<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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IOMEGA CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
[IOMEGA LETTERHEAD]
March 13, 1998
To Our Stockholders:
It is our pleasure to invite you to the 1998 Annual Meeting of Stockholders
of Iomega Corporation. The meeting will be held on Tuesday, April 21, 1998 at
11:00 a.m. at the Marriott Hotel, 75 South West Temple, Salt Lake City, Utah.
The Notice of Annual Meeting and Proxy Statement accompanying this letter
describe the business to be transacted at the meeting.
In 1997, we achieved some significant accomplishments:
- Annual revenue increased 43 percent to $1.7 billion,
- Net income for the year doubled to $115 million,
- Zip drive shipments nearly doubled in 1997 over 1996, and
- Jaz drive shipments surpassed the one million milestone.
I am pleased to present Iomega's 1997 Annual Report, which is being mailed
together with the enclosed Proxy Statement. It will give you an update with
respect to Iomega's progress in 1997 and report to you on our continuing efforts
to "Give our customers what they want, when they want it, at a price they are
willing to pay."
Our Proxy Statement and Annual Report mailing is only one of the ways that
we try to reach our stockholders. Please remember that there are other avenues
for communication open to you throughout the year; they are: our toll-free
fax-back service (1-888-88-IOMEGA), the IR section of Iomega's monthly Internet
magazine, Iomegazine, on our website (www.iomega.com), and our Investor
Information Line (1-801-778-3585).
To ensure proper representation of your shares at the meeting, please
carefully mark the enclosed proxy card, sign and date it, and return it at your
earliest convenience.
We look forward to seeing you at the meeting.
Sincerely yours,
/s/ Kim B. Edwards
---------------------------------
KIM B. EDWARDS
President and
Chief Executive Officer
<PAGE> 3
IOMEGA CORPORATION
1821 WEST IOMEGA WAY
ROY, UTAH 84067
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, APRIL 21, 1998
The 1998 Annual Meeting of Stockholders of Iomega Corporation will be held
at the Marriott Hotel, 75 South West Temple, Salt Lake City, Utah on Tuesday,
April 21, 1998 at 11:00 a.m., local time. At the meeting, stockholders will act
on the following matters:
1. Election of three Class I Directors, each for a term of three years;
2. Approval of certain amendments to the Company's 1995 Director Stock
Option Plan;
3. Approval of the Company's 1998 Employee Stock Purchase Plan and 1998
International Employee Stock Purchase Plan;
4. Ratification of the selection of Arthur Andersen LLP as the Company's
independent auditors for the current year; and
5. Any other business as may properly come before the meeting or any
adjournment thereof.
Stockholders of record at the close of business on February 23, 1998 are
entitled to notice of and to vote at the meeting or any adjournments. The stock
transfer books of the Company will remain open.
By Order of the Board of Directors,
LAURIE BARTLETT KEATING
Secretary
Roy, Utah
March 13, 1998
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Proxy Statement............................................. 1
Voting Procedures...................................... 1
Item One -- Election of Directors...................... 3
Stock Ownership Information.......................... 7
Corporate Governance................................. 9
Director Compensation................................ 11
Executive Compensation............................... 12
Stock Performance Graph.............................. 14
Management Development and Compensation Committee
Report on Executive Compensation...................... 15
Item Two -- Amendment of 1995 Director Stock Option
Plan.................................................. 18
Item Three -- Approval of Employee Stock Purchase
Plans................................................. 20
Item Four -- Ratification of Auditors.................. 22
Additional Information................................. 22
Appendix A: Federal Income Tax Consequences of 1995 Director
Stock Option Plan and 1998 Employee Stock Purchase Plan... A-1
</TABLE>
2
<PAGE> 5
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PROXY STATEMENT -- 1998 ANNUAL MEETING OF STOCKHOLDERS
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This Proxy Statement contains information about the 1998 Annual Meeting of
Stockholders of Iomega Corporation, including any adjournments of the meeting.
The meeting is scheduled to be held on Tuesday, April 21, 1998, beginning at
11:00 a.m., local time, at the Marriott Hotel, 75 South West Temple, Salt Lake
City, Utah.
This Proxy Statement is furnished in connection with the solicitation of
proxies by Iomega's Board of Directors.
The Company's Annual Report for 1997 was first mailed to stockholders,
along with these proxy materials, on or about March 13, 1998.
- -------------------------------------------------------
VOTING PROCEDURES
- -------------------------------------------------------
WHO CAN VOTE?
In order to vote, you must have been a stockholder of record at the close
of business on February 23, 1998 (the "record date"). Stockholders whose shares
are owned of record by brokers and other nominees should follow the voting
instructions provided by their broker or other nominee.
As of the record date, there were 262,605,307 shares of Common Stock
issued, outstanding and entitled to vote. Each such share of Common Stock is
entitled to one vote on each matter to be voted upon.
HOW DO I VOTE?
Stockholders can vote by submitting proxies or by voting in person at the
meeting.
VOTING BY PROXY. Proxies will be voted in accordance with each
stockholder's instructions. If no choice is specified, proxies will be voted in
favor of the matters set forth in the accompanying Notice of Annual Meeting.
Any proxy may be revoked by a stockholder at any time before its exercise
by delivery of a written revocation or a subsequently dated proxy to the
Secretary of the Company or by voting in person at the meeting.
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YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting, please
take the time to vote by completing and mailing the enclosed proxy card as
soon as possible. We have included a postage-prepaid envelope for your
convenience.
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VOTING IN PERSON. If you attend the meeting, you may deliver your completed
proxy card in person or you may vote by completing a ballot which will be
available at the meeting.
WHAT CONSTITUTES A QUORUM?
In order for business to be conducted at the meeting, a quorum must be
present. A quorum consists of the holders of a majority of the shares of Common
Stock issued and outstanding as of the record date (excluding treasury shares).
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
to be voted upon) will be counted for purposes of determining whether a quorum
exists.
If a quorum is not present, it is expected that the meeting will be
adjourned until a quorum is obtained.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The three nominees receiving the highest number of
votes, whether or not a majority of the total number of votes, will be elected.
OTHER MATTERS. The affirmative vote of the holders of a majority of the
shares of Common Stock voting on the matter is required to approve the three
other matters to be voted on at the meeting.
HOW ARE VOTES COUNTED?
Shares which (i) abstain from voting as to a particular matter or (ii) are
held in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote as to a particular matter
("broker non-votes") 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
<PAGE> 6
effect on the outcome of voting on the matters to be voted on at the meeting.
ARE THERE OTHER MATTERS TO BE VOTED ON AT THE MEETING?
The Board of Directors does not know of any other matters which may come
before the meeting. If any other matters are properly presented to the meeting,
it is the intention of the persons named in the accompanying proxy card to vote,
or otherwise act, in accordance with their judgment.
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PLANNING TO ATTEND THE MEETING?
If you plan to attend the meeting and hold your shares in "street name," please
bring a statement from your broker showing your holdings. Attendance at the
meeting will be on a first-come, first-served basis. If you have any questions
about the meeting, please call Iomega's Investor Information Line
(1-801-778-3585). Photographs will be taken at the meeting for use by the
Company, and the Company may use these photographs in publications. If you
attend the meeting, permission to use your picture will be assumed. The Marriott
Hotel is handicap accessible. If you require special assistance, please call the
Investor Information Line at (1-801-778-3585).
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2
<PAGE> 7
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ITEM ONE -- ELECTION OF DIRECTORS
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- --------------------------------------------------------------------------------
THE FIRST AGENDA ITEM TO BE VOTED ON IS THE ELECTION OF THREE
CLASS I DIRECTORS. THE BOARD HAS NOMINATED THREE PEOPLE, EACH
OF WHOM IS CURRENTLY SERVING AS A DIRECTOR OF THE COMPANY, AND
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" SUCH NOMINEES.
- --------------------------------------------------------------------------------
Under the Company's Restated Certificate of Incorporation, the Board of
Directors is divided into three classes, with one class being elected each year
and members of each class holding office for three-year terms. The Board of
Directors currently consists of ten directors, four of whom are Class I
Directors (with terms expiring at the 1998 Annual Meeting), three of whom are
Class II Directors (with terms expiring at the 1999 Annual Meeting) and three of
whom are Class III Directors (with terms expiring at the 2000 Annual Meeting).
Two of the current directors, Messrs. Andersen and Kucha, have informed the
Board that they intend to retire following the meeting. At that time, the Board
of Directors will consist of eight members. In anticipation of the reduction in
the number of Directors after the meeting, the Board will, prior to the meeting,
reallocate a number of its members into different classes from those to which
they are currently designated. As a result of these changes, stockholders will
have the opportunity at the 1998 Annual Meeting to vote on the reelection of
Messrs. Duke and Sierk, each of whom was initially elected as a director by
action of the Board after the 1997 Annual Meeting. The information presented
below gives effect to these changes.
The persons named in the enclosed proxy card will vote to elect as
directors the three nominees listed below, unless authority to vote for the
election of any or all of the nominees is withheld by marking the proxy card to
that effect. All of the nominees have indicated their current 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.
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NOMINEES FOR CLASS I DIRECTOR -- TERMS TO EXPIRE IN 2001
- --------------------------------------------------------------------------------
NAME BUSINESS EXPERIENCE / DIRECTORSHIPS
- -------------- ------------------------------------------------------------
[PICTURE] From April 1988 to June 1996, AGE 62
David A. Duke Dr. Duke was Vice Chairman of DIRECTOR SINCE 1997
Corning Incorporated, a
manufacturer in the fields of CURRENTLY SERVING AS A
communications, specialty CLASS III DIRECTOR
materials and consumer
products. Previously, Dr. Duke COMMITTEE
served in various executive and MEMBERSHIPS:
technical management positions - OPERATIONS AND
at Corning over a 30-year TECHNOLOGY
period, including Senior Vice - MANAGEMENT DEVELOPMENT
President of Corning's Research AND COMPENSATION
and Development Division and
Senior Vice President and
General Manager of Corning's
Telecommunications Products.
Dr. Duke is a director of
Armco, Inc. and Quest
Diagnostics, Inc.
3
<PAGE> 8
NAME BUSINESS EXPERIENCE / DIRECTORSHIPS
- --------- -------------------------------------------------------------
[PICTURE] Mr. Dunn, Chairman of Iomega's AGE 67
David J. Dunn Board of Directors, has been DIRECTOR SINCE 1980
Managing General Partner of
Idanta Partners Ltd., a venture CURRENTLY SERVING AS A
capital firm, since 1971. He is CLASS I DIRECTOR
a director of GateField
Corporation. COMMITTEE
MEMBERSHIP:
- NOMINATING AND
GOVERNANCE
- --------------------------------------------------------------------------------
[PICTURE] From January 1991 to September AGE 59
James E. Sierk 1997, Mr. Sierk was Vice DIRECTOR SINCE 1997
President of Quality, Allied
Signal Inc., a manufacturer in CURRENTLY SERVING AS A
the aerospace, automotive and CLASS I DIRECTOR
engineered materials fields.
Prior to joining Allied Signal COMMITTEE MEMBERSHIPS:
Inc., Mr. Sierk spent 27 years - OPERATIONS AND
with Xerox Corporation in TECHNOLOGY
operations management. Mr. - MANAGEMENT DEVELOPMENT
Sierk is a director of Ames AND COMPENSATION
Rubber Corporation.
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CLASS II DIRECTORS -- TERMS EXPIRE IN 1999
- --------------------------------------------------------------------------------
NAME BUSINESS EXPERIENCE / DIRECTORSHIPS
- ---------------- ------------------------------------------------------------
[PICTURE] Mr. Nolan has been a partner at AGE 70
John E. Nolan the law firm of Steptoe & DIRECTOR SINCE 1993
Johnson LLP since 1963. He is a
director of Hooper Holmes, Inc. CURRENTLY SERVING AS A
CLASS I DIRECTOR
COMMITTEE MEMBERSHIPS:
- AUDIT
- ETHICS AND COMPLIANCE
- NOMINATING AND
GOVERNANCE
4
<PAGE> 9
NAME BUSINESS EXPERIENCE / DIRECTORSHIPS
- -------------- ------------------------------------------------------------
[PICTURE] Mr. Sheehan, an entrepreneur AGE 68
The Honorable since 1976, is a director and DIRECTOR SINCE 1990
John E. Sheehan the principal stockholder of
several of the privately owned CURRENTLY SERVING AS A
enterprises which he founded. CLASS I DIRECTOR
He is Chairman and Chief
Executive Officer of Rhome COMMITTEE
Management Co., which provides MEMBERSHIPS:
oversight to his various - ETHICS AND COMPLIANCE
corporate interests. He is also - AUDIT
a member of the Executive
Committee of the Associates of
the Harvard Business School and
Chairman Emeritus of the Board
of Trustees of the U.S. Naval
Academy Alumni Association. Mr.
Sheehan is a former member of
the Board of Governors of the
Federal Reserve System.
- --------------------------------------------------------------------------------
CLASS III DIRECTORS -- TERMS EXPIRE IN 2000
- --------------------------------------------------------------------------------
NAME BUSINESS EXPERIENCE / DIRECTORSHIPS
- -------------- -----------------------------------------------------------
[PICTURE] Mr. Berkowitz has been a AGE 62
Robert P. Berkowitz private consultant since March DIRECTOR SINCE 1983
1992. From August 1991 until
March 1992, he was President CURRENTLY SERVING AS A
and Chief Executive Officer of CLASS II DIRECTOR
CimTelligence Systems, a
developer of process planning COMMITTEE
software for the manufacturing MEMBERSHIP:
industry. - AUDIT
- --------------------------------------------------------------------------------
[PICTURE] Mr. Edwards has been Iomega's AGE 50
Kim B. Edwards President and Chief Executive DIRECTOR SINCE 1994
Officer since January 1994. He
served as President and Chief CURRENTLY SERVING AS A
Executive Officer of Gates CLASS III DIRECTOR
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.
5
<PAGE> 10
NAME BUSINESS EXPERIENCE / DIRECTORSHIPS
- ------------- ------------------------------------------------------------
[PICTURE] Mr. Myers has been a private AGE 61
John R. Myers consultant since July 1996, DIRECTOR SINCE 1994
when Garrett Aviation Services,
where Mr. Myers was Chairman, CURRENTLY SERVING AS A
was sold to UNC Corporation. CLASS II DIRECTOR
Both companies were in the
repair and modification of COMMITTEE
corporate aircraft and aviation MEMBERSHIPS:
parts. From October 1993 to - OPERATIONS AND
July 1994, Mr. Myers was a TECHNOLOGY
private consultant. He was - MANAGEMENT
President, and then CEO, of DEVELOPMENT AND
Thiokol Corporation, a COMPENSATION
manufacturer of rocket motors
and specialty fastener devices,
from June 1992 until October
1993. From 1980 until 1992, he
was President of Textron
Lycoming, a producer of pistons
and turbine engines. He is a
director of Curtiss-Wright
Corporation.
- --------------------------------------------------------------------------------
Following is biographical information about Messrs. Andersen and Kucha, who
intend to resign after the meeting. The Company is grateful to Messrs. Andersen
and Kucha for their many years of service as directors of the Company.
WILLEM H. J. ANDERSEN, age 57, has been a director of the Company since
1994 and is currently serving as a Class II Director. 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
semiconductor manufacturer. Mr. Andersen is a director of Analytical Surveys,
Inc. Mr. Andersen is a member of the Company's Management Development and
Compensation Committee.
MICHAEL J. KUCHA, age 56, has been a director of the Company since 1980 and
is currently serving as a Class III Director. He has been a private investor
since June 1996. Mr. Kucha was also President and Chief Executive Officer of
ERISS Corporation, an 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. Mr. Kucha is a member of the
Company's Audit Committee, Ethics and Compliance Committee and Nominating and
Governance Committee.
6
<PAGE> 11
- --------------------------------------------------------------------------------
STOCK OWNERSHIP INFORMATION
- --------------------------------------------------------------------------------
OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
the Company's Common Stock as of January 31, 1998 by each director, certain
executive officers and the holders of more than five percent of the Company's
outstanding Common Stock. All information in this Proxy Statement has been
adjusted to reflect the two-for-one stock split, effected by means of a 100%
stock dividend paid on December 22, 1997 to stockholders of record on December
1, 1997.
<TABLE>
<CAPTION>
SHARES
ACQUIRABLE TOTAL PERCENT
SHARES WITHIN 60 BENEFICIAL OWNER-
BENEFICIAL OWNER OWNED (1) DAYS (2) OWNERSHIP SHIP
- ---------------- --------- + ---------- = ---------- -------
<S> <C> <C> <C> <C>
Idanta Partners Ltd. (3).................... 21,179,712 0 21,179,712 8.1%
FMR Corp. (4)............................... 15,878,200 0 15,878,200 6.1%
Willem H.J. Andersen........................ 9,160 10,126 19,286 *
Robert P. Berkowitz......................... 2,000 0 2,000 *
David A. Duke............................... 0 0 0 --
David J. Dunn............................... 23,981,726(5) 0 23,984,126 9.2%
Kim B. Edwards.............................. 1,320,419(6) 2,988,500 4,308,918 1.6%
Michael J. Kucha............................ 151,032(7) 0 151,032 *
John R. Myers............................... 14,320 137,000 151,320 *
John E. Nolan............................... 120,000(8) 300,000 420,000 *
The Honorable John E. Sheehan............... 80,000 0 80,000 *
James E. Sierk.............................. 0 0 0 --
Laurie Bartlett Keating..................... 21,600 25,000 46,600 *
Edward D. Briscoe........................... 0 415,024 415,024 *
Leonard C. Purkis........................... 115,560(9) 277,000 392,560 *
M. Wayne Stewart............................ 0 311,024 311,024 *
All current directors and executive officers
as a group (21 persons)................... 26,948,202(10) 4,548,650 31,496,852 11.8%
</TABLE>
- ---------------
* Less than 1%
(1) For each person, the number in the "Shares Owned" column may include shares
attributable to the person because of that person's voting or investment
power or other relationship.
(2) Under the rules of the Securities and Exchange Commission (the "SEC"), a
person is deemed to have "beneficial ownership" of any Common Stock over
which that person has or shares voting or investment power, plus any Common
Stock that person may acquire within 60 days, including through the
exercise of a stock option or the conversion of a convertible security. For
each person other than Mr. Andersen, the number in the "Shares Acquirable
Within 60 Days" column constitutes shares covered by options exercisable
within 60 days after January 31, 1998. Mr. Andersen's shares are issuable
upon the conversion of 6 3/4% Convertible Subordinated Notes due 2001.
(3) The address of Idanta Partners Ltd. ("Idanta") is 4660 La Jolla Village
Drive, Suite 850, San Diego, CA 92122.
(4) Based on a report filed in February 1998 by FMR Corp. ("FMR"), Edward C.
Johnson 3d and Abigail P. Johnson under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The report discloses their
beneficial ownership of shares of the Company's Common Stock as of December
31, 1997. Of such shares, FMR reported that it has sole investment power
with respect to 15,878,200 shares and sole voting power with respect to
203,400 shares. Mr. Johnson and Ms. Johnson are directors and stockholders
of FMR. The address of FMR is 82 Devonshire Street, Boston, MA 02109.
7
<PAGE> 12
(5) Consists of 2,802,014 shares held by a family trust of which Mr. Dunn is
trustee (the "Trust"), and 21,179,712 shares held by Idanta, with respect
to which the Trust is a managing general partner. Mr. Dunn shares voting
and investment power with respect to such shares. Excludes 2,400 shares
held by Mr. Dunn's spouse. Mr. Dunn disclaims beneficial ownership of all
of the foregoing shares.
(6) Includes 12,000 shares held by Mr. Edwards' spouse, as to which shares Mr.
Edwards disclaims beneficial ownership.
(7) Consists of 30,000 shares held by Mr. Kucha as custodian for his children,
as to which Mr. Kucha disclaims beneficial ownership, and 121,032 shares
held as co-trustee with his spouse.
(8) Includes 20,000 shares held by the Nolan Family Foundation, as to which Mr.
Nolan disclaims beneficial ownership.
(9) Consists of 110,400 shares held by trusts of which Mr. Purkis and his
spouse are trustees and 5,160 shares held by Mr. Purkis' children.
(10) Includes 21,179,712 shares of Common Stock held by Idanta.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of reports submitted to the Company with respect to the
1997 fiscal year, except as follows, all reports regarding beneficial ownership
of securities of the Company required to be filed under Section 16(a) of the
Exchange Act were timely filed.
A report on Form 3 (Initial Statement of Beneficial Ownership) was filed
late by James Kelly. A stock purchase in September 1997 by Kevin O'Connor,
required to be reported on Form 4 (Statement of Changes in Beneficial
Ownership), was reported late.
8
<PAGE> 13
- --------------------------------------------------------------------------------
CORPORATE GOVERNANCE
- --------------------------------------------------------------------------------
CORPORATE GOVERNANCE POLICY
In January 1998, the Board of Directors adopted the following corporate
governance policy. It is the intention of the Board to review the policy at
least once a year.
- --------------------------------------------------------------------------------
The purpose of Iomega's corporate governance policy is to ensure that
Iomega is managed for the long-term benefit of its shareholders. This policy
recognizes that shareholder interests are rarely, if ever, well served by
failing to consider the interests of employees and the other communities in
which the Company operates. It is the directors' obligation to ensure that this
policy becomes part of the fabric of decision-making and operations throughout
Iomega.
We agree with the 1990 Business Roundtable statement of the function of
boards of directors, as follows:
"The board of directors has five primary functions:
1. Select, regularly evaluate, and, if necessary, replace the Chief
Executive Officer. Determine management compensation. Review succession
planning.
2. Review and, where appropriate, approve the financial objectives, major
strategies, and plans of the corporation.
3. Provide advice and counsel to top management.
4. Select and recommend to shareholders for election an appropriate slate
of candidates for the board of directors. Evaluate board processes and
performance.
5. Review the adequacy of systems to comply with all applicable
laws/regulations and sound business practices."
In performing these functions, the Board of Directors of Iomega carries out
a number of activities during the year, including:
- Evaluating the performance of the Chief Executive Officer at least
annually at a meeting of non-management directors.
- Evaluating its own performance and the performance of individual
directors on a periodic basis.
- Succession planning and management development are reported on annually
by the Chief Executive Officer to the Board. A detailed performance
evaluation for each of his subordinates is provided at that time.
- Annually, the Board reviews and approves a multi-year strategic plan and
a one-year operating plan for the Company.
- The Board, through its Management Development and Compensation Committee,
conducts an annual review of management compensation and incentives. In
dealing with incentives, the Board will not approve re-pricing options
(i.e., lowering of option prices) without an affirmative vote of the
holders of a majority of the shares voting on the issue.
- --------------------------------------------------------------------------------
9
<PAGE> 14
BOARD COMMITTEES
The Board of Directors has five standing committees: Audit; Ethics and
Compliance; Management Development and Compensation; Nominating and Governance;
and Operations and Technology. All members of all committees are non-employee
directors. Mr. Dunn is an ex-officio (non-voting) member of all standing
committees (other than the Nominating and Governance Committee, of which he is a
voting member).
AUDIT COMMITTEE. The Audit Committee met nine times during 1997. The
primary functions of the Committee are to:
- recommend the selection of the Company's independent auditors;
- review the scope and results of the audit with the independent auditors;
- review with management and the independent accountants the Company's
interim and year-end operating results;
- consider the accuracy of the Company's internal accounting and audit
procedures;
- consider the independence of the Company's outside auditors; and
- oversee the Company's internal audit work.
The current members of the Audit Committee are Messrs. Berkowitz, Kucha,
Nolan and Sheehan.
ETHICS AND COMPLIANCE COMMITTEE. The Ethics and Compliance Committee met
eight times during 1997. The primary functions of the Committee are to review
the policies and programs that are designed to assure the Company's compliance
with legal and ethical standards that affect its role as a responsible corporate
citizen, including those related to:
- human resource issues, such as equal employment opportunities;
- health, safety and environmental matters;
and
- other proper business practices.
The current members of the Ethics and Compliance Committee are Messrs.
Nolan, Kucha and Sheehan.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE. The Management
Development and Compensation Committee met twelve times during 1997 and acted by
written action on four occasions. The primary functions of the Committee are to:
- recommend the President's compensation to the entire Board;
- recommend the compensation packages of the other executive officers to
the President and the Chairman;
- approve compensation arrangements for other senior level employees;
- consider matters related to management development and succession;
- recommend individuals for election as officers;
- administer the Company's employee stock option, stock purchase, cash
bonus and other employee benefit plans; and
- authorize stock option grants under the Company's 1997 Stock Incentive
Plan.
The current members of the Management Development and Compensation
Committee are Messrs. Andersen, Duke, Myers and Sierk.
NOMINATING AND GOVERNANCE COMMITTEE. The Nominating and Governance
Committee met three times during 1997. The primary functions of the Committee
are to:
- review policies and make recommendations to the Board concerning:
- the size and composition of the Board;
- the criteria and qualifications for election to the Board;
- retirement from the Board; and
- the structure, composition and members of Board committees;
- periodically review the overall effectiveness of the Board and make
recommendations for improvement;
- recommend nominees for director; and
- review and recommend director compensation and benefits.
The current members of the Nominating and Governance Committee are Messrs.
Dunn, Kucha and Nolan.
OPERATIONS AND TECHNOLOGY COMMITTEE. The Operations and Technology
Committee acted on 12 occasions during 1997. The primary functions of the
Committee are to:
- review and report to the Board on operational and technology issues,
including quality control, customer service, manufacturing, engineering,
product development and cost controls; and
- review and decide on management recommendations on sites for new
facilities and relocation of existing facilities.
The current members of the Operations and Technology Committee are Messrs.
Duke, Myers and Sierk.
10
<PAGE> 15
BOARD MEETINGS AND ATTENDANCE
During 1997, the Board of Directors met ten times and acted by written
consent on one occasion. 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.
- --------------------------------------------------------------------------------
DIRECTOR COMPENSATION
- --------------------------------------------------------------------------------
The Company's non-employee directors receive the fees described below for
their services on the Board of Directors and its committees. In addition, all
non-employee directors are reimbursed for certain Company-related out-of-pocket
expenses.
============================================================================
ANNUAL
RETAINER:
- Chairman of the Board............................. $150,000
(the Chairman does not receive any other committee or
meeting fees)
- Other Non-Employee Directors...................... $ 20,000
============================================================================
COMMITTEE
FEES:
- Chairman of the Audit Committee................... $ 22,500
- Chairman of the Management Development and
Compensation Committee........................... $ 12,500
- Chairman of the Operations and Technology
Committee......................................... $ 8,000
- Chairman of the Ethics and Compliance
Committee......................................... $ 8,000
- Other Members of a Standing Committee............. $ 5,000
============================================================================
MEETING
FEES:
- Per Board Meeting................................. $ 2,000
- Per Committee Meeting............................. $ 2,000
(not paid in certain circumstances if Committee Meeting is
held on a Board Meeting date)
- Per Board or Committee Meeting by
Teleconference.................................... $ 750
============================================================================
In 1995, the Board of Directors adopted and the Company's stockholders
approved the Company's 1995 Director Stock Option Plan, which was amended and
restated in 1997 (the "Director Plan"). All options granted under the Director
Plan are granted with an exercise price equal to closing price of the Common
Stock on the date of grant. Under the Director Plan, Messrs. Berkowitz, Dunn,
Kucha and Sheehan each received an option to purchase 10,000 shares exercisable
at $8.36 per share on the date of the 1997 Annual Meeting. Upon their initial
election to the Board of Directors, Dr. Duke and Mr. Sierk each received an
option to purchase 40,000 shares exercisable at $13.47 and $12.38 per share,
respectively. If the proposed amendment of the Director Plan is approved at the
meeting, Dr. Duke and Mr. Sierk will each be granted a supplemental initial
option to purchase 10,000 shares exercisable at the closing price of the Common
Stock on the date of the meeting. The Director Plan provides for the issuance of
a maximum of 2,400,000 shares of Common Stock, of which 2,280,000 remained
available for grant as of December 31, 1997. For information relating to
proposed amendments to the Director Plan, see "Item Two -- Amendment of 1995
Director Stock Option Plan."
11
<PAGE> 16
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION
The following table contains information concerning the five most highly
compensated executive officers of the Company (the "Named Executive Officers"),
as required under applicable rules of the SEC.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -----------------------
-------------------------------- AWARDS
OTHER -----------------------
ANNUAL RESTRICTED SHARES ALL OTHER
NAME AND COMPENSA- STOCK UNDERLYING COMPENSA-
PRINCIPAL POSITION YEAR SALARY BONUS TION(1) AWARDS(2) OPTIONS(3) TION(4)
------------------ ---- ------ ----- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Kim B. Edwards 1997 $450,000 $641,800 -- $ 0 0 $4,500
President, Chief 1996 $402,288 $636,640 -- $ 0 900,000 $4,500
Executive Officer 1995 $240,000 $160,000 -- $1,000,500 0 $4,500
Laurie Bartlett Keating(5) 1997 $205,452 $189,032(6) $163,966 $ 0 150,000 $4,500
Senior Vice President,
General Counsel
Edward D. Briscoe 1997 $198,269 $128,371 -- $ 0 0 $4,500
President and General 1996 $164,440 $ 90,334 -- $ 0 280,000 $4,500
Manager, Personal Storage 1995 $134,000 $172,500 $140,036 $ 0 600,000 $4,500
Division
Leonard C. Purkis(7) 1997 $192,115 $125,909 -- $ 0 0 $4,500
Senior Vice President, 1996 $178,852 $102,863 -- $ 0 220,000 $4,500
Finance, Chief Financial 1995 $139,615 $ 93,289 $ 75,913 $ 0 600,000 $ 650
Officer
M. Wayne Stewart (8) 1997 $209,423 $100,123 -- $ 0 0 $ 0
Senior Vice President 1996 $196,923 $113,681 $ 69,446 $ 0 700,000 $ 0
</TABLE>
- ---------------
(1) In accordance with the rules of the SEC, 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. All amounts disclosed constitute
payment or reimbursement of relocation expenses.
(2) In January 1996, the Management Development and Compensation Committee voted
to grant Mr. Edwards the maximum number of shares of stock (240,000)
issuable under his 1995 bonus arrangement, which had previously been adopted
by the Committee. The amount shown is the fair market value of such shares
as of the January 1996 date of grant. One-third of such shares were issued
to Mr. Edwards on each January 1 of 1997 and 1998, and the remaining one-
third of such shares are issuable to Mr. Edwards on January 1, 1999, subject
to his continued employment with the Company. As of December 31, 1997, the
value of the shares remaining subject to the award (80,000) was $992,333,
based on the last reported sale price of the Common Stock on that date
($12.44 per share) minus the par value purchase price of such shares. The
remaining shares issuable to Mr. Edwards under his bonus arrangement will
not be issued until the date they vest, and no cash dividends are payable
with respect to such shares prior to their issuance.
(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 the Company's matching contribution under the Iomega Retirement
and Investment Savings Plan (the "IRIS Plan").
(5) Ms. Keating commenced serving as an executive officer of the Company in
January 1997.
(6) Includes a bonus received by Ms. Keating in connection with her initial
employment by the Company in January 1997.
(7) Mr. Purkis commenced serving as an executive officer of the Company in March
1995.
(8) Mr. Stewart served as an executive officer of the Company from January 1996
to January 1998.
12
<PAGE> 17
OPTION GRANTS
The following table sets forth certain information regarding options
granted to the Named Executive Officers during 1997 and the potential realizable
value of such options as determined in accordance with SEC rules.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SHARES AT ASSUMED ANNUAL RATES
UNDERLYING PERCENT OF TOTAL EXERCISE OF STOCK APPRECIATION FOR
OPTIONS OPTIONS GRANTED PRICE PER EXPIRA- OPTION TERM (3)
GRANTED TO EMPLOYEES IN SHARE TION --------------------------
(1) FISCAL YEAR (2) DATE 5% 10%
---------- ---------------- --------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kim B. Edwards................ -- -- -- -- -- --
Laurie Bartlett Keating....... 150,000 6.4% $8.38 1/6/07 $790,521 $2,003,334
Edward D. Briscoe............. -- -- -- -- -- --
Leonard C. Purkis............. -- -- -- -- -- --
M. Wayne Stewart.............. -- -- -- -- -- --
</TABLE>
- ---------------
(1) Option vests at the rate of 25,000 shares 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.
(2) Exercise price is equal to the fair market value of the Common Stock on the
date of grant.
(3) Amounts represent hypothetical gains that could be achieved for the option
if exercised at the end of the option term. These gains are disclosed as
required under SEC rules, and are based on assumed rates of stock
appreciation of 5% and 10% compounded annually from the option's date of
grant to its date of expiration. Actual gain upon exercise, if any, will
depend on the future performance of the Common Stock, the optionholder's
continued employment with the Company and the date on which the option is
exercised.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information regarding options
exercised by the Named Executive Officers during 1997 and options held by the
Named Executive Officers as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED YEAR-END FISCAL YEAR-END (2)
ON VALUE ------------------------- -----------------------
NAME EXERCISE REALIZED (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Kim B. Edwards............... 949,000 $12,844,491 2,163,500/1,537,500 $26,518,100/$15,292,476
Laurie Bartlett Keating...... 0 -- 0/ 150,000 -- /$ 609,375
Edward D. Briscoe............ 0 -- 195,036/ 534,964 $ 2,241,829/$ 5,391,528
Leonard C. Purkis............ 258,000 $ 3,109,304 72,000/ 490,000 $ 855,540/$ 4,891,749
M. Wayne Stewart............. 14,000 $ 144,078 136,036/ 549,964 $ 1,123,657/$ 4,207,453
</TABLE>
- ---------------
(1) Based on the fair market value of the Common Stock at the time of exercise,
less the option exercise price.
(2) Based on the closing price of the Common Stock on December 31, 1997 ($12.44
per share), less the option exercise price.
13
<PAGE> 18
EMPLOYMENT AND SEVERANCE AGREEMENTS
In January 1994, in connection with his employment as the Company's
President and Chief Executive Officer, the Company entered into an employment
agreement with Mr. Edwards. 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.
- --------------------------------------------------------------------------------
STOCK PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The Company's Common Stock has been listed for trading on the New York
Stock Exchange under the symbol IOM since November 1996. Prior to that time, the
Company's Common Stock was traded on the Nasdaq National Market under the symbol
IOMG.
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
return of (i) the CRSP Total Returns Index for the New York Stock Exchange Stock
Market (U.S. Companies) (the "CRSP NYSE Index"); and (ii) the CRSP Total Returns
Index for New York Stock Exchange Computer and Office Equipment Stocks (U.S. and
Foreign) (the "CRSP Computer Index").
This graph assumes the investment of $100 on December 31, 1992 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, 1993, 1994, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
Measurement Period CRSP NYSE CRSP Computer
(Fiscal Year Covered) Iomega Corporation Index Index
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
12/31/93 34.70 110.50 120.20
12/30/94 55.10 110.40 139.10
12/29/95 824.20 149.70 181.90
12/31/96 1766.90 181.50 243.00
12/31/97 2,529.70 241.10 295.90
</TABLE>
14
<PAGE> 19
- --------------------------------------------------------------------------------
MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program for 1997 was administered by
the Management Development and Compensation Committee of the Board of Directors.
None of the Committee's members are employees of the Company. Messrs. Sheehan,
Andersen and Myers served on the Committee throughout 1997. Dr. Duke joined the
Committee in September 1997, upon his election to the Board. In January 1998,
Mr. Sierk joined the Committee and Mr. Sheehan ceased serving on the Management
Development and Compensation Committee and joined the Audit and Ethics and
Compliance Committees.
During 1997, the Committee was responsible for approving the compensation
package of each existing executive officer and recommending it to the Board of
Directors, and for approving, in consultation with the Chairman of the Board,
the compensation package of each newly recruited executive officer. In making
decisions regarding executive compensation, the Committee considered the input
of the Company's other directors, including the input of Mr. Dunn, Chairman of
the Board of Directors, who is an ex-officio (non-voting) member of the
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 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.
BASE SALARY
The Company has historically determined base salary for all of its
employees by reference to grade level rankings based on job content. This system
was begun in 1988 with the assistance of an outside consulting group and has
been updated annually. Based on the consulting group's recommendation for 1997,
the Board of Directors adopted a system of six salary "bands" for exempt
employees other than the Chief Executive Officer, under which the Company may
determine salaries, within the limits of an assigned salary band, in response to
market pay practices and the employee's background and qualifications.
In addition, in determining 1997 compensation, the Committee considered
data from a benchmarking study prepared by a second consultant (the
"Benchmarking Study"). The Benchmarking Study focused on a peer group of nine
publicly traded companies in the high-tech industry with annual revenues of
between $1.0 billion and $2.3 billion: Amdahl Corporation, AST Research, Inc.,
Cisco Systems, Inc., EMC Corporation, Lexmark International Group Inc., Silicon
Graphics Inc., Storage Technology Corporation, Tandem Computers, Inc. and
Western Digital Corporation. The Benchmarking Study evaluated the Company's
executive compensation against information about compensation for the top five
executive positions at the peer group companies, and indicated that base
salaries of Iomega executives were generally below the 25th percentile of the
peer group. The Company also considered information about the compensation of
other executives from a number of broad based surveys of high technology
companies. Based on the data reviewed by the Committee, and in its subjective
judgment, the Committee approved increases in base salary for 1997 for executive
officers ranging from approximately 5 to 30 percent.
- --------------------------------------------------------------------------------
15
<PAGE> 20
- --------------------------------------------------------------------------------
CASH BONUS PROGRAM
For 1997, the Company adopted a cash bonus program tied to the achievement
by the Company of specified levels of net after-tax income and consolidated
worldwide revenue. Except with respect to the Chief Executive Officer, no
bonuses were payable under the program unless minimum targets in both categories
were achieved. The program was divided into four separate plans covering
different groups of employees: (i) bonus for Chief Executive Officer; (ii) bonus
for Executive Group; (iii) bonus for Key Contributors; and (iv) a Profit-Sharing
program for other full-time regular employees who were not participants in other
cash incentive plans.
The target bonus for Executive Group, which included each of the Named
Executive Officers other than Mr. Edwards, consisted of two components: (i)
payment ranging from 0% to 40% of each executive's 1997 gross salary tied to the
level of the Company's 1997 net after-tax income and (ii) a discretionary bonus
pool, the size of which would be determined based in part on a formula tied to
the Company's 1997 net after-tax income, and in part on the discretion of the
Committee. Mr. Edwards allocated the discretionary bonus pool based upon his
subjective assessment of the contributions by the members of the Executive
Group.
In January 1998, the Committee reviewed the Company's performance against
the objective criteria of the program and approved the incentive payments to
executives tied to financial targets. The Committee also approved the size of
the discretionary pool to be allocated by Mr. Edwards. The amounts paid to the
Named Executive Officers, which reflect Mr. Edwards' allocation of the
discretionary bonus pool among the Executive Group, are included in the Summary
Compensation Table included in this Proxy Statement.
STOCK OPTIONS
Between 1992 and 1995, the Committee maintained a general policy of not
granting stock options to employees, except for recruiting key personnel and in
other special circumstances. In connection with setting 1996 compensation, the
Committee determined that it would be appropriate to begin granting stock
options to key employees on an annual basis as the long-term component of their
compensation package. This determination was reached after considering, among
other things, the results of a 1995 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 study.
In September 1996, the Committee determined that it would have a positive
impact on employee morale and achievement of the Company'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 and
provided for vesting in four equal annual installments beginning on January 1,
1998. As a result of its decision to grant options in September 1996, the
Company did not grant any stock options to the Named Executive Officers during
1997, other than to Ms. Keating, who joined the Company in January 1997.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In January 1997, the Committee increased Mr. Edwards' base salary for 1997
from $400,000 to $450,000. Mr. Edwards' base salary was subjectively determined
after review of the results of the Benchmarking Study. This increase placed Mr.
Edwards' base pay below the 25th percentile, and his total cash compensation
between the 50th and 75th percentile, of the peer group included in the
Benchmarking Study.
Mr. Edwards' cash bonus plan for 1997 consisted of a formula-based payment
tied to the Company's 1997 net after-tax income and an opportunity to receive a
discretionary supplemental bonus based upon certain non-financial criteria. In
January 1998, the Board approved a 1997 cash bonus for Mr. Edwards in the amount
of $641,800, determined in accordance with the formula contained in the plan. No
additional discretionary amounts were paid.
- --------------------------------------------------------------------------------
16
<PAGE> 21
- --------------------------------------------------------------------------------
IMPACT OF SECTION 162(m) OF THE INTERNAL REVENUE CODE
Except as described below, the Company does not believe Section 162(m) of
the Internal Revenue Code, which disallows a tax deduction for certain
compensation in excess of one million dollars, 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 240,000 shares of Common Stock over a
three-year period for nominal consideration. Although 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). Accordingly, the value of the shares is not expected to be
deductible. In addition, because the Company's cash bonus programs for 1997 and
1998 are not operated in a manner designed to qualify as "performance-based
compensation" as defined by Section 162(m), it is possible that a portion of any
bonus payable to Mr. Edwards and certain other executives under these programs
will not be deductible. The 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).
Willem H. J. Andersen
David A. Duke
John E. Myers
The Honorable John E. Sheehan
- --------------------------------------------------------------------------------
17
<PAGE> 22
- --------------------------------------------------------------------------------
ITEM TWO -- AMENDMENT OF 1995 DIRECTOR STOCK OPTION PLAN
- --------------------------------------------------------------------------------
THE SECOND AGENDA ITEM TO BE VOTED ON IS THE AMENDMENT OF THE
COMPANY'S 1995 DIRECTOR STOCK OPTION PLAN. THE BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE AMENDMENT.
The purpose of the 1995 Director Stock Option Plan (the "Director Plan") is
to encourage ownership of the Company's stock by outside directors whose
continued services are considered essential to the Company's future progress,
and to provide them with an incentive to continue as directors of the Company.
In September 1997, the Board of Directors adopted, subject to stockholder
approval, certain amendments to the Director Plan which are described below. The
Board believes these amendments will help the Company to attract and retain
qualified outside directors and provide further incentives to directors as a
result of their equity interest in the Company.
SUMMARY OF PROPOSED CHANGES
The amendments, if approved by the stockholders, will result in the
following changes to the Director Plan:
- INCREASED INITIAL OPTION GRANT. After the 1998 Annual Meeting, the
option granted to each non-employee director at the time of his or her initial
election to the Board will be increased from 40,000 shares to 50,000 shares
(after giving effect to the two-for-one stock split effected in December 1997).
In addition, the two directors initially elected after last year's Annual
Meeting will receive, on the date of the 1998 Annual Meeting, an option for
10,000 shares (to supplement the option for 40,000 shares previously granted to
them). The Director Plan is also being clarified to provide that, as is the case
with the total number of shares issuable under the Director Plan, the numbers of
shares included in each initial and annual option grant issuable under the terms
of the Director Plan will automatically be adjusted to reflect any future stock
splits, combinations and other similar changes in the Company's capital
structure.
- ADDITION OF MONTHLY OPTION ALTERNATIVE. In place of the grant of any
initial or annual option under the Director Plan, a director entitled to an
option grant can elect to receive his or her grant as a series of monthly
options ("Monthly Options"), consisting of between 2 and 24 Monthly Options (as
determined by the Management Development and Compensation Committee) and
covering, in total, the same number of shares as the single option grant would
have covered, on terms substantially identical to those of the single option
grant. Each Monthly Option in a series will have an exercise price equal to the
fair market value of the Company's Common Stock on the date of grant of such
Monthly Option. A director must make the request to receive Monthly Options no
later than the date the single option grant would otherwise be made.
SUMMARY OF THE DIRECTOR PLAN
The principal provisions of the Director Plan, as proposed to be amended,
are summarized below. This summary is qualified in its entirety by reference to
the plan, a copy of which is attached to the electronic copy of this Proxy
Statement filed with the SEC and may be accessed from the SEC's home page
(www.sec.gov). In addition, copies of the Director Plan may be obtained from the
Secretary of the Company.
ELIGIBILITY. Only directors of the Company who are not employees of the
Company or any of its subsidiaries are eligible to receive options under the
Director Plan.
NUMBER OF SHARES. A total of up to 2,400,000 shares of Common Stock may be
issued 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 are available for future grants under the
Director Plan.
INITIAL AND ANNUAL OPTION GRANTS. The Director Plan provides for two types
of option grants:
- Initial Option -- a one-time option grant made in connection with the
initial election of a new director; and
- Annual Options -- after the initial option is fully vested, directors
become eligible to receive an
18
<PAGE> 23
annual option grant each year. For directors elected prior to the adoption of
the Director Plan, the right to receive annual options depends on whether the
option they received from the Company under one of its previous director option
plans is fully vested. See "Vesting" below.
Each non-employee director who is first elected to the Board of Directors
after the 1998 Annual Meeting will be granted (i) an initial option to purchase
50,000 shares of Common Stock on the date of such election and (ii) after such
initial option is fully vested, an annual option to purchase 10,000 shares of
Common Stock on each anniversary of his or her initial election. Dr. Duke and
Mr. Sierk, the two non-employee directors who were first elected to the Board of
Directors after April 22, 1997 but before the 1998 Annual Meeting, will each be
granted (i) an option to purchase 10,000 shares of Common Stock on the date of
the 1998 Annual Meeting (to supplement the option for 40,000 shares previously
granted under the Director Plan) and (ii) after such options are fully vested,
an annual option to purchase 10,000 shares of Common Stock on each subsequent
anniversary of his initial election. Each director who was serving as a
non-employee director on April 22, 1997 and whose option granted under one of
the Company's previous director option plans is then fully vested will be
granted an option to purchase 10,000 shares of Common Stock on each anniversary
of April 22 for so long as he continues to be a director. A director may, as
described above, substitute a series of Monthly Options for any initial or
annual option.
OPTIONS TO BE GRANTED AT THE 1998 ANNUAL MEETING. Under the terms of the
Director Plan as it currently exists, and regardless of whether the proposed
amendments are adopted, on April 22, 1998, Messrs. Berkowitz, Dunn, Nolan and
Sheehan will each be granted an annual option to purchase 10,000 shares. As
discussed above, if the proposed amendments are adopted, on the date of the
Annual Meeting, Dr. Duke and Mr. Sierk will each be granted a supplemental
option to purchase 10,000 shares.
EXERCISE PRICE. The exercise price for all options granted under the
Director Plan is the closing price of the Common Stock on the date of grant. On
February 27, 1998, the closing price of the Common Stock on the New York Stock
Exchange was $9.13.
VESTING. Each option becomes exercisable (or "vests") 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. The supplemental options to be granted to Dr.
Duke and Mr. Sierk will vest based on the date of grant of each of the 40,000-
share options which they supplement. Each Monthly Option in a series will vest
such that the total number of shares vested at any time is equal to the number
that would have been vested if a single option had been granted.
EFFECT OF TERMINATION OF SERVICE AS A DIRECTOR. In general, after
termination of his or her service as a director, each optionee is entitled, for
a period of 90 days, to exercise his or her options to purchase the number of
shares of Common Stock which were vested at the time of termination. This
exercise period is extended from 90 days to two years if termination is by
reason of death, disability or 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 unvested options will immediately become exercisable in full.
All options expire 10 years after the date of grant. The termination provisions
of each Monthly Option in a series are designed to provide for substantially the
same rights upon termination as would have resulted if a single option had been
granted.
TRANSFERABILITY. Options may be transferred by the directors to family
members or as charitable gifts, but any transferee will hold such options
subject to the terms and conditions of the option.
EFFECT OF A CHANGE OF CONTROL OF THE COMPANY.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, will 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
19
<PAGE> 24
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.
The Change of Control provisions of each Monthly Option in a series are designed
to provide for substantially the same rights upon a Change of Control as would
have resulted if a single option had been granted.
BOARD AUTHORITY TO CHANGE DIRECTOR PLAN. The Board of Directors may
suspend or discontinue the Director Plan or amend it in any respect whatsoever,
except that stockholder approval is required for any amendment that (i) changes
the number of shares subject to the Director Plan, (ii) changes the designation
of directors eligible to receive options under the Director Plan, or (iii)
materially increases the benefits accruing to participants in the Director Plan.
In addition, in the case of any Monthly Options, without the consent of the
affected director, the Board may not suspend, discontinue, revise or amend the
Director Plan or any outstanding option if it would materially and adversely
affect his or her rights to receive Monthly Options under the Director Plan.
FEDERAL INCOME TAX CONSEQUENCES. All options granted under the Director
Plan will be nonstatutory stock options. See Appendix A for a discussion of the
tax treatment of nonstatutory stock options.
- --------------------------------------------------------------------------------
ITEM THREE -- APPROVAL OF EMPLOYEE STOCK PURCHASE PLANS
- --------------------------------------------------------------------------------
THE THIRD AGENDA ITEM TO BE VOTED ON IS THE APPROVAL OF THE
COMPANY'S 1998 EMPLOYEE STOCK PURCHASE PLAN AND 1998
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN. THE BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PURCHASE PLANS.
In order to encourage stock ownership by employees of the Company and its
subsidiaries, in November 1997, the Board of Directors adopted, subject to
stockholder approval, the 1998 Employee Stock Purchase Plan (the "1998 Plan")
covering 1,500,000 shares of Common Stock and the 1998 International Employee
Stock Purchase Plan (the "1998 International Plan" and, together with the "1998
Plan", the "Purchase Plans") covering 1,500,000 shares of Common Stock.
Except for provisions regarding the manner in which employees pay the
purchase price for stock to be acquired and certain provisions relating to U.S.
tax law included in the 1998 Plan, the two Purchase Plans are substantially
identical. The 1998 Plan is intended for employees of the Company, its domestic
subsidiaries and certain international subsidiaries located in countries in
which participation by payroll withholding is permitted. The 1998 International
Plan is intended for employees of international subsidiaries of the Company
located in countries where applicable laws or regulations prohibit participation
by payroll withholding.
SUMMARY OF THE PURCHASE PLANS
The principal provisions of the Purchase Plans are summarized below. This
summary is qualified in its entirety by reference to the plans, copies of which
are attached to the electronic copy of this Proxy Statement filed with the SEC
and may be accessed from the SEC's home page (www.sec.gov). In addition, copies
of the plans may be obtained from the Secretary of the Company.
ELIGIBILITY. Subject to certain restrictions described below, all
employees (i) who are employed on the date that an offering commences or who
become employed during an offering and (ii) who are customarily employed for
more than 20 hours a week are eligible to participate in one of the Purchase
20
<PAGE> 25
Plans. Anyone who is both a "highly compensated employee" within the meaning of
the Internal Revenue Code of 1986, as amended (the "Code"), and who is
designated by the Board of Directors or the Management Development and
Compensation Committee as ineligible to participate may not participate in
either of the Purchase Plans. None of the Named Executive Officers are currently
eligible to participate in the Purchase Plans.
In addition, no person will be eligible to participate in the Purchase
Plans if he or she would be treated for tax purposes as possessing five percent
or more of the voting power or value of the Company's or any subsidiary's Common
Stock immediately after the grant of an option under the Purchase Plans.
As of February 23, 1998, approximately 4,800 persons were eligible to
participate in the Purchase Plans.
OFFERINGS. The Purchase Plans each consist of consecutive, semiannual
offerings, the first of which commenced on January 1, 1998 and expires on June
30, 1998. If the Purchase Plans are not approved at the meeting, the current
offering will be terminated, and all funds returned to employees. Future
offerings will generally start on each subsequent July 1 and January 1.
NUMBER OF SHARES. A total of up to 1,500,000 shares may be purchased in
all offerings under the 1998 Plan, and a total of up to 1,500,000 shares may be
purchased in all offerings under the 1998 International Plan. If the Company
receives requests from employees to purchase more than the number of shares
available during any offering, the available shares will be allocated on a pro
rata basis to subscribing employees.
PURCHASE LIMITATIONS. An employee may elect to have up to 10% of his or
her salary deducted for the purpose of purchasing stock under the 1998 Plan, or
may pay up to 10% of his or her salary to purchase stock under the 1998
International Plan. In no event may an employee's total deduction or payment
during a calendar year exceed $5,000.
PURCHASE PRICE. The price at which the employee may purchase the stock is
85% of the last reported sale price of the Common Stock on the day the offering
period ends.
NEW PLAN BENEFITS. Because participation in the Purchase Plans is
voluntary and participants may withdraw from the Purchase Plans at any time
during an offering period without penalty, the benefits to be received by any
particular person or group are not determinable by the Company at this time.
AMENDMENTS AND ADMINISTRATION. The Board of Directors of the Company may
at any time terminate or amend the Purchase Plans. However, the Board of
Directors may not amend the 1998 Plan without approval of the stockholders of
the Company if (a) approval of such amendment is required by Section 423 of the
Code, or (b) the amendment would cause the plan to fail to comply with Section
423 of the Code.
The Purchase Plans will be administered by the Management Development and
Compensation Committee, which is authorized to make rules and regulations for
the administration and interpretation of the plans.
FEDERAL INCOME TAX CONSEQUENCES. See Appendix A for a discussion of the
U.S. federal income tax consequences of the 1998 Plan.
21
<PAGE> 26
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ITEM FOUR -- RATIFICATION OF AUDITORS
- --------------------------------------------------------------------------------
THE FOURTH AND FINAL AGENDA ITEM TO BE VOTED ON IS
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE CURRENT YEAR. THE BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" SUCH RATIFICATION.
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 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
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.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SOLICITATION EXPENSES
All costs of solicitation of proxies will be paid by the Company. In
addition to solicitations by mail, the Company's directors, officers and
employees, without additional pay, may solicit proxies by telephone, or personal
meetings. The Company has retained Morrow & Company, Inc. to assist in the
solicitation of proxies, at a cost to the Company of approximately $5,000 plus
reimbursement of reasonable expenses. The Company reserves the right to retain
other outside agencies for the purpose of soliciting proxies. 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.
DIRECTOR NOMINATIONS
The Nominating and Governance Committee will consider nominees recommended
by stockholders. Stockholders who wish to recommend nominees for director should
submit such recommendations to the Secretary of the Company, at the principal
offices of the Company.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company at the
principal offices of the Company not later than November 11, 1998 for inclusion
in the proxy statement for the 1999 Annual Meeting.
By Order of the Board of Directors,
LAURIE BARTLETT KEATING
Secretary
22
<PAGE> 27
APPENDIX A:
FEDERAL INCOME TAX CONSEQUENCES OF
1995 DIRECTOR STOCK OPTION PLAN AND 1998 EMPLOYEE STOCK PURCHASE PLAN
1995 DIRECTOR STOCK OPTION PLAN
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to the grant and exercise of
stock options under the Director Plan and with respect to the sale of Common
Stock acquired under the Director Plan. The Director Plan is not a qualified
plan under Section 401(a) of the Code.
TAX CONSEQUENCES TO PARTICIPANTS. A participant will not recognize taxable
income upon the grant of an option under the Director Plan. However, a
participant will recognize ordinary compensation income upon the exercise of the
option in an amount equal to the excess of the fair market value of the Common
Stock acquired through the exercise of the option (the "Option Stock") on the
exercise date over the exercise price.
A participant will have a tax basis for any Option Stock equal to the
exercise price plus any income recognized with respect to the option. Upon
selling Option Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the Option
Stock and the participant's tax basis in the Option Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
Option Stock for more than one year prior to the date of the sale and will be a
short-term capital gain or loss if the participant has held the Option Stock for
a shorter period.
TAX CONSEQUENCES TO THE COMPANY. The grant of a stock option under the
Director Plan will have no tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the Director Plan.
1998 EMPLOYEE STOCK PURCHASE PLAN
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to participation in the 1998
Plan and with respect to the sale of Common Stock acquired under the 1998 Plan.
The 1998 Plan is intended to qualify as an "Employee Stock Purchase Plan" within
the meaning of Section 423 of the Code. The 1998 Plan is not a qualified plan
under Section 401(a) of the Code.
TAX CONSEQUENCES TO PARTICIPANTS. In general, a participant will not
recognize taxable income upon enrolling in the 1998 Plan or upon purchasing
shares of Common Stock at the end of an Offering. Instead, if a participant
sells Common Stock acquired under the 1998 Plan at a sale price that exceeds the
price at which the participant purchased the Common Stock, then the participant
will recognize taxable income in an amount equal to the excess of the sale price
of the Common Stock over the price at which the participant purchased the Common
Stock. A portion of that taxable income will be ordinary income, and a portion
may be capital gain.
If the participant sells the Common Stock more than two years after the
date on which the Offering terminated (the "Grant Date"), then the participant
will be taxed as follows. If the sale price of the Common Stock is higher than
the price at which the participant purchased the Common Stock, then the
participant will recognize ordinary compensation income in an amount equal to
the lesser of:
(i) the excess of the fair market value of the Common Stock on the Grant
Date over the price at which the participant purchased the Common Stock; and
(ii) the excess of the sale price of the Common Stock over the price at
which the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
If the participant sells the Common Stock within two years after the Grant
Date (a "Disqualifying Disposition"), then the participant will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the Common
A-1
<PAGE> 28
Stock on the date that it was purchased over the price at which the participant
purchased the Common Stock. The participant will also recognize capital gain in
an amount equal to the excess of the sale price of the Common Stock over the
fair market value of the Common Stock on the date that it was purchased, or
capital loss in an amount equal to the excess of the fair market value of the
Common Stock on the date that it was purchased over the sale price of the Common
Stock. This capital gain or loss will be a long-term capital gain or loss if the
participant has held the Common Stock for more than one year prior to the date
of the sale and will be a short-term capital gain or loss if the participant has
held the Common Stock for a shorter period.
TAX CONSEQUENCES TO THE COMPANY. The offering of Common Stock under the
1998 Plan will have no tax consequences to the Company. Moreover, in general,
neither the purchase nor the sale of Common Stock acquired under the 1998 Plan
will have any tax consequences to the Company except that the Company will be
entitled to a business-expense deduction with respect to any ordinary
compensation income recognized by a participant upon making a Disqualifying
Disposition. Any such deduction will be subject to the limitations of Section
162(m) of the Code.
A-2
<PAGE> 29
PROXY PROXY
IOMEGA CORPORATION
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 21, 1998
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 Bartlett 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 21, 1998 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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<TABLE>
<S> <C>
[x] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE.
WITHHOLD
FOR all AUTHORITY
1. To elect the nominees to vote for Nominees:
three Class I all nominees David A. Duke
Directors listed [ ] [ ] David J. Dunn
at right (except as marked below): James A. Sierk
[ ] FOR all nominees except the following (to withhold
authority to vote for any individual nominee,
write that nominee's name below):
---------------------------------------------------
---------------------------------------------------
FOR AGAINST ABSTAIN
2. To approve amendments to the Company's 1995 [ ] [ ] [ ]
Director Stock Option Plan.
3. To approve the Company's 1998 Employee Stock [ ] [ ] [ ]
Purchase Plan and 1998 International Employee
Stock Purchase Plan.
</TABLE>
<PAGE> 30
<TABLE>
<S> <C>
FOR AGAINST ABSTAIN
4. To ratify the selection of Arthur Andersen LLP [ ] [ ] [ ]
as the Company's independent
auditors for the current year.
</TABLE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE 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 4. 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.
<TABLE>
<S> <C>
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.
</TABLE>
<PAGE> 31
APPENDIX 1
IOMEGA CORPORATION
SECOND 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
2,400,000 shares of the Company's Common Stock, subject to adjustment as
provided in Section 9 of the Plan.
* All numbers of shares set forth herein give effect to the two-for-one split
of the Common Stock effected December 22, 1997 in the form of a 100% stock
dividend issued to stockholders of record as of December 1, 1997.
<PAGE> 32
(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
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:
(x) an option to purchase (i) if such person first becomes a
non-employee director prior to the Company's 1998 Annual Meeting of
Stockholders, 40,000 shares of Common Stock on the date that he/she is first
elected to serve as such a director ("Initial Option Date") and 10,000 shares of
Common Stock on the date of the Company's 1998 Annual Meeting of Stockholders
(with such 10,000-share grant to vest in accordance with the vesting schedule
contained in, and to have the same term as, the 40,000-share grant) or (ii) if
such person first becomes a non-employee director at or after the Company's 1998
Annual Meeting of Stockholders, 50,000 shares of Common Stock on the Initial
Option Date; and
(y) an annual option to purchase 10,000 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 10,000
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.
2
<PAGE> 33
(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.
(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
3
<PAGE> 34
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.
(h) MONTHLY OPTION GRANTS. At the discretion of the Board of Directors or
the Committee, in lieu of any option to be granted pursuant to section 5(a) (the
"Replaced Option"), the Board of Directors or the Committee may, upon request of
the optionee made no later than the time of grant, provide for the granting of a
series of monthly option grants over a number of months (which may range from 2
to 24) determined by the Board of Directors or the Committee. The first such
monthly options shall be granted on the date on which the Replaced Option would
have been granted and the subsequent monthly options will be granted on the
comparable day in each successive month during the period of months over which
such series shall be granted. The terms of such monthly options shall be the
same as those of the options granted under Section 5(a), with the following
exceptions:
(i) the number of shares subject to each monthly option in the series
shall equal the number of shares which would have been covered by the Replaced
Option divided by the number of monthly periods (which may range from 2 to 24)
determined by the Board of Directors or the Committee (subject to adjustment to
eliminate fractional shares);
(ii) the option exercise price for each such monthly option shall equal
the closing price of the Company's Common Stock on the New York Stock Exchange
on the date of grant of such monthly option;
(iii) all monthly options shall terminate ten years after the date of
grant of the first monthly option in the applicable series (the "Initial Monthly
Option");
(iv) the vesting of each such monthly option shall be determined with
reference to the date of grant of the Initial Monthly Option (and if the date of
grant of a monthly option is on or after the first anniversary of the date of
grant of the
4
<PAGE> 35
Initial Monthly Option, such monthly option shall be exercisable upon grant to
the same extent as the Initial Monthly Option is then exercisable);
(v) if the optionee ceases to serve as a Director prior to the date of
grant of any monthly option in the applicable series:
(x) if the Director's service is terminated by reason of death or
disability, then (1) on the next scheduled monthly grant date, the Company shall
grant to the Director one fully vested option for all the shares that would have
been covered by the options that remained issuable under the applicable series
of grants and (2) all prior monthly options shall automatically become
exercisable in full; or
(y) if the Director's service is terminated other than by reason of
death or disability, then (1) no further monthly grants shall be made and (2)
the vesting of all previously granted monthly options shall be accelerated (on a
pro rata basis) such that the number of shares for which such monthly options
are exercisable as of such termination of service is equal to the number of
shares for which the Replaced Option would have been exercisable as of such
termination of service; and
(vi) in the event of a Change of Control, (x) the Company shall,
immediately prior to such Change of Control, grant to the Director an option
for all the shares that would have been covered by the Monthly Options that
remained issuable under the applicable series of grants and (y) the vesting of
all Monthly Options shall be accelerated to the extent required so that the
Director is entitled to purchase, in total, the number of shares he or she
would have been vested in, pursuant to Section 10 ("Change of Control"), had
the Replaced Option been granted in accordance with Section 5(a).
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
5
<PAGE> 36
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 Stock, or other securities, an appropriate and
proportionate adjustment shall automatically 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, (iii) the number and kind of shares or other securities subject to options
to be granted under Section 5 of the Plan, and (iv) the price for each share
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
6
<PAGE> 37
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. Notwithstanding the foregoing, with respect to any option issued or
issuable in accordance with Section 5(h), the Board shall not suspend,
discontinue, revise or amend the Plan or any outstanding option in a manner
which materially and adversely affects the rights of a director under Section
5(h) without the consent of the affected director.
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.
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.
7
<PAGE> 38
APPENDIX II
IOMEGA CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
November 10, 1997
The purpose of this Plan is to provide eligible employees of Iomega
Corporation (the "Company") and certain of its U.S. subsidiaries with
opportunities to purchase shares of the Company's common stock, $0.03 1/3 par
value per share (the "Common Stock"), commencing on January 1, 1998. One million
five hundred thousand (1,500,000) shares of Common Stock in the aggregate have
been reserved for this purpose.
1. ADMINISTRATION. The Plan will be administered by the Company's Board of
Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan, to determine any brokerage and
other fees to be paid or subsidized by the Company, and to determine the number
of shares in each Offering; its interpretation and decisions with regard thereto
shall be final and conclusive.
2. ELIGIBILITY. Participation in the Plan will neither be permitted nor
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company and all employees of any subsidiary of the Company (as
defined in Section 424(f) of the Code) designated by the Board or the Committee
from time to time (a "Designated Subsidiary"), are eligible to participate in
any one or more of the offerings of Options (as defined in Section 9) to
purchase Common Stock under the Plan provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week; and
(b) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below) or become
employees of the Company or a Designated Subsidiary during the
applicable Plan Period.
Notwithstanding the foregoing, anyone who is both a "highly compensated
employee" within the meaning of Section 414(q) of the Code and is designated by
the Board or the Committee from time to time as ineligible to participate in the
Plan, shall not be entitled to participate in the Plan.
No employee may be granted an option hereunder if such employee, immediately
after the option is granted, owns 5% or more of the total combined voting
<PAGE> 39
power or value of the stock of the Company or any subsidiary. For purposes of
the preceding sentence, the attribution rules of Section 424(d) of the Code
shall apply in determining the stock ownership of an employee, and all stock
which the employee has a contractual right to purchase shall be treated as stock
owned by the employee.
3. OFFERINGS. The Company will make offerings (each, an "Offering") to
employees to purchase shares of Common Stock under this Plan. Offerings will
begin each January 1 and July 1, or the first business day thereafter (the
"Offering Commencement Dates"). Each Offering Commencement Date will begin a six
month period (a "Plan Period") during which payroll deductions will be made and
held for the purchase of Common Stock at the end of the Plan Period.
4. PARTICIPATION. An employee eligible on the Offering Commencement Date of
any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office, or in any other manner determined to be appropriate by the Board or the
Committee ("Appropriate Authorization"), at least 15 days prior to the
applicable Offering Commencement Date. An employee who becomes an eligible
employee during a Plan Period, or not more than 15 days prior to an Offering
Commencement Date for such Plan Period, may participate in such Offering by
effecting an Appropriate Authorization to the employee's appropriate payroll
office within 15 days of his employment commencement date. Such an employee
shall be deemed enrolled in the Offering for such Plan Period as of his first
payroll deduction beginning more than 15 days after the Appropriate
Authorization has been effected. The Appropriate Authorization will authorize a
regular payroll deduction from the Compensation received by the employee during
the Plan Period. Unless an employee notifies the Company of a new Appropriate
Authorization or withdraws from the Plan, his deductions and purchases will
continue at the same rate for future Offerings under the Plan as long as the
Plan remains in effect. The term "Compensation" means the amount of money
reportable on the employee's Federal Income Tax Withholding Statement, excluding
allowances and reimbursements for expenses such as relocation allowances, travel
expenses, income or gains on the exercise of Company stock options or stock
appreciation rights, whether or not shown on the employee's Federal Income Tax
Withholding Statement, but including, in the case of salespersons, sales
commissions.
5. DEDUCTIONS. The Company will maintain payroll deduction accounts for all
participating employees. With respect to any Offering made under this Plan, an
employee may authorize a payroll deduction in any dollar amount up to a maximum
of 10% of the Compensation he receives during the Plan Period or such shorter
period during which deductions from payroll are made. In no event may an
employee's total payroll deductions during a calendar year exceed $5,000. The
minimum payroll deduction is such percentage of Compensation as may be
established from time to time by the Board or the Committee.
-2-
<PAGE> 40
No employee may be granted an Option (as defined in Section 9) which permits
his rights to purchase Common Stock under this Plan and any other employee stock
purchase plan (as defined in Section 423(b) of the Code) of the Company and its
subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value
of such Common Stock (determined as of the last business day of the Plan Period)
for each calendar year in which the Option is outstanding at any time.
6. DEDUCTION CHANGES. An employee may increase, decrease or discontinue his
payroll deduction once during any Plan Period, by effecting a new Appropriate
Authorization. If an employee elects to discontinue his payroll deductions
during a Plan Period, but does not elect to withdraw his funds pursuant to
Section 8 hereof, funds deducted prior to his election to discontinue will be
applied to the purchase of Common Stock on the Exercise Date (as defined below).
7. INTEREST. Interest will not be paid on any employee accounts.
8. WITHDRAWAL OF FUNDS. An employee may at any time prior to the close of
business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. Any employee who withdraws from participation in an Offering shall
not be permitted to participate in the Plan again until the start of the next
Plan Period.
9. PURCHASE OF SHARES. Each eligible employee who is a participant in the
Plan on the last day of a Plan Period shall have the right and option ("Option")
to purchase on the last business day of such Plan Period (the "Exercise Date"),
at the Option Price hereinafter provided for, the largest number of whole shares
of Common Stock of the Company as does not exceed the number of shares
determined by dividing $12,500 by the closing price (as defined below) on the
last business day of such Plan Period. Unless the participating employee elects
otherwise, by written notice to the Company, he shall be deemed to have
exercised his Option at the Option Price on the Exercise Date and shall be
deemed to have purchased from the Company the number of full shares of Common
Stock that his accumulated payroll deductions will pay for on the Exercise Date,
but not in excess of the maximum number determined in the manner set forth
above.
The purchase price for each share purchased will be 85% of the closing price
of the Common Stock on the Exercise Date. Such closing price shall be (a) the
closing price on any national securities exchange on which the Common Stock is
listed, (b) the closing price of the Common Stock on the Nasdaq National Market
or (c) the average of the closing bid and asked prices in the
over-the-counter-market, whichever is applicable, as published in THE WALL
STREET JOURNAL. If no sales of Common Stock were made on such a day, the price
of the Common Stock for purposes of clauses (a) and (b) above shall be the
reported price for the next preceding day on which sales were made.
-3-
<PAGE> 41
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. ISSUANCE OF CERTIFICATES. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the name
of a brokerage firm, bank or other nominee holder designated by the employee.
The Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing stock
certificates.
11. RIGHTS ON RETIREMENT, DEATH OR TERMINATION OF EMPLOYMENT. In the event
of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, and such employee is not transferred to the
Company or another Designated Subsidiary, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan. If,
prior to the last business day of the Plan Period, an employee is transferred
from the Company to a Designated Subsidiary or from a Designated Subsidiary to
the Company or to another Designated Subsidiary, the employee shall not be
deemed to have terminated employment for the purposes of this Plan.
12. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. RIGHTS NOT TRANSFERABLE. Rights under this Plan are not transferable by
a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
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<PAGE> 42
14. APPLICATION OF FUNDS. All funds received or held by the Company under
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK. In the event of a
subdivision of outstanding shares of Common Stock, or the payment of a dividend
in Common Stock, the number of shares reserved for issuance under this Plan, the
number of shares issuable in any Offering, and the share limitation set forth in
Section 9, shall be increased proportionately, and such other adjustment shall
be made as may be deemed equitable by the Board or the Committee. In the event
of any other change affecting the Common Stock, such adjustment shall be made as
may be deemed equitable by the Board or the Committee to give proper effect to
such event.
16. MERGER. In the event of a proposed sale of all or substantially all of
the assets of the Company or a merger or consolidation of the Company with or
into another corporation (other than a merger in which the Company is the
surviving corporation and the holders of the capital stock of the Company
immediately prior to such merger continue to hold at least 80% by voting power
of the capital stock of the Company) or the proposed dissolution or liquidation
of the Company during a Plan Period, the Board or the Committee shall set a new
Exercise Date (the "New Exercise Date") for such Plan Period, and such Plan
Period shall end on the New Exercise Date. The New Exercise Date shall be before
the date of such asset sale, merger, consolidation, dissolution or liquidation.
The Board or the Committee shall send written notice to each employee
participating in the Offering for such Plan Period, at least ten business days
prior to the New Exercise Date, that the Exercise Date for such Offering has
been changed to the New Exercise Date and that the employee's Option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
employee has withdrawn from such Offering as provided in Section 8 hereof.
17. AMENDMENT OF THE PLAN. The Board may at any time, and from time to time,
amend this Plan in any respect, except that (a) if the approval of any such
amendment by the shareholders of the Company is required by Section 423 of the
Code, such amendment shall not be effected without such approval, and (b) in no
event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. INSUFFICIENT SHARES. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis based on the number of
shares of Common Stock subject to Options granted on the Exercise Date. Any
balance remaining in an employee's payroll deduction account at the end of a
Plan Period due to an insufficiency of shares will be refunded to the employee
without interest.
-5-
<PAGE> 43
19. TERMINATION OF THE PLAN. This Plan may be terminated at any time by the
Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on the Nasdaq National Market and the approval of all governmental
authorities required in connection with the authorization, issuance or sale of
such stock.
21. GOVERNING LAW. The Plan shall be governed by Delaware law except to the
extent that such law is preempted by federal law.
22. ISSUANCE OF SHARES. Shares may be issued upon exercise of an Option from
authorized but unissued Common Stock, from shares held in the treasury of the
Company, or from any other proper source.
23. NOTIFICATION UPON SALE OF SHARES. Each employee agrees, by entering the
Plan, to promptly give the Company notice of any disposition of shares purchased
under the Plan where such disposition occurs within two years after the date of
grant of the Option pursuant to which such shares were purchased.
24. EFFECTIVE DATE AND APPROVAL OF SHAREHOLDERS. The Plan shall take effect
on January 1, 1998, but is subject to approval by the stockholders of the
Company at the 1998 Annual Meeting of Stockholders of the Company. If the Plan
is not approved by the stockholders of the Company at the 1998 Annual Meeting,
the Plan shall automatically terminate and all funds held in an employee's
payroll deduction account will be refunded to the employee, without interest.
Adopted by the Board of Directors
on November 10, 1997
Approved by the stockholders on
_______________, 1998
-6-
<PAGE> 44
APPENDIX III
IOMEGA CORPORATION
1998 INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
November 10, 1997
The purpose of this Plan is to provide eligible employees of certain
non-U.S. subsidiaries of Iomega Corporation (the "Company") with opportunities
to purchase shares of the Company's common stock, $ 0.03 1/3 par value per share
(the "Common Stock"), commencing on January 1, 1998. One million five hundred
thousand (1,500,000) shares of Common Stock (giving prospective effect to the
2-for-1 stock split to be effected as of December 22, 1997 by means of a stock
dividend) in the aggregate have been reserved for this purpose.
1. ADMINISTRATION. The Plan will be administered by the Company's Board of
Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan, to determine any brokerage and
other fees to be paid or subsidized by the Company, and to determine the number
of shares in each Offering; its interpretation and decisions with regard thereto
shall be final and conclusive.
2. ELIGIBILITY. All employees of any subsidiary of the Company designated by
the Board or the Committee from time to time (a "Designated Subsidiary"), are
eligible to participate in any one or more of the offerings of Options (as
defined in Section 9) to purchase Common Stock under the Plan provided that:
(a) they are customarily employed by a Designated Subsidiary for
more than 20 hours a week; and
(b) they are employees of a Designated Subsidiary on the first day
of the applicable Plan Period (as defined below) or become employees of
a Designated Subsidiary during the applicable Plan Period.
Notwithstanding the foregoing, anyone who is both a "highly compensated
employee" within the meaning of Section 414(q) of the Code and is designated by
the Board or the Committee from time to time as ineligible to participate in the
Plan, shall not be entitled to participate in the Plan.
No employee may be granted an option hereunder if such employee, immediately
after the option is granted, owns 5% or more of the total combined voting
power or value of the stock of the Company or any subsidiary. For purposes of
the preceding sentence, the attribution rules of Section 424(d) of the U.S.
Internal
<PAGE> 45
Revenue Code of 1986, as amended (the "Code"), shall apply in determining the
stock ownership of an employee, and all stock which the employee has a
contractual right to purchase shall be treated as stock owned by the employee.
3. OFFERINGS. The Company will make offerings (each, an "Offering") to
employees to purchase shares of Common Stock under this Plan. Offerings will
begin each January 1 and July 1, or the first business day thereafter (the
"Offering Commencement Dates"). Each Offering Commencement Date will begin a six
month period (a "Plan Period") during which payroll deductions will be made and
held for the purchase of Common Stock at the end of the Plan Period.
4. PARTICIPATION. An employee eligible on the Offering Commencement Date of
any Offering may participate in such Offering by completing and forwarding an
authorization form to the employee's appropriate payroll office, or in any other
manner determined to be appropriate by the Board or the Committee ("Appropriate
Authorization") at least 15 days prior to the applicable Offering Commencement
Date. An employee who becomes an eligible employee during a Plan Period, or not
more than 15 days prior to the Offering Commencement Date for such Plan Period,
may participate in such Offering by effecting an Appropriate Authorization to
the employee's appropriate payroll office within 15 days of his employment
commencement date. Such an employee shall be deemed enrolled in the Offering for
such Plan Period as of his first participation payment beginning more than 15
days after the Appropriate Authorization has been effected. Unless an employee
files a new Appropriate Authorization or withdraws from the Plan, his
participation and purchases will continue at the same rate for future Offerings
under the Plan as long as the Plan remains in effect. The term "Compensation"
means the amount of money reportable on the employee's U.S. Federal Income Tax
Withholding Statement (or other comparable statement which may be provided
pursuant to applicable laws and regulations), excluding allowances and
reimbursements for expenses such as relocation allowances, travel expenses,
income or gains on the exercise of Company stock options or stock appreciation
rights, whether or not shown on the employee's U.S. Federal Income Tax
Withholding Statement (or other comparable statement), but including, in the
case of salespersons, sales commissions.
5. PARTICIPATION ACCOUNTS. The Company or its Designated Subsidiaries will
maintain participation accounts for all participating employees. With respect to
any Offering made under this Plan, an employee may participate at the rate of
10% of Compensation with any change in Compensation during the Plan Period to
result in an automatic corresponding change in the amount to be paid. In no
event may the employee's total participation account during a calendar year
exceed $5,000.
No employee may be granted an Option (as defined in Section 9) which permits
his rights to purchase Common Stock under this Plan and any other employee stock
purchase plan (as defined in Section 423(b) of the Code) of the
-2-
<PAGE> 46
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such Common Stock (determined at the last business day of
the Plan Period) for each calendar year in which the Option is outstanding at
any time.
6. PARTICIPATION RATE CHANGES. An employee may increase, decrease or
discontinue his participation once during any Plan Period, by effecting a new
Appropriate Authorization. If an employee elects to discontinue his
participation during a Plan Period, but does not elect to withdraw his funds, if
any, pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. INTEREST. Interest will not be paid on any employee accounts.
8. WITHDRAWAL. An employee may at any time prior to the close of business on
the last business day in a Plan Period and for any reason permanently draw out
the balance, if any, accumulated in the employee's participation account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. Any employee who withdraws from participation in an Offering shall
not be permitted to participate in the Plan again until the start of the next
Plan Period.
9. PURCHASE OF SHARES. Each eligible employee who is a participant in the
Plan on the last day of a Plan Period shall have the right and option ("Option")
to purchase on the last business day of such Plan Period (the "Exercise Date"),
at the Option Price hereinafter provided for, the largest number of whole shares
of Common Stock of the Company as does not exceed the number of shares
determined by dividing $12,500 by the closing price (as defined below) on the
last business day of such Plan Period. Unless the participating employee elects
otherwise, by written notice to the Company, he shall be deemed to have
exercised his Option on the Exercise Date at the Option Price upon payment to
the Company or a Designated Subsidiary of the Option Price for the number of
full shares of Common Stock that his accumulated participation account will pay
on the Exercise Date, but not in excess of the maximum number determined in the
manner set forth above.
The purchase price for each share purchased will be 85% of the closing price
of the Common Stock on the Exercise Date. Such closing price shall be (a) the
closing price on any national securities exchange on which the Common Stock is
listed, (b) the closing price of the Common Stock on the Nasdaq National Market
or (c) the average of the closing bid and asked prices in the
over-the-counter-market, whichever is applicable, as published in THE WALL
STREET JOURNAL. If no sales of Common Stock were made on such a day, the price
of the Common Stock for purposes of clauses (a) and (b) above shall be the
reported price for the next preceding day on which sales were made.
-3-
<PAGE> 47
Any balance remaining in an employee's participation account at the end of a
Plan Period will be automatically refunded to the employee except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's participation account for the following
Offering, unless the employee elects not to participate in the following
Offering under the Plan, in which case the balance in the employee's
participation account shall be refunded.
10. ISSUANCE OF CERTIFICATES. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the name
of a brokerage firm, bank or other nominee holder designated by the employee.
The Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing stock
certificates.
11. RIGHTS ON RETIREMENT, DEATH OR TERMINATION OF EMPLOYMENT. In the event
of a participating employee's termination of employment prior to the last
business day of a Plan Period, the balance, if any, in the employee's
participation account shall be paid to the employee or, in the event of the
employee's death, (a) to a beneficiary previously designated in a revocable
notice signed by the employee (with any spousal consent required under
applicable law) or (b) in the absence of such a designated beneficiary, to the
executor or administrator of the employee's estate or (c) if no such executor or
administrator has been appointed to the knowledge of the Company, to such other
person(s) as the Company may, in its discretion, designate. If, prior to the
last business day of the Plan Period, the Designated Subsidiary by which an
employee is employed shall cease to be a subsidiary of the Company, and such
employee is not transferred to another Designated Subsidiary, or if the employee
is transferred to a subsidiary of the Company that is not a Designated
Subsidiary, the employee shall be deemed to have terminated employment for the
purposes of this Plan. If, prior to the last business day of the Plan Period, an
employee transfers from a Designated Subsidiary to another Designated
Subsidiary, the employee shall not be deemed to have terminated employment for
the purposes of this Plan.
12. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an Option to an
employee nor any contributions the employee may make shall constitute such
employee a stockholder of the shares of Common Stock covered by an Option under
this Plan until such shares have been purchased by and issued to him.
13. RIGHTS NOT TRANSFERABLE. Rights under this Plan are not transferable by
a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
-4-
<PAGE> 48
14. APPLICATION OF FUNDS. All funds received or held by the Company under
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK. In the event of a
subdivision of outstanding shares of Common Stock, or the payment of a dividend
in Common Stock, the number of shares reserved for issuance under this Plan, the
number of shares issuable in any Offering, and the share limitation set forth in
Section 9, shall be increased proportionately, and such other adjustment shall
be made as may be deemed equitable by the Board or the Committee. In the event
of any other change affecting the Common Stock, such adjustment shall be made as
may be deemed equitable by the Board or the Committee to give proper effect to
such event.
16. MERGER. In the event of a proposed sale of all or substantially all of
the assets of the Company or a merger or consolidation of the Company with or
into another corporation (other than a merger in which the Company is the
surviving corporation and the holders of the capital stock of the Company
immediately prior to such merger continue to hold at least 80% by voting power
of the capital stock of the Company) or the proposed dissolution or liquidation
of the Company during a Plan Period, the Board or the Committee shall set a new
Exercise Date (the "New Exercise Date") for such Plan Period, and such Plan
Period shall end on the New Exercise Date. The New Exercise Date shall be before
the date of such asset sale, merger, consolidation, dissolution or liquidation.
The Board or the Committee shall send written notice to each employee
participating in the Offering for such Plan Period, at least ten business days
prior to the New Exercise Date, that the Exercise Date for such Offering has
been changed to the New Exercise Date and that the employee's Option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
employee has withdrawn from such Offering as provided in Section 8 hereof.
17. AMENDMENT OF THE PLAN. The Board may at any time, and from time to time,
amend this Plan in any respect, except that (a) if the approval of any such
amendment by the shareholders of the Company is required by Section 423 of the
Code, such amendment shall not be effected without such approval, and (b) in no
event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. INSUFFICIENT SHARES. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis based on the number of
shares of Common Stock subject to Options granted on the Exercise Date. Any
balance
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<PAGE> 49
remaining in an employee's participation account at the end of a Plan Period due
to an insufficiency of shares will be refunded to the employee without interest.
19. TERMINATION OF THE PLAN. This Plan may be terminated at any time by the
Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on the Nasdaq National Market and the approval of all governmental
authorities required in connection with the authorization, issuance or sale of
such stock.
21. GOVERNING LAW. The Plan shall be governed by Delaware law except to the
extent that such law is preempted by federal law.
22. ISSUANCE OF SHARES. Shares may be issued upon exercise of an Option from
authorized but unissued Common Stock, from shares held in the treasury of the
Company, or from any other proper source.
23. NOTIFICATION UPON SALE OF SHARES. Each employee agrees, by entering the
Plan, to promptly give the Company notice of any disposition of shares purchased
under the Plan where such disposition occurs within two years after the date of
grant of the Option pursuant to which such shares were purchased.
24. EFFECTIVE DATE AND APPROVAL OF SHAREHOLDERS. The Plan shall take effect
on January 1, 1998, but is subject to approval by the stockholders of the
Company at the 1998 Annual Meeting of Stockholders of the Company. If the Plan
is not approved by the stockholders of the Company at the 1998 Annual Meeting,
the Plan shall automatically terminate and all funds held in an employee's
participation account shall be refunded to the employee, without interest.
Adopted by the Board of Directors
on November 10, 1997
Approved by the stockholders on
_______________, 1998
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