<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
IOMEGA CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
PRELIMINARY COPIES
IOMEGA CORPORATION
1821 West Iomega Way
Roy, Utah 84067
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, APRIL 22, 1997
The Annual Meeting of Stockholders of Iomega Corporation (the "Company")
will be held at the Marriott Hotel, 75 South West Temple, Salt Lake City, Utah
84101 on Tuesday, April 22, 1997 at 11:00 a.m., local time, to consider and act
upon the following matters:
1. To elect eight members of the Board of Directors. If the proposed
amendment to the Company's Restated Certificate of Incorporation
providing for a classified Board of Directors (proposal 2 below) is
adopted, the eight directors will be elected to a classified Board of
Directors, with three directors being elected for a one-year term,
three directors being elected for a two-year term and two directors
being elected for a three-year term. If this proposed amendment is not
adopted, all eight directors will be elected for a one-year term.
2. To approve an amendment to the Company's Restated Certificate of
Incorporation providing for the classification of the Board of
Directors into three classes, with members of each class serving for
staggered terms.
3. To approve an amendment to the Company's Restated Certificate of
Incorporation increasing the number of authorized shares of Common
Stock from 150,000,000 to 400,000,000.
4. To approve the Company's 1997 Stock Incentive Plan and the reservation
of 6,000,000 shares of Common Stock for issuance thereunder.
5. To approve amendments to the Company's 1995 Director Stock Option Plan,
as set forth in the accompanying Proxy Statement.
6. To ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for the current year.
7. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on February 24, 1997 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
The stock transfer books of the Company will remain open.
By Order of the Board of Directors,
LAURIE B. KEATING, Secretary
Roy, Utah
March 7, 1997
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS
MAILED IN THE UNITED STATES.
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<PAGE> 3
PRELIMINARY COPIES
IOMEGA CORPORATION
1821 West Iomega Way
Roy, Utah 84067
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 22, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Iomega Corporation (the "Company") for use
at the Annual Meeting of Stockholders to be held on April 22, 1997 and at any
adjournment of that meeting. All proxies will be voted in accordance with the
stockholders' instructions, and if no choice is specified, the proxies will be
voted in favor of the matters set forth in the accompanying Notice of Meeting.
Any proxy may be revoked by a stockholder at any time before its exercise by
delivery of written revocation or a subsequently dated proxy to the Secretary of
the Company or by voting in person at the Annual Meeting.
At the close of business on February 24, 1997, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of shares of Common
Stock of the Company (constituting all of the outstanding voting stock of the
Company). Holders of Common Stock are entitled to one vote per share.
The Company's Annual Report for 1996 was mailed to stockholders, along with
these proxy materials, on or about March 7, 1997.
VOTES REQUIRED
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Annual Meeting shall constitute a quorum
for the transaction of business at the Annual Meeting. Shares of Common Stock
present in person or represented by proxy (including shares which abstain or do
not vote with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum exists at
the Annual Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock voting on the matter is required for the election of directors. The
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock is required to approve the proposed amendments to the Company's
Restated Certificate of Incorporation. The affirmative vote of the holders of a
majority of the shares of Common Stock voting on the matter is required to (i)
approve the Company's 1997 Stock Incentive Plan, (ii) approve the amendments to
the Company's 1995 Director Stock Option Plan, and (iii) ratify the selection of
Arthur Andersen LLP as the Company's independent auditors for the current year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be voted in favor of such matter, and will also not be counted
as shares voting on such matter. Accordingly, abstentions and "broker non-votes"
will have no effect on the voting on a matter that requires the affirmative vote
of a plurality or a majority of the shares voting on such matter. However,
because shares which abstain and shares represented by broker non-votes are
nonetheless considered outstanding shares, abstentions and broker non-votes with
respect to one of the proposed amendments to the Company's Restated Certificate
of Incorporation will have same effect as a vote against such proposed
amendment.
<PAGE> 4
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of January 20, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director or nominee for director
of the Company, (iii) each executive officer of the Company named in the Summary
Compensation Table set forth under the caption "Executive Compensation" below
and (iv) all directors and executive officers of the Company as of January 20,
1997 as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
BENEFICIALLY OF OUTSTANDING
BENEFICIAL OWNER OWNED(1) SHARES(2)
- ---------------- ---------------- --------------
<S> <C> <C>
Idanta Partners Ltd.(3).................................. 11,354,356 8.9%
4660 La Jolla Village Drive
Suite 775
San Diego, CA 92122
Willem H.J. Andersen(4).................................. 10,307 *
Robert P. Berkowitz...................................... 0 --
David J. Dunn(5)......................................... 12,757,828 10.0%
Kim B. Edwards(6)........................................ 1,965,195 1.5%
Michael J. Kucha(7)...................................... 75,516 *
John R. Myers(8)......................................... 37,000 *
John E. Nolan(9)......................................... 172,500 *
The Honorable John E. Sheehan............................ 0 --
M. Wayne Stewart(10)..................................... 75,018 *
Anton J. Radman, Jr.(11)................................. 659,785 *
Leonard C. Purkis(12).................................... 187,080 *
Srini Nageshwar(13)...................................... 172,314 *
Leon J. Staciokas(14).................................... 1,070,174 *
All directors and executive officers as a group
(21 persons)(15)....................................... 16,349,397 12.5%
</TABLE>
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* Less than 1%
(1) The inclusion herein of any shares of Common Stock as beneficially owned
does not constitute an admission of beneficial ownership of those shares.
Unless otherwise indicated, each person listed above has sole voting and
investment power with respect to the shares listed. In accordance with the
rules of the Securities and Exchange Commission (the "Commission"), each
person is deemed to beneficially own (i) any shares issuable upon the
exercise of stock options held by such person that are currently
exercisable or that become exercisable within 60 days after January 20,
1997 (and any reference in these footnotes to shares subject to stock
options refers only to such options); (ii) any shares issuable to such
person under the Company's 1991 Stock Purchase Plan within 60 days after
January 20, 1997 (and any reference in these footnotes to shares issuable
under the Company's 1991 Stock Purchase Plan refers only to such shares);
and (iii) any shares issuable upon conversion of 6 3/4% Convertible
Subordinated Notes due 2001 ("Convertible Notes") of the Company held by
such person.
(2) Number of shares deemed outstanding for purposes of calculating these
percentages is comprised of the 128,042,866 shares outstanding as of
January 20, 1997 (excluding treasury shares), plus any shares subject to
options held by the person in question, any shares issuable to the person
in question under the 1991 Stock Purchase Plan and any shares issuable upon
conversion of Convertible Notes held by the person in question.
2
<PAGE> 5
(3) David J. Dunn, a director of the Company, Dev Purkayastha and Perscilla
Faily are the trustees of trusts, each of which are, along with Jonathan
Huberman, the general partners of Idanta Partners Ltd. and share voting and
dispositive power with respect to such shares.
(4) Includes 5,062 shares issuable upon conversion of Convertible Notes held by
Mr. Andersen.
(5) Consists of 11,354,356 shares held by Idanta Partners Ltd., of which Mr.
Dunn is Managing General Partner, and 1,403,472 shares held by a family
trust, of which Mr. Dunn is trustee. Excludes 1,200 shares held by Mr.
Dunn's wife, as to which shares Mr. Dunn disclaims beneficial ownership.
(6) Includes 1,462,500 shares subject to stock options held by Mr. Edwards.
Also includes 6,000 shares held by Mr. Edwards' wife, as to which shares
Mr. Edwards disclaims beneficial ownership.
(7) Consists of 15,000 shares held by Mr. Kucha as custodian for his children,
as to which shares Mr. Kucha disclaims beneficial ownership, 516 shares
held as co-trustee with his wife, as to which shares Mr. Kucha has shared
voting and investment power, and 60,000 shares subject to stock options
held by Mr. Kucha.
(8) Consists of 6,000 shares held jointly by Mr. Myers and his wife, as to
which shares Mr. Myers has shared voting and investment power, and 31,000
shares subject to stock options held by Mr. Myers.
(9) Includes 112,500 shares subject to stock options held by Mr. Nolan.
(10) Consists of shares subject to stock options held by Mr. Stewart.
(11) Consists of 648,259 shares held in a trust as to which Mr. Radman shares
voting power, 11,250 shares subject to a stock option held by Mr. Radman
and 276 shares issuable under the 1991 Stock Purchase Plan.
(12) Consists of 2,580 shares held by Mr. Purkis' children, as to which shares
Mr. Purkis disclaims beneficial ownership, 19,500 shares held jointly by
Mr. Purkis and his wife, as to which Mr. Purkis shares voting and
investment power, and 165,000 shares subject to stock options held by Mr.
Purkis.
(13) Includes 165,000 shares subject to stock options held by Mr. Nageshwar and
228 shares issuable under the 1991 Stock Purchase Plan.
(14) Includes 980,000 shares subject to stock options held by Mr. Staciokas.
Also includes 51,000 shares held by Mr. Staciokas' wife, as to which Mr.
Staciokas disclaims beneficial ownership. Mr. Staciokas served as an
executive officer of the Company until October 1996.
(15) Includes 11,354,356 shares of Common Stock held by Idanta Partners Ltd.
Also includes an aggregate of 2,288,360 shares subject to stock options, an
aggregate of 504 shares issuable under the 1991 Stock Purchase Plan and
5,062 shares issuable upon conversion of Convertible Notes. Excludes shares
beneficially owned by Mr. Staciokas. See Note (14).
3
<PAGE> 6
ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect as directors the
eight nominees listed below, unless authority to vote for the election of any or
all of the nominees is withheld by marking the proxy to that effect. All of the
nominees listed below are currently directors of the Company. All of the
nominees have indicated their willingness to serve, if elected, but if any
should be unable or unwilling to serve, proxies may be voted for a substitute
nominee designated by the Board of Directors.
If the proposed amendment to the Company's Restated Certificate of
Incorporation described below providing for the classification of the Board of
Directors into three classes is approved at the meeting by the Company's
stockholders, three Class I Directors (Messrs. Dunn, Nolan and Sheehan) will be
elected for a one-year term expiring at the 1998 Annual Meeting of Stockholders,
three Class II Directors (Messrs. Andersen, Berkowitz and Myers) will be elected
for a two-year term expiring at the 1999 Annual Meeting of Stockholders and two
Class III Directors (Messrs. Edwards and Kucha) will be elected for a three-year
term expiring at the 2000 Annual Meeting of Stockholders, in all cases subject
to the election and qualification of their successors and to their earlier
death, resignation or removal. If this proposed amendment to the Company's
Restated Certificate of Incorporation is not adopted, all eight directors will
be elected for a one-year term expiring at the 1998 Annual Meeting of
Stockholders, subject to the election and qualification of their successors and
to their earlier death, resignation or removal. See "Approval of Amendment
Providing for Classified Board of Directors."
NOMINEES
Set forth below for each nominee are his name and age, his positions with
the Company, his principal occupation and business experience during the past
five years, and the year of his first election as a director of the Company:
WILLEM H. J. ANDERSEN, age 56, has been a director of the Company since
1994. Mr. Andersen has been a private consultant since February 1995. From June
1992 until February 1995, he was Chief Executive Officer and a director of
Comlinear Corporation, a semi-conductor manufacturer. From November 1986 until
June 1992, he was Chief Executive Officer of Laser Magnetic Storage
International Company, a designer and manufacturer of optical and tape mass
storage equipment. Mr. Andersen is a director of Analytical Surveys, Inc.
ROBERT P. BERKOWITZ, age 61, has been a director of the Company since 1983.
Mr. Berkowitz has been a private consultant since March 1992. From August 1991
until March 1992, he was President and Chief Executive Officer of CimTelligence
Systems, a developer of process planning software for the manufacturing
industry. Previously, he had been a private investor and a writer since August
1988.
DAVID J. DUNN, age 66, has been Chairman of the Board of Directors since
1980. Mr. Dunn has been Managing General Partner of Idanta Partners Ltd., a
venture capital firm, since 1971.
KIM B. EDWARDS, age 49, has been President, Chief Executive Officer and a
director of the Company since 1994. Mr. Edwards served as President and Chief
Executive Officer of Gates Energy Products, Inc., a manufacturer of rechargeable
batteries and the successor of General Electric Battery Division, from March
1993 to December 1993. From January 1987 until March 1993, Mr. Edwards served in
various other executive positions for Gates Energy Products Inc., including Vice
President and General Manager of its Consumer Business Unit and Vice President
of Marketing and Sales.
MICHAEL J. KUCHA, age 55, has been a director of the Company since 1980. He
has been a private investor since June 1996. Mr. Kucha was also President and
Chief Executive Officer of ERISS Corporation, an
4
<PAGE> 7
information services company, from January 1996 to May 1996. From October 1990
to June 1996, he was President of Melvin C. Dill Co., Inc., a manufacturer of
industrial labels.
JOHN R. MYERS, age 60, has been a director of the Company since April 1994.
Mr. Myers has been a private consultant to UNC Corp., a corporation in the
aerospace industry, since June 1996 when UNC acquired Garrett Aviation Services,
a provider of modification and upgrade services for corporate jet aircraft. From
July 1994 to June 1996, he was Chairman of Garrett Aviation Services. From
December 1993 to July 1994, Mr. Myers was a private consultant. From June 1992
until October 1993, he was an executive officer of Thiokol Corporation, a
manufacturer of rocket motors and specialty fastener devices, initially serving
as Chief Operating Officer and later as Chief Executive Officer. From 1980 until
1992, he was President of Textron Lycoming, a producer of piston and turbine
engines. He is a director of Curtiss-Wright Corporation.
JOHN E. NOLAN, age 69, has been a director since 1993. Mr. Nolan has been a
Partner at the law firm of Steptoe & Johnson since 1963. He is a director of
Hooper Holmes, Inc.
THE HONORABLE JOHN E. SHEEHAN, age 67, has been a director of the Company
since 1990. Mr. Sheehan, an entrepreneur since 1976, is a director and the
principal stockholder of several of the privately owned enterprises which he
founded. He is Chairman and Chief Executive Officer of Rhome Management Co.,
which provides oversight to his various corporate interests. He is also a member
of the Board of Trustees for the Harvard Business School Alumni Association and
Chairman of the Board of Trustees of the U.S. Naval Academy Alumni Association.
Mr. Sheehan is a former member, Board of Governors of the Federal Reserve
System.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
provides the opportunity for direct contact between the Company's independent
auditors and the Board. The Audit Committee met four times during 1996, to
review the effectiveness of the auditors during the annual audit, to discuss the
Company's internal accounting control policies and procedures and to consider
and recommend the selection of the Company's independent auditors. The current
Audit Committee members are Messrs. Berkowitz (Chairman), Kucha and Nolan.
The Company has a standing Compensation Committee of the Board of
Directors, which is responsible for determining the compensation package of each
executive officer and recommending it to the Board of Directors and for
administering the Company's employee stock option, stock purchase, cash bonus
and other employee benefit plans. The Compensation Committee also authorizes
stock option grants under the 1987 Stock Option Plan and is expected to be
delegated power to authorize grants under the 1997 Stock Incentive Plan. During
1996, the Compensation Committee met six times and acted by written consent on
16 occasions. The current members of the Compensation Committee are Messrs.
Sheehan (Chairman), Andersen and Myers. In addition, during 1996, the Company
had a Special Administration Committee, a subcommittee of the Compensation
Committee consisting of Messrs. Andersen and Sheehan authorized to take actions
with respect to the granting of stock options under the Company's 1987 Stock
Option Plan, which acted by written consent.
The Company has a standing Nominating Committee of the Board of Directors,
which provides recommendations to the Board regarding nominees for director. The
Nominating Committee will consider nominees recommended by stockholders.
Stockholders who wish to recommend nominees for director should submit such
recommendations to the Assistant Secretary of the Company, at the principal
offices of the Company, who will forward such recommendations to the Nominating
Committee for consideration. The Nominating Committee met once during 1996. The
current members of the Nominating Committee are Messrs. Dunn and Kucha.
5
<PAGE> 8
The Company has a standing Executive Committee of the Board of Directors,
which reviews certain issues relating to the Company's business between meetings
of the full Board of Directors. The Executive Committee met three times during
1996. The current members of the Executive Committee are Messrs. Dunn
(Chairman), Edwards, Kucha and Myers.
The Company has a Special Operations Committee, which meets with existing
and potential third-party manufacturers and advises the Board of Directors with
respect to certain production-related matters. Mr. Myers was the sole member of
the committee during 1996 and acted in such capacity on seven occasions during
1996.
During 1996, the Board of Directors met eight times and acted by written
consent on two occasions. Each director attended at least 75% of the aggregate
of the number of Board meetings and the number of meetings held by all
committees on which he then served.
In January 1997, the Board of Directors established a standing Ethics and
Compliance Committee which will periodically review the Company's legal
compliance and business conduct policies and the monitoring and enforcement
mechanisms used by the Company to ensure these policies are followed. The
current members of the Ethics and Compliance Committee are Messrs. Nolan
(Chairman) and Kucha.
DIRECTORS' COMPENSATION
The Chairman of the Board received an annual fee of $100,000 for 1996 and
will receive an annual fee of $150,000 for 1997. Other directors who are not
employees of the Company received an annual fee of $15,000 for 1996 plus $1,500
per meeting attended and will receive an annual fee of $20,000 for 1997 plus
$1,500 per meeting attended. Directors who are members of standing committees
receive $5,000 per year and $1,500 per meeting attended (unless a standing
committee meeting and a one-day Board meeting are held on the same day, in which
case only one $1,500 payment for attendance is made). Beginning in 1997,
directors other than the Chairman of the Board will also receive $750 for each
meeting of the Board or a standing committee of the Board held by
teleconference. In addition, the Chairman of the Audit Committee received an
annual fee of $8,000 for 1996 and will receive an annual fee of $15,000 for
1997; the Chairman of the Special Operations Committee receives an annual fee of
$8,000; and the Chairman of the Compensation Committee received an annual fee of
$4,000 for 1996 and will receive an annual fee of $12,500 for 1997. Directors
who are employees of the Company receive no director's fees. All directors are
reimbursed for certain Company-related out-of-pocket expenses.
In 1995, the Board of Directors adopted, and the stockholders approved, the
1995 Director Stock Option Plan (the "Director Plan"), which currently provides
for the grant to each non-employee director of the Company, upon initial
election as a director, of an option to purchase 37,500 shares of Common Stock,
at an exercise price equal to the fair market value of the Common Stock on the
date of grant. No options have been granted under the Director Plan, which
provides for the issuance of a maximum of 1,200,000 shares of Common Stock. For
information relating to proposed amendments to the Director Plan, see "Approval
of Amendments to 1995 Director Stock Option Plan."
6
<PAGE> 9
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information concerning the
compensation in each of the last three fiscal years of (i) the Company's Chief
Executive Officer during the fiscal year ended December 31, 1996, (ii) the
Company's four other most highly compensated executive officers during the
fiscal year ended December 31, 1996 who were serving as executive officers on
December 31, 1996 and (iii) one former executive officer of the Company who
would have been among the executive officers covered by clause (ii) above but
for the fact that he was not serving as an executive officer on December 31,
1996 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- -------------------------
OTHER ANNUAL RESTRICTED SECURITIES
NAME AND COMPENSATION STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) AWARDS(2) OPTIONS(3) COMPENSATION(4)
------------------ ---- ------ ----- - ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kim B. Edwards....................... 1996 $402,288 $636,640 -- $ 0 450,000 $ 4,500
President, Chief 1995 $240,000 $160,000 -- $1,000,500 0 $ 4,500
Executive Officer 1994 $240,000 $160,000 $79,569(5) $ 0 1,875,000 $ 650
M. Wayne Stewart(6).................. 1996 $196,923 $113,681 $69,446(5) $ 0 350,000 $ 0
Senior Vice President,
Chief Operating Officer
Anton J. Radman, Jr.................. 1996 $187,247 $108,040 -- $ 0 75,000 $ 4,500
Senior Vice President, 1995 $172,653 $120,652 -- $ 0 0 $ 4,500
Strategic Business 1994 $168,852 $ 74,090 -- $ 0 0 $ 650
Development
Leonard C. Purkis(7)................. 1996 $178,852 $102,863 -- $ 0 110,000 $ 4,500
Senior Vice President, 1995 $139,615 $ 93,289 $75,913(5) $ 0 300,000 $ 650
Finance, Chief
Financial Officer
Srini Nageshwar...................... 1996 $175,447 $102,067 -- $ 0 60,000 $368,099
Senior Vice President, 1995 $166,149 $ 96,819 -- $ 0 0 $283,861
Europe 1994 $157,326 $ 60,561 -- $ 0 0 $ 52,191
Leon J. Staciokas(8)................. 1996 $227,587 $133,633 -- $ 0 0 $ 4,500
Senior Vice President, 1995 $222,369 $155,423 -- $ 0 0 $ 4,500
Chief Internal 1994 $219,001 $ 76,650 -- $ 0 0 $ 650
Operating Officer
</TABLE>
- ---------------
(1) In accordance with the rules of the Commission, other compensation in the
form of perquisites and other personal benefits has been omitted in those
instances where such perquisites and other personal benefits constituted
less than the lesser of $50,000 or ten percent of the total of annual salary
and bonus for the Named Executive Officer for such year.
(2) In January 1996, the Compensation Committee voted to grant Mr. Edwards the
maximum number of shares of stock (120,000) issuable under his 1995 bonus
arrangement, which had previously been adopted by the Compensation
Committee. The amount shown is the fair market value of such shares as of
the date of grant. One-third of such shares were issued to Mr. Edwards on
January 1, 1997 and one-third of such shares are issuable to Mr. Edwards on
each of January 1, 1998 and 1999, subject to his continued employment with
the Company. As of December 31, 1996, the value of the shares remaining
subject to the award (80,000) was $1,387,733, based on the last reported
sale price of the Common Stock on December 31, 1996 ($17.38 per share) minus
the par value purchase price of such shares.
7
<PAGE> 10
Certain of the Named Executive Officers remain eligible to receive shares
of Common Stock issuable as a "retention premium" under the Company's 1991 Stock
Purchase Plan with respect to years prior to 1993. Such shares vest and are
issued in equal annual installments over a period of four such years from the
date of grant. The following table sets forth for each such Named Executive
Officer the number of unvested retention premium shares as of December 31, 1996
and the value of such shares based on the last reported sale price of the Common
Stock on December 31, 1996 ($17.38 per share):
<TABLE>
<CAPTION>
TOTAL UNVESTED
RETENTION PREMIUM
SHARES AS OF 12/31/96
-------------------------
NUMBER VALUE
------ ------
<S> <C> <C>
Mr. Radman....................................... 276 $4,797
Mr. Nageshwar.................................... 228 $3,963
</TABLE>
All of the retention premium shares are scheduled to vest in 1997.
Since neither the retention premium shares nor the remaining shares issuable
to Mr. Edwards under his bonus arrangement will be issued until the date
they vest, no cash dividends are payable with respect to such shares while
they are not vested.
(3) Reflects the number of shares covered by options to purchase Common Stock
granted during the year indicated. The Company has never granted any stock
appreciation rights ("SARs").
(4) Represents, for 1996, the Company's matching contribution under the Iomega
Retirement and Investment Savings Plan (the "IRIS Plan"), other than
$363,599 with respect to Mr. Nageshwar, which amount represents payments
relating to his overseas assignment.
(5) Consists of relocation expenses.
(6) Mr. Stewart commenced serving as an executive officer of the Company on
January 1, 1996.
(7) Mr. Purkis commenced serving as an executive officer of the Company on March
1, 1995.
(8) Mr. Staciokas served as an executive officer of the Company until October
1996.
8
<PAGE> 11
Option Grants, Exercises and Year-End Values
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the fiscal year ended December
31, 1996:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT
TOTAL ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(1)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ------------------------
NAME GRANTED YEAR PER SHARE DATE 5% 10%
- ----------------------------------------------- --------- ----------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kim B. Edwards................................. 300,000(2) 7.8% $ 6.29 2/18/06 $1,199,566 $3,047,882
150,000(3) 3.9% $15.06 9/29/06 $1,436,046 $3,648,737
M. Wayne Stewart............................... 47,838(2) 1.3% $ 8.36 1/1/06 $ 251,511 $ 637,379
252,162(2) 6.6% $ 8.36 1/31/06 $1,340,103 $3,404,962
50,000(3) 1.3% $15.06 9/29/06 $ 478,682 $1,216,246
Anton J. Radman, Jr............................ 45,000(2) 1.2% $ 6.29 1/19/06 $ 178,009 $ 451,109
30,000(3) 0.8% $15.06 9/29/06 $ 287,209 $ 729,747
Leonard C. Purkis.............................. 10,632(2) 0.3% $ 6.29 1/19/06 $ 42,058 $ 106,582
49,368(2) 1.3% $ 6.29 2/18/06 $ 197,401 $ 501,559
50,000(3) 1.3% $15.06 9/29/06 $ 478,682 $1,216,246
Srini Nageshwar................................ 60,000(2) 1.6% $ 6.29 1/19/06 $ 237,345 $ 601,478
Leon J. Staciokas.............................. 0 -- -- -- -- --
</TABLE>
- ---------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will depend
on the future performance of the Common Stock, the optionholder's continued
employment with the Company and the date on which the options are exercised.
(2) Options vest 25% per year beginning with the first anniversary of the date
of grant, subject to acceleration upon certain events constituting a change
of control of the Company.
(3) Options vest 25% per year beginning on January 1, 1998, subject to
acceleration upon certain events constituting a change of control of the
Company.
The following table sets forth, for each of the Named Executive Officers,
the number of shares acquired on exercise of options during the fiscal year
ended December 31, 1996, the aggregate dollar value realized upon such exercise
and the number and value of unexercised options held by each such officer on
December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR-END FISCAL YEAR-END(2)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------- ------------ ------------ -------------------------- --------------------------
<S> <C> <C> <C> <C>
Kim B. Edwards....................... 0 -- 1,087,500 / 1,237,500 $18,487,234 / $17,050,144
M. Wayne Stewart..................... 0 -- 0 / 350,000 $ -- / $ 2,823,500
Anton J. Radman, Jr.................. 1,072,470 $24,886,778 0 / 75,000 $ -- / $ 568,574
Leonard C. Purkis.................... 0 -- 75,000 / 335,000 $ 1,220,250 / $ 4,442,048
Srini Nageshwar...................... 150,000 $ 4,423,740 300,000 / 60,000 $ 4,936,995 / $ 665,298
Leon J. Staciokas.................... 220,000 $ 8,264,240 980,000 / 0 $16,657,343 / --
</TABLE>
9
<PAGE> 12
- ---------------
(1) Based on the fair market value of the Common Stock on the date of exercise,
less the option exercise price.
(2) Based on the fair market value of the Common Stock on December 31, 1996
($17.38 per share), less the option exercise price.
EMPLOYMENT AND SEVERANCE AGREEMENTS
In connection with his employment as the Company's President and Chief
Executive Officer beginning January 1, 1994, the Company entered into an
employment agreement with Mr. Edwards. Under this agreement, Mr. Edwards'
initial annual base salary was set at $240,000. The agreement provides for
severance pay of up to 12 months of Mr. Edwards' base salary if he is discharged
by the Company other than for cause.
Mr. Nageshwar's employment agreement with the Company, which was entered
into at the time Mr. Nageshwar became Vice President, Europe, provides that if
the Company terminates Mr. Nageshwar for any reason other than for cause within
the span of his assignment in Europe, he will be entitled to receive a severance
payment equal to six months of his base salary in addition to the reimbursement
of certain relocation expenses.
CERTAIN BUSINESS RELATIONSHIPS
Mr. Nageshwar's spouse is employed by the Company as a Human Resource
Manager. During 1996, she received salary and other compensation from the
Company totalling approximately ECU$136,905 (or approximately $109,000 based on
the exchange rate at December 31, 1996).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of reports submitted to the Company during fiscal year
1996, all reports with respect to beneficial ownership of securities of the
Company required to be filed under Section 16(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), by officers and directors and holders
of more than 10% of the Common Stock of the Company were timely filed, except as
set forth below. A report on Form 4 with respect to the stock award granted to
Mr. Edwards in January 1996 in connection with his 1995 bonus arrangement was
timely filed with Nasdaq in February 1996, but, due to a mailing error, was
filed with the Commission after the required filing date. A report on Form 4
with respect to a purchase by Mr. Dunn's wife in July 1996 of 1,200 shares of
stock of the Company, of which Mr. Dunn was not then aware, was filed with the
Commission after the required filing date. Mr. Dunn disclaims beneficial
ownership of the shares purchased by his wife.
10
<PAGE> 13
- -------------------------------------------------------------------------------
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors, which is comprised of
directors who are not employees of the Company. Messrs. Sheehan, Andersen and
Myers served on the Compensation Committee throughout 1996. Anthony L. Craig,
who served as a director of the Company until August 1996, was also a member of
the Compensation Committee during 1996. In addition, during 1996, the Company
maintained a Special Administration Committee, a subcommittee of the
Compensation Committee, consisting of Messrs. Sheehan and Andersen, each of whom
qualified as an "outside director" for purposes of Section 162(m) of the
Internal Revenue Code, which was authorized to take action with respect to stock
option grants.
The Compensation Committee is responsible for approving the compensation
package of each executive officer and recommending it to the Board of Directors.
In making decisions regarding executive compensation, the Compensation Committee
considers the input of the Company's other directors, including the input of Mr.
Dunn, Chairman of the Board of Directors, who generally attends meetings of the
Compensation Committee, and, with respect to the compensation of the Company's
other executive officers, Mr. Edwards, the Company's Chief Executive Officer and
President.
The Company's executive compensation program consists of a mixture of base
salary, cash bonuses and stock awards. In determining the total amount and
mixture of the compensation package for each executive officer, the Compensation
Committee and the Board subjectively consider the overall value to the Company
of each executive in light of numerous factors such as competitive position,
individual performance, including the past and expected contribution by each
executive officer to the Company's goals, and the Company's long-term needs and
goals, including attracting and retaining key management personnel.
Due to the Company's introduction during 1995 of two major new products
lines -- Zip (in March 1995) and Jaz (in December 1995) -- 1996 was expected to
represent a significant transition year for Iomega. In designing a compensation
program for 1996, the Compensation Committee sought to create an incentive for
the Company's top executives to achieve internal performance goals, while at the
same time recognizing existing uncertainties regarding the Company's ability to
achieve its performance goals due, in part, to external constraints, including
the component shortages and vendor ramp-up issues experienced by the Company
during 1995.
BASE SALARY
The Company has historically determined base salary for all its employees
by reference to grade level rankings based on job content. This system was
implemented in 1988 with the assistance of an outside consulting group and has
been updated annually using a broad-based salary survey provided by the same
consultant. In addition, in determining 1996 compensation, the Committee
considered the input of another compensation consulting group, including a
benchmarking study prepared in November 1995 (the "Benchmarking Study"). The
Benchmarking Study focused on a peer group of seven publicly traded companies
selected on the basis of size and industry sector (BancTec, Inc., Bay Networks,
Inc., Exabyte Corporation, Micropolis Corporation, Standard Microsystems
Corporation, Symbol Technologies, Inc. and Telxon Corporation) for information
about the top five executive positions, as well as a number of other broader
published surveys of data for high technology companies for information about
the compensation of other executives. The Benchmarking Study for the top five
positions indicated that Iomega's base salary and total cash compensation for
comparable positions was generally below the 25th percentile of the peer group
with respect to both base pay and total cash compensation. Based on the data
reviewed by the Committee, and in its subjective judgment, the Compensation
Committee approved increases in base salary for executive
- -------------------------------------------------------------------------------
11
<PAGE> 14
- -------------------------------------------------------------------------------
officers ranging from approximately 5 to 30 percent (other than for Mr. Edwards,
whose base salary is discussed below). Giving effect to these increases, the
base salaries for the Named Executive Officers were generally in the top half of
the peer group.
CASH BONUS PROGRAM
For 1996, the Company adopted a cash bonus program tied to the achievement
by the Company of a specified level of net after-tax profits (provided the ratio
of net after-tax profits to total sales exceeded a specified percentage). The
program set a specific objective formula for determining the amount of Mr.
Edwards' bonus and for determining the amount of two other bonus pools, one for
"Senior Executives", including all of the Named Executive Officers, and the
other for a broader group of "Key Contributors". Mr. Edwards was granted
authority to determine the allocation of bonus payments within the bonus pools
for Senior Executives and Key Contributors, subject to the limitation that no
bonus could exceed 135% of a participant's base salary.
In January 1997, the Compensation Committee reviewed the Company's
performance against the objective criteria of the program and approved the bonus
amounts payable under the program's formula to Mr. Edwards and the aggregate
size of the other two bonus pools. The amounts paid to the Named Executive
Officers, which reflect Mr. Edwards' allocation of bonuses among the Senior
Executives and Key Contributors, are included in the Summary Compensation Table
included in this Proxy Statement. In deciding to authorize the payment of
bonuses under the program, the Committee waived the requirement that the ratio
of net after-tax profits to total sales exceed a specified percentage in light
of what the Committee believed to be the overall outstanding performance of the
management group.
STOCK OPTIONS
Between 1992 and 1995, the Compensation Committee maintained a general
policy of not granting stock options, except for recruiting key personnel and in
other special circumstances. In connection with setting 1996 compensation, the
Compensation Committee determined that it would be appropriate to begin granting
stock options to key employees as the long-term component of their compensation
package. This determination was reached after considering, among other things,
the results of the Benchmarking Study, which indicated that Iomega's long-term
incentives, including equity-based incentives, were less competitive than those
of the peer group companies included in the Benchmarking Study. Accordingly, in
January 1996, options were granted to approximately 90 key employees, including
certain of the Named Executive Officers. These options were granted at an
exercise price equal to fair market value of the Company's Common Stock on the
date of grant ($6.29) and provided for vesting in four equal annual installments
beginning on the first anniversary of the date of grant.
In September 1996 the Compensation Committee determined that it would have
a positive impact on employee morale and achievement of the Corporation's
objectives to advance the timing of the grants of options intended to constitute
a portion of the Company's 1997 compensation program. Accordingly, in September
1996, options were granted to approximately 150 employees, including certain of
the Named Executive Officers. These options were granted at an exercise price
equal to fair market value of the Company's Common Stock on the date of grant
($15.06) and provided for vesting in four equal annual installments beginning on
January 1, 1998. The number of shares subject to each option granted during 1996
was subjectively determined.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In January 1996, the Compensation Committee increased Mr. Edwards' base
salary for 1996 from the $240,000 level it had been at since he commenced
employment in 1994 to $400,000. This increase in base pay
- -------------------------------------------------------------------------------
12
<PAGE> 15
- -------------------------------------------------------------------------------
raised Mr. Edwards' base pay from below the 25th percentile of the peer group
included in the Benchmarking Study to the top quartile.
For 1996, Mr. Edwards received a bonus of $636,640 under the bonus program
described above. Of this bonus, $386,640 was objectively determined based on the
Company's net after-tax profits and the remaining $250,000 was determined under
a provision of the program authorizing the payment of a discretionary bonus of
up to $250,000 to Mr. Edwards based on a subjective assessment of his
performance with respect to the following non-financial objectives: successful
financing of the Company, strategic partnering, organization staffing,
establishing production capacity, product development and time to market of
products developed. In awarding Mr. Edwards the full discretionary portion of
the bonus, the Committee considered the completion by the Company of two public
offerings during 1996, the numerous strategic alliances formed by the Company
during 1996, the Company's success in hiring several new executives in key
areas, the development and implementation of a new manufacturing plan centered
around a facility in Penang, Malaysia and the Company's new product development
efforts.
Mr. Edwards received an option grant for 300,000 shares of Common Stock in
January 1996 and for 150,000 shares of Common Stock in September 1996. The size
and timing of such option grants were subjectively determined by the Committee
based in part on its review of information contained in the Benchmarking Study.
IMPACT OF SECTION 162(M) OF THE INTERNAL REVENUE CODE
Except as described below with respect to Mr. Edwards, the Company does not
believe Section 162(m) of the Internal Revenue Code, which disallows a tax
deduction for certain compensation in excess of $1 million, will generally have
an effect on the Company. In connection with his bonus arrangement for 1995, the
Company awarded Mr. Edwards the right to buy 120,000 shares of Common Stock over
a three-year period for nominal consideration. Even though these shares were
expressly awarded to Mr. Edwards based on the Committee's assessment of his
outstanding performance in 1995 as Chief Executive Officer, the shares will not
technically qualify as "performance-based compensation" within the meaning of
Section 162(m). Therefore, depending on the market value of such shares on each
vesting date and the other compensation paid to Mr. Edwards in each such year,
all or a portion of the compensation expense associated with such shares may not
be deductible by the Company for income tax purposes. Notwithstanding the fact
that the compensation expense associated with these shares is expected to be
nondeductible, the Committee believes the award was in the Company's best
interests in light of the fact that the increase in the value of the shares
subject to the award reflected the increase in the value of the Company's Common
Stock during 1995 shared by all stockholders, which was due in large part to Mr.
Edwards' efforts, and the fact that the award's three-year vesting period is
designed to provide an incentive for Mr. Edwards' continued contribution to the
Company. In addition, because the Company's cash bonus programs for 1996 and
1997 are not operated in a manner designed to qualify as "performance-based
compensation" as defined by Section 162(m), it is likely that a portion of any
bonus payable to Mr. Edwards under these programs will be non-deductible. The
Compensation Committee reviews the potential effect of Section 162(m)
periodically and in the future may decide to structure the performance-based
portion of its executive officer compensation to comply with Section 162(m).
The Honorable John E. Sheehan
Willem H.J. Andersen
John E. Myers
- -------------------------------------------------------------------------------
13
<PAGE> 16
APPROVAL OF AMENDMENT PROVIDING FOR CLASSIFIED BOARD OF DIRECTORS
BACKGROUND
On February 21, 1997, the Board of Directors adopted an amendment to the
Company's Restated Certificate of Incorporation (the "Certificate") which
provides for the reinstitution of a classified Board of Directors. The full text
of the proposed amendment is set forth in Exhibit A to this Proxy Statement and
the following description is qualified in its entirety by reference thereto. If
the proposed amendment is approved, the eight directors elected to the Board
will be divided into three classes as provided under "Election of Directors" and
certain conforming amendments, in substantially the form set forth in Exhibit B
to this Proxy Statement, will be made to the By-laws of the Company.
Delaware law authorizes provisions in a certificate of incorporation that
provide for a classified board of directors. During the three-year period ended
with the Annual Meeting held in April 1993, the Company's Board of Directors was
classified into three classes, each elected for staggered three-year terms.
Since 1993, the directors have been elected for one-year terms at each Annual
Meeting. THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT REINSTATING
A CLASSIFIED BOARD OF DIRECTORS IS IN THE BEST INTEREST OF THE COMPANY AND ITS
STOCKHOLDERS AND THEREFORE RECOMMENDS A VOTE FOR THIS PROPOSAL.
The proposed amendment to the Certificate and conforming amendments to the
By-laws provide that directors will be classified into three classes, as nearly
equal in number as possible. One class would hold office initially for a term
expiring at the Annual Meeting to be held in 1998; another class would hold
office initially for a term expiring at the Annual Meeting to be held in 1999;
and another class would hold office initially for a term expiring at the Annual
Meeting to be held in 2000. At each Annual Meeting following this initial
classification and election, the successors to the class of directors whose
terms expire at that meeting would be elected for a term of office to expire at
the third succeeding Annual Meeting after their election and until their
successors have been duly elected and qualified. See "Election of Directors" as
to the composition of each class of directors, and each director's initial term,
if this proposal is adopted.
The Board believes that classification of the Board will help lend
continuity and stability to the management of the Company. Following adoption of
the classified board structure, at any given time at least approximately
two-thirds of the members of the Board will generally have had experience as
directors of the Company. The Board believes that this will facilitate
long-range business planning, strategic planning and policy making and will have
a positive impact on customer and employee loyalty. In particular, the Company
believes that a classified Board of Directors will permit the Company to more
effectively represent the interests of all of its stockholders in a variety of
situations, including responding to circumstances which might be created by
demands or actions of a single stockholder or stockholder group, than might be
the case if the Board of Directors were not classified and a measure of
continuity from year to year were not thereby assured. The proposed amendment is
not a response to any specific effort of which the Company is aware to
accumulate the Company's stock or to obtain control of the Company.
The proposed classified Board amendment could discourage efforts to obtain
control of the Company. The classification of directors will have the effect of
making it more difficult for stockholders to change the composition of the Board
in a relatively short period of time since at least two Annual Meetings will be
required to be held in order to effect a change in a majority of the members of
the Board. The delay afforded by the proposed amendment will help ensure that
the Board, if confronted with a hostile tender offer, a proxy contest or other
similar proposal, will have sufficient time to review and consider the proposal
and appropriate alternatives to the proposal and to act in what it believes to
be the best interests of the stockholders.
The proposed classified Board amendment provides that directors may be
removed by the stockholders only for cause by the affirmative vote of the
holders of at least two-thirds of the shares of capital stock of the
14
<PAGE> 17
Company issued and outstanding and entitled to vote, and requires the
affirmative vote of the holders of at least eighty percent of the shares of
capital stock of the Company issued and outstanding and entitled to vote to
amend or repeal, or to adopt any provision inconsistent with, its terms.
Under Delaware law, stockholders are not entitled to dissenter's rights
with respect to the proposed amendment to the Company's Restated Certificate of
Incorporation.
APPROVAL OF AMENDMENT INCREASING AUTHORIZED COMMON STOCK
On January 28, 1997, the Board of Directors of the Company unanimously
voted to recommend to the stockholders that the Company's Restated Certificate
of Incorporation be amended to increase the number of authorized shares of
Common Stock from 150,000,000 to 400,000,000 shares.
THE BOARD OF DIRECTORS BELIEVES THAT THE ADOPTION OF THE PROPOSED AMENDMENT
INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, AND THEREFORE RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE ADOPTION OF THE PROPOSED AMENDMENT.
The authorized Common Stock of the Company currently consists of
150,000,000 shares, $.03 1/3 par value per share, of which (i) 127,977,426
shares were outstanding as of December 31, 1996 (net of treasury shares), (ii)
11,475,188 shares were issuable pursuant to options or awards outstanding as of
December 31, 1996 under the Company's stock plans and (iii) 4,631,194 shares
were issuable upon conversion of Convertible Notes outstanding as of December
31, 1996.
The Board believes that the authorization of additional shares of Common
Stock is necessary to provide shares for issuance in connection with the
exercise of stock options expected to be granted under the Company's stock
option and stock purchase plans, including the 1997 Plan and the Director Plan,
and in connection with possible future stock dividends, financings, joint
ventures, acquisitions and other general corporate purposes. Other than as
described above or as provided for pursuant to the Company's Rights Agreement
dated July 28, 1989, as amended, there are no existing plans, understandings or
agreements for the issuance of any shares of Common Stock. If the amendment is
adopted by the stockholders, the Board of Directors will have authority to issue
shares of Common Stock without the necessity of further stockholder action.
Holders of the Common Stock have no preemptive rights with respect to any shares
which may be issued in the future.
Under Delaware law, stockholders are not entitled to dissenter's rights
with respect to the proposed amendment to the Company's Restated Certificate of
Incorporation.
APPROVAL OF 1997 STOCK INCENTIVE PLAN
On January 28, 1997, the Board of Directors of the Company adopted, subject
to the approval of stockholders, the 1997 Stock Incentive Plan (the "1997
Plan"). Up to 6,000,000 shares of Common Stock (subject to certain limitations
described below and subject to adjustment upon the occurrence of certain events)
may be issued pursuant to awards (collectively, "Awards") granted under the 1997
Plan.
The 1997 Plan is intended to replace the Company's 1987 Stock Option Plan
(the "1987 Plan"), which expires by its terms on April 20, 1997. As of January
31, 1997, options to purchase an aggregate of 9,776,462 shares of Common Stock
were outstanding under the 1987 Plan and an additional 5,234,614 shares were
reserved for future option grants under such Plan. Upon the expiration date of
the 1987 Plan on April 20, 1997, all then outstanding options will remain in
effect, but no additional option grants may be made under the 1987 Plan. Other
than in connection with any grants made to key hires or in connection with
promotions or
15
<PAGE> 18
relocations, the Company does not expect to grant any additional options under
the 1987 Plan prior to its expiration.
THE BOARD OF DIRECTORS BELIEVES ADOPTION OF THE 1997 PLAN IS ESSENTIAL TO
THE ABILITY OF THE COMPANY TO MAINTAIN A COMPETITIVE POSITION IN ATTRACTING AND
RETAINING KEY PERSONNEL AND IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ADOPTION OF THE 1997 PLAN AND THE RESERVATION OF 6,000,000 SHARES OF COMMON
STOCK FOR ISSUANCE THEREUNDER.
SUMMARY OF PLAN
The 1997 Plan provides for the grant of "incentive stock options" intended
to qualify under Section 422 of the Internal Revenue Code (the "Code"),
nonstatutory stock options and restricted stock awards. Officers, key employees,
directors, consultants and advisors of the Company and its subsidiaries are
eligible to be granted Awards under the 1997 Plan.
The 1997 Plan is administered by the Board of Directors. The Board of
Directors selects the recipients of Awards and determines (i) the number of
shares of Common Stock covered by options and the dates upon which such options
become exercisable, (ii) the exercise price of options, which may not be less
than 100% (in the case of incentive stock options and options intended to
qualify as performance-based compensation under Section 162(m) of the Code) or,
subject to certain limitations described below, 25% (in the case of nonstatutory
options) of the fair market value of the Common Stock as of the date of grant,
(iii) the duration of options (which may not exceed ten years from the date of
grant), and (iv) the number of shares of Common Stock subject to any restricted
stock awards and the terms and conditions of such awards, including conditions
for repurchase and the issue price. The Board of Directors may delegate its
authority under the 1997 Plan to one or more committees of the Board, and
subject to certain limitations, to one or more executive officers of the
Company.
The 1997 Plan contains limits on the number of shares of Common Stock
subject to Awards that can be made at below 100% of fair market value or that
can be made to any individual participant. The maximum number of shares of
Common Stock subject to restricted stock awards granted in any calendar year at
below 100% of fair market value may not exceed 10% of the total number of shares
of Common Stock subject to Awards made in the prior calendar year (or, with
respect to the first year of the 1997 Plan, in 1997). The maximum number of
shares of Common Stock subject to nonstatutory stock options granted in any
calendar year at below 100% of fair market value may not exceed 10% of the total
number of shares of Common Stock subject to options granted in the prior
calendar year (or, with respect to the first year of the 1997 Plan, in 1997).
The 1987 Plan, which is being replaced by the 1997 Plan, permits nonstatutory
options to be granted at not less than 25% of fair market value and does not
restrict the number of shares subject to options granted at below fair market
value. All options granted during 1995 and 1996 were granted at exercise prices
equal to the fair market value of the Common Stock on the date of grant. The
maximum number of shares with respect to which an Award may be granted to any
participant under the 1997 Plan may not exceed 500,000 shares per calendar year
or, in the case of an initial Award made in connection with the employment of a
new employee, 1,000,000 shares in the initial calendar year of employment.
The Board of Directors is required to make appropriate adjustments in
connection with the 1997 Plan and any outstanding Awards to reflect stock
dividends, stock splits and similar events. In the event of a merger or other
acquisition event (as defined in the 1997 Plan), the 1997 Plan provides for
outstanding options to be assumed or substitute awards granted, unless the
surviving corporation refuses to agree to such assumption or substitution, in
which case the Board of Directors shall accelerate the Awards or provide for a
cash out of the value of the Awards.
16
<PAGE> 19
The 1997 Plan will expire by its terms on January 28, 2007. The Board of
Directors may at any time amend, suspend or terminate the 1997 Plan, except that
no outstanding Award designated as subject to Section 162(m) by the Board of
Directors after the date of such amendment shall become exercisable, realizable
or vested (as applicable to such Award) unless and until such amendment shall
have been approved by the Company's stockholders.
As of January 31, 1997, approximately 3,000 persons were eligible for
Awards under the 1997 Plan, including the Named Executive Officers. The granting
of Awards under the 1997 Plan is discretionary, and the Company cannot now
determine the number or type of Awards to be granted in the future to any
particular person or group. The following table sets forth the benefits received
during 1996 by the Named Executive Officers and the indicated groups under the
1987 Plan, which is being replaced by the 1997 Plan:
OPTION GRANTS DURING 1996 UNDER THE 1987 PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE($)(1) SHARES
- ----------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Kim B. Edwards................................................... $ 0 450,000
President, Chief Executive Officer
M. Wayne Stewart................................................. 0 350,000
Senior Vice President, Chief Operating Officer
Anton J. Radman, Jr.............................................. 0 75,000
Senior Vice President, Strategic Business Development
Leonard C. Purkis................................................ 0 110,000
Senior Vice President, Finance, Chief Financial Officer
Srini Nageshwar.................................................. 0 60,000
Senior Vice President, Europe
Leon J. Staciokas................................................ 0 0
Senior Vice President, Chief Internal Operating Officer
Executive Group.................................................. 0 1,637,000
Non-Executive Director Group..................................... 0 0
Non-Executive Officer Employee Group............................. 0 2,186,000
</TABLE>
- ---------------
(1) All options granted in 1996 were granted at an exercise price equal to the
fair market value of the underlying shares of Common Stock on the date of
grant.
On March , 1997, the closing sale price of the Common Stock on the New
York Stock Exchange was $ .
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1997 Plan and with respect to the sale of Common Stock acquired under the 1997
Plan.
Incentive Stock Options. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will generally recognize taxable income with respect to an
incentive stock option only upon the sale of Common Stock acquired through the
exercise of the option ("ISO Stock").
17
<PAGE> 20
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock prior to having owned it for at least
two years from the Grant Date and one year from the Exercise Date (a
"Disqualifying Disposition"), then generally all or a portion of the gain
recognized will be ordinary compensation income and the remaining gain will be a
capital gain, long-term if the participant has held the ISO Stock for more than
one year prior to the date of the sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of the sale.
Nonstatutory Options. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
option. Unlike the case of an incentive stock option, however, a participant who
exercises a nonstatutory option generally will recognize ordinary compensation
income in an amount equal to the excess of the fair market value of the Common
Stock acquired through the exercise of the option (the "NSO Stock") on the
Exercise Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term capital gain or loss if the participant has held the NSO Stock for
more than one year prior to the date of the sale.
Restricted Stock. A participant will not recognize taxable income upon the
grant of a restricted stock award, unless the participant makes an election
under Section 83(b) of the Code. If the participant makes a Code Section 83(b)
election within 30 days of the date of the grant, then the participant will
recognize ordinary income, for the year in which the award is granted, in an
amount equal to the difference between the fair market value of the Common Stock
at the time the award is granted and the purchase price paid for the Common
Stock. If a Code Section 83(b) election is not made, the participant will
recognize ordinary income, at the time that the forfeiture provisions or
restrictions on transfer lapse, in an amount equal to the difference between the
fair market value of the Common Stock at the time of such lapse and the original
purchase price paid for the Common Stock. The participant will have a basis in
the Common Stock acquired equal to the sum of the price paid and the amount of
ordinary compensation income recognized.
Upon the disposition of the Common Stock acquired pursuant to a restricted
stock award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the Common Stock and the participant's
basis in the Common Stock. The gain or loss will be a long-term gain or loss if
the shares are held for more than one year. For this purpose, the holding period
shall begin just after the date on which the forfeiture provisions or
restrictions lapse if a Code Section 83(b) election is not made, or just after
the award is granted if a Code Section 83(b) election is made.
Tax Consequences to the Company. The grant of a stock option or restricted
stock award (absent an election under Section 83(b) of the Code by the
participant) under the 1997 Plan will have no tax consequences to the Company.
Moreover, in general, neither the exercise of an incentive stock option acquired
under the 1997 Plan nor the sale of any Common Stock acquired under the 1997
Plan will have any tax consequences to the Company. The Company generally will
be entitled to a business-expense deduction,
18
<PAGE> 21
however, with respect to any ordinary compensation income recognized by a
participant under the 1997 Plan. Any such deduction will be subject to the
limitations of Section 162(m) of the Code.
APPROVAL OF AMENDMENTS TO 1995 DIRECTOR STOCK OPTION PLAN
On January 26, 1995, the Board of Directors adopted the Company's 1995
Director Stock Option Plan (the "Director Plan"), which was approved by the
Company's stockholders on April 25, 1995. The purpose of the Director Plan is to
encourage ownership of stock of the Company by outside directors whose continued
services are essential to the Company's future progress, and to provide them
with an incentive to continue as directors of the Company. No options have been
granted to any director under the Director Plan because no new directors have
been elected to the Board since adoption of the Director Plan. A maximum of
1,200,000 shares of Common Stock are currently reserved for issuance under the
Director Plan.
On February 10, 1997, the Board of Directors adopted, subject to the
approval of the stockholders, certain amendments (the "Amendments") to the
Director Plan which, in its opinion, would help the Company attract and retain
qualified outside directors and provide further incentive to directors as a
result of their equity interest in the Company. The Amendments are being
submitted to the stockholders for a single vote, and therefore a favorable vote
will constitute approval of all the Amendments. THE BOARD OF DIRECTORS BELIEVES
THAT THE APPROVAL OF THE AMENDMENTS IS IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS, AND THEREFORE RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENTS.
The Amendments would provide the following:
1. INITIAL OPTION GRANT. An initial grant to each non-employee director
at the time of his or her initial election to the Board of an option to purchase
20,000 shares of Common Stock (formerly 25,000 shares, adjusted to 37,500 at the
time of the Company's three-for-one stock split in January 1996). Such options
would vest in five equal annual installments beginning on the first anniversary
of the date of grant, subject to acceleration in certain events as described
below.
2. ANNUAL OPTION GRANT. An annual grant to each non-employee director of
an option to purchase 5,000 shares of Common Stock on each anniversary of the
date of his or her initial election following the full vesting of his or her
initial option grant. Incumbent directors would receive such a grant on the date
of approval by the stockholders of the Amendments and on each anniversary of
such date, provided the stock option granted to such incumbent director prior to
April 22, 1997 is fully vested as of such grant date. Such options would vest in
five equal annual installments beginning on the first anniversary of the date of
grant subject to acceleration in certain events as described below.
3. CHANGE OF CONTROL. The automatic acceleration of vesting of one-half
of outstanding options which are not, by their terms, then exercisable upon a
"Change of Control" (as defined in the Plan).
4. EXTENSION OF EXERCISE PERIOD AND VESTING UPON DEATH OR DISABILITY. The
right to exercise an option for a period of two years following termination of
his or her service as a director if such termination results from his or her (i)
death, (ii) disability or (iii) resignation or decision not to stand for
re-election at age 55 or older following five or more years of service as a
director. In the event service as a director terminates by reason of death or
disability, all then unvested options shall automatically vest and become
immediately exercisable in full.
5. TRANSFERABILITY. The right to permit a director to transfer his or her
options to members of the director's family or to make a charitable gift.
19
<PAGE> 22
SUMMARY OF THE 1995 DIRECTOR PLAN (AS AMENDED)
A total of up to 1,200,000 shares of Common Stock may be issued upon the
exercise of options granted under the Director Plan (subject to adjustment upon
the occurrence of certain events such as stock splits). Any shares subject to
options which terminate or expire unexercised will be available for future
grants under the Director Plan. Only directors of the Company who are not
employees of the Company or any subsidiary corporation will be eligible to
receive options under the Director Plan. All options granted under the Director
Plan will be nonstatutory stock options, not entitled to the tax treatment
provided for under Section 422 of the Internal Revenue Code.
If the Amendments to the Director Plan are approved by the Company's
stockholders, each non-employee director who thereafter is first elected to the
Board of Directors will be granted an option to purchase 20,000 shares of Common
Stock on the date of such election and an option to purchase 5,000 shares of
Common Stock on each anniversary of his or her initial election following the
full vesting of the initial option grant; and each director currently serving as
a non-employee director will be granted an option to purchase 5,000 shares on
the date that the stockholders approve the Amendments and an option to purchase
5,000 shares of Common Stock on each anniversary of such date; provided the
stock option granted to such director prior to April 22, 1997 is fully vested as
of such grant date. If the Amendments are adopted, Messrs. Berkowitz, Dunn,
Kucha and Sheehan will each be granted an option to acquire 5,000 shares of
Common Stock on the date that the stockholders approve the Amendments and
Messrs. Andersen, Myers and Nolan will first become eligible to receive option
grants under the Director Plan in 1999, 1999, and 1998, respectively. The
exercise price for each option will be the fair market value of the Common Stock
on the date of grant. Each option will become exercisable (or "vest") on a
cumulative basis in five equal annual installments beginning on the first
anniversary of the date of grant, provided the optionee continues to serve as a
director on such dates, except as otherwise provided in the case of death or
disability or a Change of Control of the Company.
For a period of 90 days after termination of his or her service as
director, each optionee shall be entitled to exercise his or her options to
purchase that number of shares of Common Stock which had vested and were
exercisable at the time of such termination, provided that the exercise period
shall be two years instead of 90 days after such termination if termination
occurs by reason of death or disability or by reason of the optionee's
resignation or decision not to stand for re-election at age 55 or older
following five years of service as a director. In addition, if a director's
service is terminated by reason of death or disability, all then unvested
options shall become automatically vested and exercisable in full. Options may
be transferred by the directors to family members or for charitable gifts, but
any transferee shall hold such options subject to the terms and conditions
thereof. All unexercised options expire 10 years after the date of grant.
In the event of a Change of Control of the Company, one-half of the
outstanding options granted under the Director Plan which are not, by their
terms, then exercisable, shall become immediately exercisable. A Change of
Control will occur if and when any of the following events occurs or the Company
enters into an agreement with respect to any of such events: (a) any merger or
consolidation which results 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 or
acquiring entity) less than 50% of the combined voting power of the voting
securities of the Company or such surviving or acquiring entity outstanding
immediately after such merger or consolidation; (b) any sale of all or
substantially all of the assets of the Company; or (c) the acquisition of
"beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities (other than through a merger or
consolidation or an acquisition of securities directly from the Company) by any
"person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act
other than the Company, any trustee or other fiduciary holding securities under
an
20
<PAGE> 23
employee benefit plan of the Company or any corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company.
The Board of Directors may suspend or discontinue the Director Plan or
amend it in any respect whatsoever; provided, however, that without approval of
the stockholders of the Company, no amendment may (i) change the number of
shares subject to the Director Plan, (ii) change the designation of directors
eligible to receive options under the Director Plan or (iii) materially increase
the benefits accruing to participants in the Director Plan.
FEDERAL INCOME TAX CONSEQUENCES
See "Approval of 1997 Stock Incentive Plan -- Federal Income Tax
Consequences" for a summary of the federal income tax consequences of
nonstatutory stock options.
21
<PAGE> 24
STOCK PERFORMANCE GRAPH
Until November 1996, the Company's Common Stock was traded on the Nasdaq
National Market under the symbol IOMG. In November 1996, the Company's Common
Stock was listed for trading on the New York Stock Exchange under the symbol IOM
and trading of the Common Stock on the Nasdaq National Market was discontinued.
The following graph compares the cumulative total stockholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return of (i) the CRSP Total Returns Index for The Nasdaq Stock Market
(U.S. Companies) (the "CRSP Nasdaq Index"); (ii) the CRSP Total Returns Index
for Nasdaq Computer Manufacturers Stocks (U.S. and Foreign) (the "CRSP Nasdaq
Computer Index"); (iii) the CRSP Total Returns Index for the New York Stock
Exchange Stock Market (U.S. Companies) (the "CRSP NYSE Index"); and (iv) the
CRSP Total Returns Index for New York Stock Exchange Computer and Office
Equipment Stock (U.S. and Foreign) (the "CRSP NYSE Computer Index"). The two
Nasdaq indices are included in accordance with the Commission's rules because
such indices were included in last year's proxy statement; the two Nasdaq
indices will not be included by the Company in future proxy statements.
This graph assumes the investment of $100 on December 31, 1991 in the
Company's Common Stock and each of the indices listed above, and assumes
dividends are reinvested. Measurement points are at the last trading day of the
fiscal years ended December 31, 1992, 1993, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
CRSP Nasdaq CRSP NYSE
Measurement Period Iomega CRSP Nasdaq Computer CRSP NYSE Computer
(Fiscal Year Covered) Corporation Index Index Index Index
<S> <C> <C> <C> <C> <C>
12/31/91 $ 100.0 $100.0 $100.0 $100.0 $100.0
12/31/92 86.8 116.4 134.4 108.8 76.7
12/31/93 30.1 133.6 127.4 120.1 92.1
12/30/94 47.8 130.6 139.9 120.1 106.7
12/29/95 715.1 184.7 220.4 162.8 139.5
12/31/96 1533.1 227.2 295.9 197.4 187.0
</TABLE>
22
<PAGE> 25
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, at the recommendation of the Audit Committee, has
selected the firm of Arthur Andersen LLP as the Company's independent auditors
for the current fiscal year. Arthur Andersen LLP has served as the Company's
independent auditors since the Company's inception. Although stockholder
approval of the Board of Directors' selection of Arthur Andersen LLP is not
required by law, the Board of Directors believes that it is advisable to give
stockholders an opportunity to ratify this selection. If this proposal is not
approved at the Annual Meeting, the Board of Directors will reconsider its
selection of Arthur Andersen LLP.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will also be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. The Company has retained
Morrow & Company, Inc. to assist in the solicitation of proxies for this year's
Annual Meeting of Stockholders, at a cost to the Company of approximately $5,500
plus reimbursement of reasonable expenses. Brokers, custodians and fiduciaries
will be requested to forward proxy soliciting material to the owners of stock
held in their names, and, as required by law, the Company will reimburse them
for their out-of-pocket expenses in this regard.
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Roy, Utah not later than November 11, 1997 for inclusion in the proxy
statement for that meeting.
By Order of the Board of Directors,
LAURIE B. KEATING, Secretary
March 7, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO ATTEND
THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR
PROXIES.
23
<PAGE> 26
EXHIBIT A
TEXT OF PROPOSED AMENDMENT TO THE CORPORATION'S CERTIFICATE OF
INCORPORATION PROVIDING FOR CLASSIFICATION OF BOARD OF DIRECTORS
ELEVENTH: This Article is inserted for the management of the business and for
the conduct of the affairs of the Corporation.
Section 1. Number of Directors. The number of directors shall not be less
than three. The exact number of directors within the limitations specified in
the preceding sentence shall be fixed from time to time pursuant to a resolution
adopted by the Board of Directors or as provided in the By-laws of the
Corporation.
Section 2. Classes of Directors. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the authorized number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class I and one of the extra directors
shall be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
Section 3. Election of Directors. Elections of directors need not be by
written ballot except as and to the extent provided in the By-laws of the
Corporation.
Section 4. Terms of Office. Each director shall serve for a term ending
on the date of the third annual meeting following the annual meeting at which
such director was elected; provided, that each initial director in Class I shall
serve for a term expiring at the Corporation's annual meeting held in 1998; each
initial director in Class II shall serve for a term expiring at the
Corporation's annual meeting held in 1999; and each initial director in Class
III shall serve for a term expiring at the Corporation's annual meeting held in
2000; provided, further, that the term of each director shall continue until the
election and qualification of his successor and shall be subject to his earlier
death, resignation or removal.
Section 5. Allocation of Directors among Classes in the Event of Increases
or Decreases in the Number of Directors. In the event of any increase or
decrease in the authorized number of directors, (i) each director then serving
as such shall nevertheless continue as a director of the class of which he is a
member until the expiration of his current term, subject to his earlier death,
resignation or removal, and (ii) the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by the Board of
Directors among the three classes of directors in accordance with the provisions
of Section 2 above. To the extent possible, consistent with the provisions of
Section 2 above, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
Section 6. Quorum; Action at Meeting. A majority of the directors at any
time in office shall constitute a quorum for the transaction of business. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each such director so
disqualified, provided that in no case shall less than one-third of the number
of directors fixed pursuant to Section 1 above constitute a quorum. In the
absence of a quorum at any such meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice other than
announcement at the meeting, until a quorum shall be present. Every act or
decision done or made by a majority of the directors present at a meeting duly
held at which a quorum is present shall be regarded as the act of the Board of
Directors unless a greater number is required by law, by the By-laws of the
Corporation or by this Certificate of Incorporation.
A-1
<PAGE> 27
Section 7. Removal. Directors of the Corporation may be removed only for
cause by the affirmative vote of the holders of at least two-thirds of the
shares of the capital stock of the Corporation issued and outstanding and
entitled to vote.
Section 8. Vacancies. Unless and until filled by the stockholders, any
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board, may be filled by vote of a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director. A director elected to fill a vacancy shall be elected to
hold office until the next election of the class for which such director shall
have been chosen, subject to the election and qualification of his successor and
to his earlier death, resignation or removal.
Section 9. Amendments to Article. Notwithstanding any other provisions of
law, this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least eighty percent (80%) of the shares
of capital stock of the Corporation issued and outstanding and entitled to vote
shall be required to amend or repeal, or to adopt any provision inconsistent
with, this Article ELEVENTH.
A-2
<PAGE> 28
EXHIBIT B
TEXT OF PROPOSED AMENDMENT TO THE CORPORATION'S BY-LAWS
RELATING TO CLASSIFICATION OF BOARD OF DIRECTORS
(UNDERLINED TEXT INDICATES CHANGES TO EXISTING BYLAWS)
ARTICLE 2 -- DIRECTORS
2.1 General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2.2 Number; Election; Tenure and Qualification.
(a) The number of directors shall not be less than three. The exact
number of directors within the limitations specified in the preceding
sentence shall be fixed from time to time pursuant to a resolution adopted
by the Board of Directors. The directors shall be elected at the annual
meeting of stockholders by such stockholders as have the right to vote on
such election. Directors need not be stockholders of the corporation.
(b) The Board of Directors shall be and is divided into three classes:
Class I, Class II and Class III. No one class shall have more than one
director more than any other class. If a fraction is contained in the
quotient arrived at by dividing the authorized number of directors by
three, then, if such fraction is one-third, the extra director shall be a
member of Class I, and if such fraction is two-thirds, one of the extra
directors shall be a member of Class I and one of the extra directors shall
be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
(c) Each director shall serve for a term ending on the date of the
third annual meeting following the annual meeting at which such director
was elected; provided, that each initial director in Class I shall serve
for a term expiring at the Corporation's annual meeting held in 1998; each
initial director in Class II shall serve for a term expiring at the
Corporation's annual meeting held in 1999; and each initial director in
Class III shall serve for a term expiring at the Corporation's annual
meeting held in 2000; provided further, that the term of each director
shall continue until the election and qualification of his successor and
shall be subject to his earlier death, resignation or removal.
2.3 Increases and Decreases in the Size of the Board. In the event of any
increase or decrease in the authorized number of directors, (i) each director
then serving as such shall nevertheless continue as a director of the class of
which he is a member until the expiration of his current term, subject to his
earlier death, resignation or removal, and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors in accordance with
the provisions of Section 2.2 above. To the extent possible, consistent with the
provisions of Section 2.2 above, any newly created directorships shall be added
to those classes whose terms of office are to expire at the latest dates
following such allocation, and any newly eliminated directorships shall be
subtracted from those classes whose terms of offices are to expire at the
earliest dates following such allocation, unless otherwise provided from time to
time by resolution adopted by the Board of Directors.
2.4 Vacancies. Unless and until filled by the stockholders, any vacancy
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board, may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected to hold office
until the next election of the class for which such
B-1
<PAGE> 29
director shall have been chosen, subject to the election and qualification of
his successor and to his earlier death, resignation or removal.
2.5 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.6 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.7 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
2.8 Notice of Special Meetings. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be given to each director
in person, by telephone or by telegram sent to his business or home address at
least 48 hours in advance of the meeting, or by written notice mailed to his
business or home address at least 72 hours in advance of the meeting. A notice
or waiver of notice of a meeting of the Board of Directors need not specify the
purposes of the meeting.
2.9 Meetings by Telephone Conference Calls. Directors or any members of
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.10 Quorum. A majority of the directors at any time in office shall
constitute a quorum for the transaction of business. In the event one or more of
the directors shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each such director so disqualified, provided
that in no case shall less than one-third of the number of directors fixed
pursuant to Section 2.2 above constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.11 Action at Meeting. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-Laws.
2.12 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.13 Removal. Directors of the Corporation may be removed only for cause
by the affirmative vote of the holders of at least two-thirds of the shares of
the capital stock of the Corporation issued and outstanding and entitled to
vote.
2.14 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the
B-2
<PAGE> 30
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except as the Board of
Directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the directors or in such
rules, its business shall be conducted as nearly as possible in the same manner
as is provided in these By-laws for the Board of Directors.
2.15 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 7 -- AMENDMENTS
7.3 Certain Amendments. Notwithstanding any other provisions of law,
these By-Laws or the Certificate of Incorporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least eighty percent (80%) of the votes which all of the
stockholders would be entitled to cast at an annual election of directors or
class of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with, Sections 1.10, 2.2, 2.3, 2.4 or 2.13 of these
By-Laws.
B-3
<PAGE> 31
PROXY PROXY
IOMEGA CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
APRIL 22, 1997 THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) Kim B.
Edwards and Laurie B. Keating, and each of them, with full power of
substitution, as proxies to represent and vote, as designated herein, all shares
of Common Stock of Iomega Corporation (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company to be held at the Marriott Hotel, 75 South West
Temple, Salt Lake City, Utah 84101 on Tuesday, April 22, 1997 at 11:00 a.m.,
local time, and at any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
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[X]PLEASE MARK YOUR VOTE AS IN THE EXAMPLE TO THE LEFT. WITHHOLD
1. To elect the eight directors listed below: AUTHORITY
(except as marked below): FOR all to vote for
Nominees: Willem H.J. Andersen nominees all nominees
Robert P. Berkowitz o o
David J. Dunn
Kim B. Edwards
Michael J. Kucha
John R. Myers
John E. Nolan
The Honorable John E. Sheehan
FOR all nominees except the following:(to withhold
authority to vote for any individual nominee,
write that nominee's name below):
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2. To approve an amendment to the Company's Restated
Certificate of Incorporation providing for the
classification of the Board of Directors into three
classes, with members of each class serving for
staggered terms.
FOR AGAINST ABSTAIN
3. To approve an amendment to the Company's Restated o o o
Certificate of Incorporation increasing the number of
authorized shares of Common Stock from 150,000,000
to 400,000,000.
FOR AGAINST ABSTAIN
4. To approve the Company's 1997 Stock Incentive Plan. o o o
5. To approve amendments to the Company's 1995 Director FOR AGAINST ABSTAIN
Stock Option Plan, as set forth in the accompanying o o o
Proxy Statement.
6. To ratify the selection of Arthur Andersen LLP FOR AGAINST ABSTAIN
as the Company's independent o o o
auditors for the current year.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
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THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 THROUGH 6. ATTENDANCE OF THE
UNDERSIGNED AT THE MEETING OR ANY ADJOURNMENT THEREOF WILL NOT BE
DEEMED TO REVOKE THIS PROXY UNLESS THE UNDERSIGNED SHALL REVOKE THIS
PROXY IN WRITING OR AFFIRMATIVELY INDICATE THE INTENT TO VOTE IN
PERSON.
SIGNATURE DATE SIGNATURE DATE
----------- ------------- ----------------- ----------
if held jointly
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation or a
partnership, please sign by authorized person.
<PAGE> 34
IOMEGA CORPORATION
AMENDED AND RESTATED
1995 DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1995 Director Stock Option Plan (the "Plan") of Iomega
Corporation (the "Company") is to encourage ownership in the Company by outside
directors of the Company whose continued services are considered essential to
the Company's continued progress and thus to provide them with a further
incentive to continue as directors of the Company.
2. ADMINISTRATION
(a) The Board of Directors, or a Committee (the "Committee") consisting of
two or more directors of the Company, shall supervise and administer the Plan.
Grants of stock options under the Plan and the amount and nature of the awards
to be granted shall be automatic in accordance with Section 5. However, all
questions of interpretation of the Plan or of any options issued under it shall
be determined by the Board of Directors or the Committee and such determination
shall be final and binding upon all persons having an interest in the Plan.
(b) The Plan is intended to comply with all applicable conditions of Rule
16b-3 or its successors under Section 16 of the Securities Exchange Act of 1934,
as amended ("Rule 16b-3"). To the extent any provision of the Plan or action by
the Board of Directors fails to so comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Board of Directors.
3. PARTICIPATION IN THE PLAN
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN
(a) The maximum number of shares which may be issued under the Plan shall
be 1,200,000 shares of the Company's Common Stock, subject to adjustment as
provided in Section 9 of the Plan.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
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unexercised portion of such option shall again become available for grant
pursuant to the Plan.
(c) All options granted under the Plan shall be nonstatutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended to date and as it may be amended from time to time (the
"Code").
(d) Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
5. TERMS, CONDITIONS AND FORM OF OPTIONS
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors or Committee shall from time to
time approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) OPTION GRANTS. Each person who first becomes a non-employee director
from and after April 22, 1997 shall be granted an option to purchase 20,000
shares of Common Stock on the date that he/she is first elected to serve as such
a director ("Initial Option Date"), and an annual option to purchase 5,000
shares of Common Stock on each anniversary of the Initial Option Date after the
full vesting of such director's initial option grant has occurred, provided that
he/she is then continuing to serve as a director. Each person who was serving as
a non-employee director on April 21, 1997 shall be granted an annual option to
purchase 5,000 shares of Common Stock on April 22, 1997 and on each April 22
thereafter that such person continues to serve as a director; provided that no
such option will be granted to a non-employee director on a scheduled date of
grant if on such scheduled date of grant the option granted to such non-employee
director prior to April 22, 1997 is not fully vested.
(b) OPTION EXERCISE PRICE. The option exercise price for each option
granted under the Plan shall equal the closing price of the Company's Common
Stock on the New York Stock Exchange on the date of grant of such option.
(c) TRANSFERABILITY OF OPTIONS. Each option granted under the Plan by its
terms shall not be transferable by the optionee otherwise than by will, or by
the laws of descent and distribution, and shall be exercised during the lifetime
of the optionee only by the optionee; provided, however, that any option may be
transferred by a director to any member of his/her immediate family (spouse,
children, parents, grandchildren, grandparents and siblings), to a trust for any
such family member or as a charitable gift to any charitable organization,
person or entity. Subject to the foregoing proviso, no option or interest
therein may be transferred, assigned, pledged or hypothecated by the optionee
during the optionee's lifetime, whether by operation of law or otherwise, or be
made subject to execution, attachment or similar process.
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<PAGE> 36
(d) TERM OF OPTIONS. No option shall be exercisable after the expiration of
ten (10) years from the date upon which such option is granted. Each option
shall be subject to termination before its date of expiration as hereinafter
provided.
(e) EXERCISE OF OPTIONS. Options shall be exercisable, on a cumulative
basis, in five equal annual installments, commencing as to one-fifth of the
shares on the first anniversary of the grant date and the remaining four annual
installments on each of the four succeeding anniversaries of the grant date. If
the optionee ceases to be a director, his/her options or any unexercised portion
thereof which was vested and exercisable on the date of termination of the
director's service shall terminate unless exercised within a period of 90 days
after the date on which the director ceased to be a director, but in no event
after the expiration of ten years from the grant date. Any such exercise may be
made only to the extent of the number of shares subject to the option which are
exercisable on the date of such termination except as otherwise provided in the
case of death of disability. Notwithstanding the foregoing, if the director
ceases to be a director by reason of (i) death, (ii) disability or (iii) the
director's resignation or decision not to stand for re-election at 55 or older
following five years of service as a director, the period during which then
vested, exercisable options may be exercised shall be two years rather than 90
days (but not after the tenth anniversary of the grant date). In addition, if a
director's service is terminated by reason of death or disability, all then
unvested options shall automatically vest and become immediately exercisable in
full.
(f) PAYMENT OF EXERCISE PRICE. Options may be exercised only by written
notice to the Company at its principal office accompanied by (i) payment in cash
or by certified or bank check of the full consideration for the shares as to
which they are exercised, (ii) delivery of outstanding shares of the Company's
Common Stock (which, in the case of shares acquired from the Company, have been
outstanding for at least six months) having a fair market value on the last
business day preceding the date of exercise equal to the option exercise price,
(iii) any combination of (i) and (ii), or (iv) an irrevocable undertaking, in a
form satisfactory to the Company, by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price or delivery of irrevocable
instructions, in a form satisfactory to the Company, by the option holder to a
broker to deliver promptly to the Company cash or a check sufficient to pay the
exercise price.
(g) EXERCISE BY REPRESENTATIVE FOLLOWING DEATH OF DIRECTOR. A director, by
written notice to the Company, may designate one or more persons (and from time
to time change such designation) including his/her legal representative, who, by
reason of his/her death, shall acquire the right to exercise all or a portion of
the option. If the person or persons so designated wish to exercise any portion
of the option, they must do so within the term of the option as provided herein.
Any exercise by a representative shall be subject to the provisions of the Plan.
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<PAGE> 37
6. ASSIGNMENTS
The rights and benefits under the Plan may not be assigned except as
provided in subsections (c) and (g) of Section 5.
7. TIME FOR GRANTING OPTIONS
All options for shares subject to the Plan shall be granted, if at all, not
later than ten (10) years after the approval of the Plan by the Company's
stockholders.
8. LIMITATION OF RIGHTS
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the granting
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain a director for any period of time, or at any particular rate
of compensation.
(b) NO STOCKHOLDER'S RIGHTS AS OPTION HOLDERS. An optionee shall have no
rights as a stockholder with respect to the shares covered by such person's
options until the date of the issuance to such person of a stock certificate
therefor, and no adjustment will be made for dividends or other rights for which
the record date is prior to the date such certificate is issued.
(c) COMPLIANCE WITH SECURITIES LAWS. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or the disclosure of
non-public information or the satisfaction of any other condition is necessary
as a condition to, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction or
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors.
9. CHANGES IN COMMON STOCK
If the outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other securities of the
Company, or if additional shares or new or different shares or other securities
of the Company or other non-cash assets are distributed with respect to such
shares of Common Stock or other securities, through or as a result of any
merger, consolidation, sale of all or substantially all of the assets of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other distribution or transaction with
respect to such shares of Common
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<PAGE> 38
Stock, or other securities, an appropriate and proportionate adjustment may be
made in (i) the maximum number and kind of shares reserved for issuance under
the Plan, (ii) the number and kind of shares or other securities subject to then
outstanding options under the Plan and (iii) the price for each shares subject
to any then outstanding options under the Plan, without changing the aggregate
purchase price as to which such options remain exercisable. No fractional shares
will be issued under the Plan on account of any such adjustments.
10. CHANGE OF CONTROL
In the event of a Change of Control, one-half of the outstanding options
granted under the Plan which are not, by their terms, then exercisable, shall
become immediately exercisable. All options which are not exercised at or prior
to the occurrence of the Change of Control shall terminate immediately upon
consummation of the Change of Control. A Change of Control will occur if and
when any of the following events occurs or the Company enters into an agreement
with respect to any of such events: (a) any merger or consolidation which
results 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 or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation; (b) any sale of all or substantially all of the assets of the
Company; or (c) the acquisition of "beneficial ownership" (as defined in rule
13d-3 under the Exchange Act) of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding securities
(other than through a merger or consolidation or an acquisition of securities
directly from the Company) by any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportion as their ownership of stock of the Company.
11. AMENDMENT OF THE PLAN
The Board of Directors or Committee may suspend or discontinue the Plan or
revise or amend it in any respect whatsoever; provided, however, that without
approval of the stockholders of the Company no revision or amendment shall
change the number of shares subject to the Plan (except as provided in Section
9), change the designation of the class of directors eligible to receive
options, or materially increase the benefits accruing to participants under the
Plan.
12. NOTICE
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
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13. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
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IOMEGA CORPORATION
1997 STOCK INCENTIVE PLAN
-------------------------
1. Purpose
-------
The purpose of this 1997 Stock Incentive Plan (the "Plan") of Iomega
Corporation, a Delaware corporation (the "Company"), is to advance the interests
of the Company's stockholders by enhancing the Company's ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and thereby better aligning the interests of such persons with
those of the Company's stockholders. Except where the context otherwise
requires, the term "Company" shall include any present or future subsidiary
corporations of Iomega Corporation as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended, and any regulations promulgated thereunder
(the "Code").
2. Eligibility
-----------
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options or restricted stock (each, an
"Award") under the Plan to purchase shares of the Company's common stock, $0.03
1/3 par value per share (the "Common Stock"). Any person who has been granted an
Award under the Plan shall be deemed a "Participant".
3. Administration, Delegation
--------------------------
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan
made in good faith.
<PAGE> 41
(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by applicable
law, the Board may delegate to one or more executive officers of the Company the
power to make Awards and exercise such other powers under the Plan as the Board
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares subject to Awards for any one
Participant to be made by such executive officers in any calendar year.
(c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). The Board shall
appoint one such Committee consisting of not less than two members, each of whom
shall be an "outside director" within the meaning of Section 162(m) of the Code
and a "non-employee director" as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All references
in the Plan to the "Board" shall mean a Committee or the Board or the executive
officer referred to in Section 3(b) to the extent of such delegation.
4. Stock Available for Awards
(a) NUMBER OF SHARES. Subject to adjustment under Section 4(c), Awards may
be made under the Plan for up to 6,000,000 shares of Common Stock. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Stock not
being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan, subject, however, in the case
of Incentive Stock Options (as hereinafter defined), to any limitation required
under the Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 4(c), the
maximum number of shares with respect to which an Award may be granted to any
Participant under the Plan shall be 500,000 shares per calendar year or, in the
case of an initial Award made in connection with the employment of a new
employee, 1,000,000 shares in the initial calendar year of such employee's
employment. The per-participant limit described in this Section 4(b) shall be
construed and applied consistently with Section 162(m) of the Code.
(c) ADJUSTMENT TO COMMON STOCK. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding
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Option, and (iii) the repurchase price per security subject to each outstanding
Restricted Stock Award, shall be appropriately adjusted by the Company (or
substituted Awards may be made, if applicable). Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. If this Section 4(c) applies and Section 7(e) also applies to any
event, Section 7(e) shall be applicable to such event, and this Section 4(c)
shall not be applicable.
5. Stock Options
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(a) GENERAL. The Board may grant options to purchase Common Stock (each, an
"Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
The exercise price of each Incentive Stock Option granted under the Plan shall
be no less than 100% of the Fair Market Value (as defined in paragraph (f)(2) of
this Section 5) of the Common Stock at the time such Option is granted. The
exercise price of each Nonstatutory Stock Option shall be no less than 25% of
the Fair Market Value of the Common Stock at the time such Option is granted;
provided however, that the maximum number of shares of Common Stock subject to
Nonstatutory Stock Options granted in any calendar year at below 100% of Fair
Market Value shall not exceed 10% of the total number of shares of Common Stock
subject to Options granted in the prior calendar year (or, with respect to the
first year of the Plan, in 1997).
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
option agreement. No Option will be granted for a term in excess of 10 years.
(e) EXERCISE OF OPTION. Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the
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<PAGE> 43
Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may otherwise provide in an Option Agreement,
(i) delivery of an irrevocable and unconditional undertaking by a credit
worthy broker to deliver promptly to the Company sufficient funds to pay the
exercise price, (ii) delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a credit worthy broker to deliver
promptly to the Company cash or a check sufficient to pay the exercise price; or
(iii) delivery of shares of Common Stock owned by the Participant valued at
their fair market value as determined by the Board in good faith ("Fair Market
Value"), which Common Stock was owned by the Participant at least six months
prior to such delivery;
(3) to the extent permitted by the Board and explicitly provided in
the Option Agreement (i) by delivery of a promissory note of the Participant
to the Company on terms agreed to and determined by the Board, (ii) by
reduction in the amount of any liability owed by the Company to the Participant,
including any liability attributable to the Participant's participation in any
Company-sponsored deferred compensation program or arrangement, or (iii) by
payment of such other lawful consideration as the Board may determine; or
(4) any combination of the above permitted forms of payment.
6. Restricted Stock
----------------
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price from
the recipient in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award (each,
"Restricted Stock Award"); provided, however, that the maximum number of shares
of Common Stock subject to Restricted Stock Awards granted in any calendar year
at below 100% of Fair Market Value shall not exceed 10% of the total number of
shares of Common Stock subject to Awards made in the prior calendar year (or,
with respect to the first year of the Plan, in 1997).
(b) TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price (which shall not be less than the
par
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value of the Common Stock), if any. Any stock certificates issued in respect of
a Restricted Stock Award shall be registered in the name of the Participant and,
unless otherwise determined by the Board, deposited by the Participant, together
with a stock power endorsed in blank, with the Company (or its designee). At the
expiration of the applicable restriction periods, the Company (or such designee)
shall deliver the certificates no longer subject to such restrictions to the
Participant or if the Participant has died, to the beneficiary designated, in a
manner determined by the Board, by a Participant to receive amounts due or
exercise rights of the Participant in the event of the Participant's death (the
"Designated Beneficiary"). In the absence of an effective designation by a
Participant, Designated Beneficiary shall mean the Participant's estate.
7. General Provisions Applicable to Awards
---------------------------------------
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each type
of Award may be made alone or in addition to any other type of Award. The terms
of each type of Award made under the Plan need not be identical, and the Board
need not treat Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an Award
of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) Acquisition Events; Dissolution or Liquidation
----------------------------------------------
(1) CONSEQUENCES OF ACQUISITION EVENTS. Upon the occurrence of an
Acquisition Event (as defined below), or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that
outstanding Awards shall be assumed, or equivalent Awards shall be substituted,
by
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<PAGE> 45
the acquiring or succeeding corporation (or an affiliate thereof), provided that
any such Options substituted for Incentive Stock Options shall satisfy, in the
determination of the Board, the requirements of Section 424(a) of the Code;
PROVIDED, HOWEVER, that if any successor corporation refuses to assume or
substitute such Awards, then the Board shall: (i) upon written notice to the
Participants, provide that all then unexercised Options will become exercisable
in full as of a specified date (the "Acceleration Date") prior to the
Acquisition Event and will terminate immediately prior to the consummation of
such Acquisition Event, except to the extent exercised by the Participants
between the Acceleration Date and the consummation of such Acquisition Event
(provided that, in the event of an Acquisition Event under the terms of which
holders of Common Stock will receive upon consummation thereof a cash payment
for each share of Common Stock surrendered pursuant to such Acquisition Event
(the "Acquisition Price"), the Board may provide that all outstanding Options
shall terminate upon consummation of such Acquisition Event and each Participant
shall receive, in exchange therefor, a cash payment equal to the amount (if any)
by which (A) the Acquisition Price multiplied by the number of shares of Common
Stock subject to such outstanding Options (whether or not then exercisable),
exceeds (B) the aggregate exercise price of such Options); and (ii) provide that
all Restricted Stock Awards then outstanding shall become free of all
restrictions prior to the consummation of the Acquisition Event.
An "Acquisition Event" shall mean: (a) any merger or consolidation
which results 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 or acquiring entity)
less than 50% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after such
merger or consolidation; (b) any sale of all or substantially all of the assets
of the Company; or (c) the acquisition of "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act) of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities (other than through a merger or consolidation or an acquisition of
securities directly from the Company) by any "person", as such term is used in
Sections 13(d) and 14(d) of the Exchange Act other than the Company, any trustee
or other fiduciary holding securities under an employee benefit plan of the
Company or any corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportion as their ownership of stock of
the Company.
(2) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify each
Participant as soon as practicable prior to the effective date of such proposed
event. The Board, in its discretion, may upon written notice to the
Participants, (i) provide that all then unexercised Options will become
exercisable in full as of a specified date and for a
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specified period of time prior to such proposed event and (ii) provide that all
Restricted Stock Awards then outstanding shall become free of all restrictions
immediately prior to the effectiveness of such proposed event.
(3) ASSUMPTION OF OPTIONS UPON CERTAIN EVENTS. The Board may grant
Awards under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
(f) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards made to such Participant no later than the
date of the event creating the tax liability. The Board may allow Participants
to satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
(g) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(h) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(i) ACCELERATION. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, or that any Restricted Stock
Awards shall be free of all restrictions, as the case may be.
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8. Miscellaneous
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(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on the
date on which it is adopted by the Board, but no Award granted to a Participant
designated as subject to Section 162(m) by the Board shall become exercisable,
vested or realizable, as applicable to such Award, unless and until the Plan has
been approved by the Company's stockholders. No Awards shall be granted under
the Plan after the completion of ten years from the date on which the Plan was
adopted, by the Board but Awards previously granted may extend beyond that date.
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no Award granted to a
Participant designated as subject to Section 162(m) by the Board after the date
of such amendment shall become exercisable, realizable or vested, as applicable
to such Award (to the extent that such amendment to the Plan was required to
grant such Award to a particular Participant), unless and until such amendment
shall have been approved by the Company's stockholders.
(e) STOCKHOLDER APPROVAL. For purposes of this Plan, stockholder approval
shall mean approval by a vote of the stockholders in accordance with the
requirements of Section 162(m) of the Code.
(f) GOVERNING LAW. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to any applicable conflicts of law.
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