Document:

exv10w3

 

Exhibit 10.3

EMPLOYMENT AGREEMENT

     This Agreement, dated as of ___, 2006, is between MTI Technology Corporation, a
Delaware corporation (“Employer”), and William Kerley (“Executive”).

RECITALS

     A. Employer and Executive wish to establish an employment relationship on the following terms
and conditions.

     B. Employer has spent significant time, effort, and money to develop or acquire certain
Proprietary Information (as defined below), which Employer considers vital to its business and
goodwill.

     C. The Proprietary Information has been or will necessarily be communicated to or acquired by
and simultaneous with this Agreement is being provided to Executive, in connection with Executive’s
employment with Employer or Collective Technologies, LLC, Executive’s previous employer,
substantially all the assets of which were acquired by Employer, and Employer wishes to establish
the employment relationship with Executive only if, in doing so, it can protect its Proprietary
Information and goodwill.

     D. Employer anticipates that certain Invention/Ideas (as defined below) will be conceived,
developed, or reduced to practice by Executive during the course of his employment by Employer.

     F. Employer wishes to establish the employment relationship with Executive only if, in doing
so, it can provide for the disclosure, assignment, and protection of these Invention/Ideas as
provided in this Agreement.

     ACCORDINGLY, the parties agree as follows:

     1. Period of Employment.

          (a) Basic Terms. Employer shall employ Executive to render services to Employer in
the position and with the duties and responsibilities described in Section 2 for the period
(the “Period of Employment”) commencing on the date of this Agreement and ending on the
date upon which the Period of Employment is terminated in accordance with Section 1(b) or
Section 4.

          (b) Renewal. Subject to Section 4, Executive’s initial Period of Employment
will end on the second anniversary of the date of this Agreement (the “Term Date”) and the
Period of Employment thereafter will be renewed automatically for an additional one (1) year period
(without any action by either party) on the Term Date and on each anniversary thereof, unless one
party gives to the other written notice at least thirty (30) days in advance of the beginning of
any one-year renewal period that the Period of Employment is to be terminated. Either party may
elect not to renew this Agreement with or without cause. If Employer shall elect not to renew this
Agreement, and Executive’s employment is not otherwise terminated pursuant to Section 4
prior to

 

 

the end of the notice period required by this Section 1(b), then Executive’s
termination shall be deemed to be a termination by Employer pursuant to Section 4(c). If
Executive shall elect not to renew this Agreement, and his employment is not otherwise terminated
pursuant to Section 4 prior to the end of the notice period required by this Section
1(b), then his termination shall be deemed to be a termination by Executive pursuant to
Section 4(e). Nothing stated in this Agreement or represented orally or in writing to
either party shall create an obligation to renew this Agreement.

     2. Position and Responsibilities.

          (a) Position. Executive accepts employment with Employer as the Vice President —
Operations of Employer’s services division and shall perform all services appropriate to that
position, as well as such other services as may be assigned by Employer from time to time by the
Chief Executive Officer of Employer or the person to whom Executive reports and as are consistent
with Executive’s position and level within Employer. Executive shall devote his best efforts and
full time attention to the performance of his duties. Executive shall be subject to the direction
of Employer, which shall retain full control of the means and methods by which he performs the
above services and of the place(s) at which all services are rendered. Executive shall report to
the Executive Vice President of Employer’s services division. Executive shall be expected to
travel if necessary or advisable in order to meet the obligations of his position.

          (b) Other Activity. Except upon the prior written consent of Employer, Executive
(during the Period of Employment) shall not (i) accept any other employment; or (ii) engage,
directly or indirectly, in any other business, commercial, or professional activity (whether or not
pursued for pecuniary advantage) that is or would be reasonably likely to be competitive with
Employer, that would be reasonably likely create a conflict of interest with Employer, or that
otherwise would be reasonably likely to significantly interfere with the business of Employer, or
any Affiliate. An “Affiliate” shall mean any person or entity that directly or indirectly
controls, is controlled by, or is under common control with Employer. Subject to the foregoing,
Executive shall be entitled to continue to engage in outside activities such as serving on the
board of directors or board of advisors of, or acting as a consultant to, for-profit and non-profit
businesses, organizations and trade or industry groups, consistent with his past practices. So that
Employer may be aware of the extent of any other demands upon Executive’s time and attention,
Executive shall disclose in confidence to Employer the nature and scope of any other business
activity in which he is or becomes engaged during the Period of Employment.

          (c) Representations and Warranties. Executive represents and warrants that
Executive’s execution of this Agreement, his employment with Employer, and the performance of his
proposed duties under this Agreement shall not violate any obligations he may have to any former
employer (or other person or entity), including any obligations with respect to proprietary or
confidential information of any other person or entity. Executive agrees that he will not use for
the benefit of, or disclose to, Employer any confidential information belonging to any former
employer or other entity
unless he has written permission from the employer or entity to do so (or unless Employer has
been granted such permission).

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     3. Compensation and Benefits.

          (a) Base Salary and Annual Bonus. In consideration of the services to be rendered
under this Agreement, Employer shall pay Executive a base salary of $235,000 per year, payable
semi-monthly, pursuant to the procedures regularly established, and as they may be amended, by
Employer in its sole discretion, during the Period of Employment. Executive shall be eligible to
receive an annual cash bonus of up to $40,000, subject to and contingent upon the achievement of
financial and operational objectives to be determined from time to time by Employer’s Chief
Executive Officer and/or Board of Directors. Employer may review annually Executive’s base salary
and potential bonus compensation and may determine, in its sole discretion, whether and how much
the existing compensation shall be adjusted, without regard to any policy or practice Employer may
have for adjusting salaries or potential bonuses, provided, however, that Employer may not reduce
Executive’s annual base salary. All compensation and other comparable payments to be paid to
Executive under this Agreement shall be less withholding and other applicable taxes required by
law.

          (b) Benefits. As Executive becomes eligible, he shall have the right to participate
in and to receive benefits from all present and future benefit plans specified in Employer’s
policies and generally made available to executive management employees of Employer from time to
time, including, but not limited to, Employer’s Executive Healthcare Expense Reimbursement Plan.
The amount and extent of benefits to which Executive is entitled shall be governed by the specific
benefit plan, as amended. Executive’s service to Collective Technologies, LLC (and its predecessor)
shall be treated as service to Employer for purposes of determining Executive’s eligibility for and
level of benefits from Employer. Without limiting the generality of the foregoing, Executive shall
be entitled to vacation leave in accordance with Employer’s standard policies for similarly
situated employees, which currently consists of three (3) weeks of vacation annually, in addition
to approved holidays, and Employer shall assume and carry forward Executive’s accrued but unused
vacation time with Collective Technologies, LLC. Executive also shall be entitled to any benefits
or compensation tied to termination as described in Section 4. Employer reserves the
ability, in its sole discretion, to adjust Executive’s benefits provided under this Agreement,
provided that the adjustment applies to all other similarly situated employees of Employer and is
not retroactive. No statement concerning benefits or compensation to which Executive is entitled
shall alter in any way the term of this Agreement, any renewal thereof, or its termination.

          (c) Expenses. Employer shall reimburse Executive for reasonable travel and other
business expenses incurred by Executive in the performance of his duties, in accordance with
Employer’s policies, as they may be amended in Employer’s sole discretion.

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          (d) Restricted Stock. As soon as reasonably practicable following the execution and
delivery of this Agreement, Employer shall, upon and subject to approval
of Employer’s Board of Directors, obtaining qualification under applicable securities laws and
the execution and delivery by Employee of the Restricted Stock Award Agreement attached hereto as
Exhibit A (the “Award Agreement”), issue and sell to Executive an aggregate of
150,000 shares (the “Restricted Shares”) of Employer’s common stock, $0.001 par value per
share, at the nominal purchase price of $0.01 per share. The Restricted Shares shall be issued
pursuant to Employer’s 2006 Stock Incentive Plan (CT), as amended (the “Plan”), and shall
be Restricted Stock (as defined in the Plan). The Restricted Shares shall be subject to the terms
of the Award Agreement and the Plan. In addition, Executive shall be eligible for, in the sole
discretion of Employer’s Board of Directors, additional grants of restricted stock, stock options
or other awards or benefits under the Plan or otherwise.

          (e) Indemnification and Change of Control Agreements. Concurrently with the execution
of this Agreement, Executive and Employer shall enter into Employer’s standard Indemnification
Agreement (the “Indemnification Agreement”) and Change of Control Agreement (the
“Change of Control Agreement”) for executive officers, forms of which are attached hereto
as Exhibit B and Exhibit C, respectively. Executive shall be entitled to the
benefits provided under such agreements during the Term of Employment, and thereafter as specified
in and subject to the terms of such agreements. During the Period of Employment, Executive shall
be a designated beneficiary under any policy of directors’ and officers’ liability insurance
maintained by Employer for the benefit of similarly situated executive officers of Employer.
Executive shall be entitled to post-termination coverage as a former officer of Employer under any
such policy of directors’ and officers’ liability insurance to the extent and subject to the
limitations specified in any such policy of insurance, and Employer shall maintain such
post-termination coverage for Executive as a former officer of Employer, if and to the extent
Employer can obtain such coverage on commercially reasonable terms, until the expiration of the
statute of limitations on any claim that may have accrued during the Period of Employment for which
Executive could be held liable. To the extent that the benefits or payments to which Executive is
entitled under this Agreement are inconsistent with or are duplicative of the benefits or payments
to which Executive is entitled under such Indemnification Agreement and/or Change of Control
Agreement, Executive shall be entitled to the greatest applicable level of benefits or payments
available thereunder but shall not be entitled to duplicative benefits or payments.

          (f) Other Perquisites. Executive shall receive perquisite benefits consistent with
those made available from time to time to similarly situated employees of Employer. Executive
shall receive a monthly transportation allowance of $450.

     4. Termination of Employment.

          (a) By Death. The Period of Employment shall terminate automatically upon the death
of Executive. Employer shall pay to Executive’s beneficiaries or estate, as appropriate, any
compensation and other amounts then due and owing through the date of termination, including
payment for accrued unused vacation, if any, vested benefits under any employee benefit plan and
unreimbursed expenses due to Executive. Thereafter, all obligations of Employer under this
Agreement shall cease. Nothing in this Section shall affect any entitlement of Executive’s heirs
to the benefits of
any life insurance plan or other applicable benefits.

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          (b) By Disability. If, by reason of any physical or mental incapacity, Executive has
been or will be prevented even with reasonable accommodation from properly performing his essential
duties under this Agreement for more than ninety (90) days in any twelve (12) month period, then,
to the extent permitted by law, Employer may terminate the Period of Employment upon fourteen (14)
days’ advance written notice. Employer shall pay Executive all compensation and other amounts to
which he is entitled through the date of termination, including payment for accrued unused
vacation, if any, vested benefits under any employee benefit plan and unreimbursed expenses due to
Executive. Thereafter, all obligations of Employer under this Agreement shall cease. Nothing in
this Section shall affect Executive’s rights under any applicable Employer disability plan.

          (c) By Employer Not For Cause. At any time, Employer may terminate Executive without
Cause (as defined below) by providing Executive thirty (30) days’ advance written notice. Employer
shall have the option, in its complete discretion, to terminate Executive at any time prior to the
end of such notice period. In the event of a termination pursuant to this Section 4(c),
Employer shall pay Executive all compensation due and owing through the last day actually worked,
including but not limited to payment for any accrued but unused vacation time, vested benefits
under any employee benefit plan and unreimbursed expenses due to Executive. In addition, Employer
shall (i) pay employee an amount, in equal installments for a period of one (1) year after
termination of the Period of Employment and pursuant to Employer’s standard payroll policies and
practices, equal to one and one-half (1 1/2) times Executive’s annual base salary at the time of the
termination of his employment plus one and one-half (1 1/2) times his target annual bonus in effect
at the time of the termination, (ii) pay Executive’s COBRA premiums, if COBRA is properly elected,
for a period of one (1) year after termination of the Period of Employment, for a period of one (1)
year after termination of the Period of Employment, and (iii) the restricted stock subject to the
Award Agreement, to the extent not previously exercised, shall automatically and immediately vest
with respect to the greater of (x) the number of shares, if any, that would have vested if
Executive continued service to Employer for a period of one (1) year after termination of the
Period of Employment, or (y) two thirds (2/3) of the aggregate number of shares subject to such
award. Thereafter, all of Employer’s obligations under this Agreement shall cease. Employer may
discipline, demote, or dismiss Executive as provided in and subject to this Section 4
notwithstanding anything to the contrary contained in or arising from any statements, policies, or
practices of Employer relating to the employment, discipline, or termination of its employees.
Employer and Executive each agree that (A) the receipt of any post-termination benefits or other
payments under this Section 4(c) or Section 4(f) hereof, except those required by
law, shall be contingent upon and subject to Executive and Employer executing and delivering to one
another a mutual general release of claims, in a form reasonably satisfactory to each party hereto,
which is not revoked by Executive or Employer, and (B) they will negotiate in good faith with the
other party hereto the terms of such release as soon as reasonably practicable following
Executive’s termination of employment.

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          (d) By Employer For Cause. At any time, and without prior notice except as provided
herein, Employer may terminate Executive for Cause. Employer shall pay Executive all compensation
and other amounts then due and owing, including payment for accrued unused vacation time, if any,
vested benefits under and employee benefit plan and unreimbursed expenses due to Executive.
Thereafter, all of Employer’s obligations under this Agreement shall cease. For purposes of this
Agreement, the term “Cause” shall mean: (i) a material breach of any term of this
Agreement by Executive and failure to cure such breach within thirty (30) days after written notice
thereof from Employer; (ii) the failure by Executive to perform his duties (other than any such
failure resulting from his incapacity due to death or physical or mental illness) coupled with a
failure to cure the same within thirty (30) days after receipt of written notice thereof; (iii)
acts or omissions which are deemed by Employer’s Board of Directors to be in bad faith, or to
constitute gross negligence, recklessness or willful misconduct, on the part of Executive with
respect to the performance of his duties; (iv) the failure by Executive to follow the reasonable
instructions of the person(s) to whom Executive reports or Employer’s Board of Directors coupled
with a failure to cure the same within thirty (30) days after receipt of written notice thereof;
(v) Executive’s engaging in misconduct that is deemed by Employer’s Board of Directors to be
materially injurious to Employer, monetarily or otherwise; (vi) Executive’s conviction, plea of
guilty or nolo contendere, or judicial determination of civil liability, based on a federal or
state felony or serious criminal or civil offense, including, but not limited to, crimes or civil
offenses involving theft, embezzlement, fraud or dishonesty, crimes or civil offenses based on
banking or securities laws (including the Sarbanes-Oxley Act of 2002), and civil enforcement
actions brought by federal or state regulatory agencies (including the Securities and Exchange
Commission); or (vii) Executive’s use of illegal narcotics and/or, to the extent permitted by law,
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 to the satisfaction of Employer. If
termination is due to Executive’s disability, Section 4(b) above shall control and not this
subsection on termination for Cause.

          (e) By Employee Not for Good Reason. At any time, Executive may terminate his
employment without Good Reason (as defined below) by providing Employer thirty (30) days’ advance
written notice. Employer shall have the option, in its complete discretion, to make Executive’s
termination effective at any time prior to the end of such notice period. Upon any termination of
Executive’s employment without Good Reason, Employer shall pay Executive all compensation and other
amounts due and owing through the end of the thirty (30) day notice period, including payment for
accrued unused vacation time, if any, vested benefits under and employee benefit plan and
unreimbursed expenses due to Executive. Thereafter, all of Employer’s obligations under this
Agreement shall cease.

          (f) By Employee for Good Reason. At any time and without any prior notice, Executive
may terminate his employment for Good Reason. If Executive terminates his employment for Good
Reason, Employer shall pay Executive all compensation due and owing through the last day actually
worked, including but not limited to payment for any accrued but unused vacation time, vested
benefits under any employee benefit plan and unreimbursed expenses due to Executive. In addition,

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Employer shall (i) pay employee an amount, in equal installments for a period of one (1) year
after termination of the Period of Employment and pursuant to Employer’s standard payroll policies
and practices, equal to one and one-half (1 1/2) times Executive’s annual base salary at the time of
the termination of his employment plus one and one-half (1 1/2) times his target annual bonus in
effect at the time of the termination, (ii) pay Executive’s COBRA premiums, if COBRA is properly
elected, for a period of one (1) year after termination of the Period of Employment, and (iii) the
restricted stock subject to the Award Agreement, to the extent not previously exercised, shall
automatically and immediately vest with respect to the greater of (x) the number of shares, if any,
that would have vested if Executive continued service to Employer for a period of one (1) year
after termination of the Period of Employment, or (y) two thirds (2/3) of the aggregate number of
shares subject to such award. Thereafter, all of Employer’s obligations under this Agreement shall
cease. For purposes of this Agreement, the term “Good Reason” shall mean any of the
following events or circumstances: (i) a change in Executive’s status, title, position or
responsibilities (including reporting responsibilities) that represents a material adverse change
from the Executive’s status, title, position or responsibilities as in effect within the ninety
(90) days preceding such change; (ii) the assignment to Executive of any duties or responsibilities
that are materially inconsistent with Executive’s status, title, position or responsibilities as in
effect immediately prior to such assignment; (iii) any removal of Executive from or failure to
reappoint or reelect Executive to the office or position (or to a substantially similar office or
position) in which Executive has been engaged to serve under this Agreement, except in connection
with the termination of Executive’s employment as a result of his death, or for Disability or
Cause; (iv) a reduction in Executive’s annual base salary as set forth herein or failure to pay
Executive any compensation or benefits to which he is entitled within ten (10) days after receipt
of written notice from Executive; (v) Employer’s requiring Executive to be based at any location
outside a fifty (50)-mile radius from Executive’s primary place of employment, except for
reasonably required travel on Employer’s business which is not materially greater than such travel
requirements required of Executive to adequately and appropriately perform his duties pursuant to
this Agreement; (vi) the failure by Employer to continue in effect (without reduction in benefit
level and/or reward opportunities) any material compensation or employee benefit plan in which
Executive is entitled to participate under this Agreement unless such plan is replaced with a plan
that provides substantially equivalent compensation or benefits to Executive, or to provide
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 employee benefit plan,
program and practice in which Executive is entitled to participate under this Agreement; (vii) the
insolvency or the filing (by any party, including Employer) of a petition for bankruptcy of
Employer, which petition is not dismissed within sixty (60) days after such filing; (viii) any
material breach by Employer of any provision of this Agreement, and failure of Employer to cure
such breach within thirty (30) days from Employer’s receipt of written notice from Executive
setting forth the nature of the alleged breach; (ix) any purported termination of Executive’s
employment for Cause by Employer which does not comply with the terms of Section 4(d)
hereof; or (x) the failure of Employer to obtain an agreement, satisfactory to Executive, from any

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applicable successors and assigns of Employer to assume and agree to be bound by the terms and
provisions of this Agreement, as contemplated in Section 12 hereof.

          (g) Termination Obligations.

               (i) Executive agrees that all property, including, without limitation, all equipment, tangible
Proprietary Information (as defined below), documents, books, records, reports, notes, contracts,
lists, computer disks (and other computer-generated files and data), and copies thereof, created on
any medium and furnished to, obtained by, or prepared by Executive in the course of or incident to
his employment, belongs to Employer and shall be returned promptly to Employer upon termination of
the Period of Employment.

               (ii) All benefits to which Executive is otherwise entitled shall cease upon Executive’s
termination, unless explicitly continued either under this Agreement or under any specific written
policy or benefit plan of Employer.

               (iii) Upon termination of the Period of Employment, Executive shall be deemed to have resigned
from all offices and directorships then held with Employer or any Affiliate.

               (iv) The representations and warranties contained in this Agreement, Employer’s payment and
other obligations under this Section 4, Employer’s obligations under any indemnification
agreement between Employer and Executive and Executive’s obligations under this Section
4(g), Section 5, and Section 6 shall survive the termination of the Period of
Employment and the expiration of this Agreement.

               (v) Following any termination of the Period of Employment, Executive shall reasonably
cooperate with Employer in all matters relating to the winding up of pending work on behalf of
Employer and the orderly transfer of work to other employees of Employer. Executive shall also
reasonably cooperate, at Employer’s cost and expense, in the defense of any action brought by any
third party against Employer that relates in any way to Executive’s acts or omissions while
employed by Employer.

     5. Proprietary Information.

          (a) Defined. “Proprietary Information” is all information and any idea in
whatever form, tangible or intangible, pertaining in any manner to the business of Employer, or any
Affiliate, or its employees, clients, consultants, or business associates, which was produced by
any employee of Employer in the course of his or her employment with Employer or Collective
Technologies, LLC, or otherwise produced or acquired by or on behalf of Employer, including all
Proprietary Information previously owned by Collective Technologies, LLC. All Proprietary
Information not generally known outside of Employer’s organization, and all Proprietary Information
so known only through improper means, shall be deemed “Confidential Information.” Without
limiting the foregoing definition, Proprietary and Confidential Information shall include, but not
be limited to: (i) formulas, teaching and development techniques, processes, trade

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secrets, computer programs, electronic codes, inventions, improvements, and research projects;
(ii) information about costs, profits, markets, sales, and lists of customers or clients; (iii)
business, marketing, and strategic plans; and (iv) employee personnel files and compensation
information. Executive should consult any written Employer procedures, generally circulated by
Employer to its employees, instituted to identify and protect certain types of Confidential
Information, which are considered by Employer to be safeguards in addition to the protection
provided by this Agreement. Nothing contained in those procedures or in this Agreement is intended
to limit the effect of the other.

          (b) General Restrictions on Use. Employer and Executive acknowledge that Proprietary
Information has been or will necessarily be communicated to or acquired by and simultaneous with
this Agreement is being provided to Executive. During the Period of Employment, Executive shall
use Proprietary Information, and shall disclose Confidential Information, only for the benefit of
Employer and as is necessary to carry out his responsibilities under this Agreement. Following
termination, Executive shall neither, directly or indirectly, use any Proprietary Information nor
disclose any Confidential Information, except as expressly and specifically authorized in writing
by Employer. The publication of any Proprietary Information through literature or speeches must be
approved in advance in writing by Employer.

          (c) Third-Party Information. Executive acknowledges that Employer has received and in
the future will receive from third parties their confidential information subject to a duty on
Employer’s part to maintain the confidentiality of this information and to use it only for certain
limited purposes. Executive agrees that he owes Employer and these third parties, during the
Period of Employment and thereafter, a duty to hold all such confidential information in the
strictest confidence and not to disclose or use it, except as necessary to perform his obligations
hereunder and as is consistent with Employer’s agreement with third parties.

          (d) Competitive Activity. Executive acknowledges and agrees that the pursuit of the
activities forbidden by this subsection would necessarily involve the use or disclosure of
Confidential Information in breach of the preceding subsections, but that proof of such a breach
would be extremely difficult. To forestall this disclosure, use, and breach, and in consideration
of the employment under this Agreement, Executive agrees that, for a period of one (1) year after
termination of the Period of Employment, he shall not, directly or indirectly, (i) divert or
attempt to divert from Employer (or any Affiliate) any business of any kind in which it is engaged;
(ii) employ or recommend for employment any person employed by Employer (or any Affiliate); (iii)
own, manage, operate, control, be employed by, participate in, or be connected in any manner with
the ownership, management, operation or control of any Competitive Business, which, for purposes of
this Agreement means any business competitive in whole or in part with the business conducted by
Employer; or (iv) otherwise engage in any business activity that is or would reasonably be likely
to be competitive with Employer (or any Affiliate) in the States of Texas, California and New York,
unless Executive can prove that any action taken in contravention of this subsection was done
without the use in any way of Confidential Information. If Executive’s employment is terminated or
deemed to have

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been terminated pursuant to Section 4(c) or Section 4(f) of this Agreement,
then Executive’s obligations under this Section 5(d) shall be contingent upon and subject
to Employer’s payment of the severance and other benefits required pursuant to such Section
4(c) or Section 4(f), as applicable.

          (e) Interference with Business. In order to avoid disruption of Employer’s business,
Executive agrees that, for a period of one (1) year after termination of the Period of Employment,
he shall not, directly or indirectly, (i) solicit for any actual or proposed Competitive Business
any customer of Employer (or any Affiliate) known to Executive during the Period of Employment to
have been a customer of Employer; or (ii) solicit for employment any person employed by Employer
(or any Affiliate), excluding any such person who responds to a general advertisement or other
communication not specifically directed at or communicated to such person or Employer’s employees
in general. If Executive’s employment is terminated or deemed to have been terminated pursuant to
Section 4(c) or Section 4(f) of this Agreement, then Executive’s obligations under
this Section 5(e) shall be contingent upon and subject to Employer’s payment of the
severance and other benefits required pursuant to such Section 4(c) or Section
4(f), as applicable.

     6. Inventions and Ideas.

          (a) Defined. The term “Invention/Idea” includes any and all ideas, processes,
trademarks, service marks, inventions, technology, computer hardware or software, original works of
authorship, designs, formulas, discoveries, patents, copyrights, products, and all improvements,
know-how, rights, and claims related to the foregoing that are conceived, developed, or reduced to
practice by Executive, alone or with others, during the Period of Employment other than those that
(i) were developed entirely on Executive’s own time without using Employer’s equipment, supplies,
facilities, or trade secret information; and (ii) did not, at the time of conception or reduction
to practice, relate to the actual, proposed or demonstrably contemplated business of Employer or
any field reasonably related any such business of Employer.

          (b) Disclosure. Executive shall maintain adequate and current written records on the
development of all Invention/Ideas and shall disclose promptly to Employer all Invention/Ideas and
relevant records, which records will remain the sole property of Employer. Executive agrees that
all information and records pertaining to any idea, process, trademark, service mark, invention,
technology, computer hardware or software, original work of authorship, design, formula, discovery,
patent, copyright, product, and all improvements, know-how, rights, and claims related to the
foregoing (“Intellectual Property”), that Executive does not believe to be an
Invention/Idea, but that is conceived, developed, or reduced to practice by Executive (alone or
with others) during the Period of Employment (or during the post-employment period set forth in
Section 6(e) below), shall be disclosed promptly to Employer (such disclosure to be
received in confidence).

          (c) Assignment. Executive agrees to, and hereby does, assign to Employer his entire
right, title, and interest (throughout the United States and in all

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foreign countries), free and clear of all liens and encumbrances, in and to each
Invention/Idea, which shall be the sole property of Employer, whether or not patentable. In the
event any Invention/Idea is deemed by Employer to be patentable or otherwise registrable, Executive
shall (at Employer’s expense) assist Employer) in obtaining letters patent or other applicable
registrations thereon and execute all documents and do all other things necessary or proper thereto
(including testifying at Employer’s expense) and to vest Employer, or any entity or person
specified by Employer, with full and perfect title thereto or interest therein. Executive shall
(at Employer’s expense) also take any action reasonably necessary in connection with any
continuations, renewals, or reissues thereof or in any related proceedings or litigation. Should
Employer be unable to secure Executive’s signature on any document necessary to apply for,
prosecute, obtain, or enforce any patent, copyright, or other right or protection relating to any
Invention/Idea, whether due to Executive’s mental or physical incapacity or any other cause,
Executive irrevocably designates and appoints Employer and each of its duly authorized officers and
agents as Executive’s agent and attorney-in-fact, to act for and in Executive’s behalf and stead
and to execute and file any such document, and to do all other lawfully permitted acts to further
the prosecution, issuance, and enforcement of patents, copyrights, or other rights or protections
with the same force and effect as if executed, delivered, and/or done by Executive.

          (d) Exclusions. Executive represents that there are no Invention/Ideas that he
desires to exclude from the operation of this Agreement. To the best of Executive’s knowledge,
there is no existing contract in conflict with this Agreement and there is no contract to assign
any Intellectual Property that is now in existence between Executive and any other person or
entity.

          (e) Post-Termination Period. Because of the difficulty of establishing when any
Intellectual Property is first conceived or developed by Executive, or whether it results from
access to Confidential Information or Employer’s equipment, supplies, facilities, or data,
Executive agrees that any Intellectual Property shall be presumed, if rationally related to
Employers’ business, to be an Invention/Idea if reduced to practice by Executive or with the aid of
Executive within one (1) year after termination of the Period of Employment. Executive can rebut
the above presumption if he proves that the Intellectual Property (i) was developed entirely on
Executive’s own time without using Employer’s equipment, supplies, facilities, or trade secret
information; (ii) was not conceived or reduced to practice during the Period of Employment, or, if
conceived or reduced to practice during this period, did not, at the time of conception or
reduction to practice, relate to the actual, proposed or demonstrably contemplated business of
Employer or any field reasonably related any such business of Employer; and (iii) did not result
from any work performed by Executive for Employer.

     7. Arbitration.

          (a) Arbitrable Claims. To the fullest extent permitted by law, all disputes between
Executive (and his attorneys, successors, and assigns) and Employer (and its Affiliates,
shareholders, directors, officers, employees, agents, successors, attorneys, and assigns) of any
kind whatsoever, including, without limitation, all disputes

11

 

relating in any manner to the employment or termination of Executive, and all disputes arising
under this Agreement, the Award Agreement, the Option Agreement, the Indemnification Agreement and
the Change of Control Agreement (collectively “Arbitrable Claims”), shall be resolved by
arbitration conducted in Travis County, Texas, notwithstanding any contrary provisions contained in
any such agreements. All persons and entities specified in the preceding sentence (other than
Employer and Executive) shall be considered third-party beneficiaries of the rights and obligations
created by this Section on Arbitration. Arbitrable Claims shall include, but are not limited to,
contract (express or implied) and tort claims of all kinds, as well as all claims based on any
federal, state, or local law, statute, or regulation, excepting only claims under applicable
workers’ compensation law and unemployment insurance claims. By way of example and not in
limitation of the foregoing, Arbitrable Claims shall include (to the fullest extent permitted by
law) any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the California Fair Employment and Housing
Act, as well as any claims asserting wrongful termination, harassment, breach of contract, breach
of the covenant of good faith and fair dealing, negligent or intentional infliction of emotional
distress, negligent or intentional misrepresentation, negligent or intentional interference with
contract or prospective economic advantage, defamation, invasion of privacy, and claims related to
disability.

          (b) Procedure. Arbitration of Arbitrable Claims shall be in accordance with the
National Rules for the Resolution of Employment Disputes of the American Arbitration Association,
as amended (“AAA Employment Rules”), as augmented in this Agreement. Arbitration shall be
initiated as provided by the AAA Employment Rules, although the written notice to the other party
initiating arbitration shall also include a statement of the claim(s) asserted and the facts upon
which the claim(s) are based. Arbitration shall be final and binding upon the parties and shall be
the exclusive remedy for all Arbitrable Claims. Either party may bring an action in court to
compel arbitration under this Agreement and to enforce an arbitration award. Otherwise, neither
party shall initiate or prosecute any lawsuit or administrative action in any way related to any
Arbitrable Claim. Notwithstanding the foregoing, either party may, at its option, seek injunctive
relief for violations of Sections 4, 5, or 6. Notwithstanding the foregoing, the decision of the
arbitrator shall be subject to judicial review and may be vacated or modified by a court if it is
not supported by substantial evidence on the record as a whole or if the decision is based on
erroneous interpretation of applicable law. The interpretation and enforcement of this agreement
to arbitrate shall be governed by the Federal Arbitration Act. THE PARTIES HEREBY WAIVE ANY RIGHTS
THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS, INCLUDING WITHOUT LIMITATION ANY
RIGHT TO TRIAL BY JURY AS TO THE MAKING, EXISTENCE, VALIDITY, OR ENFORCEABILITY OF THE AGREEMENT TO
ARBITRATE.

          (c) Arbitrator Selection and Authority. All disputes involving Arbitrable Claims
shall be decided by a single arbitrator. The arbitrator shall be selected by mutual agreement of
the parties within thirty (30) days of the effective date of the notice initiating the arbitration.
If the parties cannot agree on an arbitrator, then the

12

 

complaining party shall notify the AAA and request selection of an arbitrator in accordance
with the AAA Employment Rules. The arbitrator shall have authority to award equitable relief,
damages, costs, and fees to the greatest extent permitted by law, including, but not limited to,
any remedy or relief that a court would have. The fees of the arbitrator shall be borne by the
non-prevailing party, as determined by the arbitrator. If the allocation of responsibility for
payment of the arbitrator’s fees would render the obligation to arbitrate unenforceable, the
parties authorize the arbitrator to modify the allocation as necessary to preserve enforceability.
The arbitrator shall have exclusive authority to resolve all Arbitrable Claims, including, but not
limited to, whether any particular claim is arbitrable and whether all or any part of this
Agreement is void or unenforceable.

          (d) Confidentiality. All proceedings and all documents prepared in connection with
any Arbitrable Claim shall be confidential and, unless otherwise required by law, the subject
matter thereof shall not be disclosed to any person other than the parties to the proceedings,
their counsel, witnesses and experts, the arbitrator, and, if involved, the court and court staff.
All documents filed with the arbitrator or with a court shall be filed under seal. The parties
shall stipulate to all arbitration and court orders necessary to effectuate fully the provisions of
this subsection concerning confidentiality.

          (e) Continuing Obligations. The rights and obligations of Executive and Employer set
forth in this Section on Arbitration shall survive the termination of Executive’s employment and
the expiration of this Agreement.

     8. Notices. Any notice or other communication under this Agreement must be in writing
and shall be effective upon delivery by hand, upon facsimile transmission to either party (but only
upon receipt by the transmitting party of a written confirmation of receipt), or three (3) business
days after deposit in the United States mail, postage prepaid, certified or registered, and
addressed to Employer or to Executive at the corresponding address or fax number below. Executive
shall be obligated to notify Employer in writing of any change in his address. Notice of change of
address shall be effective only when done in accordance with this Section.

Employer’s Notice Address:

MTI Technology Corporation

17595 Cartwright Road

Irvine, California 92614

Attention: Chief Financial Officer

13

 

     Executive’s Notice Address:

 

 

 

     9. Action by Employer. All actions required or permitted to be taken under this
Agreement by Employer, including, without limitation, exercise of discretion, consents, waivers,
and amendments to this Agreement, shall be made and authorized only by the President or by his or
her representative specifically authorized in writing to fulfill these obligations under this
Agreement.

     10. Integration. This Agreement is intended to be the final, complete, and exclusive
statement of the terms of Executive’s employment by Employer. This Agreement supersedes all other
prior and contemporaneous agreements and statements, whether written or oral, express or implied,
pertaining in any manner to the employment of Executive, and it may not be contradicted by evidence
of any prior or contemporaneous statements or agreements. To the extent that the practices,
policies, or procedures of Employer, now or in the future, apply to Executive and are inconsistent
with the terms of this Agreement, the provisions of this Agreement shall control.

     11. Amendments; Waivers. This Agreement may not be amended except by an instrument in
writing, signed by each of the parties. No failure to exercise and no delay in exercising any
right, remedy, or power under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, or power under this Agreement preclude any other
or further exercise thereof, or the exercise of any other right, remedy, or power provided herein
or by law or in equity.

     12. Assignment, Successors and Assigns. Executive agrees that he will not assign,
sell, transfer, delegate, or otherwise dispose of, whether voluntarily or involuntarily, or by
operation of law, any rights or obligations under this Agreement. Any such purported assignment,
transfer, or delegation shall be null and void. Nothing in this Agreement shall prevent the
consolidation of Employer with, or its merger into, any other entity, or the sale by Employer of
all or substantially all of its assets, and Employer shall be entitled to assign its rights and
obligations hereunder in connection therewith provided that the assignee agrees in writing to be
bound by the terms and provisions hereof. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns, and shall not benefit any person or entity
other than those specifically enumerated in this Agreement.

     13. Severability. If any provision of this Agreement, or its application to any
person, place, or circumstance, is held by an arbitrator or a court of competent jurisdiction to be
invalid, unenforceable, or void, such provision shall be enforced to the

14

 

greatest extent permitted by law, and the remainder of this Agreement and such provision as
applied to other persons, places, and circumstances shall remain in full force and effect.

     14. Attorneys’ Fees. In any legal action, arbitration, or other proceeding brought to
enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys’ fees and costs.

     15. Injunctive Relief. If Executive breaches or threatens to breach any of the
covenants in Section 5 on Proprietary Information or Section 6 on Inventions and Ideas, the parties
acknowledge and agree that the damage or imminent damage to Employer’s business or its goodwill
would be irreparable and extremely difficult to estimate, making any remedy at law or in damages
inadequate. Accordingly, Employer shall be entitled to injunctive relief against Executive in the
event of any breach or threatened breach of the above provisions by Executive, in addition to any
other relief (including damages) available to Employer under this Agreement or under law.

     16. Governing Law. Except to the extent specifically provided in Section 7 above,
this Agreement shall be governed by and construed in accordance with the laws of the State of
Texas.

     17. Interpretation. This Agreement shall be construed as a whole, according to its
fair meaning, and not in favor of or against any party. By way of example and not in limitation,
this Agreement shall not be construed in favor of the party receiving a benefit nor against the
party responsible for any particular language in this Agreement. Captions are used for reference
purposes only and should be ignored in the interpretation of the Agreement.

     18. Employee Acknowledgment. Executive acknowledges that he has had the opportunity
to consult legal counsel in regard to this Agreement, that he has read and understands this
Agreement, that he is fully aware of its legal effect, and that he has entered into it freely and
voluntarily and based on his own judgment and not on any representations or promises other than
those contained in this Agreement.

Signature Page Follows.

15

 

The parties have duly executed this Agreement as of the date first written above.

	 	 	 	 	 
	 	“Executive”

 	 
	 	 	 
	 	William Kerley 	 
	 	 	 
	 
	 	“Employer”

MTI Technology Corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

16

 

	 	 	 	 	 

EXHIBIT A

Form of Restricted Stock Award Agreement

 

 

EXHIBIT B

Form of Indemnification Agreement

 

 

EXHIBIT C

Form of Change of Control Agreement<PAGE>

                                                                   EXHIBIT 10.1
                               FIRST AMENDMENT TO
                   PLAN OF COMPENSATION FOR OUTSIDE DIRECTORS

                     (Amendment adopted on November 8, 2006)

     The Plan of Compensation for Outside Directors, as adopted on August 8,
2006 (the "Plan") is amended as follows, effective as of November 8, 2006:

     1. The provision of the Plan captioned "Number of shares" in the "Annual
Compensation" section of the Plan is amended to read as follows:

     Number of shares     The option will be for a number of shares equal to
                          the quotient obtained by dividing (i) 3 times the
                          amount of cash compensation to be converted into an
                          option by (ii) the average closing price of Stericycle
                          stock during the period from the prior year's annual
                          meeting through the last trading day before the
                          current annual meeting.

     2. The provisions of the Plan captioned "Joining grant" and "Annual grant"
in the "Option Grants to New Director" section of the Plan are amended to read
as follows:

     Joining grant        A new director will receive two stock options upon
                          joining the Board.

                          The first option, for joining the Board, will be for a
                          number of shares equal to the quotient obtained by
                          dividing (i) 6 times the amount of the directors'
                          current cash compensation ($125,000) by (ii) the
                          average closing price of Stericycle stock during the
                          12-month period ending on the last trading day before
                          the director's election to the Board. The exercise
                          price of the option will be the closing price on the
                          day of the director's election, and one-fifth of the
                          option shares will vest on each of the first five
                          anniversaries of the director's election.

     Annual grant         The new director will also receive an option
                          reflecting his annual compensation as a director.

                          The option will be for a number of shares equal to a
                          pro rata portion of the quotient obtained by dividing
                          (i) 3 times the amount of the directors' current cash
                          compensation ($125,000) by (ii) the average closing
                          price of Stericycle stock during the 12-month period
                          ending on the last trading day immediately before the
                          director's election to the Board.

                                      -4-
<PAGE>

                          The exercise price of the option will be the closing
                          price on the day of the director's election, and the
                          option will vest on the day of the next annual meeting
                          of stockholders.

                          The pro rata portion means a fraction, the numerator
                          of which is the number of months until the next
                          annual meeting of stockholders and the denominator of
                          which is 12.

                                      -5-

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