notices, requests, demands, and other communications hereunder shall be in writing, and shall be delivered in person, by facsimile, or by certified or registered mail with 8 9 return receipt requested. Each such notice, request, demand, or other communication shall be effective (a) if delivered by hand, when delivered at the address specified in this Section; (b) if given by facsimile, when such facsimile is transmitted to the telefacsimile number specified in this Section and confirmation is received; or (c) if given by certified or registered mail, three days after the mailing thereof. Notices shall be delivered as follows: If to the Company: MTI Technology Corporation 4905 E. La Palma Avenue Anaheim, California 92807 Attention: Chief Financial Officer Fax: (714) 693-2202 With a copy to: Morrison & Foerster LLP 19900 MacArthur Boulevard 12th Floor Irvine, California 92612 Attention: Tamara Powell Tate Fax: (714) 251-0900 If to the Executive: Earl Pearlman 9 Knollwood Flossmoor, Illinois 60422 Any party may change its address by notice giving notice to the other party of a new address in accordance with the foregoing provisions. 9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Settlement Of Claims. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against an Executive or others. 9 10 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged, unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time, No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law. This Agreement has been negotiated and exactitude in the State of California and is to be performed in Orange County, California. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, including all matters of construction, validity, performance, and enforcement, without giving effect to principles of conflict of laws. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 13. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. 15. Remedies. All rights, remedies, undertakings, obligations, options, covenants, conditions, and agreements contained in this Agreement shall be cumulative and no one of them shall be exclusive of any other. 16. Interpretation. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any party. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa. The descriptive headings of the sections and subsections of this Agreement are inserted for convenience only and shall not control or affect the interpretation or construction of any of the provisions herein. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 18. Further Documents and Acts. Each of the parties hereto agrees to cooperate in good faith with the other and to execute and deliver such further instruments and perform such other acts as may be reasonably necessary or appropriate to consummate and carry into effect the transactions contemplated under this Agreement. 10 11 19. Consultation with Counsel. Executive acknowledges (a) that he has been given the opportunity to consult with counsel of his own choice concerning this Agreement, and (b) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based upon his own judgment with or without the advice of such counsel. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT. BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written. MTI TECHNOLOGY CORPORATION By: /s/ DALE R BOYD -------------------------------- Title: Sr. V.P. & CFO -------------------------- /s/ EARL M. PEARLMAN ------------------------------------ Earl M. Pearlman 11 12 EXHIBIT "A" 13 STATEMENT REGARDING EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT Attached to this statement is your Employee/Consultant Proprietary Information Agreement (the "Agreement") with MTI Technology Corporation (together with its subsidiaries, the "Company"). Please take the time to review the Agreement carefully. It contains material restrictions on your right to disclose or use, during or after your employment, certain information and technology learned or developed by you during your employment with the Company. The Company considers this Agreement to be very important to the protection of its business. If you have any questions concerning the Agreement, you may wish to consult an attorney. Managers, legal counsel, and others in the Company are not authorized to give you legal advice concerning the Agreement. If you have read and understand the Agreement, and if you agree to its terms and conditions, please return a fully executed copy of it to the Company, retaining one copy for yourself. I HAVE READ AND UNDERSTAND THE ATTACHED AGREEMENT: Executive Name: EARL PEARLMAN ----------------------------- Executive Signature: /s/ EARL PEARLMAN ------------------------ Title: ----------------------------- Date: ------------------------------ A-1 14 EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT In consideration of my present and future employment by MTI Technology Corporation (together with its subsidiaries, the "Company"), I agree to the following: 1. Proprietary Information. (a) I understand and acknowledge that my work as an employee of the Company has involved and will continue to involve access to and creation of confidential, proprietary, and trade secret information of the Company and its affiliates, consultants, customers, clients, and business associates (collectively, as defined more extensively below, "Proprietary Information"). I further understand and acknowledge that the Company and its clients have developed, compiled, and otherwise obtained this Proprietary Information often at great expense, and that such information has great value to their respective businesses. I agree to hold in strict confidence and in trust for the sole benefit of the Company and its clients all Proprietary Information. I further agree that I shall treat all Proprietary Information as private, privileged, and confidential, and that I shall not use, disclose, or release any Proprietary Information in any way to any person, firm, or institution at any time, even after termination of my employment, except to the extent necessary to carry out my responsibilities as an Executive of the Company. I further understand and agree that the publication of Proprietary Information through literature or speeches must be approved in advance in writing by a duly authorized officer of the Company. (b) I understand and acknowledge that, for purposes of this Agreement, "Proprietary Information" means all confidential, proprietary, or trade secret information and ideas in whatever form, tangible or intangible, whether disclosed to or learned or developed by me, prior or subsequent to the date hereof, pertaining in any manner to the business of the Company or to the Company's affiliates, consultants, clients, or business associates, unless: (i) the information is or becomes publicly known through lawful means; (ii) the information was rightfully in my possession or part of my general knowledge prior to my employment by the Company; or (iii) the information is disclosed to me without confidential or proprietary restriction by a third party who rightfully possesses the information (without confidential or proprietary restriction) and did not learn of it, directly or indirectly, from the Company. (c) Without limiting the generality of the foregoing, I understand and acknowledge that "Proprietary Information" includes all: (i) inventions, computer codes, computer programs, formulas, schematics, techniques, algorithms, employee suggestions, development tools and processes, computer printouts, design drawings and manuals, and improvements or modification to any of the foregoing; (ii) information about costs, profits, markets, and sales; (iii) plans for future development and new product concepts; and (iv) all documents, books, papers, drawings, models, sketches, and other data of any kind and description, including electronic data recorded or retrieved by any means, that have been or will be given to me by the Company (or any present or future affiliates, consultants, customers, clients, and business associates of the Company), as well as written or verbal instructions or comments. A-2 15 1. Use Of Proprietary Information. I agree that I will maintain at my work station or in other places under my control only such Proprietary Information that I have a current "need to know," and that I will return to the appropriate person or location, or otherwise dispose of, Proprietary Information once my need to know no longer exists. I agree that I will not make copies of information unless I have a legitimate need for such copies in connection with my work. 2. Third-Party Information. I recognize that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree that I owe the Company and such third parties, during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm, or corporation (except as necessary in carrying out my work for the Company consistent with the Company's agreement with such third party) or to use it for the benefit of anyone other than for the Company or such third party (consistent with the Company's agreement with such third party) without the express written authorization of a duly authorized officer of the Company. 3. Inventions. (a) Subject to Section 9 below, I hereby assign to the Company, without additional consideration, all right, title and interest (throughout the United States and in all foreign countries) in all ideas, processes, inventions, technology, writings, computer programs, designs, formulas, discoveries, patents, copyrights, trademarks, service marks, original works of authorship, any claims or rights, and any improvements or modifications to the foregoing (collectively, "Inventions"), whether or not subject to patent or copyright protection, relating to any activities of the Company that have been or will be conceived, developed, or reduced to practice by me alone or with others (i) during the term of my employment, whether or not conceived or developed during regular business hours, and whether or not conceived before, on, or after the date hereof or (ii) if based on Proprietary Information, after termination of my employment. Such Inventions shall be the sole property of the Company and, to the maximum extent permitted by applicable law, shall be deemed works made for hire. (b) I will, whether during or after my employment by the Company, execute such written instruments and do other such acts as may be necessary in the opinion of the Company to obtain a patent, register a copyright, or otherwise enforce the Company's rights in such Inventions (and I hereby irrevocably appoint the Company and any of its officers as my attorney in fact to undertake such acts in my name). (c) I understand that the assignment by me to the Company does not apply to Inventions that qualify fully under Section 2870(a) of the California Labor Code, which is set forth on Schedule "A." I understand that nothing in this Agreement is intended to expand the scope of protection provided by Sections 2870 through 2872 of the California Labor Code. Except as disclosed in Schedule "B", there are no ideas, inventions, technology, computer A-3 16 programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing that I wish to exclude from the operation of this Agreement. (d) To the best of my knowledge, there is no existing contract in conflict with this Agreement or any other contract in existence between me and any other person or entity to assign ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing. 1. Termination of Employment. (a) I hereby acknowledge and agree that nothing in this Agreement shall be construed to imply that the term of my employment is of any definite duration. I further acknowledge and agree that I am employed on an "at-will" basis, which means that I may quit at any time with or without cause, and the Company may terminate my employment at any time with or without cause. (b) I acknowledge that, because of my responsibilities at the Company, I have helped and will continue to help to develop and have been and will be exposed to the Company's research and, development, products, business strategies, information on customers and clients, and other valuable Proprietary Information, and that use or disclosure of such Proprietary Information in breach of this Agreement would be extremely difficult to detect or prove. I also acknowledge that the Company's relationships with its employees, affiliates, consultants, customers, clients, business associates, and other persons are valuable business assets. To forestall any use or disclosure of Proprietary Information in breach of this Agreement, I agree that for the term of this Agreement and for a period of one (1) year after termination of my employment with the Company, I shall not, for myself or any third party, directly or indirectly: (i) divert or attempt to divert from the Company any business of any kind in which it is engaged, including, without limitation, the solicitation of or interference with any of its suppliers or customer; or (ii) employ, solicit for employment, or recommend for employment any person employed by the Company. Furthermore, I agree that during the period of my employment with the Company I shall not engage in any business activity that is or may be competitive with the Company. I understand that none of my activities will be prohibited under this section if I can prove that the action was taken without the use in any way of Proprietary Information. (c) I acknowledge that, because of the difficulty of establishing when any Invention is first conceived or developed by me, or whether it results from access to Proprietary Information or the Company's equipment, facilities, and data, I agree that any ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing shall be presumed to be an Invention if A-4 17 conceived, developed, used, sold, exploited, or reduced to practice by me or with my aid within one (1) year after my termination of employment with the Company. I can rebut the above presumption if I prove that the invention, idea, process, etc., is not an Invention as defined in paragraph 4(a). (d) I hereby acknowledge and agree that all personal property including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, files, computer software, computer tapes or disks, blueprints, and other documents or materials (or copies thereof), Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment, belong to the Company and shall be promptly returned to the Company once my employment with the Company is terminated, for any reason. I will not retain any written or other tangible information pertaining to any Invention. In the event of the termination of my employment, I agree to sign and deliver the Termination Certificate attached as Schedule "C" to this Agreement. (e) I understand that my obligations contained in this Agreement will survive the termination of my employment with the Company, and that I will continue to make all disclosures required of me by Paragraph 6. 1. Disclosure. I agree to maintain adequate and current written records on the development of all Inventions and to disclose promptly to the Company all Inventions and relevant records, which records will remain the sole property of the Company. I further agree that all information and records pertaining to any Inventions conceived, developed, or reduced to practice by me (alone or with others) during my period of employment or during the one-year period following termination of my employment, shall be promptly disclosed to the Company (any such disclosures made after the termination of my employment shall be received by the Company in confidence for the purpose of determining if they have been based on any Proprietary Information). The Company shall examine such information to determine if in fact such information are Inventions subject to this Agreement. 2. Former or Conflicting Agreements. During my employment with the Company, I will not disclose to the Company, or use, or induce the Company to use, any confidential, proprietary, or trade secret information of others. I represent and warrant that I have returned all property and confidential, proprietary and trade secret information belonging to all prior employers, if any. I further represent and warrant that my performance of the terms of this Agreement will not breach any agreement to keep in confidence confidential proprietary and trade secret information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith. 3. Information on Company Premises. I acknowledge that all information generated, received, or maintained by or for me on the premises or equipment of the Company (including, without limitation, computer systems and A-5 18 electronic-mail or voicemail systems) is the property of the Company, and I hereby waive any property or privacy rights that I may have with respect to such information. 4. Reserved Inventions. To avoid future confusion, I have listed on Schedule "B" a description of all Inventions, if any, developed or conceived by me in which I claim any ownership or other right. I understand that, by not listing an Invention, I am acknowledging that the Invention was not developed or conceived before commencement of my employment. 10. Choice of Law. The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to its conflict of law rules. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 11. Remedies. I recognize that nothing in this Agreement is intended to limit any remedy of the Company under the California Uniform Trade Secrets Act and that I could face possible criminal and civil actions, resulting in imprisonment and substantial monetary liability, if I misappropriate the Company's or its clients' trade secrets. In addition, I recognize that my violation of this Agreement could cause the Company irreparable harm and significant injury, the amount of which may be extremely difficult to estimate, thus, making any remedy at law or in damages inadequate. Therefore, I agree that, in the event of a breach or threatened breach that involves Proprietary Information of the Company or its clients, the Company shall have the right to apply to any court of competent jurisdiction for an order restraining any breach or threatened breach of this Agreement and for any other relief the Company deems appropriate. This right shall be in addition to any other remedy available to the Company in law or equity. 12. Successors and Assigns. (a) I understand and agree that the Company may assign to another person or entity any of its rights under this Agreement. (b) I further understand and agree that this Agreement shall be binding upon me and my heirs, executors, administrators, and successors, and shall inure to the benefit of the Company's successors and assigns. 12. Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, the validity or enforceability of the other provisions shall not be affected. A-6 19 13. Entire Agreement. The terms of this Agreement are the final expression of my agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. This Agreement shall constitute the complete and exclusive statement of its terms and no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding involving this Agreement. No modification or amendment of this Agreement shall be binding unless executed in writing by me and a duly authorized officer of the Company. I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS, PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS, RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS AGREEMENT. This Agreement is made and entered into as of July 15, 1998. MTI TECHNOLOGY CORPORATION By: /s/ Dale R. Boyd -------------------------------- Title: Sr. V.P. & CFO -------------------------- Executive: EARL PEARLMAN ------------------------- Signature: /s/ EARL PEARLMAN ------------------------- A-7 20 SCHEDULE A California Labor Code Section 2870(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information, except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. Schedule A 21 SCHEDULE B 1. Proprietary Information. Except as set forth below, I acknowledge that at this time I know nothing about the business or Proprietary Information of the Company, other than information I have learned from the Company in the course of being hired: --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- 2. Reserved Inventions. Except as set forth below, there are no ideas, processes, inventions, technology, writings, programs, designs, formulas, discoveries, patents, copyrights, or trademarks, or any claims, rights, or improvements to the foregoing, that I wish to exclude from the operation of this Agreement: N/A --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- Name: EARL PEARLMAN -------------------------------- Signature: /s/ EARL PEARLMAN --------------------------- Date: 9-1-98 -------------------------------- Schedule B 22 SCHEDULE C TERMINATION CERTIFICATE This is to certify that I have returned all personal property of the Company, including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, blueprints, and other documents and materials, Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment with the Company, and that I did not make or distribute any copies of the foregoing. I further certify that I have reviewed the Employee/Consultant Proprietary Information Agreement signed by me and that I have complied with and will continue to comply with all of its terms including, without limitation: (i) the reporting of any invention, process, idea, etc. conceived or developed by me and covered by the Agreement; and (ii) the preservation as confidential of all Proprietary Information pertaining to the Company. This certificate in no way limits my responsibilities or the Company's rights under the Agreement. On termination of my employment with the Company, I will be employed by [NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will be working in connection with the following projects: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Name: ----------------------------------- Signature: ------------------------------ Date: ----------------------------------- Schedule C EX-10.29 3 SEVERANCE AGREEMENT - DALE BOYD 1 EXHIBIT 10.29 SEVERANCE AGREEMENT This Agreement, (the "Agreement") is made and entered into as of July 15, 1998, is entered into between MTI Technology Corporation, a corporation organized under the laws of the State of Delaware (the "Company"), and Dale Boyd (the "Executive"). RECITALS A. Executive is currently serving as an officer of the Company. B. The Board of Directors of the Company (the "Board") recognizes that the possibility of a Change in Control (as hereinafter defined) exists and that the threat or the occurrence of a Change in Control can result in significant distractions to its key management personnel because of the uncertainties inherent in such a situation; C. The Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Executive in the event of a threat or occurrence of a Change in Control and to ensure the Executive's continued dedication and efforts in such event without undue concern for the Executive's personal, financial and employment security; and D. In order to induce the Executive to remain in the employ of the Company, particularly in the event of a threat or the occurrence of a Change in Control, the Company desires to enter into this Agreement with the Executive to provide the Executive with certain benefits in the event that the Executive's employment is terminated as a result of, or in connection with, a Change in Control. AGREEMENT In consideration of the respective agreements of the parties contained herein, it is agreed as follows: 1. Term Of Agreement. This Agreement shall commence as of the date first set forth above and shall continue in effect until July 15, 2000; provided, however, that commencing on July 15, 2000 and on each July 15 thereafter, the term of this Agreement shall automatically be extended for one (1) year unless the Company or the Executive shall have given written notice to the other at least ninety (90) days prior thereto that the term of this Agreement shall not be so extended; and provided, further, however, that notwithstanding any such notice by the Company not to extend, the term of this Agreement shall not expire prior to the expiration of twelve (12) months after the occurrence of a Change in Control. 2. Definitions. 2.1. Accrued Compensation. For purposes of this Agreement, "Accrued Compensation" shall mean an amount which shall include all amounts earned or accrued through the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, 2 including (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date, (iii) vacation pay and (iv) bonuses and incentive compensation (other than the "Pro Rata Bonus" (as hereinafter defined)). 2.2. Base Amount. For purposes of this Agreement, "Base Amount" shall mean the greater of the Executive's annual base salary (a) at the rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the Change in Control, and shall include all amounts of base salary that are deferred under the Executive benefit plans of the Company or any other agreement or arrangement. 2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount" shall mean the greatest of: (a) 100% of the annual bonus payable to the Executive under the Company's Executive Management Bonus Plan for the fiscal year in which the Termination Date occurs; (b) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which the Termination Date occurred; (c) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which a Change in Control occurred; (d) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Termination Date occurred; or (e) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Change in Control occurred. 2.4. Cause. The Company may terminate this Agreement and discharge Executive for Cause (as defined) at any time upon written notice. For purposes of this Agreement, the term "Cause" shall mean: (i) a material breach of any term of this Agreement and failure to cure such breach within ten (10) days after written notice thereof from the Company; (ii) the willful and continued failure by Executive substantially to perform his duties for the Company (other than any such failure resulting from his incapacity due to death or physical or mental illness), after written demand for substantial performance is delivered to Executive by the Company, which specifically identifies the manner in which the Company believes that Executive has not substantially performed his duties; (iii) the failure by Executive to follow the reasonable instructions of the Board of Directors; (iv) the willful engaging by Executive in misconduct that is materially injurious to the Company, monetarily or otherwise; (v) Executive's final conviction for fraud or of any felony; or (vi) Executive's habitual use of illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol abuse, Executive shall be given notice and a thirty (30) day opportunity to remedy the problem. For purposes of this paragraph, no act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive other than in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company. 2 3 2.5. Change In Control. (a) For purposes of this Agreement, "Change of Control" shall mean: (i) any "person" as such term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than (1) a trustee or other fiduciary holding securities under an Executive benefit plan of the Company, (2) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (3) any current beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange Act, of securities possessing more than [TWENTY-FIVE] percent (25%) of the total combined voting power of the Company's outstanding securities, hereafter becomes the "beneficial owner," as defined in Rule 13d-3 under of the Exchange Act, directly or indirectly, of securities of the Company representing [TWENTY-FIVE] percent (25%) or more of the total combined voting power of the Company's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company, in one transaction or a series of transactions, of all or substantially all of the Company's assets; or (iv) the sale of substantially all of the Company's assets. 2.6. Company. For purposes of this Agreement, the "Company" shall mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors and Assigns (as hereinafter defined). 2.7. Disability. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs the Executive's ability to substantially perform the Executive's duties with the Company for a total period of ninety (90) days and the Executive has not returned to full time employment prior to the Termination Date as stated in the "Notice of Termination." 3 4 2.8. Good Reason. (a) For purposes of this Agreement, "Good Reason" shall mean the occurrence after a Change in Control of any of the events or conditions described in subsections (1) through (8) hereof: (i) a change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, represents an adverse change from the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; or any removal of the Executive from or failure to reappoint or reelect the Executive to any of such offices or positions, except in connection with the termination of the Executive's employment for Disability, Cause, as a result of the Executive's death or by the Executive; (ii) a reduction in the Executive's base salary or any failure to pay the Executive any compensation or benefits to which the Executive is entitled within ten (10) days of the date due after receipt of written notice from Executive; (iii) the Company's requiring the Executive to be based at any place outside a 25-mile radius from MTI's Corporate Offices, located at 4905 E. LaPalma Avenue, Anaheim, CA 92807, except for reasonably required travel on the Company's business which is not materially greater than such travel requirements prior to the Change in Control; (iv) the failure by the Company to (A) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or Executive benefit plan in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the Executive, or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other Executive benefit plan, program and practice in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; (v) the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty (60) days; (vi) any material breach by the Company of any provision of this Agreement; 4 5 (vii) any purported termination of the Executive's employment for Cause by the Company which does not comply with the terms of Section 2.4; or (viii) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any Successors and Assigns to assume and agree to perform this Agreement, as contemplated in Section 6 hereof. (b) The Executive's right to terminate the Executive's employment pursuant to this Section 2.8 shall not be affected by the Executive's incapacity due to physical or mental illness. 2.9. Notice Of Termination. For purposes of this Agreement, following a Change in Control, "Notice of Termination" shall mean a written notice of termination of the Executive's employment from the Company, which notice indicates the date on which termination is to be effective, the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.10 Pro Rata Bonus. For purposes of this Agreement, "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction the numerator of which is the number of days in the fiscal year through the Termination Date and the denominator of which is 365. 2.11. Successors And Assigns. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or other entity acquiring all or substantially all of the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. 2.12. Termination Date. For purposes of this Agreement, "Termination Date" shall mean in, the case of the Executive's death, the Executive's date of death, in the case of Good Reason, the last day of the Executive's employment and, in all other cases, the date specified in the Notice of Termination; provided, however, that if the Executive's employment is terminated by the Company for Cause or due to Disability, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to the Executive, provided that, in the case of Disability, the Executive shall not have returned to the full-time performance of the Executive's duties during such period of at least thirty (30) days. 3. Termination Of Employment. 3.1. If, during the term of this Agreement, the Executive's employment with the Company shall be terminated within twelve (12) months following a Change in Control, the Executive shall be entitled to the following compensation and benefits: (a) If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by reason of the Executive's death or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued Compensation 5 6 and, if such termination is other than by the Company for Cause, the Company shall also pay the Executive a Pro Rata Bonus. (b) If the Executive's employment with the Company shall be terminated for any reason other than as specified in Section 3.1(a), the Executive shall be entitled to the following: (i) the Company shall pay the Executive all Accrued Compensation and a Pro Rata Bonus; (ii) the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment, an amount in cash equal to the sum of (A) the Base Amount and (B) the Bonus Amount; and (iii) for a number of months equal to twelve (12) (the "Continuation Period"), the Company shall, at its expense, continue on behalf of the Executive and the Executive's dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (A) to the Executive at any time during the 90-day period prior to the Change in Control or at any time thereafter or (B) to other similarly situated executives who continue in the employ of the Company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section 3.1(b)(iii) during the Continuation Period shall be no less favorable to the Executive and the Executive's dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (A) and (B) above. The Company's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iii) shall not be interpreted so as to limit any benefits to which the Executive or the Executive's dependents or beneficiaries may be entitled under any of the Company's Executive benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits. (c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and (ii) shall be paid in a single lump sum cash payment within forty-five (45) days after the Executive's Termination Date (or earlier, if required by applicable law). (d) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in Section 3.1(b)(iii). 6 7 3.2. (a) The severance pay and benefits provided for in this Section 3 shall be in lieu of any other severance or termination pay to which the Executive may be entitled under any Company severance or termination plan, program, practice or arrangement. (b) The Executive's entitlement to any other compensation or benefits shall be determined in accordance with the Company's Executive benefit plans and other applicable programs, policies and practices then in effect. 4. Notice Of Termination. Following a Change in Control, any purported termination of the Executive's employment shall be communicated by Notice of Termination to the Executive. For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination. 5. Exercise Tax Limitation. (a) Notwithstanding anything in this Agreement to the contrary, if any portion of any payments to Executive by the Company under this Agreement and any other present or future plan of the Company or other present or future agreement between Executive and the Company would not be deductible by the Company (collectively, "Payments") for federal income tax purposes by reason of application of Section 162(m) of the Internal Revenue Code (the "Code"), then payment of that portion to Executive shall be deferred until the earliest date upon which payment thereof can be made to Executive without being non-deductible pursuant to Section 162(m) of the Code. In the event of such deferral, the Company shall pay interest to Executive on the deferred amount at 120% of the applicable federal rate provided for in Section 1274(d)(1) of the Code. In addition, notwithstanding any provision of this Agreement to the contrary, the aggregate present value of the payments and benefits (excluding those payments and benefits not treated as parachute payments under Code Section 28OG(b)) to be made or provided to the Executive by the Company (whether pursuant to this Agreement or otherwise) shall not exceed three times the Executive's annualized includible compensation for the base period, as defined in Code Section 280G(d) of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any excess payments or benefits shall be forfeited; provided, however, that the forfeiture provision of this sentence shall apply only if such forfeiture provision results in larger aggregate after-tax payments and benefits to the Executive than if the forfeiture provision did not apply. The intent of this portion of this subsection 5(a) is to prevent any payment or benefit to the Executive from being subject to the excise tax imposed by Code Section 4999 and to prevent any item of expense or deduction of the Company from being disallowed as a result of the application of Code Section 280G, but only if the after-tax payments and benefits payable or provided to the Executive are greater after application of the forfeiture provision than if the forfeiture provision did not apply. The interpretation of this subsection 5(a), its application to any occurrence or event, the determination of whether any payment or benefit would not be treated as a parachute payment, the determination of the aggregate present value of all payments and benefits to be made or provided to the Executive, the determination of the value of the payments and benefits payable or to be provided to the Executive after reduction for all applicable taxes, and what specific payments or benefits otherwise available to the Executive 7 8 shall be limited or eliminated by operation of this subsection 5(a) shall be reasonably made by the Company and shall be binding on all persons. (b) An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount and the amount of such Limited Payment Amount shall be made, at the Company's expense, by the accounting firm that is the Company's independent accounting firm as of the date of the Change in Control (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination", together with detailed supporting calculations and documentation, to the Company and the Executive within twenty (20) days of the Termination Date if applicable, or such other time as requested by the Company or by the Executive (provided the Executive reasonably believes that any of the Payments may be subject to the Excise Tax), and if the Accounting Firm determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the Determination to the Executive, the Executive shall have the right to dispute the Determination (the "Dispute"). If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and the Executive. 6. Successors; Binding Agreement. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its Successors and Assigns and the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive or the Executive's beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative. 7. Confidential Information. The Company and Executive acknowledge that Executive, in performing the terms and conditions of Executive's employment, has and will continue to directly or indirectly gain access to information about Company and its operations, including, but not limited to, its modes and methods of conducting its business and producing and marketing its products, its employee, customer, vendor and referral source lists, its trade secrets, its copyrighted and non-copyrighted or non-protected computer software programs, its techniques of operation, its financial structure, and its weakness, if any. As part of this Agreement, Executive agrees to execute, and be bound by, the Company's "Employee/ Consultant Proprietary Information Agreement," a copy of which is attached hereto as Exhibit "A." 8. Notice. All notices, requests, demands, and other communications hereunder shall be in writing, and shall be delivered in person, by facsimile, or by certified or registered mail with 8 9 return receipt requested. Each such notice, request, demand, or other communication shall be effective (a) if delivered by hand, when delivered at the address specified in this Section; (b) if given by facsimile, when such facsimile is transmitted to the telefacsimile number specified in this Section and confirmation is received; or (c) if given by certified or registered mail, three days after the mailing thereof. Notices shall be delivered as follows: If to the Company: MTI Technology Corporation 4905 E. La Palma Avenue Anaheim, California 92807 Attention: Chief Financial Officer Fax: (714) 693-2202 With a copy to: Morrison & Foerster LLP 19900 MacArthur Boulevard 12th Floor Irvine, California 92612 Attention: Tamara Powell Tate Fax: (714) 251-0900 If to the Executive: Dale Boyd 27800 Mount Shasta Way Yorba Linda, CA 92887 Any party may change its address by notice giving notice to the other party of a new address in accordance with the foregoing provisions. 9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Settlement Of Claims. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against an Executive or others. 9 10 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged, unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law. This Agreement has been negotiated and exactitude in the State of California and is to be performed in Orange County, California. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, including all matters of construction, validity, performance, and enforcement, without giving effect to principles of conflict of laws. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 13. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. 15. Remedies. All rights, remedies, undertakings, obligations, options, covenants, conditions, and agreements contained in this Agreement shall be cumulative and no one of them shall be exclusive of any other. 16. Interpretation. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any party. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa. The descriptive headings of the sections and subsections of this Agreement are inserted for convenience only and shall not control or affect the interpretation or construction of any of the provisions herein. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 18. Further Documents and Acts. Each of the parties hereto agrees to cooperate in good faith with the other and to execute and deliver such further instruments and perform such other acts as may be reasonably necessary or appropriate to consummate and carry into effect the transactions contemplated under this Agreement. 10 11 19. Consultation with Counsel. Executive acknowledges (a) that he has been given the opportunity to consult with counsel of his own choice concerning this Agreement, and (b) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based upon his own judgment with or without the advice of such counsel. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT. BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written. MTI TECHNOLOGY CORPORATION By: /s/ Earl M Pearlman ------------------------------ Title: PRESIDENT --------------------------- /s/ Dale Boyd --------------------------------- Dale Boyd 11 12 EXHIBIT "A" Exhibit "A" 13 STATEMENT REGARDING EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT Attached to this statement is your Employee/Consultant Proprietary Information Agreement (the "Agreement") with MTI Technology Corporation (together with its subsidiaries, the "Company"). Please take the time to review the Agreement carefully. It contains material restrictions on your right to disclose or use, during or after your employment, certain information and technology learned or developed by you during your employment with the Company. The Company considers this Agreement to be very important to the protection of its business. If you have any questions concerning the Agreement, you may wish to consult an attorney. Managers, legal counsel, and others in the Company are not authorized to give you legal advice concerning the Agreement. If you have read and understand the Agreement, and if you agree to its terms and conditions, please return a fully executed copy of it to the Company, retaining one copy for yourself. I HAVE READ AND UNDERSTAND THE ATTACHED AGREEMENT: Executive Name: Dale R. Boyd ----------------------- Executive Signature: /s/ DALE R. BOYD ------------------- Title: Sr. V.P. & CEO -------------------------------- Date: July 15, 1998 --------------------------------- A-1 14 EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT In consideration of my present and future employment by MTI Technology Corporation (together with its subsidiaries, the "Company"), I agree to the following: 1. Proprietary Information (a) I understand and acknowledge that my work as an employee of the Company has involved and will continue to involve access to and creation of confidential, proprietary, and trade secret information of the Company and its affiliates, consultants, customers, clients, and business associates (collectively, as defined more extensively below, "Proprietary Information"). I further understand and acknowledge that the Company and its clients have developed, compiled, and otherwise obtained this Proprietary Information often at great expense, and that such information has great value to their respective businesses. I agree to hold in strict confidence and in trust for the sole benefit of the Company and its clients all Proprietary Information. I further agree that I shall treat all Proprietary Information as private, privileged, and confidential, and that I shall not use, disclose, or release any Proprietary Information in any way to any person, firm, or institution at any time, even after termination of my employment, except to the extent necessary to carry out my responsibilities as an Executive of the Company. I further understand and agree that the publication of Proprietary Information through literature or speeches must be approved in advance in writing by a duly authorized officer of the Company. (b) I understand and acknowledge that, for purposes of this Agreement, "Proprietary Information" means all confidential, proprietary, or trade secret information and ideas in whatever form, tangible or intangible, whether disclosed to or learned or developed by me, prior or subsequent to the date hereof, pertaining in any manner to the business of the Company or to the Company's affiliates, consultants, clients, or business associates, unless: (i) the information is or becomes publicly known through lawful means; (ii) the information was rightfully in my possession or part of my general knowledge prior to my employment by the Company; or (iii) the information is disclosed to me without confidential or proprietary restriction by a third party who rightfully possesses the information (without confidential or proprietary restriction) and did not learn of it, directly or indirectly, from the Company. (c) Without limiting the generality of the foregoing, I understand and acknowledge that "Proprietary Information" includes all: (i) inventions, computer codes, computer programs, formulas, schematics, techniques, algorithms, employee suggestions, development tools and processes, computer printouts, design drawings and manuals, and improvements or modification to any of the foregoing; (ii) information about costs, profits, markets, and sales; (iii) plans for future development and new product concepts; and (iv) all documents, books, papers, drawings, models, sketches, and other data of any kind and description, including electronic data recorded or retrieved by any means, that have been or will be given to me by the Company (or any present or future affiliates, consultants, customers, clients, and business associates of the Company), as well as written or verbal instructions or comments. A-2 15 1. Use Of Proprietary Information. I agree that I will maintain at my work station or in other places under my control only such Proprietary Information that I have a current "need to know," and that I will return to the appropriate person or location, or otherwise dispose of, Proprietary Information once my need to know no longer exists. I agree that I will not make copies of information unless I have a legitimate need for such copies in connection with my work. 2. Third-Party Information. I recognize that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree that I owe the Company and such third parties, during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm, or corporation (except as necessary in carrying out my work for the Company consistent with the Company's agreement with such third party) or to use it for the benefit of anyone other than for the Company or such third party (consistent with the Company's agreement with such third party) without the express written authorization of a duly authorized officer of the Company. 3. Inventions. (a) Subject to Section 9 below, I hereby assign to the Company, without additional consideration, all right, title and interest (throughout the United States and in all foreign countries) in all ideas, processes, inventions, technology, writings, computer programs, designs, formulas, discoveries, patents, copyrights, trademarks, service marks, original works of authorship, any claims or rights, and any improvements or modifications to the foregoing (collectively, "Inventions"), whether or not subject to patent or copyright protection, relating to any activities of the Company that have been or will be conceived, developed, or reduced to practice by me alone or with others (i) during the term of my employment, whether or not conceived or developed during regular business hours, and whether or not conceived before, on, or after the date hereof or (ii) if based on Proprietary Information, after termination of my employment. Such Inventions shall be the sole property of the Company and, to the maximum extent permitted by applicable law, shall be deemed works made for hire. (b) I will, whether during or after my employment by the Company, execute such written instruments and do other such acts as may be necessary in the opinion of the Company to obtain a patent, register a copyright, or otherwise enforce the Company's rights in such Inventions (and I hereby irrevocably appoint the Company and any of its officers as my attorney in fact to undertake such acts in my name). (c) I understand that the assignment by me to the Company does not apply to Inventions that qualify fully under Section 2870(a) of the California Labor Code, which is set forth on Schedule "A." I understand that nothing in this Agreement is intended to expand the scope of protection provided by Sections 2870 through 2872 of the California Labor Code. Except as disclosed in Schedule "B", there are no ideas, inventions, technology, computer A-3 16 programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing that I wish to exclude from the operation of this Agreement. (d) To the best of my knowledge, there is no existing contract in conflict with this Agreement or any other contract in existence between me and any other person or entity to assign ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing. 1. Termination of Employment. (a) I hereby acknowledge and agree that nothing in this Agreement shall be construed to imply that the term of my employment is of any definite duration. I further acknowledge and agree that I am employed on an "at-will" basis, which means that I may quit at any time with or without cause, and the Company may terminate my employment at any time with or without cause. (b) I acknowledge that, because of my responsibilities at the Company, I have helped and will continue to help to develop and have been and will be exposed to the Company's research and development, products, business strategies, information on customers and clients, and other valuable Proprietary Information, and that use or disclosure of such Proprietary Information in breach of this Agreement would be extremely difficult to detect or prove. I also acknowledge that the Company's relationships with its employees, affiliates, consultants, customers, clients, business associates, and other persons are valuable business assets. To forestall any, use or disclosure of Proprietary Information in breach of this Agreement, I agree that for the term of this Agreement and for a period of one (1) year after termination of my employment with the Company, I shall not, for myself or any third party, directly or indirectly: (i) divert or attempt to divert from the Company any business of any kind in which it is engaged, including, without limitation, the solicitation of or interference with any of its suppliers or customer; or (ii) employ, solicit for employment, or recommend for employment any person employed by the Company. Furthermore, I agree that during the period of my employment with the Company I shall not engage in any business activity that is or may be competitive with the Company. I understand that none of my activities will be prohibited under this section if I can prove that the action was taken without the use in any way of Proprietary Information. (c) I acknowledge that, because of the difficulty of establishing when any Invention is first conceived or developed by me, or whether it results from access to Proprietary Information or the Company's equipment, facilities, and data, I agree that any ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing shall be presumed to be an Invention if A-4 17 conceived, developed, used, sold, exploited, or reduced to practice by me or with my aid within one (1) year after my termination of employment with the Company. I can rebut the above presumption if I prove that the invention, idea, process, etc., is not an Invention as defined in paragraph 4(a). (d) I hereby acknowledge and agree that all personal property including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, files, computer software, computer tapes or disks, blueprints, and other documents or materials (or copies thereof), Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment, belong to the Company and shall be promptly returned to the Company once my employment with the Company is terminated, for any reason. I will not retain any written or other tangible information pertaining to any Invention. In the event of the termination of my employment, I agree to sign and deliver the Termination Certificate attached as Schedule "C" to this Agreement. (e) I understand that my obligations contained in this Agreement will survive the termination of my employment with the Company, and that I will continue to make all disclosures required of me by Paragraph 6. 1. Disclosure. I agree to maintain adequate and current written records on the development of all Inventions and to disclose promptly to the Company all Inventions and relevant records, which records will remain the sole property of the Company. I further agree that all information and records pertaining to any Inventions conceived, developed, or reduced to practice by me (alone or with others) during my period of employment or during the one-year period following termination of my employment, shall be promptly disclosed to the Company (any such disclosures made after the termination of my employment shall be received by the Company in confidence for the purpose of determining if they have been based on any Proprietary Information). The Company shall examine such information to determine if in fact such information are Inventions subject to this Agreement. 2. Former or Conflicting Agreements. During my employment with the Company, I will not disclose to the Company, or use, or induce the Company to use, any confidential, proprietary, or trade secret information of others. I represent and warrant that I have returned all property and confidential, proprietary and trade secret information belonging to all prior employers, if any. I further represent and warrant that my performance of the terms of this Agreement will not breach any agreement to keep in confidence confidential proprietary and trade secret information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith. 3. Information on Company Premises. I acknowledge that all information generated, received, or maintained by or for me on the premises or equipment of the Company (including, without limitation, computer systems and A-5 18 electronic-mail or voicemail systems) is the property of the Company, and I hereby waive any property or privacy rights that I may have with respect to such information. 4. Reserved Inventions. To avoid future confusion, I have listed on Schedule "B" a description of all Inventions, if any, developed or conceived by me in which I claim any ownership or other right. I understand that, by not listing an Invention, I am acknowledging that the Invention was not developed or conceived before commencement of my employment. 10. Choice of Law. The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to its conflict of law rules. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 11. Remedies. I recognize that nothing in this Agreement is intended to limit any remedy of the Company under the California Uniform Trade Secrets Act and that I could face possible criminal and civil actions, resulting in imprisonment and substantial monetary liability, if I misappropriate the Company's or its clients' trade secrets. In addition, I recognize that my violation of this Agreement could cause the Company irreparable harm and significant injury, the amount of which may be extremely difficult to estimate, thus, making any remedy at law or in damages inadequate. Therefore, I agree that, in the event of a breach or threatened breach that involves Proprietary Information of the Company or its clients, the Company shall have the right to apply to any court of competent Jurisdiction for an order restraining any breach or threatened breach of this Agreement and for any other relief the Company deems appropriate. This right shall be in addition to any other remedy available to the Company in law or equity. 12. Successors and Assigns. (a) I understand and agree that the Company may assign to another person or entity any of its rights under this Agreement. (b) I further understand and agree that this Agreement shall be binding upon me and my heirs, executors, administrators, and successors, and shall inure to the benefit of the Company's successors and assigns. 12. Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, the validity or enforceability of the other provisions shall not be affected. A-6 19 13. Entire Agreement. The terms of this Agreement are the final expression of my agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. This Agreement shall constitute the complete and exclusive statement of its terms and no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding involving this Agreement. No modification or amendment of this Agreement shall be binding unless executed in writing by me and a duly authorized officer of the Company. I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS, PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS, RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS AGREEMENT. This Agreement is made and entered into as of July 15, 1998. MTI TECHNOLOGY CORPORATION By: /s/ EARL M PEARLMAN ---------------------------------- Title: PRESIDENT --------------------------- Executive: DALE R. BOYD -------------------------- Signature: /s/ Dale R. Boyd -------------------------- A-7 20 SCHEDULE A California Labor Code Section 2870(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an Invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information, except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. Schedule A 21 SCHEDULE B 1. Proprietary Information. Except as set forth below, I acknowledge that at this time I know nothing about the business or Proprietary Information of the Company, other than information I have learned from the Company in the course of being hired: ----------------------------------------------------------------------- N/A ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- 2. Reserved Inventions. Except as set forth below, there are no ideas, processes, inventions, technology, writings, programs, designs, formulas, discoveries, patents, copyrights, or trademarks, or any claims, rights, or improvements to the foregoing, that I wish to exclude from the operation of this Agreement: ----------------------------------------------------------------------- N/A ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- Name: DALE R. BOYD ----------------------------- Signature: /s/ DALE R. BOYD ------------------------- Date: July 15, 1998 ----------------------------- Schedule B 22 SCHEDULE C TERMINATION CERTIFICATE This is to certify that I have returned all personal property of the Company, including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, blueprints, and other documents and materials, Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment with the Company, and that I did not make or distribute any copies of the foregoing. I further certify that I have reviewed the Employee/Consultant Proprietary Information Agreement signed by me and that I have complied with and will continue to comply with all of its terms including, without limitation: (i) the reporting of any invention, process, idea, etc. conceived or developed by me and covered by the Agreement; and (ii) the preservation as confidential of all Proprietary Information pertaining to the Company. This certificate in no way limits my responsibilities or the Company's rights under the Agreement. On termination of my employment with the Company, I will be employed by [NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will be working in connection with the following projects: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Name: ---------------------------- Signature: ----------------------- Date: ---------------------------- Schedule C EX-10.30 4 SEVERANCE AGREEMENT - TOM RAIMONDI 1 EXHIBIT 10.30 SEVERANCE AGREEMENT This Agreement, (the "Agreement") is made and entered into as of July 15, 1998, is entered into between MTI Technology Corporation, a corporation organized under the laws of the State of Delaware (the "Company"), and Tom Raimondi (the "Executive"). RECITALS A. Executive is currently serving as an officer of the Company. B. The Board of Directors of the Company (the "Board") recognizes that the possibility of a Change in Control (as hereinafter defined) exists and that the threat or the occurrence of a Change in Control can result in significant distractions to its key management personnel because of the uncertainties inherent in such a situation; C. The Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Executive in the event of a threat or occurrence of a Change in Control and to ensure the Executive's continued dedication and efforts in such event without undue concern for the Executive's personal, financial and employment security; and D. In order to induce the Executive to remain in the employ of the Company, particularly in the event of a threat or the occurrence of a Change in Control, the Company desires to enter into this Agreement with the Executive to provide the Executive with certain benefits in the event that the Executive's employment is terminated as a result of, or in connection with, a Change in Control. AGREEMENT In consideration of the respective agreements of the parties contained herein, it is agreed as follows: 1. Term Of Agreement. This Agreement shall commence as of the date first set forth above and shall continue in effect until July 15, 2000; provided, however, that commencing on July 15, 2000 and on each July 15 thereafter, the term of this Agreement shall automatically be extended for one (1) year unless the Company or the Executive shall have given written notice to the other at least ninety (90) days prior thereto that the term of this Agreement shall not be so extended; and provided, further, however, that notwithstanding any such notice by the Company not to extend, the term of this Agreement shall not expire prior to the expiration of twelve (12) months after the occurrence of a Change in Control. 2. Definitions. 2.1. Accrued Compensation. For purposes of this Agreement, "Accrued Compensation" shall mean an amount which shall include all amounts earned or accrued through the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, 2 including (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date, (iii) vacation pay and (iv) bonuses and incentive compensation (other than the "Pro Rata Bonus" (as hereinafter defined)). 2.2. Base Amount. For purposes of this Agreement, "Base Amount" shall mean the greater of the Executive's annual base salary (a) at the rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the Change in Control, and shall include all amounts of base salary that are deferred under the Executive benefit plans of the Company or any other agreement or arrangement. 2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount" shall mean the greatest of: (a) 100% of the annual bonus payable to the Executive under the Company's Executive Management Bonus Plan for the fiscal year in which the Termination Date occurs; (b) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which the Termination Date occurred; (c) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which a Change in Control occurred; (d) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Termination Date occurred; or (e) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Change in Control occurred. 2.4. Cause. The Company may terminate this Agreement and discharge Executive for Cause (as defined) at any time upon written notice. For purposes of this Agreement, the term "Cause" shall mean: (i) a material breach of any term of this Agreement and failure to cure such breach within ten (10) days after written notice thereof from the Company; (ii) the willful and continued failure by Executive substantially to perform his duties for the Company (other than any such failure resulting from his incapacity due to death or physical or mental illness), after written demand for substantial performance is delivered to Executive by the Company, which specifically identifies the manner in which the Company believes that Executive has not substantially performed his duties; (iii) the failure by Executive to follow the reasonable instructions of the Board of Directors; (iv) the willful engaging by Executive in misconduct that is materially injurious to the Company, monetarily or otherwise; (v) Executive's final conviction for fraud or of any felony; or (vi) Executive's habitual use of illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol abuse, Executive shall be given notice and a thirty (30) day opportunity to remedy the problem. For purposes of this paragraph, no act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive other than in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company. 2 3 2.5. Change In Control. (a) For purposes of this Agreement, "Change of Control" shall mean: (i) any "person" as such term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than (1) a trustee or other fiduciary holding securities under an Executive benefit plan of the Company, (2) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (3) any current beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange Act, of securities possessing more than [TWENTY-FIVE] percent (25%) of the total combined voting power of the Company's outstanding securities, hereafter becomes the "beneficial owner," as defined in Rule 13d-3 under of the Exchange Act, directly or indirectly, of securities of the Company representing [TWENTY-FIVE] percent (25%) or more of the total combined voting power of the Company's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company, in one transaction or a series of transactions, of all or substantially all of the Company's assets; or (iv) the sale of substantially all of the Company's assets. 2.6. Company. For purposes of this Agreement, the "Company" shall mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors and Assigns (as hereinafter defined). 2.7. Disability. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs the Executive's ability to substantially perform the Executive's duties with the Company for a total period of ninety (90) days and the Executive has not returned to full time employment prior to the Termination Date as stated in the "Notice of Termination." 3 4 2.8. Good Reason. (a) For purposes of this Agreement, "Good Reason" shall mean the occurrence after a Change in Control of any of the events or conditions described in subsections (1) through (8) hereof: (i) a change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, represents an adverse change from the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; or any removal of the Executive from or failure to reappoint or reelect the Executive to any of such offices or positions, except in connection with the termination of the Executive's employment for Disability, Cause, as a result of the Executive's death or by the Executive; (ii) a reduction in the Executive's base salary or any failure to pay the Executive any compensation or benefits to which the Executive is entitled within ten (10) days of the (date due after receipt of written notice from Executive; (iii) the Company's requiring the Executive to be based at any place outside a 25-mile radius from MTI's Corporate Offices, located at 4905 E. LaPalma Avenue, Anaheim, CA 92807, except for reasonably required travel on the Company's business which is not materially greater than such travel requirements prior to the Change in Control; (iv) the failure by the Company to (A) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or Executive benefit plan in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the Executive, or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other Executive benefit plan, program and practice in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; (v) the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty (60) days; (vi) any material breach by the Company of any provision of this Agreement; 4 5 (vii) any purported termination of the Executive's employment for Cause by the Company which does not comply with the terms of Section 2.4; or (viii) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any Successors and Assigns to assume and agree to perform this Agreement, as contemplated in Section 6 hereof. (b) The Executive's right to terminate the Executive's employment pursuant to this Section 2.8 shall not be affected by the Executive's incapacity due to physical or mental illness. 2.9. Notice Of Termination. For purposes of this Agreement, following a Change in Control, "Notice of Termination" shall mean a written notice of termination of the Executive's employment from the Company, which notice indicates the date on which termination is to be effective, the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction the numerator of which is the number of days in the fiscal year through the Termination Date and the denominator of which is 365. 2.11. Successors And Assigns. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or other entity acquiring all or substantially all of the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. 2.12. "Termination Date. For purposes of this Agreement, "Termination Date" shall mean in, the case of the Executive's death, the Executive's date of death, in the case of Good Reason, the last day of the Executive's employment and, in all other cases, the date specified in the Notice of Termination; provided, however, that if the Executive's employment is terminated by the Company for Cause or due to Disability, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to the Executive, provided that, in the case of Disability, the Executive shall not have returned to the full-time performance of the Executive's duties during such period of at least thirty (30) days. 3. Termination Of Employment. 3.1. If, during the term of this Agreement, the Executive's employment with the Company shall be terminated within twelve (12) months following a Change in Control, the Executive shall be entitled to the following compensation and benefits: (a) If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by reason of the Executive's death or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued Compensation 5 6 and, if such termination is other than by the Company for Cause, the Company shall also pay the Executive a Pro Rata Bonus. (b) If the Executive's employment with the Company shall be terminated for any reason other than as specified in Section 3.1(a), the Executive shall be entitled to the following: (i) the Company shall pay the Executive all Accrued Compensation and a Pro Rata Bonus; (ii) the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment, an amount in cash equal to the sum of (A) the Base Amount and (B) the Bonus Amount; and (iii) for a number of months equal to twelve (12) (the "Continuation Period"), the Company shall, at its expense, continue on behalf of the Executive and the Executive's dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (A) to the Executive at any time during the 90-day period prior to the Change in Control or at any time thereafter or (B) to other similarly situated executives who continue in the employ of the Company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section 3.1(b)(iii) during the Continuation Period shall be no less favorable to the Executive and the Executive's dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (A) and (B) above. The Company's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iii) shall not be interpreted so as to limit any benefits to which the Executive or the Executive's dependents or beneficiaries may be entitled under any of the Company's Executive benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits. (c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and (ii) shall be paid in a single lump sum cash payment within forty-five (45) days after the Executive's Termination Date (or earlier, if required by applicable law). (d) The Executive shall not be required to mitigate the amount of any payment for in this Agreement by seeking other employment or otherwise, and no such payment prove shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in Section 3.1(b)(iii). 6 7 3.2. (a) The severance pay and benefits provided for in this Section 3 shall be in lieu of any other severance or termination pay to which the Executive may be entitled under any Company severance or termination plan, program, practice or arrangement. (b) The Executive's entitlement to any other compensation or benefits shall be determined in accordance with the Company's Executive benefit plans and other applicable programs, policies and practices then in effect, 4. Notice Of Termination. Following a Change in Control, any purported termination of the Executive's employment shall be communicated by Notice of Termination to the Executive. For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination. 5. Excise Tax Limitation. (a) Notwithstanding anything in this Agreement to the contrary, if any portion of any payments to Executive by the Company under this Agreement and any other present or future plan of the Company or other present or future agreement between Executive and the Company would not be deductible by the Company (collectively, "Payments") for federal income tax purposes by reason of application of Section 162(m) of the Internal Revenue Code (the "Code"), then payment of that portion to Executive shall be deferred until the earliest date upon which payment thereof can be made to Executive without being non-deductible pursuant to Section 162(m) of the Code. In the event of such deferral, the Company shall pay interest to Executive on the deferred amount at 120% of the applicable federal rate provided for in Section 1274(d)(1) of the Code. In addition, notwithstanding any provision of this Agreement to the contrary, the aggregate present value of the payments and benefits (excluding those payments and benefits not treated as parachute payments under Code Section 28OG(b)) to be made or provided to the Executive by the Company (whether pursuant to this Agreement or otherwise) shall not exceed three times the Executive's annualized includible compensation for the base period, as defined in Code Section 280G(d) of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any excess payments or benefits shall be forfeited; provided, however, that the forfeiture provision of this sentence shall apply only if such forfeiture provision results in larger aggregate after-tax payments and benefits to the Executive than if the forfeiture provision did not apply. The intent of this portion of this subsection 5(a) is to prevent any payment or benefit to the Executive from being subject to the excise tax imposed by Code Section 4999 and to prevent any item of expense or deduction of the Company from being disallowed as a result of the application of Code Section 280G, but only if the after-tax payments and benefits payable or provided to the Executive are greater after application of the forfeiture provision than if the forfeiture provision did not apply. The interpretation of this subsection 5(a), its application to any occurrence or event, the determination of whether any payment or benefit would not be treated as a parachute payment, the determination of the aggregate present value of all payments and benefits to be made or provided to the Executive, the determination of the value of the payments and benefits payable or to be provided to the Executive after reduction for all applicable taxes, and what specific payments or benefits otherwise available to the Executive 7 8 shall be limited or eliminated by operation of this subsection 5(a) shall be reasonably made by the Company and shall be binding on all persons. (b) An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount and the amount of such Limited Payment Amount shall be made, at the Company's expense, by the accounting firm that is the Company's independent accounting firm as of the date of the Change in Control (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination", together with detailed supporting calculations and documentation, to the Company and the Executive within twenty (20) days of the Termination Date if applicable, or such other time as requested by the Company or by the Executive (provided the Executive reasonably believes that any of the Payments may be subject to the Excise Tax), and if the Accounting Firm determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the Determination to the Executive, the Executive shall have the night to dispute the Determination (the "Dispute"). If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and the Executive. 6. Successors; Binding Agreement. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its Successors and Assigns and the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive or the Executive's beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative. 7. Confidential Information. The Company and Executive acknowledge that Executive, in performing the terms and conditions of Executive's employment, has and will continue to directly or indirectly gain access to information about Company and its operations, including, but not limited to, its modes and methods of conducting its business and producing and marketing its products, its employee customer, vendor and referral source lists, its trade secrets, its copyrighted and non-copyrighted or non-protected computer software programs, its techniques of operation, its financial structure, and its weakness, if any. As part of this Agreement, Executive agrees to execute, and be bound by, the Company's "Employee/ Consultant Proprietary Information Agreement," a copy of which is attached hereto as Exhibit "A." 8. Notice. All notices, requests, demands, and other communications hereunder shall be in writing, and shall be delivered in person, by facsimile, or by certified or registered mail with 8 9 return receipt requested. Each such notice, request, demand, or other communication shall be effective (a) if delivered by hand, when delivered at the address specified in this Section; (b) if given by facsimile, when such facsimile is transmitted to the telefacsimile number specified in this Section and confirmation is received; or (c) if given by certified or registered mail, three days after the mailing thereof. Notices shall be delivered as follows: If to the Company: MTI Technology Corporation 4905 E. La Palma Avenue Anaheim, California 92807 Attention: Chief Financial Officer Fax: (714) 693-2202 With a copy to: Morrison & Foerster LLP 19900 MacArthur Boulevard 12th Floor Irvine, California 92612 Attention: Tamara Powell Tate Fax: (714) 251-0900 If to the Executive: Tom Raimondi 10232 Camden Circle Villa Park, CA 92861 Any party may change its address by notice giving notice to the other party of a new address in accordance with the foregoing provisions. 9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 1O. Settlement Of Claims. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against an Executive or others. 9 10 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged, unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law. This Agreement has been negotiated and exactitude in the State of California and is to be performed in Orange County, California. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, including all matters of construction, validity, performance, and enforcement, without giving effect to principles of conflict of laws. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 13. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. 15. Remedies. All fights, remedies, undertakings, obligations, options, covenants, conditions, and agreements contained in this Agreement shall be cumulative and no one of them shall be exclusive of any other. 16. Interpretation. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any party. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa. The descriptive headings of the sections and subsections of this Agreement are inserted for convenience only and shall not control or affect the interpretation or construction of any of the provisions herein. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument, 18. Further Documents and Acts. Each of the parties hereto agrees to cooperate in good faith with the other and to execute and deliver such further instruments and perform such other acts as may be reasonably necessary or appropriate to consummate and carry into effect the transactions contemplated under this Agreement. 10 11 19. Consultation with Counsel. Executive acknowledges (a) that he has been given the opportunity to consult with counsel of his own choice concerning this Agreement, and (b) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based upon his own judgment with or without the advice of such counsel. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT. BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written. MTI TECHNOLOGY CORPORATION By: /s/ DALE R. BOYD ------------------------------------- Title: Sr. Vice President & CFO ------------------------------- /s/ TOM RAIMONDI COO ----------------------------------------- Tom Raimondi 11 12 EXHIBIT "A" Exhibit "A" 13 STATEMENT REGARDING EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT Attached to this statement is your Employee/Consultant Proprietary Information Agreement (the "Agreement") with MTI Technology Corporation (together with its subsidiaries, the "Company"). Please take the time to review the Agreement carefully. It contains material restrictions on your right to disclose or use, during or after your employment, certain information and technology learned or developed by you during your employment with the Company. The Company considers this Agreement to be very important to the protection of its business. If you have any questions concerning the Agreement, you may wish to consult an attorney. Managers, legal counsel, and others in the Company are not authorized to give you legal advice concerning the Agreement. If you have read and understand the Agreement, and if you agree to its terms and conditions, please return a fully executed copy of it to the Company, retaining one copy for yourself. I HAVE READ AND UNDERSTAND THE ATTACHED AGREEMENT: Executive Name: Tom Raimondi ---------------- Executive Signature: /s/ THOMAS RAIMONDI ------------------- Title: COO -------- Date: 8/10/98 --------- A-1 14 EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT In consideration of my present and future employment by MTI Technology Corporation (together with its subsidiaries, the "Company"), I agree to the following: 1. Proprietary Information. (a) I understand and acknowledge that my work as an employee of the Company has involved and will continue to involve access to and creation of confidential, proprietary, and trade secret information of the Company and its affiliates, consultants, customers, clients, and business associates (collectively, as defined more extensively below, "Proprietary Information"). I further understand and acknowledge that the Company and its clients have developed, compiled, and otherwise obtained this Proprietary Information often at great expense, and that such information has great value to their respective businesses. I agree to hold in strict confidence and in trust for the sole benefit of the Company and its clients all Proprietary Information. I further agree that I shall treat all Proprietary Information as private, privileged, and confidential, and that I shall not use, disclose, or release any Proprietary Information in any way to any person, firm, or institution at any time, even after termination of my employment, except to the extent necessary to carry out my responsibilities as an Executive of the Company. I further understand and agree that the publication of Proprietary Information through literature or speeches must be approved in advance in writing by a duly authorized officer of the Company. (b) I understand and acknowledge that, for purposes of this Agreement, "Proprietary Information" means all confidential, proprietary, or trade secret information and ideas in whatever form, tangible or intangible, whether disclosed to or learned or developed by me, prior or subsequent to the date hereof, pertaining in any manner to the business of the Company or to the Company's affiliates, consultants, clients, or business associates, unless: (i) the information is or becomes publicly known through lawful means; (ii) the information was rightfully in my possession or part of my general knowledge prior to my employment by the Company; or (iii) the information is disclosed to me without confidential or proprietary restriction by a third party who rightfully possesses the information (without confidential or proprietary restriction) and did not learn of it, directly or indirectly, from the Company. (c) Without limiting the generality of the foregoing, I understand and acknowledge that "Proprietary Information" includes all: (i) inventions, computer codes, computer programs, formulas, schematics, techniques, algorithms, employee suggestions, development tools and processes, computer printouts, design drawings and manuals, and improvements or modification to any of the foregoing; (ii) information about costs, profits, markets, and sales; (iii) plans for future development and new product concepts; and (iv) all documents, books, papers, drawings, models, sketches, and other data of any kind and description, including electronic data recorded or retrieved by any means, that have been or will be given to me by the Company (or any present or future affiliates, consultants, customers, clients, and business associates of the Company), as well as written or verbal instructions or comments. A-2 15 1. Use Of Proprietary Information. I agree that I will maintain at my work station or in other places under my control only such Proprietary Information that I have a current "need to know," and that I will return to the appropriate person or location, or otherwise dispose of, Proprietary Information once my need to know no longer exists. I agree that I will not make copies of information unless I have a legitimate need for such copies in connection with my work. 2. Third-Party Information I recognize that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree that I owe the Company and such third parties, during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm, or corporation (except as necessary in carrying out my work for the Company consistent with the Company's agreement with such third party) or to use it for the benefit of anyone other than for the Company or such third party (consistent with the Company's agreement with such third party) without the express written authorization of a duly authorized officer of the Company. 3. Inventions. (a) Subject to Section 9 below, I hereby assign to the Company, without additional consideration, all right, title and interest (throughout the United States and in all foreign countries) in all ideas, processes, inventions, technology, writings, computer programs, designs, formulas, discoveries, patents, copyrights, trademarks, service marks, original works of authorship, any claims or rights, and any improvements or modifications to the foregoing (collectively, "Inventions"), whether or not subject to patent or copyright protection, relating to any activities of the Company that have been or will be conceived, developed, or reduced to practice by me alone or with others (i) during the term of my employment, whether or not conceived or developed during regular business hours, and whether or not conceived before, on, or after the date hereof or (ii) if based on Proprietary Information, after termination of my employment. Such Inventions shall be the sole property of the Company and, to the maximum extent permitted by applicable law, shall be deemed works made for hire. (b) I will, whether during or after my employment by the Company, execute such written instruments and do other such acts as may be necessary in the opinion of the Company to obtain a patent, register a copyright, or otherwise enforce the Company's rights in such Inventions (and I hereby irrevocably appoint the Company and any of its officers as my attorney in fact to undertake such acts in my name). (c) I understand that the assignment by me to the Company does not apply to Inventions that qualify fully under Section 2870(a) of the California Labor Code, which is set forth on Schedule "A." I understand that nothing in this Agreement is intended to expand the scope of protection provided by Sections 2870 through 2872 of the California Labor Code. Except as disclosed in Schedule "B", there are no ideas, inventions, technology, computer A-3 16 programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing that I wish to exclude from the operation of this Agreement. (d) To the best of my knowledge, there is no existing contract in conflict with this Agreement or any other contract in existence between me and any other person or entity to assign ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing. 1. Termination of Employment. (a) I hereby acknowledge and agree that nothing in this Agreement shall be construed to imply that the term of my employment is of any definite duration. I further acknowledge and agree that I am employed on an "at-will" basis, which means that I may quit at any time with or without cause, and the Company may terminate my employment at any time with or without cause. (b) I acknowledge that, because of my responsibilities at the Company, I have helped and will continue to help to develop and have been and will be exposed to the Company's research and development, products, business strategies, information on customers and clients, and other valuable Proprietary Information, and that use or disclosure of such Proprietary Information in breach of this Agreement would be extremely difficult to detect or prove. I also acknowledge that the Company's relationships with its employees, affiliates, consultants, customers, clients, business associates, and other persons are valuable business assets. To forestall any use or disclosure of Proprietary Information in breach of this Agreement, I agree that for the term of this Agreement and for a period of one (1) year after termination of my employment with the Company, I shall not, for myself or any third party, directly or indirectly: (i) divert or attempt to divert from the Company any business of any kind in which it is engaged, including, without limitation, the solicitation of or interference with any of its suppliers or customer; or (ii) employ, solicit for employment, or recommend for employment any person employed by the Company. Furthermore, I agree that during the period of my employment with the Company I shall not engage in any business activity that is or may be competitive with the Company, I understand that none of my activities will be prohibited under this section if I can prove that the action was taken without the use in any way of Proprietary Information. (c) I acknowledge that, because of the difficulty of establishing when any Invention is first conceived or developed by me, or whether it results from access to Proprietary Information or the Company's equipment, facilities, and data, I agree that any ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing shall be presumed to be an Invention if A-4 17 conceived, developed, used, sold, exploited, or reduced to practice by me or with my aid within one (1) year after my termination of employment with the Company. I can rebut the above presumption if I prove that the invention, idea, process, etc., is not an Invention as defined in paragraph 4(a). (d) I hereby acknowledge and agree that all personal property including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, files, computer software, computer tapes or disks, blueprints, and other documents or materials (or copies thereof), Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment, belong to the Company and shall be promptly returned to the Company once my employment with the Company is terminated, for any reason. I will not retain any written or other tangible information pertaining to any Invention. In the event of the termination of my employment, I agree to sign and deliver the Termination Certificate attached as Schedule "C" to this Agreement. (e) I understand that my obligations contained in this Agreement will survive the termination of my employment with the Company, and that I will continue to make all disclosures required of me by Paragraph 6. 1. Disclosure. I agree to maintain adequate and current written records on the development of all Inventions and to disclose promptly to the Company all Inventions and relevant records, which records will remain the sole property of the Company. I further agree that all information and records pertaining to any Inventions conceived, developed, or reduced to practice by me (alone or with others) during my period of employment or during the one-year period following termination of my employment, shall be promptly disclosed to the Company (any such disclosures made after the termination of my employment shall be received by the Company in confidence for the purpose of determining if they have been based on any Proprietary Information). The Company shall examine such information to determine if in fact such information are Inventions subject to this Agreement. 2. Former or Conflicting Agreements. During my employment with the Company, I will not disclose to the Company, or use, or induce the Company to use, any confidential, proprietary, or trade secret information of others. I represent and warrant that I have returned all property and confidential, proprietary and trade secret information belonging to all prior employers, if any. I further represent and warrant that my performance of the terms of this Agreement will not breach any agreement to keep in confidence confidential proprietary and trade secret information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith. 3. Information on Company Premises. I acknowledge that all information generated, received, or maintained by or for me on the premises or equipment of the Company (including, without limitation, computer systems and A-5 18 electronic-mail or voicemail systems) is the property of the Company, and I hereby waive any property or privacy rights that I may have with respect to such information. 4. Reserved Inventions. To avoid future confusion, I have listed on Schedule "B" a description of all Inventions, if any, developed or conceived by me in which I claim any ownership or other right. I understand that, by not listing an Invention, I am acknowledging that the Invention was not developed or conceived before commencement of my employment. 10. Choice of Law. The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to its conflict of law rules. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 11. Remedies. I recognize that nothing in this Agreement is intended to limit any remedy of the Company under the California Uniform Trade Secrets Act and that I could face possible criminal and civil actions, resulting in imprisonment and substantial monetary liability, if I misappropriate the Company's or its clients' trade secrets. In addition, I recognize that my violation of this Agreement could cause the Company irreparable harm and significant injury, the amount of which may be extremely difficult to estimate, thus, making any remedy at law or in damages inadequate. Therefore, I agree that, in the event of a breach or threatened breach that involves Proprietary Information of the Company or its clients, the Company shall have the right to apply to any court of competent jurisdiction for an order restraining any breach or threatened breach of this Agreement and for any other relief the Company deems appropriate. This fight shall be in addition to any other remedy available to the Company in law or equity. 12. Successors and Assigns. (a) I understand and agree that the Company may assign to another person or entity any of its rights under this Agreement. (b) I further understand and agree that this Agreement shall be binding upon me and my heirs, executors, administrators, and successors, and shall inure to the benefit of the Company's successors and assigns. 12. Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, the validity or enforceability of the other provisions shall not be affected. A-6 19 13. Entire Agreement The terms of this Agreement are the final expression of my agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. This Agreement shall constitute the complete and exclusive statement of its terms and no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding involving this Agreement. No modification or amendment of this Agreement shall be binding unless executed in writing by me and a duly authorized officer of the Company. I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS, PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS, RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS AGREEMENT. This Agreement is made and entered into as of July 15, 1998. MTI TECHNOLOGY CORPORATION By: /s/ DALE R. BOYD ------------------------------------- Title: Sr. Vice President & CFO ------------------------------ Executive: Tom Raimondi Jr. ------------------------------ Signature: /s/ TOM RAIMONDI ------------------------------ A-7 20 SCHEDULE A California Labor Code Section 2870(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information, except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. Schedule A 21 SCHEDULE B 1. Proprietary Information. Except as set forth below, I acknowledge that at this time I know nothing about the business or Proprietary Information of the Company, other than information I have learned from the Company in the course of being hired: -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- 2. Reserved Inventions. Except as set forth below, there are no ideas, processes, inventions, technology, writings, programs, designs, formulas, discoveries, patents, copyrights, or trademarks, or any claims, rights, or improvements to the foregoing, that I wish to exclude from the operation of this Agreement: -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------------------------------------- Name: Thomas P. Raimondi Jr. --------------------------- Signature: /s/ THOMAS P. RAIMONDI ---------------------- Date: 8/10/98 --------------------------- Schedule B 22 SCHEDULE C TERMINATION CERTIFICATE This is to certify that I have returned all personal property of the Company, including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, blueprints, and other documents and materials, Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment with the Company, and that I did not make or distribute any copies of the foregoing. I further certify that I have reviewed the Employee/Consultant Proprietary Information Agreement signed by me and that I have complied with and will continue to comply with all of its terms including, without limitation: (i) the reporting of any invention, process, idea, etc. conceived or developed by me and covered by the Agreement; and (ii) the preservation as confidential of all Proprietary Information pertaining to the Company. This certificate in no way limits my responsibilities or the Company's rights under the Agreement. On termination of my employment with the Company, I will be employed by [NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will be working in connection with the following projects: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Name: -------------------- Signature: --------------- Date: -------------------- Schedule C EX-10.31 5 SEVERANCE AGREEMENT - GARY SCOTT 1 EXHIBIT 10.31 SEVERANCE AGREEMENT This Agreement, (the "Agreement") is made and entered into as of July 15, 1998, is entered into between MTI Technology Corporation, a corporation organized under the laws of the State of Delaware (the "Company"), and Gary Scott (the "Executive"). RECITALS A. Executive is currently serving as an officer of the Company. B. The Board of Directors of the Company (the "Board") recognizes that the possibility of a Change in Control (as hereinafter defined) exists and that the threat or the occurrence of a Change in Control can result in significant distractions to its key management personnel because of the uncertainties inherent in such a situation; C. The Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Executive in the event of a threat or occurrence of a Change in Control and to ensure the Executive's continued dedication and efforts in such event without undue concern for the Executive's personal, financial and employment security; and D. In order to induce the Executive to remain in the employ of the Company, particularly in the event of a threat or the occurrence of a Change in Control, the Company desires to enter into this Agreement with the Executive to provide the Executive with certain benefits in the event that the Executive's employment is terminated as a result of, or in connection with, a Change in Control. AGREEMENT In consideration of the respective agreements of the parties contained herein, it is agreed as follows: 1. Term Of Agreement. This Agreement shall commence as of the date first set forth above and shall continue in effect until July 15, 2000; provided, however, that commencing on July 15, 2000 and on each July 15 thereafter, the term of this Agreement shall automatically be extended for one (1) year unless the Company or the Executive shall have given written notice to the other at least ninety (90) days prior thereto that the term of this Agreement shall not be so extended; and provided, further, however, that notwithstanding any such notice by the Company not to extend, the term of this Agreement shall not expire prior to the expiration of twelve (12) months after the occurrence of a Change in Control. 2. Definitions. 2.1. Accrued Compensation. For purposes of this Agreement, "Accrued Compensation" shall mean an amount which shall include all amounts earned or accrued through the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, 2 including (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date, (iii) vacation pay and (iv) bonuses and incentive compensation (other than the "Pro Rata Bonus" (as hereinafter defined)). 2.2. Base Amount. For purposes of this Agreement, "Base Amount" shall mean the greater of the Executive's annual base salary (a) at the rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the Change in Control, and shall include all amounts of base salary that are deferred under the Executive benefit plans of the Company or any other agreement or arrangement. 2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount" shall mean the greatest of: (a) 100% of the annual bonus payable to the Executive under the Company's Executive Management Bonus Plan for the fiscal year in which the Termination Date occurs; (b) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which the Termination Date occurred; (c) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which a Change in Control occurred; (d) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Termination Date occurred; or (e) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Change in Control occurred. 2.4. Cause. The Company may terminate this Agreement and discharge Executive for Cause (as defined) at any time upon written notice. For purposes of this Agreement, the term "Cause" shall mean: (i) a material breach of any term of this Agreement and failure to cure such breach within ten (10) days after written notice thereof from the Company; (ii) the willful and continued failure by Executive substantially to perform his duties for the Company (other than any such failure resulting from his incapacity due to death or physical or mental illness), after written demand for substantial performance is delivered to Executive by the Company, which specifically identifies the manner in which the Company believes that Executive has not substantially performed his duties; (iii) the failure by Executive to follow the reasonable instructions of the Board of Directors; (iv) the willful engaging by Executive in misconduct that is materially injurious to the Company, monetarily or otherwise; (v) Executive's final conviction for fraud or of any felony; or (vi) Executive's habitual use of illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol abuse, Executive shall be given notice and a thirty (30) day opportunity to remedy the problem. For purposes of this paragraph, no act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive other than in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company. 2 3 2.5. Change In Control. (a) For purposes of this Agreement, "Change of Control" shall mean: (i) any "person" as such term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than (1) a trustee or other fiduciary holding securities under an Executive benefit plan of the Company, (2) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (3) any current beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange Act, of securities possessing more than [TWENTY-FIVE] percent (25%) of the total combined voting power of the Company's outstanding securities, hereafter becomes the "beneficial owner," as defined in Rule 13d-3 under of the Exchange Act, directly or indirectly, of securities of the Company representing [TWENTY-FIVE] percent (25%) or more of the total combined voting power of the Company's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company, in one transaction or a series of transactions, of all or substantially all of the Company's assets; or (iv) the sale of substantially all of the Company's assets. 2.6. Company. For purposes of this Agreement, the "Company" shall mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors and Assigns (as hereinafter defined). 2.7. Disability. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs the Executive's ability to substantially perform the Executive's duties with the Company for a total period of ninety (90) days and the Executive has not returned to full time employment prior to the Termination Date as stated in the "Notice of Termination." 3 4 2.8. Good Reason. (a) For purposes of this Agreement, "Good Reason" shall mean the occurrence after a Change in Control of any of the events or conditions described in subsections (1) through (8) hereof: (i) a change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, represents an adverse change from the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; or any removal of the Executive from or failure to reappoint or reelect the Executive to any of such offices or positions, except in connection with the termination of the Executive's employment for Disability, Cause, as a result of the Executive's death or by the Executive; (ii) a reduction in the Executive's base salary or any failure to pay the Executive any compensation or benefits to which the Executive is entitled within ten (10) days of the date due after receipt of written notice from Executive; (iii) the Company's requiring the Executive to be based at any place outside a 25-mile radius from MTI's Germany Office, located at Otto-Von-Guericke, Ring15, 65205 Wiesbaden, Germany except for reasonably required travel on the Company's business which is not materially greater than such travel requirements prior to the Change in Control; (iv) the failure by the Company to (A) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or Executive benefit plan in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the Executive, or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other Executive benefit plan, program and practice in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; (v) the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty (60) days; (vi) any material breach by the Company of any provision of this Agreement; 4 5 (vii) any purported termination of the Executive's employment for Cause by the Company which does not comply with the terms of Section 2.4; or (viii) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any Successors and Assigns to assume and agree to perform this Agreement, as contemplated in Section 6 hereof. (b) The Executive's right to terminate the Executive's employment pursuant to this Section 2.8 shall not be affected by the Executive's incapacity due to physical or mental illness. 2.9. Notice Of Termination. For purposes of this Agreement, following a Change in Control, "Notice of Termination" shall mean a written notice of termination of the Executive's employment from the Company, which notice indicates the date on which termination is to be effective, the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction the numerator of which is the number of days in the fiscal year through the Termination Date and the denominator of which is 365. 2.11. Successors And Assigns. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or other entity acquiring all or substantially all of the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. 2.12. Termination Date. For purposes of this Agreement, "Termination Date" shall mean in, the case of the Executive's death, the Executive's date of death, in the case of Good Reason, the last day of the Executive's employment and, in all other cases, the date specified in the Notice of Termination; provided, however, that if the Executive's employment is terminated by the Company for Cause or due to Disability, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to the Executive, provided that, in the case of Disability, the Executive shall not have returned to the full-time performance of the Executive's duties during such period of at least thirty (30) days. 3. Termination Of Employment. 3.1. If, during the term of this Agreement, the Executive's employment with the Company shall be terminated within twelve (12) months following a Change in Control, the Executive shall be entitled to the following compensation and benefits: (a) If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by reason of the Executive's death or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued Compensation 5 6 and, if such termination is other than by the Company for Cause, the Company shall also pay the Executive a Pro Rata Bonus. (b) If the Executive's employment with the Company shall be terminated for any reason other than as specified in Section 3.1(a), the Executive shall be entitled to the following: (i) the Company shall pay the Executive all Accrued Compensation and a Pro Rata Bonus; (ii) the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment, an amount in cash equal to the sum of (A) the Base Amount and (B) the Bonus Amount; and (iii) for a number of months equal to twelve (12) (the "Continuation Period"), the Company shall, at its expense, continue on behalf of the Executive and the Executive's dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (A) to the Executive at any time during the 90-day period prior to the Change in Control or at any time thereafter or (B) to other similarly situated executives who continue in the employ of the Company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section 3.1(b)(iii) during the Continuation Period shall be no less favorable to the Executive and the Executive's dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (A) and (B) above. The Company's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iii) shall not be interpreted so as to limit any benefits to which the Executive or the Executive's dependents or beneficiaries may be entitled under any of the Company's Executive benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits. (c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and (ii) shall be paid in a single lump sum cash payment within forty-five (45) days after the Executive's Termination Date (or earlier, if required by applicable law). (d) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in Section 3.1(b)(iii). 6 7 3.2. (a) The severance pay and benefits provided for in this Section 3 shall be in lieu of any other severance or termination pay to which the Executive may be entitled under any Company severance or termination plan, program, practice or arrangement. (b) The Executive's entitlement to any other compensation or benefits shall be determined in accordance with the Company's Executive benefit plans and other applicable programs, policies and practices then in effect. 4. Notice Of Termination. Following a Change in Control, any purported termination of the Executive's employment shall be communicated by Notice of Termination to the Executive. For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination. 5. Excise Tax Limitation. (a) Notwithstanding anything in this Agreement to the contrary, if any portion of any payments to Executive by the Company under this Agreement and any other present or future plan of the Company or other present or future agreement between Executive and the Company would not be deductible by the Company (collectively, "Payments") for federal income tax purposes by reason of application of Section 162(m) of the Internal Revenue Code (the "Code"), then payment of that portion to Executive shall be deferred until the earliest date upon which payment thereof can be made to Executive without being non-deductible pursuant to Section 162(m) of the Code. In the event of such deferral, the Company shall pay interest to Executive on the deferred amount at 120% of the applicable federal rate provided for in Section 1274(d)(1) of the Code. In addition, notwithstanding any provision of this Agreement to the contrary, the aggregate present value of the payments and benefits (excluding those payments and benefits not treated as parachute payments under Code Section 280G(b)) to be made or provided to the Executive by the Company (whether pursuant to this Agreement or otherwise) shall not exceed three times the Executive's annualized includible compensation for the base period, as defined in Code Section 280G(d) of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any excess payments or benefits shall be forfeited; provided, however, that the forfeiture provision of this sentence shall apply only if such forfeiture provision results in larger aggregate after-tax payments and benefits to the Executive than if the forfeiture provision did not apply. The intent of this portion of this subsection 5(a) is to prevent any payment or benefit to the Executive from being subject to the excise tax imposed by Code Section 4999 and to prevent any item of expense or deduction of the Company from being disallowed as a result of the application of Code Section 280G, but only if the after-tax payments and benefits payable or provided to the Executive are greater after application of the forfeiture provision than if the forfeiture provision did not apply. The interpretation of this subsection 5(a), its application to any occurrence or event, the determination of whether any payment or benefit would not be treated as a parachute payment, the determination of the aggregate present value of all payments and benefits to be made or provided to the Executive, the determination of the value of the payments and benefits payable or to be provided to the Executive after reduction for all applicable taxes, and what specific payments or benefits otherwise available to the Executive 7 8 shall be limited or eliminated by operation of this subsection 5(a) shall be reasonably made by the Company and shall be binding on all persons. (b) An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount and the amount of such Limited Payment Amount shall be made, at the Company's expense, by the accounting firm that is the Company's independent accounting firm as of the date of the Change in Control (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination", together with detailed supporting calculations and documentation, to the Company and the Executive within twenty (20) days of the Termination Date if applicable, or such other time as requested by the Company or by the Executive (provided the Executive reasonably believes that any of the Payments may be subject to the Excise Tax), and if the Accounting Firm determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the Determination to the Executive, the Executive shall have the right to dispute the Determination (the "Dispute"). If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and the Executive. 6. Successors, Binding Agreement. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its Successors and Assigns and the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive or the Executive's beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative. 7. Confidential Information. The Company and Executive acknowledge that Executive, in performing the terms and conditions of Executive's employment, has and will continue to directly or indirectly gain access to information about Company and its operations, including, but not limited to, its modes and methods of conducting its business and producing and marketing its products, its employee, customer, vendor and referral source lists, its trade secrets, its copyrighted and non-copyrighted or non-protected computer software programs, its techniques of operation, its financial structure, and its weakness, if any. As part of this Agreement, Executive agrees to execute, and be bound by, the Company's "Employee/ Consultant Proprietary Information Agreement," a copy of which is attached hereto as Exhibit "A." 8. Notice. All notices, requests, demands, and other communications hereunder shall be in writing, and shall be delivered in person, by facsimile, or by certified or registered mail with 8 9 return receipt requested. Each such notice, request, demand, or other communication shall be effective (a) if delivered by hand, when delivered at the address specified in this Section; (b) if given by facsimile, when such facsimile is transmitted to the telefacsimile number specified in this Section and confirmation is received; or (c) if given by certified or registered mail, three days after the mailing thereof Notices shall be delivered as follows: If to the Company: MTI Technology Corporation 4905 E. La Palma Avenue Anaheim, California 92807 Attention: Chief Financial Officer Fax: (714) 693-2202 With a copy to: Morrison & Foerster LLP 19900 MacArthur Boulevard 12th Floor Irvine, California 92612 Attention: Tamara Powell Tate Fax: (714) 251-0900 If to the Executive: Gary Scott Kufsteiner Platz 3 81679 Munich Germany Any party may change its address by notice giving notice to the other party of a new address in accordance with the foregoing provisions. 9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Settlement Of Claims. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against an Executive or others. 9 10 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged, unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law. This Agreement has been negotiated and exactitude in the State of California and is to be performed in Orange County, California. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, including all matters of construction, validity, performance, and enforcement, without giving effect to principles of conflict of laws. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 13. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. 15. Remedies. All rights, remedies, undertakings, obligations, options, covenants, conditions, and agreements contained in this Agreement shall be cumulative and no one of them shall be exclusive of any other. 16. Interpretation. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any party. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa. The descriptive headings of the sections and subsections of this Agreement are inserted for convenience only and shall not control or affect the interpretation or construction of any of the provisions herein. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 18. Further Documents and Acts. Each of the parties hereto agrees to cooperate in good faith with the other and to execute and deliver such further instruments and perform such other acts as may be reasonably necessary or appropriate to consummate and carry into effect the transactions contemplated under this Agreement. 10 11 19. Consultation with Counsel. Executive acknowledges (a) that he has been given the opportunity to consult with counsel of his own choice concerning this Agreement, and (b) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based upon his own judgment with or without the advice of such counsel. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT. BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written. MTI TECHNOLOGY CORPORATION By: /s/ DALE R. BOYD ---------------------------------- Title: Sr. V.P. & CFO /s/ GARY SCOTT ------------------------------------- Gary Scott 11 12 EXHIBIT "A" Exhibit "A" 13 STATEMENT REGARDING EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT Attached to this statement is your Employee/Consultant Proprietary Information Agreement (the "Agreement") with MTI Technology Corporation (together with its subsidiaries, the "Company"). Please take the time to review the Agreement carefully. It contains material restrictions on your right to disclose or use, during or after your employment, certain information and technology learned or developed by you during your employment with the Company. The Company considers this Agreement to be very important to the protection of its business. If you have any questions concerning the Agreement, you may wish to consult an attorney. Managers, legal counsel, and others in the Company are not authorized to give you legal advice concerning the Agreement. If you have read and understand the Agreement, and if you agree to its terms and conditions, please return a fully executed copy of it to the Company, retaining one copy for yourself. I HAVE READ AND UNDERSTAND THE ATTACHED AGREEMENT: Executive Name: Gary M. Scott ---------------------------- Executive Signature: /s/ GARY M. SCOTT ----------------------- Title: Sr. V.P. Europe ------------------------------------- Date: July 15, 1998 -------------------------------------- A-1 14 EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT In consideration of my present and future employment by MTI Technology Corporation (together with its subsidiaries, the "Company"), I agree to the following: 1. Proprietary Information. (a) I understand and acknowledge that my work as an employee of the Company has involved and will continue to involve access to and creation of confidential, proprietary, and trade secret information of the Company and its affiliates, consultants, customers, clients, and business associates (collectively, as defined more extensively below, "Proprietary Information"). I further understand and acknowledge that the Company and its clients have developed, compiled, and otherwise obtained this Proprietary Information often at great expense, and that such information has great value to their respective businesses. I agree to hold in strict confidence and in trust for the sole benefit of the Company and its clients all Proprietary Information. I further agree that I shall treat all Proprietary Information as private, privileged, and confidential, and that I shall not use, disclose, or release any Proprietary Information in any way to any person, firm, or institution at any time, even after termination of my employment, except to the extent necessary to carry out my responsibilities as an Executive of the Company. I further understand and agree that the publication of Proprietary Information through literature or speeches must be approved in advance in writing by a duly authorized officer of the Company. (b) I understand and acknowledge that, for purposes of this Agreement, "Proprietary Information" means all confidential, proprietary, or trade secret information and ideas in whatever form, tangible or intangible, whether disclosed to or learned or developed by me, prior or subsequent to the date hereof, pertaining in any manner to the business of the Company or to the Company's affiliates, consultants, clients, or business associates, unless: (i) the information is or becomes publicly known through lawful means; (ii) the information was rightfully in my possession or part of my general knowledge prior to my employment by the Company; or (iii) the information is disclosed to me without confidential or proprietary restriction by a third party who rightfully possesses the information (without confidential or proprietary restriction) and did not learn of it, directly or indirectly, from the Company. (c) Without limiting the generality of the foregoing, I understand and acknowledge that "Proprietary Information" includes all: (i) inventions, computer codes, computer programs, formulas, schematics, techniques, algorithms, employee suggestions, development tools and processes, computer printouts, design drawings and manuals, and improvements or modification to any of the foregoing; (ii) information about costs, profits, markets, and sales; (iii) plans for future development and new product concepts; and (iv) all documents, books, papers, drawings, models, sketches, and other data of any kind and description, including electronic data recorded or retrieved by any means, that have been or will be given to me by the Company (or any present or future affiliates, consultants, customers, clients, and business associates of the Company), as well as written or verbal instructions or comments. A-2 15 1. Use Of Proprietary Information. I agree that I will maintain at my work station or in other places under my control only such Proprietary Information that I have a current "need to know," and that I will return to the appropriate person or location, or otherwise dispose of, Proprietary Information once my need to know no longer exists. I agree that I will not make copies of information unless I have a legitimate need for such copies in connection with my work. 2. Third-Party Information. I recognize that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree that I owe the Company and such third parties, during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm, or corporation (except as necessary in carrying out my work for the Company consistent with the Company's agreement with such third party) or to use it for the benefit of anyone other than for the Company or such third party (consistent with the Company's agreement with such third party) without the express written authorization of a duly authorized officer of the Company. 3. Inventions. (a) Subject to Section 9 below, I hereby assign to the Company, without additional consideration, all right, title and interest (throughout the United States and in all foreign countries) in all ideas, processes, inventions, technology, writings, computer programs, designs, formulas, discoveries, patents, copyrights, trademarks, service marks, original works of authorship, any claims or rights, and any improvements or modifications to the foregoing (collectively, "Inventions"), whether or not subject to patent or copyright protection, relating to any activities of the Company that have been or will be conceived, developed, or reduced to practice by me alone or with others (i) during the term of my employment, whether or not conceived or developed during regular business hours, and whether or not conceived before, on, or after the date hereof or (ii) if based on Proprietary Information, after termination of my employment. Such Inventions shall be the sole property of the Company and, to the maximum extent permitted by applicable law, shall be deemed works made for hire. (b) I will, whether during or after my employment by the Company, execute such written instruments and do other such acts as may be necessary in the opinion of the Company to obtain a patent, register a copyright, or otherwise enforce the Company's rights in such Inventions (and I hereby irrevocably appoint the Company and any of its officers as my attorney in fact to undertake such acts in my name). (c) I understand that the assignment by me to the Company does not apply to Inventions that qualify fully under Section 2870(a) of the California Labor Code, which is set forth on Schedule "A." I understand that nothing in this Agreement is intended to expand the scope of protection provided by Sections 2870 through 2872 of the California Labor Code. Except as disclosed in Schedule "B", there are no ideas, inventions, technology, computer A-3 16 programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing that I wish to exclude from the operation of this Agreement. (d) To the best of my knowledge, there is no existing contract in conflict with this Agreement or any other contract in existence between me and any other person or entity to assign ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing. 1. Termination of Employment. (a) I hereby acknowledge and agree that nothing in this Agreement shall be construed to imply that the term of my employment is of any definite duration. I further acknowledge and agree that I am employed on an "at-will" basis, which means that I may quit at any time with or without cause, and the Company may terminate my employment at any time with or without cause. (b) I acknowledge that, because of my responsibilities at the Company, I have helped and will continue to help to develop and have been and will be exposed to the Company's research and development, products, business strategies, information on customers and clients, and other valuable Proprietary Information, and that use or disclosure of such Proprietary Information in breach of this Agreement would be extremely difficult to detect or prove. I also acknowledge that the Company's relationships with its employees, affiliates, consultants, customers, clients, business associates, and other persons are valuable business assets. To forestall any use or disclosure of Proprietary Information in breach of this Agreement, I agree that for the term of this Agreement and for a period of one (1) year after termination of my employment with the Company, I shall not, for myself or any third party, directly or indirectly: (i) divert or attempt to divert from the Company any business of any kind in which it is engaged, including, without limitation, the solicitation of or interference with any of its suppliers or customer; or (ii) employ, solicit for employment, or recommend for employment any person employed by the Company. Furthermore, I agree that during the period of my employment with the Company I shall not engage in any business activity that is or may be competitive with the Company. I understand that none of my activities will be prohibited under this section if I can prove that the action was taken without the use in any way of Proprietary Information. (c) I acknowledge that, because of the difficulty of establishing when any Invention is first conceived or developed by me, or whether it results from access to Proprietary Information or the Company's equipment, facilities, and data, I agree that any ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing shall be presumed to be an Invention if A-4 17 conceived, developed, used, sold, exploited, or reduced to practice by me or with my aid within one (1) year after my termination of employment with the Company. I can rebut the above presumption if I prove that the invention, idea, process, etc., is not an Invention as defined in paragraph 4(a). (d) I hereby acknowledge and agree that all personal property including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, files, computer software, computer tapes or disks, blueprints, and other documents or materials (or copies thereof), Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment, belong to the Company and shall be promptly returned to the Company once my employment with the Company is terminated, for any reason. I will not retain any written or other tangible information pertaining to any Invention. In the event of the termination of my employment, I agree to sign and deliver the Termination Certificate attached as Schedule "C" to this Agreement. (e) I understand that my obligations contained in this Agreement will survive the termination of my employment with the Company, and that I will continue to make all disclosures required of me by Paragraph 6. 1. Disclosure. I agree to maintain adequate and current written records on the development of all Inventions and to disclose promptly to the Company all Inventions and relevant records, which records will remain the sole property of the Company. I further agree that all information and records pertaining to any Inventions conceived, developed, or reduced to practice by me (alone or with others) during my period of employment or during the one-year period following termination of my employment, shall be promptly disclosed to the Company (any such disclosures made after the termination of my employment shall be received by the Company in confidence for the purpose of determining if they have been based on any Proprietary Information). The Company shall examine such information to determine if in fact such information are Inventions subject to this Agreement. 2. Former or Conflicting Agreements. During my employment with the Company, I will not disclose to the Company, or use, or induce the Company to use, any confidential, proprietary, or trade secret information of others. I represent and warrant that I have returned all property and confidential, proprietary and trade secret information belonging to all prior employers, if any. I further represent and warrant that my performance of the terms of this Agreement will not breach any agreement to keep in confidence confidential proprietary and trade secret information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith. 3. Information on Company Premises. I acknowledge that all information generated, received, or maintained by or for me on the premises or equipment of the Company (including, without limitation, computer systems and A-5 18 electronic-mail or voicemail systems) is the property of the Company, and I hereby waive any property or privacy rights that I may have with respect to such information. 4. Reserved Inventions. To avoid future confusion, I have listed on Schedule "B" a description of all Inventions, if any, developed or conceived by me in which I claim any ownership or other right. I understand that, by not listing an Invention, I am acknowledging that the Invention was not developed or conceived before commencement of my employment. 10. Choice of Law. The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to its conflict of law rules. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 11. Remedies. I recognize that nothing in this Agreement is intended to limit any remedy of the Company under the California Uniform Trade Secrets Act and that I could face possible criminal and civil actions, resulting in imprisonment and substantial monetary liability, if I misappropriate the Company's or its clients' trade secrets. In addition, I recognize that my violation of this Agreement could cause the Company irreparable harm and significant injury, the amount of which may be extremely difficult to estimate, thus, making any remedy at law or in damages inadequate. Therefore, I agree that, in the event of a breach or threatened breach that involves Proprietary Information of the Company or its clients, the Company shall have the right to apply to any court of competent jurisdiction for an order restraining any breach or threatened breach of this Agreement and for any other relief the Company deems appropriate. This right shall be in addition to any other remedy available to the Company in law or equity. 12. Successors and Assigns. (a) I understand and agree that the Company may assign to another person or entity any of its rights under this Agreement. (b) I further understand and agree that this Agreement shall be binding upon me and my heirs, executors, administrators, and successors, and shall inure to the benefit of the Company's successors and assigns. 12. Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, the validity or enforceability of the other provisions shall not be affected. A-6 19 13. Entire Agreement. The terms of this Agreement are the final expression of my agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. This Agreement shall constitute the complete and exclusive statement of its terms and no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding involving this Agreement. No modification or amendment of this Agreement shall be binding unless executed in writing by me and a duly authorized officer of the Company. I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS, PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS, RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS AGREEMENT. This Agreement is made and entered into as of July 15, 1998. MTI TECHNOLOGY CORPORATION By: /s/ DALE R. BOYD ---------------------------------------- Title: Sr. V.P. & CFO ---------------------------------- Executive: Gary M. Scott --------------------------------- Signature: /s/ GARY M. SCOTT --------------------------------- A-7 20 SCHEDULE A California Labor Code Section 2870(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information, except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. Schedule A 21 SCHEDULE B 1. Proprietary Information. Except as set forth below, I acknowledge that at this time I know nothing about the business or Proprietary Information of the Company, other than information I have learned from the Company in the course of being hired: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2. Reserved Inventions. Except as set forth below, there are no ideas, processes, inventions, technology, writings, programs, designs, formulas, discoveries, patents, copyrights, or trademarks, or any claims, rights, or improvements to the foregoing, that I wish to exclude from the operation of this Agreement: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Name: Gary M. Scott ------------------------------ Signature: /s/ GARY M. SCOTT ------------------------- Date: July 15, 1998 ------------------------------ Schedule B 22 SCHEDULE C TERMINATION CERTIFICATE This is to certify that I have returned all personal property of the Company, including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, blueprints, and other documents and materials, Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment with the Company, and that I did not make or distribute any copies of the foregoing. I further certify that I have reviewed the Employee/Consultant Proprietary Information Agreement signed by me and that I have complied with and will continue to comply with all of its terms including, without limitation: (i) the reporting of any invention, process, idea, etc. conceived or developed by me and covered by the Agreement; and (ii) the preservation as confidential of all Proprietary Information pertaining to the Company. This certificate in no way limits my responsibilities or the Company's rights under the Agreement. On termination of my employment with the Company, I will be employed by [NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will be working in connection with the following projects: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Name: ------------------------------ Signature: ------------------------- Date: ------------------------------ Schedule C EX-10.32 6 SEVERANCE AGREEMENT - CHUCK SITZMAN 1 EXHIBIT 10.32 SEVERANCE AGREEMENT This Agreement, (the "Agreement") is made and entered into as of July 15, 1998, is entered into between MTI Technology Corporation, a corporation organized under the laws of the State of Delaware (the "Company"), and Chuck Sitzman (the "Executive"). RECITALS A. Executive is currently serving as an officer of the Company. B. The Board of Directors of the Company (the "Board") recognizes that the possibility of a Change in Control (as hereinafter defined) exists and that the threat or the occurrence of a Change in Control can result in significant distractions to its key management personnel because of the uncertainties inherent in such a situation; C. The Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Executive in the event of a threat or occurrence of a Change in Control and to ensure the Executive's continued dedication and efforts in such event without undue concern for the Executive's personal, financial and employment security; and D. In order to induce the Executive to remain in the employ of the Company, particularly in the event of a threat or the occurrence of a Change in Control, the Company desires to enter into this Agreement with the Executive to provide the Executive with certain benefits in the event that the Executive's employment is terminated as a result of, or in connection with, a Change in Control. AGREEMENT In consideration of the respective agreements of the parties contained herein, it is agreed as follows: 1. Term Of Agreement. This Agreement shall commence as of the date first set forth above and shall continue in effect until July 15, 2000; provided, however, that commencing on July 15, 2000 and on each July 15 thereafter, the term of this Agreement shall automatically be extended for one (1) year unless the Company or the Executive shall have given written notice to the other at least ninety (90) days prior thereto that the term of this Agreement shall not be so extended; and provided, further, however, that notwithstanding any such notice by the Company not to extend, the term of this Agreement shall not expire prior to the expiration of twelve (12) months after the occurrence of a Change in Control. 2. Definitions. 2.1. Accrued Compensation. For purposes of this Agreement, "Accrued Compensation" shall mean an amount which shall include all amounts earned or accrued through the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, 2 including (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date, (iii) vacation pay and (iv) bonuses and incentive compensation (other than the "Pro Rata Bonus" (as hereinafter defined)). 2.2. Base Amount. For purposes of this Agreement, "Base Amount" shall mean the greater of the Executive's annual base salary (a) at the rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the Change in Control, and shall include all amounts of base salary that are deferred under the Executive benefit plans of the Company or any other agreement or arrangement. 2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount" shall mean the greatest of: (a) 100% of the annual bonus payable to the Executive under the Company's Executive Management Bonus Plan for the fiscal year in which the Termination Date occurs; (b) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which the Termination Date occurred; (c) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which a Change in Control occurred; (d) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Termination Date occurred; or (e) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Change in Control occurred. 2.4. Cause. The Company may terminate this Agreement and discharge Executive for Cause (as defined) at any time upon written notice. For purposes of this Agreement, the term "Cause" shall mean: (i) a material breach of any term of this Agreement and failure to cure such breach within ten (10) days after written notice thereof from the Company; (ii) the willful and continued failure by Executive substantially to perform his duties for the Company (other than any such failure resulting from his incapacity due to death or physical or mental illness), after written demand for substantial performance is delivered to Executive by the Company, which specifically identifies the manner in which the Company believes that Executive has not substantially performed his duties; (iii) the failure by Executive to follow the reasonable instructions of the Board of Directors; (iv) the willful engaging by Executive in misconduct that is materially injurious to the Company, monetarily or otherwise; (v) Executive's final conviction for fraud or of any felony; or (vi) Executive's habitual use of illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol abuse, Executive shall be given notice and a thirty (30) day opportunity to remedy the problem. For purposes of this paragraph, no act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive other than in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company. 2 3 2.5. Change In Control. (a) For purposes of this Agreement, "Change of Control" shall mean: (i) any "person" as such term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than (1) a trustee or other fiduciary holding securities under an Executive benefit plan of the Company, (2) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (3) any current beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange Act, of securities possessing more than [TWENTY-FIVE] percent (25%) of the total combined voting power of the Company's outstanding securities, hereafter becomes the "beneficial owner," as defined in Rule 13d-3 under of the Exchange Act, directly or indirectly, of securities of the Company representing [TWENTY-FIVE] percent (25%) or more of the total combined voting power of the Company's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company, in one transaction or a series of transactions, of all or substantially all of the Company's assets; or (iv) the sale of substantially all of the Company's assets. 2.6. Company. For purposes of this Agreement, the "Company" shall mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors and Assigns (as hereinafter defined). 2.7. Disability. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs the Executive's ability to substantially perform the Executive's duties with the Company for a total period of ninety (90) days and the Executive has not returned to full time employment prior to the Termination Date as stated in the "Notice of Termination." 3 4 2.8. Good Reason. (a) For purposes of this Agreement, "Good Reason" shall mean the occurrence after a Change in Control of any of the events or conditions described in subsections (1) through (8) hereof: (i) a change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, represents an adverse change from the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; or any removal of the Executive from or failure to reappoint or reelect the Executive to any of such offices or positions, except in connection with the termination of the Executive's employment for Disability, Cause, as a result of the Executive's death or by the Executive; (ii) a reduction in the Executive's base salary or any failure to pay the Executive any compensation or benefits to which the Executive is entitled within ten (10) days of the date due after receipt of written notice from Executive; (iii) the Company's requiring the Executive to be based at any place outside a 25-mile radius from MTI's Corporate Offices, located at 4905 E. LaPalma Avenue, Anaheim, CA 92807, except for reasonably required travel on the Company's business which is not materially greater than such travel requirements prior to the Change in Control; (iv) the failure by the Company to (A) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or Executive benefit plan in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the Executive, or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other Executive benefit plan, program and practice in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; (v) the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty (60) days; (vi) any material breach by the Company of any provision of this Agreement; 4 5 (vii) any purported termination of the Executive's employment for Cause by the Company which does not comply with the terms of Section 2.4; or (viii) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any Successors and Assigns to assume and agree to perform this Agreement, as contemplated in Section 6 hereof. (b) The Executive's right to terminate the Executive's employment pursuant to this Section 2.8 shall not be affected by the Executive's incapacity due to physical or mental illness. 2.9. Notice Of Termination. For purposes of this Agreement, following a Change in Control, "Notice of Termination" shall mean a written notice of termination of the Executive's employment from the Company, which notice indicates the date on which termination is to be effective, the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction the numerator of which is the number of days in the fiscal year through the Termination Date and the denominator of which is 365. 2.11. Successors And Assigns. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or other entity acquiring all or substantially all of the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. 2.12. Termination Date. For purposes of this Agreement, "Termination Date" shall mean in, the case of the Executive's death, the Executive's date of death, in the case of Good Reason, the last day of the Executive's employment and, in all other cases, the date specified in the Notice of Termination; provided, however, that if the Executive's employment is terminated by the Company for Cause or due to Disability, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to the Executive, provided that, in the case of Disability, the Executive shall not have returned to the full-time performance of the Executive's duties during such period of at least thirty (30) days. 3. Termination Of Employment. 3.1. If, during the term of this Agreement, the Executive's employment with the Company shall be terminated within twelve (12) months following a Change in Control, the Executive shall be entitled to the following compensation and benefits: (a) If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by reason of the Executive's death or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued Compensation 5 6 and, if such termination is other than by the Company for Cause, the Company shall also pay the Executive a Pro Rata Bonus. (b) If the Executive's employment with the Company shall be terminated for any reason other than as specified in Section 3.1 (a), the Executive shall be entitled to the following: (i) the Company shall pay the Executive all Accrued Compensation and a Pro Rata Bonus; (ii) the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment, an amount in cash equal to the sum of (A) the Base Amount and (B) the Bonus Amount; and (iii) for a number of months equal to twelve (12) (the "Continuation Period"), the Company shall, at its expense, continue on behalf of the Executive and the Executive's dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (A) to the Executive at any time during the 90-day period prior to the Change in Control or at any time thereafter or (B) to other similarly situated executives who continue in the employ of the Company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section 3.1(b)(iii) during the Continuation Period shall be no less favorable to the Executive and the Executive's dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (A) and (B) above. The Company's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iii) shall not be interpreted so as to limit any benefits to which the Executive or the Executive's dependents or beneficiaries may be entitled under any of the Company's Executive benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits. (c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and (ii) shall be paid in a single lump sum cash payment within forty-five (45) days after the Executive's Termination Date (or earlier, if required by applicable law). (d) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in Section 3.1 (b)(iii). 6 7 3.2. (a) The severance pay and benefits provided for in this Section 3 shall be in lieu of any other severance or termination pay to which the Executive may be entitled under any Company severance or termination plan, program, practice or arrangement. (b) The Executive's entitlement to any other compensation or benefits shall be determined in accordance with the Company's Executive benefit plans and other applicable programs, policies and practices then in effect. 4. Notice Of Termination. Following a Change in Control, any purported termination of the Executive's employment shall be communicated by Notice of Termination to the Executive. For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination. 5. Excise Tax Limitation. (a) Notwithstanding anything in this Agreement to the contrary, if any portion of any payments to Executive by the Company under this Agreement and any other present or future plan of the Company or other present or future agreement between Executive and the Company would not be deductible by the Company (collectively, "Payments") for federal income tax purposes by reason of application of Section 162(m) of the Internal Revenue Code (the "Code"), then payment of that portion to Executive shall be deferred until the earliest date upon which payment thereof can be made to Executive without being non-deductible pursuant to Section 162(m) of the Code. In the event of such deferral, the Company shall pay interest to Executive on the deferred amount at 120% of the applicable federal rate provided for in Section 1274(d)(1) of the Code. In addition, notwithstanding any provision of this Agreement to the contrary, the aggregate present value of the payments and benefits (excluding those payments and benefits not treated as parachute payments under Code Section 280G(b)) to be made or provided to the Executive by the Company (whether pursuant to this Agreement or otherwise) shall not exceed three times the Executive's annualized includible compensation for the base period, as defined in Code Section 280G(d) of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any excess payments or benefits shall be forfeited; provided, however, that the forfeiture provision of this sentence shall apply only if such forfeiture provision results in larger aggregate after-tax payments and benefits to the Executive than if the forfeiture provision did not apply. The intent of this portion of this subsection 5(a) is to prevent any payment or benefit to the Executive from being subject to the excise tax imposed by Code Section 4999 and to prevent any item of expense or deduction of the Company from being disallowed as a result of the application of Code Section 280G, but only if the after-tax payments and benefits payable or provided to the Executive are greater after application of the forfeiture provision than if the forfeiture provision did not apply. The interpretation of this subsection 5(a) its application to any occurrence or event, the determination of whether any payment or benefit would not be treated as a parachute payment, the determination of the aggregate present value of all payments and benefits to be made or provided to the Executive, the determination of the value of the payments and benefits payable or to be provided to the Executive after reduction for all applicable taxes, and what specific payments or benefits otherwise available to the Executive 7 8 shall be limited or eliminated by operation of this subsection 5(a) shall be reasonably made by the Company and shall be binding on all persons. (b) An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount and the amount of such Limited Payment Amount shall be made, at the Company's expense, by the accounting firm that is the Company's independent accounting firm as of the date of the Change in Control (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination", together with detailed supporting calculations and documentation, to the Company and the Executive within twenty (20) days of the Termination Date if applicable, or such other time as requested by the Company or by the Executive (provided the Executive reasonably believes that any of the Payments may be subject to the Excise Tax), and if the Accounting Firm determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the Determination to the Executive, the Executive shall have the right to dispute the Determination (the "Dispute"). If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and the Executive. 6. Successors, Binding Agreement. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its Successors and Assigns and the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive or the Executive's beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative. 7. Confidential Information. The Company and Executive acknowledge that Executive, in performing the terms and conditions of Executive's employment, has and will continue to directly or indirectly gain access to information about Company and its operations, including, but not limited to, its modes and methods of conducting its business and producing and marketing its products, its employee, customer, vendor and referral source lists, its trade secrets, its copyrighted and non-copyrighted or non-protected computer software programs, its techniques of operation, its financial structure, and its weakness, if any. As part of this Agreement, Executive agrees to execute, and be bound by, the Company's "Employee/ Consultant Proprietary Information Agreement," a copy of which is attached hereto as Exhibit "A." 8. Notice. All notices, requests, demands, and other communications hereunder shall be in writing, and shall be delivered in person, by facsimile, or by certified or registered mail with 8 9 return receipt requested. Each such notice, request, demand, or other communication shall be effective (a) if delivered by hand, when delivered at the address specified in this Section; (b) if given by facsimile, when such facsimile is transmitted to the telefacsimile number specified in this Section and confirmation is received; or (c) if given by certified or registered mail, three days after the mailing thereof Notices shall be delivered as follows: If to the Company: MTI Technology Corporation 4905 E. La Palma Avenue Anaheim, California 92807 Attention: Chief Financial Officer Fax: (714) 693-2202 With a copy to: Morrison & Foerster LLP 19900 MacArthur Boulevard 12th Floor Irvine, California 92612 Attention: Tamara Powell Tate Fax: (714) 251-0900 If to the Executive: Chuck Sitzman 5445 Los Monteros Yorba Linda, CA 92887 Any party may change its address by notice giving notice to the other party of a new address in accordance with the foregoing provisions. 9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Settlement Of Claims. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against an Executive or others. 9 10 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged, unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law. This Agreement has been negotiated and exactitude in the State of California and is to be performed in Orange County, California. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, including all matters of construction, validity, performance, and enforcement, without giving effect to principles of conflict of laws. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 13. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. 15. Remedies. All rights, remedies, undertakings, obligations, options, covenants, conditions, and agreements contained in this Agreement shall be cumulative and no one of them shall be exclusive of any other. 16. Interpretation. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any party. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa The descriptive headings of the sections and subsections of this Agreement are inserted for convenience only and shall not control or affect the interpretation or construction of any of the provisions herein. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 18. Further Documents and Acts. Each of the parties hereto agrees to cooperate in good faith with the other and to execute and deliver such further instruments and perform such other acts as may be reasonably necessary or appropriate to consummate and carry into effect the transactions contemplated under this Agreement. 10 11 19. Consultation with Counsel. Executive acknowledges (a) that he has been given the opportunity to consult with counsel of his own choice concerning this Agreement, and (b) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based upon his own judgment with or without the advice of such counsel. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT. BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written. MTI TECHNOLOGY CORPORATION By: /s/ Dale R. Boyd ------------------------------ Title: Sr. V.P. & CFO /s/ Charles J. Sitzman ---------------------------------- Chuck Sitzman 11 12 EXHIBIT "A" Exhibit "A" 13 STATEMENT REGARDING EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT Attached to this statement is your Employee/Consultant Proprietary Information Agreement (the "Agreement") with MTI Technology Corporation (together with its subsidiaries, the "Company"). Please take the time to review the Agreement carefully. It contains material restrictions on your right to disclose or use, during or after your employment, certain information and technology learned or developed by you during your employment with the Company. The Company considers this Agreement to be very important to the protection of its business. If you have any questions concerning the Agreement, you may wish to consult an attorney. Managers, legal counsel, and others in the Company are not authorized to give you legal advice concerning the Agreement. If you have read and understand the Agreement, and if you agree to its terms and conditions, please return a fully executed copy of it to the Company, retaining one copy for yourself. I HAVE READ AND UNDERSTAND THE ATTACHED AGREEMENT: Executive Name: Charles J. Sitzman ---------------------------- Executive Signature: /s/ Charles J. Sitzman ----------------------- Title: --------------------------------------- Date: --------------------------------------- A-1 14 EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT In consideration of my present and future employment by MTI Technology Corporation (together with its subsidiaries, the "Company"), I agree to the following: 1. Proprietary Information. (a) I understand and acknowledge that my work as an employee of the Company has involved and will continue to involve access to and creation of confidential, proprietary, and trade secret information of the Company and its affiliates, consultants, customers, clients, and business associates (collectively, as defined more extensively below, "Proprietary Information"). I further understand and acknowledge that the Company and its clients have developed, compiled, and otherwise obtained this Proprietary Information often at great expense, and that such information has great value to their respective businesses. I agree to hold in strict confidence and in trust for the sole benefit of the Company and its clients all Proprietary Information. I further agree that I shall treat all Proprietary Information as private, privileged, and confidential, and that I shall not use, disclose, or release any Proprietary Information in any way to any person, firm, or Institution at any time, even after termination of my employment, except to the extent necessary to carry out my responsibilities as an Executive of the Company. I further understand and agree that the publication of Proprietary Information through literature or speeches must be approved in advance in writing by a duly authorized officer of the Company. (b) I understand and acknowledge that, for purposes of this Agreement, "Proprietary Information" means all confidential, proprietary, or trade secret information and ideas in whatever form, tangible or intangible, whether disclosed to or learned or developed by me, prior or subsequent to the date hereof, pertaining in any manner to the business of the Company or to the Company's affiliates, consultants, clients, or business associates, unless: (i) the information is or becomes publicly known through lawful means; (ii) the information was rightfully in my possession or part of my general knowledge prior to my employment by the Company; or (iii) the information is disclosed to me without confidential or proprietary restriction by a third party who rightfully possesses the information (without confidential or proprietary restriction) and did not team of it, directly or indirectly, from the Company. (c) Without limiting the generality of the foregoing, I understand and acknowledge that "Proprietary Information" includes all: (i) inventions, computer codes, computer programs, formulas, schematics, techniques, algorithms, employee suggestions, development tools and processes, computer printouts, design drawings and manuals, and improvements or modification to any of the foregoing; (ii) information about costs, profits, markets, and sales; (iii) plans for future development and new product concepts; and (iv) all documents, books, papers, drawings, models, sketches, and other data of any kind and description, including electronic data recorded or retrieved by any means, that have been or will be given to me by the Company (or any present or future affiliates, consultants, customers, clients, and business associates of the Company), as well as written or verbal instructions or comments. A-2 15 1. Use Of Proprietary Information. I agree that I will maintain at my work station or in other places under my control only such Proprietary Information that I have a current "need to know," and that I will return to the appropriate person or location, or otherwise dispose of, Proprietary Information once my need to know no longer exists. I agree that I will not make copies of information unless I have a legitimate need for such copies in connection with my work. 2. Third-Party Information. I recognize that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree that I owe the Company and such third parties, during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm, or corporation (except as necessary in carrying out my work for the Company consistent with the Company's agreement with such third party) or to use it for the benefit of anyone other than for the Company or such third party (consistent with the Company's agreement with such third party) without the express written authorization of a duly authorized officer of the Company. 3. Inventions. (a) Subject to Section 9 below, I hereby assign to the Company, without additional consideration, all right, title and interest (throughout the United States and in all foreign countries) in all ideas, processes, inventions, technology, writings, computer programs, designs, formulas, discoveries, patents, copyrights, trademarks, service marks, original works of authorship, any claims or rights, and any improvements or modifications to the foregoing (collectively, "Inventions"), whether or not subject to patent or copyright protection, relating to any activities of the Company that have been or will be conceived, developed, or reduced to practice by me alone or with others (i) during the term of my employment, whether or not conceived or developed during regular business hours, and whether or not conceived before, on, or after the date hereof or (ii) if based on Proprietary Information, after termination of my employment. Such Inventions shall be the sole property of the Company and, to the maximum extent permitted by applicable law, shall be deemed works made for hire. (b) I will, whether during or after my employment by the Company, execute such written instruments and do other such acts as may be necessary in the opinion of the Company to obtain a patent, register a copyright, or otherwise enforce the Company's rights in such Inventions (and I hereby irrevocably appoint the Company and any of its officers as my attorney in fact to undertake such acts in my name). (c) I understand that the assignment by me to the Company does not apply to Inventions that qualify fully under Section 2870(a) of the California Labor Code, which is set forth on Schedule "A." I understand that nothing in this Agreement is intended to expand the scope of protection provided by Sections 2870 through 2872 of the California Labor Code. Except as disclosed in Schedule "B", there are no ideas, inventions, technology, computer A-3 16 programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing that I wish to exclude from the operation of this Agreement. (d) To the best of my knowledge, there is no existing contract in conflict with this Agreement or any other contract in existence between me and any other person or entity to assign ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing. 1. Termination of Employment. (a) I hereby acknowledge and agree that nothing in this Agreement shall be construed to imply that the term of my employment is of any definite duration. I further acknowledge and agree that I am employed on an "at-will" basis, which means that I may quit at any time with or without cause, and the Company may terminate my employment at any time with or without cause. (b) I acknowledge that, because of my responsibilities at the Company, I have helped and will continue to help to develop and have been and will be exposed to the Company's research and development, products, business strategies, information on customers and clients, and other valuable Proprietary Information, and that use or disclosure of such Proprietary Information in breach of this Agreement would be extremely difficult to detect or prove. I also acknowledge that the Company's relationships with its employees, affiliates, consultants, customers, clients, business associates, and other persons are valuable business assets. To forestall any use or disclosure of Proprietary Information in breach of this Agreement, I agree that for the term of this Agreement and for a period of one (1) year after termination of my employment with the Company, I shall not, for myself or any third party, directly or indirectly: (i) divert or attempt to divert from the Company any business of any kind in which it is engaged, including, without limitation, the solicitation of or interference with any of its suppliers or customer; or (ii) employ, solicit for employment, or recommend for employment any person employed by the Company. Furthermore, I agree that during the period of my employment with the Company I shall not engage in any business activity that is or may be competitive with the Company. I understand that none of my activities will be prohibited under this section if I can prove that the action was taken without the use in any way of Proprietary Information. (c) I acknowledge that, because of the difficulty of establishing when any Invention is first conceived or developed by me, or whether it results from access to Proprietary Information or the Company's equipment, facilities, and data, I agree that any ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing shall be presumed to be an Invention if A-4 17 conceived, developed, used, sold, exploited, or reduced to practice by me or with my aid within one (1) year after my termination of employment with the Company. I can rebut the above presumption if I prove that the invention, idea, process, etc., is not an Invention as defined in paragraph 4(a). (d) I hereby acknowledge and agree that all personal property including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, files, computer software, computer tapes or disks, blueprints, and other documents or materials (or copies thereof), Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment, belong to the Company and shall be promptly returned to the Company once my employment with the Company is terminated, for any reason. I will not retain any written or other tangible information pertaining to any Invention. In the event of the termination of my employment, I agree to sign and deliver the Termination Certificate attached as Schedule "C" to this Agreement. (e) I understand that my obligations contained in this Agreement will survive the termination of my employment with the Company, and that I will continue to make all disclosures required of me by Paragraph 6. 1. Disclosure. I agree to maintain adequate and current written records on the development of all Inventions and to disclose promptly to the Company all Inventions and relevant records, which records will remain the sole property of the Company. I further agree that all information and records pertaining to any Inventions conceived, developed, or reduced to practice by me (alone or with others) during my period of employment or during the one-year period following termination of my employment, shall be promptly disclosed to the Company (any such disclosures made after the termination of my employment shall be received by the Company in confidence for the purpose of determining if they have been based on any Proprietary Information). The Company shall examine such information to determine if in fact such information are Inventions subject to this Agreement. 2. Former or Conflicting Agreements. During my employment with the Company, I will not disclose to the Company, or use, or induce the Company to use, any confidential, proprietary, or trade secret information of others. I represent and warrant that I have returned all property and confidential, proprietary and trade secret information belonging to all prior employers, if any. I further represent and warrant that my performance of the terms of this Agreement will not breach any agreement to keep in confidence confidential proprietary and trade secret information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith. 3. Information on Company Premises. I acknowledge that all information generated, received, or maintained by or for me on the premises or equipment of the Company (including, without limitation, computer systems and A-5 18 electronic-mail or voicemail systems) is the property of the Company, and I hereby waive any property or privacy rights that I may have with respect to such information. 4. Reserved Inventions. To avoid future confusion, I have listed on Schedule "B" a description of all Inventions, if any, developed or conceived by me in which I claim any ownership or other right. I understand that, by not listing an Invention, I am acknowledging that the Invention was not developed or conceived before commencement of my employment. 10. Choice of Law. The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to its conflict of law rules. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 11. Remedies. I recognize that nothing in this Agreement is intended to limit any remedy of the Company under the California Uniform Trade Secrets Act and that I could face possible criminal and civil actions, resulting in imprisonment and substantial monetary liability, if I misappropriate the Company's or its clients' trade secrets. In addition, I recognize that my violation of this Agreement could cause the Company irreparable harm and significant injury, the amount of which may be extremely difficult to estimate, thus, making any remedy at law or in damages inadequate. Therefore, I agree that, in the event of a breach or threatened breach that involves Proprietary Information of the Company or its clients, the Company shall have the right to apply to any court of competent jurisdiction for an order restraining any breach or threatened breach of this Agreement and for any other relief the Company deems appropriate. This right shall be in addition to any other remedy available to the Company in law or equity. 12. Successors and Assigns. (a) I understand and agree that the Company may assign to another person or entity any of its rights under this Agreement. (b) I further understand and agree that this Agreement shall be binding upon me and my heirs, executors, administrators, and successors, and shall inure to the benefit of the Company's successors and assigns. 12. Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, the validity or enforceability of the other provisions shall not be affected. A-6 19 13. Entire Agreement The terms of this Agreement are the final expression of my agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. This Agreement shall constitute the complete and exclusive statement of its terms and no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding involving this Agreement. No modification or amendment of this Agreement shall be binding unless executed in writing by me and a duly authorized officer of the Company. I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS, PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS, RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS AGREEMENT. This Agreement is made and entered into as of July 15, 1998. MTI TECHNOLOGY CORPORATION By: /s/ DALE R. BOYD ------------------------------ Title: Sr. V.P. & C.F.O. Executive: Charles J. Sitzman Signature: /s/ CHARLES J. SITZMAN A-7 20 SCHEDULE A California Labor Code Section 2870(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information, except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. Schedule A 21 SCHEDULE B 1. Proprietary Information. Except as set forth below, I acknowledge that at this time I know nothing about the business or Proprietary Information of the Company, other than information I have learned from the Company in the course of being hired: ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2. Reserved Inventions. Except as set forth below, there are no ideas, processes, inventions, technology, writings, programs, designs, formulas, discoveries, patents, copyrights, or trademarks, or any claims, rights, or improvements to the foregoing, that I wish to exclude from the operation of this Agreement: ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Name: Charles J. Sitzman ------------------------------ Signature: /s/ Charles J. Sitzman ------------------------------ Date: July 15, 1998 ------------------------------ Schedule B 22 SCHEDULE C TERMINATION CERTIFICATE This is to certify that I have returned all personal property of the Company, including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, blueprints, and other documents and materials, Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment with the Company, and that I did not make or distribute any copies of the foregoing. I further certify that I have reviewed the Employee/Consultant Proprietary Information Agreement signed by me and that I have complied with and will continue to comply with all of its terms including, without limitation: (i) the reporting of any invention, process, idea, etc. conceived or developed by me and covered by the Agreement; and (ii) the preservation as confidential of all Proprietary Information pertaining to the Company. This certificate in no way limits my responsibilities or the Company's rights under the Agreement. On termination of my employment with the Company, I will be employed by [NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will be working in connection with the following projects: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Name: ------------------------------ Signature: ------------------------------ Date: ------------------------------ Schedule C EX-10.33 7 SEVERANCE AGREEMENT - VENKI VENKATARAMAN 1 EXHIBIT 10.33 SEVERANCE AGREEMENT This Agreement, (the "Agreement") is made and entered into as of July 15, 1998, is entered into between MTI Technology Corporation, a corporation organized under the laws of the State of Delaware (the "Company"), and Venki Venkataraman (the "Executive"). RECITALS A. Executive is currently serving as an officer of the Company. B. The Board of Directors of the Company (the "Board") recognizes that the possibility of a Change in Control (as hereinafter defined) exists and that the threat or the occurrence of a Change in Control can result in significant distractions to its key management personnel because of the uncertainties inherent in such a situation; C. The Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Executive in the event of a threat or occurrence of a Change in Control and to ensure the Executive's continued dedication and efforts in such event without undue concern for the Executive's personal, financial and employment security; and D. In order to induce the Executive to remain in the employ of the Company, particularly in the event of a threat or the occurrence of a Change in Control, the Company desires to enter into this Agreement with the Executive to provide the Executive with certain benefits in the event that the Executive's employment is terminated as a result of, or in connection with, a Change in Control. AGREEMENT In consideration of the respective agreements of the parties contained herein, it is agreed as follows: 1. Term Of Agreement. This Agreement shall commence as of the date first set forth above and shall continue in effect until July 15, 2000; provided, however, that commencing on July 15, 2000 and on each July 15 thereafter, the term of this Agreement shall automatically be extended for one (1) year unless the Company or the Executive shall have given written notice to the other at least ninety (90) days prior thereto that the term of this Agreement shall not be so extended; and provided, further, however, that notwithstanding any such notice by the Company not to extend, the term of this Agreement shall not expire prior to the expiration of twelve (12) months after the occurrence of a Change in Control. 2. Definitions. 2.1. Accrued Compensation. For purposes of this Agreement, "Accrued Compensation" shall mean an amount which shall include all amounts earned or accrued through the "Termination Date" (as hereinafter defined) but not paid as of the Termination Date, 2 including (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date, (iii) vacation pay and (iv) bonuses and incentive compensation (other than the "Pro Rata Bonus" (as hereinafter defined)). 2.2. Base Amount. For purposes of this Agreement, "Base Amount" shall mean the greater of the Executive's annual base salary (a) at the rate in effect on the Termination Date or (b) at the highest rate in effect at any time during the ninety (90) day period prior to the Change in Control, and shall include all amounts of base salary that are deferred under the Executive benefit plans of the Company or any other agreement or arrangement. 2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount" shall mean the greatest of: (a) 100% of the annual bonus payable to the Executive under the Company's Executive Management Bonus Plan for the fiscal year in which the Termination Date occurs; (b) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which the Termination Date occurred; (c) the annual bonus paid or payable to the Executive under the Company's Executive Management Bonus Plan for the full fiscal year ended prior to the fiscal year during which a Change in Control occurred; (d) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Termination Date occurred; or (e) the average of the annual bonuses paid or payable to the Executive under the Company's Executive Management Bonus Plan during the three full fiscal years ended prior to the fiscal year during which the Change in Control occurred. 2.4. Cause. The Company may terminate this Agreement and discharge Executive for Cause (as defined) at any time upon written notice. For purposes of this Agreement, the term "Cause" shall mean: (i) a material breach of any term of this Agreement and failure to cure such breach within ten (10) days after written notice thereof from the Company; (ii) the willful and continued failure by Executive substantially to perform his duties for the Company (other than any such failure resulting from his incapacity due to death or physical or mental illness), after written demand for substantial performance is delivered to Executive by the Company, which specifically identifies the manner in which the Company believes that Executive has not substantially performed his duties; (iii) the failure by Executive to follow the reasonable instructions of the Board of Directors; (iv) the willful engaging by Executive in misconduct that is materially injurious to the Company, monetarily or otherwise; (v) Executive's final conviction for fraud or of any felony; or (vi) Executive's habitual use of illegal drugs and/or abuse of alcohol; provided, however, that as to alcohol abuse, Executive shall be given notice and a thirty (30) day opportunity to remedy the problem. For purposes of this paragraph, no act, or failure to act, on Executive's part shall be considered "willful" unless done, or omitted to be done, by Executive other than in good faith and without reasonable belief that Executive's action or omission was in the best interest of the Company. 2 3 2.5. Change In Control. (a) For purposes of this Agreement, "Change of Control" shall mean: (i) any "person" as such term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than (1) a trustee or other fiduciary holding securities under an Executive benefit plan of the Company, (2) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (3) any current beneficial stockholder or group, as defined by Rule 13d-5 of the Exchange Act, of securities possessing more than [TWENTY-FIVE] percent (25%) of the total combined voting power of the Company's outstanding securities, hereafter becomes the "beneficial owner," as defined in Rule 13d-3 under of the Exchange Act, directly or indirectly, of securities of the Company representing [TWENTY-FIVE] percent (25%) or more of the total combined voting power of the Company's then outstanding securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least eighty percent (80%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company, in one transaction or a series of transactions, of all or substantially all of the Company's assets; or (iv) the sale of substantially all of the Company's assets. 2.6. Company. For purposes of this Agreement, the "Company" shall mean MTI Incorporated and its Subsidiaries and shall include MTI's Successors and Assigns (as hereinafter defined). 2.7. Disability. For purposes of this Agreement, "Disability" shall mean a physical or mental infirmity which impairs the Executive's ability to substantially perform the Executive's duties with the Company for a total period of ninety (90) days and the Executive has not returned to full time employment prior to the Termination Date as stated in the "Notice of Termination." 3 4 2.8. Good Reason. (a) For purposes of this Agreement, "Good Reason" shall mean the occurrence after a Change in Control of any of the events or conditions described in subsections (1) through (8) hereof: (i) a change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, represents an adverse change from the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; the assignment to the Executive of any duties or responsibilities which, in the Executive's reasonable judgment, are inconsistent with the Executive's status, title, position or responsibilities as in effect at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; or any removal of the Executive from or failure to reappoint or reelect the Executive to any of such offices or positions, except in connection with the termination of the Executive's employment for Disability, Cause, as a result of the Executive's death or by the Executive; (ii) a reduction in the Executive's base salary or any failure to pay the Executive any compensation or benefits to which the Executive is entitled within ten (10) days of the date due after receipt of written notice from Executive; (iii) the Company's requiring the Executive to be based at any place outside a 25-mile radius from MTI's Corporate Offices, located at 4905 E. LaPalma Avenue, Anaheim, CA 92807, except for reasonably required travel on the Company's business which is not materially greater than such travel requirements prior to the Change in Control; (iv) the failure by the Company to (A) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or Executive benefit plan in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the Executive, or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other Executive benefit plan, program and practice in which the Executive was participating at any time within ninety (90) days preceding the date of a Change in Control or at any time thereafter; (v) the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty (60) days; (vi) any material breach by the Company of any provision of this Agreement; 4 5 (vii) any purported termination of the Executive's employment for Cause by the Company which does not comply with the terms of Section 2.4; or (viii) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any Successors and Assigns to assume and agree to perform this Agreement, as contemplated in Section 6 hereof. (b) The Executive's right to terminate the Executive's employment pursuant to this Section 2.8 shall not be affected by the Executive's incapacity due to physical or mental illness. 2.9. Notice Of Termination. For purposes of this Agreement, following a Change in Control, "Notice of Termination" shall mean a written notice of termination of the Executive's employment from the Company, which notice indicates the date on which termination is to be effective, the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount multiplied by a fraction the numerator of which is the number of days in the fiscal year through the Termination Date and the denominator of which is 365. 2.11. Successors And Assigns. For purposes of this Agreement, "Successors and Assigns" shall mean a corporation or other entity acquiring all or substantially all of the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. 2.12. Termination Date. For purposes of this Agreement, "Termination Date" shall mean in, the case of the Executive's death, the Executive's date of death, in the case of Good Reason, the last day of the Executive's employment and, in all other cases, the date specified in the Notice of Termination; provided, however, that if the Executive's employment is terminated by the Company for Cause or due to Disability, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to the Executive, provided that, in the case of Disability, the Executive shall not have returned to the full-time performance of the Executive's duties during such period of at least thirty (30) days. 3. Termination Of Employment. 3.1. If, during the term of this Agreement, the Executive's employment with the Company shall be terminated within twelve (12) months following a Change in Control, the Executive shall be entitled to the following compensation and benefits: (a) If the Executive's employment with the Company shall be terminated (1) by the Company for Cause or Disability, (2) by reason of the Executive's death or (3) by the Executive other than for Good Reason, the Company shall pay to the Executive the Accrued Compensation 5 6 and, if such termination is other than by the Company for Cause, the Company shall also pay the Executive a Pro Rata Bonus. (b) If the Executive's employment with the Company shall be terminated for any reason other than as specified in Section 3.1(a), the Executive shall be entitled to the following: (i) the Company shall pay the Executive all Accrued Compensation and a Pro Rata Bonus; (ii) the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment, an amount in cash equal to the sum of (A) the Base Amount and (B) the Bonus Amount; and (iii) for a number of months equal to twelve (12) (the "Continuation Period"), the Company shall, at its expense, continue on behalf of the Executive and the Executive's dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (A) to the Executive at any time during the 90-day period prior to the Change in Control or at any time thereafter or (B) to other similarly situated executives who continue in the employ of the Company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section 3.1(b)(iii) during the Continuation Period shall be no less favorable to the Executive and the Executive's dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (A) and (B) above. The Company's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iii) shall not be interpreted so as to limit any benefits to which the Executive or the Executive's dependents or beneficiaries may be entitled under any of the Company's Executive benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits. (c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i) and (ii) shall be paid in a single lump sum cash payment within forty-five (45) days after the Executive's Termination Date (or earlier, if required by applicable law). (d) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in Section 3.1(b)(iii). 6 7 3.2. (a) The severance pay and benefits provided for in this Section 3 shall be in lieu of any other severance or termination pay to which the Executive may be entitled under any Company severance or termination plan, program, practice or arrangement. (b) The Executive's entitlement to any other compensation or benefits shall be determined in accordance with the Company's Executive benefit plans and other applicable programs, policies and practices then in effect, 4. Notice Of Termination. Following a Change in Control, any purported termination of the Executive's employment shall be communicated by Notice of Termination to the Executive. For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination. 5. Excise Tax Limitation. (a) Notwithstanding anything in this Agreement to the contrary, if any portion of any payments to Executive by the Company under this Agreement and any other present or future plan of the Company or other present or future agreement between Executive and the Company would not be deductible by the Company (collectively, "Payments") for federal income tax purposes by reason of application of Section 162(m) of the Internal Revenue Code (the "Code"), then payment of that portion to Executive shall be deferred until the earliest date upon which payment thereof can be made to Executive without being non-deductible pursuant to Section 162(m) of the Code. In the event of such deferral, the Company shall pay interest to Executive on the deferred amount at 120% of the applicable federal rate provided for in Section 1274(d)(1) of the Code. In addition, notwithstanding any provision of this Agreement to the contrary, the aggregate present value of the payments and benefits (excluding those payments and benefits not treated as parachute payments under Code Section 280G(b)) to be made or provided to the Executive by the Company (whether pursuant to this Agreement or otherwise) shall not exceed three times the Executive's annualized includible compensation for the base period, as defined in Code Section 280G(d) of the Code, minus one dollar ($1.00) (the "Limited Payment Amount"), and any excess payments or benefits shall be forfeited; provided, however, that the forfeiture provision of this sentence shall apply only if such forfeiture provision results in larger aggregate after-tax payments and benefits to the Executive than if the forfeiture provision did not apply. The intent of this portion of this subsection 5(a) is to prevent any payment or benefit to the Executive from being subject to the excise tax imposed by Code Section 4999 and to prevent any item of expense or deduction of the Company from being disallowed as a result of the application of Code Section 280G, but only if the after-tax payments and benefits payable or provided to the Executive are greater after application of the forfeiture provision than if the forfeiture provision did not apply. The interpretation of this subsection 5(a), its application to any occurrence or event, the determination of whether any payment or benefit would not be treated as a parachute payment, the determination of the aggregate present value of all payments and benefits to be made or provided to the Executive, the determination of the value of the payments and benefits payable or to be provided to the Executive after reduction for all applicable taxes, and what specific payments or benefits otherwise available to the Executive 7 8 shall be limited or eliminated by operation of this subsection 5(a) shall be reasonably made by the Company and shall be binding on all persons. (b) An initial determination as to whether the Payments shall be reduced to the Limited Payment Amount and the amount of such Limited Payment Amount shall be made, at the Company's expense, by the accounting firm that is the Company's independent accounting firm as of the date of the Change in Control (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination", together with detailed supporting calculations and documentation, to the Company and the Executive within twenty (20) days of the Termination Date if applicable, or such other time as requested by the Company or by the Executive (provided the Executive reasonably believes that any of the Payments may be subject to the Excise Tax), and if the Accounting Firm determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the Determination to the Executive, the Executive shall have the right to dispute the Determination (the "Dispute"). If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and the Executive. 6. Successors; Binding Agreement. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its Successors and Assigns and the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive or the Executive's beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative. 7. Confidential Information. The Company and Executive acknowledge that Executive, in performing the terms and conditions of Executive's employment, has and will continue to directly or indirectly gain access to information about Company and its operations, including, but not limited to, its modes and methods of conducting its business and producing and marketing its products, its employee, customer, vendor and referral source lists, its trade secrets, its copyrighted and non-copyrighted or non-protected computer software programs, its techniques of operation, its financial structure, and its weakness, if any. As part of this Agreement, Executive agrees to execute, and be bound by, the Company's "Employee/ Consultant Proprietary Information Agreement," a copy of which is attached hereto as Exhibit "A." 8. Notice. All notices, requests, demands, and other communications hereunder shall be in writing, and shall be delivered in person, by facsimile, or by certified or registered mail with 8 9 return receipt requested. Each such notice, request, demand, or other communication shall be effective (a) if delivered by hand, when delivered at the address specified in this Section; (b) if given by facsimile, when such facsimile is transmitted to the telefacsimile number specified in this Section and confirmation is received; or (c) if given by certified or registered mail, three days after the mailing thereof Notices shall be delivered as follows: If to the Company: MTI Technology Corporation 4905 E. La Palma Avenue Anaheim, California 92807 Attention: Chief Financial Officer Fax: (714) 693-2202 With a copy to: Morrison & Foerster LLP 19900 MacArthur Boulevard 12th Floor Irvine, California 92612 Attention: Tamara Powell Tate Fax: (714) 251-0900 If to the Executive: Venki Venkataraman P.O. Box 17127 Anaheim, CA 92817-7127 Any party may change its address by notice giving notice to the other party of a new address in accordance with the foregoing provisions. 9. Non-Exclusivity Of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 10. Settlement Of Claims. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against an Executive or others. 9 10 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged, unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representation, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. 12. Governing Law. This Agreement has been negotiated and exactitude in the State of California and is to be performed in Orange County, California. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, including all matters of construction, validity, performance, and enforcement, without giving effect to principles of conflict of laws. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 13. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. 15. Remedies. All rights, remedies, undertakings, obligations, options, covenants, conditions, and agreements contained in this Agreement shall be cumulative and no one of them shall be exclusive of any other. 16. Interpretation. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any party. Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa. The descriptive headings of the sections and subsections of this Agreement are inserted for convenience only and shall not control or affect the interpretation or construction of any of the provisions herein. 17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 18. Further Documents and Acts. Each of the parties hereto agrees to cooperate in good faith with the other and to execute and deliver such further instruments and perform such other acts as may be reasonably necessary or appropriate to consummate and carry into effect the transactions contemplated under this Agreement. 10 11 19. Consultation with Counsel. Executive acknowledges (a) that he has been given the opportunity to consult with counsel of his own choice concerning this Agreement, and (b) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based upon his own judgment with or without the advice of such counsel. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND UNDERSTANDS ITS CONTENTS. EXECUTIVE FURTHER ACKNOWLEDGES THAT THE COMPANY HAS ADVISED HIM OF HIS RIGHT TO CONSULT WITH LEGAL COUNSEL OF HIS OWN CHOICE CONCERNING THIS AGREEMENT. BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY AGREE TO BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written. MTI TECHNOLOGY CORPORATION By: /s/ DALE R. BOYD ----------------------------------------- Title: Sr. V.P. & CFO ----------------------------------- /s/ VENKI VENKATARAMAN -------------------------------------------- Venki Venkataraman (V.S. Venkataraman) 11 12 EXHIBIT "A" Exhibit "A" 13 STATEMENT REGARDING EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT Attached to this statement is your Employee/Consultant Proprietary Information Agreement (the "Agreement") with MTI Technology Corporation (together with its subsidiaries, the "Company"). Please take the time to review the Agreement carefully. It contains material restrictions on your right to disclose or use, during or after your employment, certain information and technology learned or developed by you during your employment with the Company. The Company considers this Agreement to be very important to the protection of its business. If you have any questions concerning the Agreement, you may wish to consult an attorney. Managers, legal counsel, and others in the Company are not authorized to give you legal advice concerning the Agreement. If you have read and understand the Agreement, and if you agree to its terms and conditions, please return a fully executed copy of it to the Company, retaining one copy for yourself. I HAVE READ AND UNDERSTAND THE ATTACHED AGREEMENT: Executive Name: V. S. Venkataraman ------------------------------------ Executive Signature: /s/ V. S. VENKATARAMAN ------------------------------- Title: Sr. V.P. Mfg. --------------------------------------------- Date: August 11, 1998 ---------------------------------------------- A-1 14 EMPLOYEE/CONSULTANT PROPRIETARY INFORMATION AGREEMENT In consideration of my present and future employment by MTI Technology Corporation (together with its subsidiaries, the "Company"), I agree to the following: 1. Proprietary Information. (a) I understand and acknowledge that my work as an employee of the Company has involved and will continue to involve access to and creation of confidential, proprietary, and trade secret information of the Company and its affiliates, consultants, customers, clients, and business associates (collectively, as defined more extensively below, "Proprietary Information"). I further understand and acknowledge that the Company and its clients have developed, compiled, and otherwise obtained this Proprietary Information often at great expense, and that such information has great value to their respective businesses. I agree to hold in strict confidence and in trust for the sole benefit of the Company and its clients all Proprietary Information. I further agree that I shall treat all Proprietary Information as private, privileged, and confidential, and that I shall not use, disclose, or release any Proprietary Information in any way to any person, firm, or institution at any time, even after termination of my employment, except to the extent necessary to carry out my responsibilities as an Executive of the Company. I further understand and agree that the publication of Proprietary Information through literature or speeches must be approved in advance in writing by a duly authorized officer of the Company. (b) I understand and acknowledge that, for purposes of this Agreement, "Proprietary Information" means all confidential, proprietary, or trade secret information and ideas in whatever form, tangible or intangible, whether disclosed to or learned or developed by me, prior or subsequent to the date hereof, pertaining in any manner to the business of the Company or to the Company's affiliates, consultants, clients, or business associates, unless: (i) the information is or becomes publicly known through lawful means; (ii) the information was rightfully in my possession or part of my general knowledge prior to my employment by the Company; or (iii) the information is disclosed to me without confidential or proprietary restriction by a third party who rightfully possesses the information (without confidential or proprietary restriction) and did not learn of it, directly or indirectly, from the Company. (c) Without limiting the generality of the foregoing, I understand and acknowledge that "Proprietary Information" includes all: (i) inventions, computer codes, computer programs, formulas, schematics, techniques, algorithms, employee suggestions, development tools and processes, computer printouts, design drawings and manuals, and improvements or modification to any of the foregoing; (ii) information about costs, profits, markets, and sales; (iii) plans for future development and new product concepts; and (iv) all documents, books, papers, drawings, models, sketches, and other data of any kind and description, including electronic data recorded or retrieved by any means, that have been or will be given to me by the Company (or any present or future affiliates, consultants, customers, clients, and business associates of the Company), as well as written or verbal instructions or comments. A-2 15 1. Use Of Proprietary Information. I agree that I will maintain at my work station or in other places under my control only such Proprietary Information that I have a current "need to know," and that I will return to the appropriate person or location, or otherwise dispose of, Proprietary Information once my need to know no longer exists. I agree that I will not make copies of information unless I have a legitimate need for such copies in connection with my work. 2. Third-Party Information. I recognize that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree that I owe the Company and such third parties, during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm, or corporation (except as necessary in carrying out my work for the Company consistent with the Company's agreement with such third party) or to use it for the benefit of anyone other than for the Company or such third party (consistent with the Company's agreement with such third party) without the express written authorization of a duly authorized officer of the Company. 3. Inventions. (a) Subject to Section 9 below, I hereby assign to the Company, without additional consideration, all right, title and interest (throughout the United States and in all foreign countries) in all ideas, processes, inventions, technology, writings, computer programs, designs, formulas, discoveries, patents, copyrights, trademarks, service marks, original works of authorship, any claims or rights, and any improvements or modifications to the foregoing (collectively, "Inventions"), whether or not subject to patent or copyright protection, relating to any activities of the Company that have been or will be conceived, developed, or reduced to practice by me alone or with others (i) during the term of my employment, whether or not conceived or developed during regular business hours, and whether or not conceived before, on, or after the date hereof or (ii) if based on Proprietary Information, after termination of my employment. Such Inventions shall be the sole property of the Company and, to the maximum extent permitted by applicable law, shall be deemed works made for hire. (b) I will, whether during or after my employment by the Company, execute such written instruments and do other such acts as may be necessary in the opinion of the Company to obtain a patent, register a copyright, or otherwise enforce the Company's rights in such Inventions (and I hereby irrevocably appoint the Company and any of its officers as my attorney in fact to undertake such acts in my name). (c) I understand that the assignment by me to the Company does not apply to Inventions that qualify fully under Section 2870(a) of the California Labor Code, which is set forth on Schedule "A." I understand that nothing in this Agreement is intended to expand the scope of protection provided by Sections 2870 through 2872 of the California Labor Code. Except as disclosed in Schedule "B", there are no ideas, inventions, technology, computer A-3 16 programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing that I wish to exclude from the operation of this Agreement. (d) To the best of my knowledge, there is no existing contract in conflict with this Agreement or any other contract in existence between me and any other person or entity to assign ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing. 1. Termination of Employment. (a) I hereby acknowledge and agree that nothing in this Agreement shall be construed to imply that the term of my employment is of any definite duration. I further acknowledge and agree that I am employed on an "at-will" basis, which means that I may quit at any time with or without cause, and the Company may terminate my employment at any time with or without cause. (b) I acknowledge that, because of my responsibilities at the Company, I have helped and will continue to help to develop and have been and will be exposed to the Company's research and development, products, business strategies, information on customers and clients, and other valuable Proprietary Information, and that use or disclosure of such Proprietary Information in breach of this Agreement would be extremely difficult to detect or prove. I also acknowledge that the Company's relationships with its employees, affiliates, consultants, customers, clients, business associates, and other persons are valuable business assets. To forestall any use or disclosure of Proprietary Information in breach of this Agreement, I agree that for the term of this Agreement and for a period of one (1) year after termination of my employment with the Company, I shall not, for myself or any third party, directly or indirectly: (i) divert or attempt to divert from the Company any business of any kind in which it is engaged, including, without limitation, the solicitation of or interference with any of its suppliers or customer; or (ii) employ, solicit for employment, or recommend for employment any person employed by the Company. Furthermore, I agree that during the period of my employment with the Company I shall not engage in any business activity that is or may be competitive with the Company. I understand that none of my activities will be prohibited under this section if I can prove that the action was taken without the use in any way of Proprietary Information. (c) I acknowledge that, because of the difficulty of establishing when any Invention is first conceived or developed by me, or whether it results from access to Proprietary Information or the Company's equipment, facilities, and data, I agree that any ideas, inventions, technology, computer programs, processes, trademarks, service marks, original works of authorship, designs, formulas, discoveries, patents, copyrights, any claims or rights, and any improvements or modifications to the foregoing shall be presumed to be an Invention if A-4 17 conceived, developed, used, sold, exploited, or reduced to practice by me or with my aid within one (1) year after my termination of employment with the Company. I can rebut the above presumption if I prove that the invention, idea, process, etc., is not an Invention as defined in paragraph 4(a). (d) I hereby acknowledge and agree that all personal property including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, files, computer software, computer tapes or disks, blueprints, and other documents or materials (or copies thereof), Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment, belong to the Company and shall be promptly returned to the Company once my employment with the Company is terminated, for any reason. I will not retain any written or other tangible information pertaining to any Invention. In the event of the termination of my employment, I agree to sign and deliver the Termination Certificate attached as Schedule "C" to this Agreement. (e) I understand that my obligations contained in this Agreement will survive the termination of my employment with the Company, and that I will continue to make all disclosures required of me by Paragraph 6. 1. Disclosure. I agree to maintain adequate and current written records on the development of all Inventions and to disclose promptly to the Company all Inventions and relevant records, which records will remain the sole property of the Company. I further agree that all information and records pertaining to any Inventions conceived, developed, or reduced to practice by me (alone or with others) during my period of employment or during the one-year period following termination of my employment, shall be promptly disclosed to the Company (any such disclosures made after the termination of my employment shall be received by the Company in confidence for the purpose of determining if they have been based on any Proprietary Information). The Company shall examine such information to determine if in fact such information are Inventions subject to this Agreement. 2. Former or Conflicting Agreements. During my employment with the Company, I will not disclose to the Company, or use, or induce the Company to use, any confidential, proprietary, or trade secret information of others. I represent and warrant that I have returned all property and confidential, proprietary and trade secret information belonging to all prior employers, if any. I further represent and warrant that my performance of the terms of this Agreement will not breach any agreement to keep in confidence confidential proprietary and trade secret information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith. 3. Information on Company Premises. I acknowledge that all information generated, received, or maintained by or for me on the premises or equipment of the Company (including, without limitation, computer systems and A-5 18 electronic-mail or voicemail systems) is the property of the Company, and I hereby waive any property or privacy rights that I may have with respect to such information. 4. Reserved Inventions. To avoid future confusion, I have listed on Schedule "B" a description of all Inventions, if any, developed or conceived by me in which I claim any ownership or other right. I understand that, by not listing an Invention, I am acknowledging that the Invention was not developed or conceived before commencement of my employment. 10. Choice of Law. The validity, interpretation, enforceability, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to its conflict of law rules. Any dispute, action, litigation, or other proceeding concerning this Agreement shall be instituted, maintained, heard, and decided in Orange County, California. 11. Remedies. I recognize that nothing in this Agreement is intended to limit any remedy of the Company under the California Uniform Trade Secrets Act and that I could face possible criminal and civil actions, resulting in imprisonment and substantial monetary liability, if I misappropriate the Company's or its clients' trade secrets. In addition, I recognize that my violation of this Agreement could cause the Company irreparable harm and significant injury, the amount of which may be extremely difficult to estimate, thus, making any remedy at law or in damages inadequate. Therefore, I agree that, in the event of a breach or threatened breach that involves Proprietary Information of the Company or its clients, the Company shall have the right to apply to any court of competent jurisdiction for an order restraining any breach or threatened breach of this Agreement and for any other relief the Company deems appropriate. This right shall be in addition to any other remedy available to the Company in law or equity. 12. Successors and Assigns. (a) I understand and agree that the Company may assign to another person or entity any of its rights under this Agreement. (b) I further understand and agree that this Agreement shall be binding upon me and my heirs, executors, administrators, and successors, and shall inure to the benefit of the Company's successors and assigns. 12. Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, the validity or enforceability of the other provisions shall not be affected. A-6 19 13. Entire Agreement. The terms of this Agreement are the final expression of my agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. This Agreement shall constitute the complete and exclusive statement of its terms and no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding involving this Agreement. No modification or amendment of this Agreement shall be binding unless executed in writing by me and a duly authorized officer of the Company. I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY NOTED ON SCHEDULE "B" TO THIS AGREEMENT ANY PROPRIETARY INFORMATION, IDEAS, PROCESSES, CREATIONS, TECHNOLOGY, INVENTIONS, PATENTS, COPYRIGHTS, OR TRADEMARKS, WRITINGS, PROGRAMS, DESIGNS, FORMULAS, DISCOVERIES, OR IMPROVEMENTS, RIGHTS, OR CLAIMS RELATING TO THE FOREGOING, THAT I DESIRE TO EXCLUDE FROM THIS AGREEMENT. This Agreement is made and entered into as of July 15, 1998. MTI TECHNOLOGY CORPORATION By: /s/ DALE R. BOYD ------------------------------------------ Title: Sr. V.P. & C.F.O. ------------------------------------ Executive: V.S. Venkataraman ----------------------------------- Signature: ----------------------------------- A-7 20 Schedule A California Labor Code Section 2870(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information, except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. Schedule A 21 SCHEDULE B 1. Proprietary Information. Except as set forth below, I acknowledge that at this time I know nothing about the business or Proprietary Information of the Company, other than information I have learned from the Company in the course of being hired: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2. Reserved Inventions. Except as set forth below, there are no ideas, processes, inventions, technology, writings, programs, designs, formulas, discoveries, patents, copyrights, or trademarks, or any claims, rights, or improvements to the foregoing, that I wish to exclude from the operation of this Agreement: N/A. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Name: V.S. Venkataraman --------------------------------- Signature: /s/ V.S. VENKATARAMAN ---------------------------- Date: July 15, 1998 --------------------------------- Schedule B 22 SCHEDULE C TERMINATION CERTIFICATE This is to certify that I have returned all personal property of the Company, including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, blueprints, and other documents and materials, Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment with the Company, and that I did not make or distribute any copies of the foregoing. I further certify that I have reviewed the Employee/Consultant Proprietary Information Agreement signed by me and that I have complied with and will continue to comply with all of its terms including, without limitation: (i) the reporting of any invention, process, idea, etc. conceived or developed by me and covered by the Agreement; and (ii) the preservation as confidential of all Proprietary Information pertaining to the Company. This certificate in no way limits my responsibilities or the Company's rights under the Agreement. On termination of my employment with the Company, I will be employed by [NAME OF EMPLOYER AND DIVISION/DEPARTMENT THAT EMPLOYEE WILL BE IN], and I will be working in connection with the following projects: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Name: --------------------------------- Signature: ---------------------------- Date: --------------------------------- Schedule C
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