<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
IOMEGA CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
IOMEGA CORPORATION
(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
--------------------------------------------------------------
<PAGE>
[IOMEGA LETTERHEAD]
March __, 2000
To Our Shareholders:
It is our pleasure to invite you to the 2000 Annual Meeting of Shareholders
of Iomega Corporation. The meeting will be held on Wednesday, April 19, 2000 at
10:00 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. I am also pleased to
present Iomega's 1999 Annual Report, which will give you an update with respect
to our challenges and accomplishments during 1999 and our plans for 2000.
One of the proposals that will be considered at the meeting is approval of
an Employee Stock Option Exchange Program. Under Iomega's corporate governance
policy, this program cannot be implemented without shareholder approval. Because
of the significance of this issue to Iomega, and in recognition of the adverse
reaction some shareholders may initially have to the concept of "repricing"
stock options, we wanted to explain why we believe the Exchange Program is in
Iomega's best interest and merits your approval.
Iomega, like most technology companies, uses stock options as an
important part of its compensation program. These options are intended to
help the Company retain employees and to provide an incentive for employees
to achieve the Company's business goals and create long-term shareholder
value. Due to the fluctuations in the market price of our common stock,
however, many of the Company's stock options currently have exercise prices
that are significantly higher than recent trading prices. As a result, these
options are no longer effectively providing the intended incentive to
employees. Your Board believes that realigning the exercise price of
previously granted options with the current market price of the Company's
Common Stock is essential to retaining and motivating our employees and to
achieving our goal of making Iomega the leader in smart storage solutions.
Unlike many stock option repricings that have been implemented by other
companies, the Exchange Program recognizes the inherent unfairness to
shareholders of simply lowering the exercise price of options held by
employees. Under our Exchange Program, in order to receive new options with a
lower exercise price, employees who elect to participate in the program will
be required to surrender between 1.5 and 2.5 shares subject to existing
options for every 1 share to be subject to a new option. None of the new
options will be exercisable for a period of one year. In addition, for future
grant awards, employees will be considered to have their original grant of
options and will not receive larger grants because of their participation in
the Exchange Program. Accordingly, we believe our Exchange Program mitigates
the dilution to public shareholders associated with most stock option
repricings.
Our Exchange Program was unanimously approved by your Board of Directors,
upon the unanimous recommendation of the Management Development and Compensation
Committee. Please take the time to review the description of the Exchange
Program contained in this Proxy Statement. If you do, we believe that you will
determine, as has your Board, that the Exchange Program is in the Company's best
interest. We urge you to vote in favor of the Exchange Program.
<PAGE>
To assure proper representation of your shares at the meeting, please take a
moment to vote by phone, via the Internet or by using the enclosed proxy card,
at your earliest convenience.
Sincerely yours,
[SIGNATURE LOGO] [SIGNATURE LOGO]
DAVID J. DUNN BRUCE R. ALBERTSON
CHAIRMAN OF THE BOARD PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
IOMEGA CORPORATION
1821 WEST IOMEGA WAY
ROY, UTAH 84067
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, APRIL 19, 2000
The 2000 Annual Meeting of Shareholders of Iomega Corporation will be held
at the Marriott Hotel, 75 South West Temple, Salt Lake City, Utah on Wednesday,
April 19, 2000 at 10:00 a.m., local time. At the meeting, shareholders will act
on the following matters:
1. Election of two Class III directors, each for a term of three years;
2. Approval of the Employee Stock Option Exchange Program;
3. Ratification of the selection of Arthur Andersen LLP as our independent
auditors for the current year; and
4. Any other business that may properly come before the meeting or any
adjournment of the meeting.
Shareholders of record at the close of business on February 28, 2000 are
entitled to vote. Your vote is important regardless of the number of shares that
you own. Kindly sign, date and return the enclosed proxy card, or follow the
instructions provided for voting by phone or the Internet.
By Order of the Board of Directors,
ROBERT D. MURRILL, JR.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Roy, Utah
March __, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information About the Meeting.....................................................................
Item One -- Election of Directors.........................................................................
Stock Ownership Information........................................................................
Corporate Governance...............................................................................
Director Compensation..............................................................................
Executive Compensation.............................................................................
Stock Performance Graph............................................................................
Management Development and Compensation Committee Report on Executive Compensation........................
Item Two -- Approval of the Employee Stock Option Exchange Program........................................
Item Three -- Ratification of Selection of Auditors.......................................................
Additional Information....................................................................................
</TABLE>
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PLANNING TO ATTEND THE MEETING?
If you plan to attend the meeting and are a record holder, please check the
appropriate box on the enclosed proxy card. If you hold your shares in "street
name," please bring a statement from your broker showing your holdings. Seating
at the meeting will be on a first-come, first-served basis. If you have any
questions about the meeting, please call our Investor Information Line
(1-801-332-3585). Photographs will be taken at the meeting for use by Iomega,
and we 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 our Investor
Information Line.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT - 2000 ANNUAL MEETING OF SHAREHOLDERS
This proxy statement contains information about the 2000 Annual Meeting of
Shareholders of Iomega Corporation. The meeting is scheduled to be held on
Wednesday, April 19, 2000, beginning at 10:00 a.m., 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. Iomega's Annual Report for 1999 and
Form 10-K Annual Report as filed with the Securities and Exchange Commission
was first mailed to shareholders, along with these proxy materials, on or
about March __, 2000.
GENERAL INFORMATION ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, shareholders will act upon the matters
outlined in the notice of meeting on the cover page of this proxy statement,
including the election of directors, approval of the Employee Stock Option
Exchange Program and ratification of the Company's independent auditors. In
addition, the Company's management will report on the Company's overall
performance during 1999 and respond to questions from shareholders.
WHO CAN VOTE?
In order to vote, you must have been a shareholder of record at the close of
business on February 28, 2000 (the "record date"). If your shares are owned of
record in the name of a broker or other nominee, you should follow the voting
instructions provided by your nominee.
On the record date, there were ___________ shares of Iomega's common stock
issued, outstanding and entitled to vote. Each share of common stock is entitled
to one vote on each matter to be voted upon.
HOW DO I VOTE?
You may vote by completing and returning the enclosed proxy or by voting in
person at the meeting. In addition, you may be able to vote by phone or via the
Internet, as described below.
VOTING BY PROXY. You may vote by completing and returning the enclosed
proxy. Your proxy will be voted in accordance with your instructions. If you do
not specify a choice on any of the matters described in this proxy statement,
your proxy will be voted in favor of that matter.
You may revoke your proxy at any time before its exercise by delivering a
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the meeting.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting, please
take the time to vote. Votes may be cast:
- by phone
- via the Internet
- by traditional paper proxy
Please take a moment to read the instructions, choose the way to vote that you
find most convenient and cast your vote as soon as possible.
- --------------------------------------------------------------------------------
<PAGE>
VOTING BY PHONE OR INTERNET. If you are a shareholder of record (that is, if
your stock is registered with the Company in your own name), you may vote by
telephone, or electronically through the Internet, by following the instructions
included with your proxy card. If your shares are registered in the name of a
broker or other nominee, your nominee may be participating in a program provided
through ADP Investor Communication Services that allows you to vote by phone or
the Internet. If so, the voting form your nominee sends you will provide
telephone and Internet instructions.
The last vote you submit chronologically (by any means) will supersede your
prior vote(s). Also, if you vote by phone or the Internet, and later decide to
attend the annual meeting, you may cancel your previous vote and vote in person
at the meeting.
The deadline for voting by telephone or electronically through the Internet
as a shareholder of record is 6:00 p.m. EDT, April 18, 2000. For shareholders
whose shares are registered in the name of a broker or other nominee that
participates in a program provided through ADP Investor Communication Services
the deadline is 11:59 p.m. EDT, April 18, 2000.
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 on the record date and entitled to vote, or at
least ___________ shares.
Shares of common stock represented in person or by proxy (including shares
that 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, the meeting will be adjourned until a quorum is
obtained.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The two nominees receiving the highest number of
votes, whether or not a majority of the total number of votes cast, 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 two other
matters scheduled to be voted on at the meeting.
HOW ARE VOTES COUNTED?
Shares that (1) abstain from voting on a particular matter or (2) are held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote on a particular matter ("broker
non-votes") will not be voted in favor of that matter, and will also not be
counted as shares voting on the matter. Accordingly, abstentions and broker
non-votes will have no 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, and, under Iomega's bylaws, the deadline for shareholders to
notify Iomega of any proposals or director nominations to be presented for
action at the annual meeting has passed. If any other matters are properly
presented at the meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment.
2
<PAGE>
ITEM ONE -- ELECTION OF DIRECTORS
THE FIRST AGENDA ITEM TO BE VOTED ON IS THE ELECTION OF TWO CLASS III DIRECTORS.
THE BOARD HAS NOMINATED TWO PEOPLE, EACH OF WHOM IS CURRENTLY SERVING AS A
DIRECTOR OF IOMEGA, AND RECOMMENDS THAT YOU VOTE FOR SUCH NOMINEES.
Our 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 seven directors, two of whom are
Class I Directors (with terms expiring at the 2001 Annual Meeting), three of
whom are Class II Directors (with terms expiring at the 2002 Annual Meeting) and
two of whom are Class III Directors (with terms expiring at the 2000 Annual
Meeting).
At the 2000 Annual Meeting, shareholders will have the opportunity to vote
on the election of Messrs. Berkowitz and Myers who are currently serving as
Class III Directors. The persons named in the enclosed proxy will vote to elect
these two nominees as directors, unless you withhold authority to vote for the
election of any or all of the nominees by marking the proxy to that effect. All
of the nominees have indicated their willingness to serve, if elected, but if
any should be unable or unwilling to serve, proxies may be voted for a
substitute nominee designated by the Board of Directors. There is presently a
vacancy on Iomega's Board of Directors. The Company's by-laws provide for
three Class III Directors, but at present only two persons are serving as
Class III Directors, each of whom is being nominated for reelection. The
persons named in the enclosed proxy will not have the authority to vote to
fill this vacancy at the 2000 Annual Meeting. The vacancy in Class III will
remain after the 2000 Annual Meeting, until filled by the Board of Directors.
NOMINEES FOR CLASS III DIRECTORS -- TERMS TO EXPIRE IN 2000
[Picture of Robert P. Berkowtiz]
ROBERT P. BERKOWITZ
Director since 1983
Mr. Berkowitz, 64, was born in Brooklyn, New York and raised in Boston,
Massachusetts. After graduating from Boston English High School, he attended
Northeastern University where, as a cooperative student, Mr. Berkowitz worked
for the U.S. Navy in Patuxent River, Maryland and Raytheon Labs in Bedford,
Massachusetts.
After graduating from Northeastern in 1959 with a bachelor of science degree
in mechanical engineering, he worked until 1968 for the Laboratory of
Electronics that designed, developed and produced the Doppler navigation system
for the F-105 fighter-bomber aircraft. In 1961, he joined Computer Control
Company. For the next ten years, Mr. Berkowitz held a series of assignments with
Computer Control Company, including the mechanical design and manufacture of the
on-board computer for the NASA Mariner 4 Mars space mission, and the manufacture
of satellite subsystems. In 1964, Computer Control Company was acquired by
Honeywell Corporation. Mr. Berkowitz's last assignment with Honeywell was as
plant manager, responsible for the production of its minicomputer systems.
Mr. Berkowitz resigned from Honeywell in 1972 to participate in forming
Prime Computer, a manufacturer and developer of minicomputer systems. From 1972
to 1984, Mr. Berkowitz was vice president of manufacturing for Prime Computer.
Specializing in asset management techniques, he installed just-in-time inventory
systems, automated production techniques and established offshore production
facilities. During this period, Prime Computer led the industry in inventory
turns and assets as a percent of revenue. From approximately 1985 to 1988, Mr.
Berkowitz served as president and chief executive officer of Ontologic, a
closely held company developing an object-oriented database management software
system with a proprietary object language. Also, he served on the board of
directors of New England Digital Corporation, a closely held firm developing
direct disc audio recording and post-production systems for the recording
industry. During 1991, he was appointed to the board of directors of
3
<PAGE>
CimTelligence Systems, a developer of process planning software, and
subsequently was appointed its president and chief executive officer holding
that position until March of 1992.
Since 1992, Mr. Berkowitz has been a private investor. From 1983 to 1990,
Mr. Berkowitz wrote a weekly newspaper column devoted to technology and its
impact on society. He has also served as a board member for the Men of the 400,
a Catholic charitable organization, for the Framingham Union Hospital, and for
the Middlesex Area Chamber of Commerce. Mr. Berkowitz is a past president of the
Framingham Union Development Fund for the 80's Inc. Currently Mr. Berkowitz
serves as a board member for the Jewish Family Service of Metrowest located in
Framingham, Massachusetts.
[Picture of John R. Myers]
JOHN R. MYERS
Director since 1994
John Myers, 63, was raised in Emmaus, Pennsylvania. Mr. Myers graduated from
Pennsylvania State University in 1960 with a bachelor of science degree in
mechanical engineering. In 1994 Mr. Myers received the Outstanding Engineer
of the Year Award from Pennsylvania State University.
Mr. Myers began his career with the General Electric Company in 1960,
holding various manufacturing, quality control, and engineering positions
primarily in the Aircraft Engine Group. Upon leaving General Electric in 1978,
he was named vice president and general manager of the nuclear medicine division
of the Technicare Company, a position he held for two years. From 1980 to 1992,
Mr. Myers served as president of the Lycoming Division of Textron Inc., a
manufacturer of small turbine and piston engines for general aviation, corporate
aviation, commercial and military helicopters, landing craft and tanks. During
his presidency, Lycoming's annual sales grew from $140 million to $1 billion.
Mr. Myers was named winner of the Silver Knight Award in 1986 for outstanding
management at Lycoming.
Mr. Myers joined Thiokol Corporation, now Cordant Technologies, Inc., in
June 1992 as president and chief operating officer and was appointed president
and chief executive officer in May 1993. From late 1993 through its sale in
1996, Mr. Myers was chairman of Garrett Aviation Service, a company that
performed maintenance and upgrades on corporate jets and piston-powered
airplanes.
From 1996 to June 1999, Mr. Myers was an independent business consultant.
Since June 1999, Mr. Myers has been Chairman and CEO of Tru-Circle Corporation,
a supplier in the aerospace industry. Mr. Myers also serves as a director for
the Curtiss-Wright Corporation, and is past national chairman of the American
Defense Preparedness Organization and a former director of Bridgeport Hospital
in Bridgeport, Connecticut.
4
<PAGE>
DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS --TERMS EXPIRING IN 2001
[Picture of David J. Dunn]
DAVID J. DUNN
Director since 1980
David Dunn, 69, was raised in Brooklyn, New York. After graduating from high
school, he worked briefly and then went on active duty in the Marine Corps in
the summer of 1950. Through the Marine Corps, he won a competitive appointment
to the United States Naval Academy, which he entered in 1951 and from which he
graduated in 1955. After four years of additional service in the Marine Corps,
Mr. Dunn resigned in 1959 to commence work on his master of business
administration at Harvard Business School, from which he graduated in 1961. A
"High Distinction" graduate, Mr. Dunn was also selected as a Baker Scholar.
Following graduation, Mr. Dunn worked for one year with G. H. Walker & Co.
as an investment banker. In the summer of 1962, he joined J. H. Whitney & Co., a
venture capital firm, where he became a partner in 1966. He resigned from
Whitney in 1970 to organize Idanta Partners Ltd., a venture capital firm, of
which he has been managing partner from its inception to the present time. As a
venture capitalist, Mr. Dunn has participated in the financing of many companies
and served on numerous boards. He provided start-up capital for Storage
Technology Corporation and was a director of that company for more than 15
years, from its start-up phase through the point where it was generating
substantially more than $1 billion a year in annual revenue.
Idanta Partners also provided all of the outside start-up capital for Prime
Computer and Mr. Dunn served as Chairman of Prime from its inception for more
than 15 years, at which time its annual sales were more than $1 billion. Mr.
Dunn's firm invested all of the outside capital for the start-up of Iomega and
he has been Chairman of the Board of Iomega since Iomega's incorporation in
1980.
Mr. Dunn served as President and Chief Executive Officer of Iomega from
August 1999 to November 11, 1999 when Mr. Albertson was named President of
Iomega. Mr. Dunn continued to serve as Chief Executive Officer until Mr.
Albertson was named Chief Executive Officer on January 20, 2000. Mr. Dunn agreed
to serve as President and Chief Executive Officer only while a search for a
president and chief executive officer was being conducted.
[Picture of James E. Sierk]
JAMES E. SIERK
Director since 1997
Mr. Sierk, 61, was raised in western New York. After graduation from the
Warsaw High School he attended Rutgers University on an athletic scholarship. He
graduated with a bachelor of science degree in chemistry in 1960 and immediately
entered the Marine Corps as an infantry officer. He served in the U.S. and
Southeast Asia and attained the rank of captain. After his active Marine Corps
service, Mr. Sierk attended Rensselaer Polytechnic Institute and received a
master's degree from the School of Management Engineering.
Following graduation, Mr. Sierk joined Xerox Corporation, then a $300
million company. He held operations positions in manufacturing and product
development and was named to be the first vice president of materials management
in 1972. Subsequent positions included responsibility for U.S. manufacturing
operations and operations in the Far East and the Americas. In 1989, he was
named to lead Xerox's successful effort to win the Malcolm Baldridge National
Quality Award. In 1991, Mr. Sierk joined AlliedSignal as the senior vice
president of quality and productivity and a member of the Leadership Committee.
During the subsequent seven years he led the change processes, including Six
Sigma, which allowed the senior management team to transform the company. By his
retirement in late 1997, he had been responsible for the functional leadership
of materials management, marketing, manufacturing, information technology,
centralized business services, research and technology, and quality.
5
<PAGE>
Mr. Sierk served as interim president and chief executive officer of
Iomega from March through October 1998 while a search for a president and
chief executive officer was underway. He serves as a director for Ames Rubber
Corporation. Mr. Sierk is an active member of various civic and professional
organizations including the Malcolm Baldridge National Quality Award Board of
Overseers. The Secretary of Commerce has appointed him to successive
positions as a judge, chairman of the judges' panel, an overseer, and as
chairman of the board of overseers of this national business excellence award.
CLASS II DIRECTORS -- TERMS TO EXPIRE IN 2002
[Picture of Bruce R. Albertson]
BRUCE R. ALBERTSON
Director since November 1999
Mr. Albertson, 54, was raised in Florida. He attended the University of
Miami and was awarded a bachelor of business administration degree in 1971. In
1973, he received a master's degree in business from Florida International
University.
Mr. Albertson began his career at General Electric Company in 1973. Mr.
Albertson served GE in various senior sales and marketing capacities for more
than 25 years, most recently as vice president, worldwide marketing and product
management, GE Appliances. From 1993 until his retirement in mid-1998, Mr.
Albertson also was an officer of GE. During his tenure at GE, he led several key
growth and brand-building initiatives. From 1992 to 1996, he spearheaded GE
Appliances' move into Asia. He developed that business into an enterprise
contributing significant volumes and profits to the GE Appliances Division. In
1996, he was promoted to vice president, worldwide marketing and product
management, GE Appliances, where he was responsible for the division's worldwide
marketing efforts. In this role, he developed GE's "Profile Plus" which further
extended GE Appliances into the high-end appliance market. Previously, in 1993,
he launched the "Profile" brand, one of the fastest-growing brands in the
appliance industry. Mr. Albertson also led GE's entrance into the private
label/original equipment manufacturer business that increased GE's appliance
market share and generated significant volumes from Sears and Roebuck and other
companies.
Mr. Albertson was elected president, chief operating officer and director
of Iomega in November 1999. In January 2000, he was elected president and chief
executive officer.
[Picture of Jonathan S. Huberman]
JONATHAN S. HUBERMAN
Director since November 1999
Mr. Huberman, 34, was raised in Washington, D.C. He attended Princeton
University with a degree in computer science in 1988 and received his master of
business administration degree at the Wharton School of Business in 1992.
Since 1997, Mr. Huberman has been a general partner of Idanta Partners Ltd.,
a private venture capital partnership making strategic investments in public and
private enterprises primarily in the high-tech and healthcare sectors. Prior to
joining Idanta Partners in 1995, Mr. Huberman was a case leader with the Boston
Consulting Group ("BCG"), a strategy management consulting firm. At BCG, he
focused on the high technology and consumer products industries and advised
clients on issues such as corporate and business unit strategy, marketing
strategy, new product development and reengineering. From 1988 to 1990, he was a
marketing manager at Cray Research, Inc.
In addition to Iomega, Mr. Huberman serves as director for Boxer Cross,
Inc., Engineous Software, Torrex Corporation, Urbanite Network and Viagate
Technologies. He also serves as chairman of the board at GateField Corporation.
6
<PAGE>
[Picture of John M. Seidl]
JOHN M. SEIDL
Director since February 1999
Mr. Seidl, 60, was raised in Wisconsin and Ohio. He is a graduate of the
United States Military Academy at West Point and has both a masters of public
administration degree and a doctorate in political economy and government from
Harvard University.
From 1961 to 1971, Mr. Seidl served in the United States Air Force where
he advanced from second lieutenant to captain. As a captain, he was an
assistant professor in the department of social sciences at West Point from
1968 to 1971. Mr. Seidl served as a deputy assistant secretary in both the
departments of Health, Education and Welfare and Interior. Mr. Seidl was a
member of the economic and public management faculty at Stanford University's
graduate school of business from 1974 to 1978.
Mr. Seidl held various executive management positions with subsidiaries of
The Natomas Company, a diversified energy company with international operations
in Indonesia, the U.K., the U.S., Canada, and several other countries from 1977
through 1983. From 1984 to 1989, Mr. Seidl held various executive positions,
including president, chief operating officer and director of Enron Corp., an
international energy company formed in 1985 from the merger of Houston Natural
Gas Corporation and InterNorth, Inc. Mr. Seidl is the former president and
ex-director of MAXXAM, Inc., which is a majority owner of Kaiser Aluminum, and
the parent company of Pacific Lumber Company and MAXXAM Property. From 1989 to
1992, he served as chairman and chief executive officer of Kaiser Aluminum, and
from 1990 to 1992, he was chairman and chief executive officer of Pacific Lumber
and chairman of MAXXAM Property Company.
After a brief retirement in 1993, Mr. Seidl joined CellNet Data Systems,
Inc., a provider of low-cost wireless data network services to the utility
industry. A proposed asset acquisition of CellNet Data Systems, Inc. by
Schlumberger Resource Management Services, a business unit of Schlumberger
Limited, is pending through a Chapter 11 filing and is subject to approval by
the Bankruptcy Court. Mr. Seidl served as chairman, president and chief
executive officer of CellNet from 1994 through May 1999. He remains as
chairman of CellNet. Mr. Seidl is also chairman of Language Line Services,
Inc. of Monterey, California, and chairman of MyHomeLink.com, an Internet
start-up company aimed at providing home management services, headquartered
in San Francisco.
Mr. Seidl is a director of the Denver, Colorado-based St. Mary's Land and
Exploration Company, a member of the endowment board, and former board member of
the Oregon Shakespeare Festival, and a member of the Corporate Council, The
Conservation Fund. He is a former chairman and president of the Houston Grand
Opera, and a former member of the board of governors of the Nature Conservancy
of Arlington, Virginia.
7
<PAGE>
STOCK OWNERSHIP INFORMATION
OWNERSHIP BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table contains information regarding ownership of Iomega's
common stock on January 31, 2000 by each director, certain executive officers
and the holders of more than five percent of Iomega's outstanding common stock.
<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)..................... 21,780,280 0 21,780,280 8.0%
Robert P. Berkowitz.......................... 24,488 6,001 30,489 *
David J. Dunn ............................... 24,790,898 (4) 106,000 24,896,898 9.2%
Jonathan S. Huberman......................... 21,780,280 (5) 20,000 21,800,280 8.0%
John R. Myers................................ 30,284 287,000 317,284 *
John M. Seidl ............................... 5,536 10,000 15,536 *
James E. Sierk............................... 73,545 222,500 296,045 *
Bruce R. Albertson........................... 0 250,000 250,000 *
John L. Conely, Sr........................... 6,446 (6) 18,900 25,346 *
Philip G. Husby.............................. 10,000 0 10,000 *
Anton J. Radman, Jr. (7)..................... 1,031,570 151,250 1,182,820 *
L. Scott Flaig (8)........................... 30,000 0 30,000 *
James A. Taylor (9).......................... 20,000 15,000 35,000 *
Jodie K. Glore (10).......................... 45,000 0 45,000 *
All current directors and executive
Officers as a group (17 persons) (11)..... 26,094,472 1,230,301 27,324,773 10.0%
</TABLE>
- ----------
* Less than 1%
(1) For each person, 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, a person is
deemed to have "beneficial ownership" of any shares over which that
person has or shares voting or investment power, plus any shares that
person may acquire within 60 days, including through the exercise of a
stock option. For each person the number in the "Shares Acquirable Within
60 Days" column constitutes shares covered by options exercisable within
60 days after January 31, 2000.
(3) The address of Idanta Partners Ltd. ("Idanta") is 4660 La Jolla Village
Drive, Suite 850, San Diego, CA 92122.
(4) Consists of 2,989,514 shares held by a family trust of which Mr. Dunn is
trustee, and 21,780,280 shares held by Idanta, with respect to which the
family 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.
(5) Consists of 21,780,280 shares held by Idanta of which Mr. Huberman is a
general partner. Mr. Huberman shares voting and investment power with
respect to such shares. Mr. Huberman disclaims beneficial ownership of
the foregoing shares.
(6) Includes 4,676 units held in the Iomega Stock Fund 401(k).
(7) Mr. Radman ceased being an executive officer of Iomega effective January
2000.
8
<PAGE>
(8) Mr. Flaig retired from Iomega in June 1999.
(9) Mr. Taylor ceased being an executive officer of Iomega effective April
1999.
(10) Mr. Glore resigned as President and Chief Executive Officer of Iomega
effective August 1999.
(11) Includes 21,780,280 shares of common stock held by Idanta. Excludes
shares held by Messrs. Radman, Flaig, Taylor and Glore. See notes (7),
(8), (9) and (10).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of reports and representations submitted to Iomega, all
reports regarding beneficial ownership of securities of the Company required to
be filed under Section 16(a) of the Exchange Act for the 1999 fiscal year were
timely filed.
9
<PAGE>
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE POLICY
In February 2000, the Board of Directors reaffirmed the corporate governance
policy it adopted in January 1998. The policy is set forth below. The Board
intends to review the corporate governance 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 STOCKHOLDER 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.
- --------------------------------------------------------------------------------
10
<PAGE>
BOARD COMMITTEES
The Board of Directors has seven standing committees: Audit; Ethics and
Compliance; Executive; Management Development and Compensation; Nominating and
Governance; Operations and Technology; and Strategy. All members of all
committees are non-employee directors, except that the Chief Executive Officer
serves as a member of the Executive and Strategy Committees.
AUDIT COMMITTEE. The Audit Committee met ten times during 1999. The
primary functions of the committee are to:
- recommend the selection of Iomega's independent auditors;
- review the scope and results of the audit with the independent
accountants;
- review non-audit work of the outside auditors and consider its effect, if
any, on the independence of the Company's outside 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; and
- oversee the Company's internal audit work.
The current members of the Audit Committee are Messrs. Berkowitz (Chairman)
and Huberman.
ETHICS AND COMPLIANCE COMMITTEE. The Ethics and Compliance Committee met
three times during 1999. The primary functions of the committee are to review
the policies and programs that are designed to assure Iomega'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
- proper business practices.
The current members of Ethics and Compliance Committee are Messrs. Myers and
Seidl (Chairman).
EXECUTIVE COMMITTEE. The Executive Committee met three times during 1999.
The primary function of the committee is to review certain issues relating to
Iomega's business between meetings of the full Board of Directors.
The current members of the Executive Committee are Messrs. Albertson, Dunn
(Chairman) and Sierk.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE. The Management
Development and Compensation Committee met eleven times plus four by written
consent during 1999. The primary functions of the committee are to:
- recommend the compensation package of each executive officer to the
President;
- approve compensation arrangements for other senior level employees;
- consider matters related to management/leadership development and
succession planning;
- recommend individuals for election as officers;
- administer Iomega'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. Dunn, Myers (Chairman) and Seidl.
11
<PAGE>
NOMINATING AND GOVERNANCE COMMITTEE. The Nominating and Governance Committee
met three times during 1999. 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;
- the structure, composition and members of Board committees;
- the overall effectiveness of the Board and areas for improvement;
- nominees for director; and
- director compensation and benefits.
The current members of the Nominating and Governance Committee are Messrs.
Dunn (Chairman) and Seidl.
OPERATIONS AND TECHNOLOGY COMMITTEE. The Operations and Technology
Committee met on four occasions during 1999. The primary functions of the
committee are to:
- review and report to the Board on operational and technology issues,
including manufacturing, engineering, product development, quality control
and customer service; 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.
Myers and Sierk (Chairman).
STRATEGY COMMITTEE. The Strategy Committee, a newly formed committee in
1999, did not meet during 1999.
The current members of the Strategy Committee are Messrs. Albertson,
Dunn, Huberman (Chairman) and Sierk.
BOARD MEETINGS AND ATTENDANCE
During 1999, 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.
12
<PAGE>
DIRECTOR COMPENSATION
Iomega's non-employee directors receive the fees described below for their
services on the Board of Directors and its committees. All fourth quarter fees
for 1998 were paid to non-employee directors in January 1999 in the form of
restricted stock in lieu of cash. In April 1999, the Board revised the terms of
its compensation to non-employee directors to provide the compensation described
below in the form of either all cash, all restricted stock or 50% cash and 50%
restricted stock as elected by the director for 1999. After the end of each
quarter, each director received payment for services during that quarter
according to the director's election of the form of payment. For payment of
services in the form of restricted stock, the number of shares distributed was
determined by dividing the total amount payable for attendance at Board and
committee meetings during the quarter, plus one-fourth of the director's annual
retainer, by the closing price of the common stock on the New York Stock
Exchange on the trading day prior to the date of issuance. The shares of
restricted stock distributed for payment of services was issued under Iomega's
1997 Stock Incentive Plan ("1997 Plan"). In addition, all non-employee directors
are reimbursed for certain Company-related out-of-pocket expenses.
The annual retainer for the Chairman of the Board will be increased to
$225,000 for the fiscal year ending December 31, 2000.
<TABLE>
=============================================================================================================
<S> <C> <C>
ANNUAL - Chairman of the Board.......................................... $150,000
RETAINER: (THE CHAIRMAN DOES NOT RECEIVE ANY OTHER COMMITTEE OR MEETING
FEES)
- Other Non-Employee Directors................................... $ 20,000
- Chairman of the Audit Committee................................ $ 22,500
COMMITTEE - Chairman of the Ethics and Compliance Committee................ $ 10,000
FEES: - Chairman of the Management Development and Compensation $ 12,500
Committee......................................................
- Chairman of the Operations and Technology Committee............ $ 10,000
- Chairman of the Strategy Committee $ 10,000
- Other Members of a Standing Committee.......................... $ 5,000
MEETING - Per Board Meeting.............................................. $ 2,000
FEES: - Per Committee Meeting.......................................... $ 2,000
(NOT PAID IF EXCEEDS $4,000 IN COMBINATION WITH OTHER MEETING
FEES FOR SAME TWO-DAY PERIOD)
- Per Board or Committee Meeting by Teleconference............... $ 750
=============================================================================================================
</TABLE>
Non-employee directors are also eligible to receive options under Iomega's
1995 Director Stock Option Plan ("Director Plan"). Options granted under the
plan vest over five years and have an exercise price equal to the fair market
value of the common stock on the date of grant. On initial election to the
Board, each director receives an option for 50,000 shares. After the initial
option fully vests, the director is eligible to receive an option for 10,000
shares on each anniversary of the director's initial election. Instead of the
initial or any annual option, directors can elect to receive a series of monthly
options covering, in total, the same number of shares as the single option grant
would have covered. 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.
In 1999, the annual grant to directors was not granted under the Director
Plan because of proposed changes to the accounting treatment of options granted
to non-employee directors. In lieu of the annual grant, an option for 4,000
fully vested shares was granted under the 1997 Plan to each eligible director
receiving an annual grant in April 1999 ("April Grant"). In September 1999, the
Financial Accounting Standards Board determined that the accounting treatment
of options granted to non-employee directors would not be altered. In September
1999, each eligible director received under the 1997 Plan an option for 6,000
shares at the same fair market value of the April Grant ("September Grant") and
the vesting of the April Grant was amended so that the total number of shares
granted to each eligible director under the April Grant and the September
Grant, and vesting schedule thereof, together represent the same number of
shares that each eligible director would have received
13
<PAGE>
had he been granted an annual grant under the Director Plan. The fair market
value of the shares on the date of the April grant was higher than on the date
of the September Grant.
The following table describes the options granted under the Director Plan
and 1997 Plan during 1999, other than options granted to Mr. Dunn, whose options
are described under "Executive Compensation - Option Grant."
<TABLE>
<CAPTION>
DATE OF EXERCISE NUMBER OF SHARES
NAME TYPE OF GRANT GRANT(S) PRICE PER UNDER OPTION
- ---- ------------- -------- --------- ------------
SHARE
------
<S> <C> <C> <C> <C>
Robert P. Berkowitz...............Annual grant 04/21/99 $ 5.125 4,000
09/08/99 $ 5.125 6,000
Jonathan S. Huberman..............Initial grant on 11/11/99 $ 3.5625 50,000
appointment to Board
John R. Myers.....................Annual grant 04/21/99 $ 5.125 4,000
09/08/99 $ 5.125 6,000
M. Bernard Puckett................Initial grant on 02/03/99 $ 7.25 50,000
appointment to Board
John M. Seidl.....................Initial grant on 02/03/99 $ 7.25 50,000
appointment to Board
</TABLE>
14
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table contains information concerning each of the two persons
who served as chief executive officer of Iomega during 1999, the other four
most highly compensated executive officers of Iomega and the two other former
executive officers of Iomega (the "Named Executive Officers"), as required under
applicable rules of the SEC.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
--------------------------------------
-------------
AWARDS
OTHER -------------
ANNUAL SHARES ALL OTHER
NAME AND COMPENSA- UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS TION OPTIONS(2) SATION (3)
------------------ ------ ------ ----- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David J. Dunn (4) 1999 $ 267,559 -- $112,500 (5) 11,000 --
Chairman and
Chief Executive Officer
Bruce R. Albertson (6) 1999 $ 61,538 $ 525,000 (7) -- 1,250,000 --
President and
Chief Operating Officer
John L. Conely, Sr. (8) 1999 $ 232,731 $ 0 $ 23,429 (9) 50,000 $ 5,000
Executive Vice President,
Global Operations
Philip G. Husby (10) 1999 $ 127,212 $ 63,462 (11) $ 12,776 (12) 75,000 $ 2,726
Senior Vice President
and Chief Financial Officer
Anton J. Radman, Jr.(13) 1999 $ 234,231 $ 0 -- 10,000 $ 5,000
Senior Vice President, 1998 $ 228,750 $ 34,800 -- 90,000 $ 5,300
Corporate Development 1997 $ 229,059 $ 110,033 -- 0 $ 4,500
and Strategy
L. Scott Flaig (14) 1999 $ 216,346 $ 0 -- 0 $ 0
Former Executive Vice 1998 $ 395,192 $ 400,000 $149,198 (12) 300,000 $ 5,300
President and Chief 1997 $ 14,423 $ 10,817 -- 200,000 $ 0
Operating Officer
James A. Taylor (15) 1999 $ 269,231 $ 0 0 $ 0
Former Chief Marketing 1998 $ 284,615 $ 213,426 $473,986 (12) 200,000 $ 0
Officer
Jodie K. Glore (16) 1999 $ 444,703 $ 0 $ 18,589 (12) 0 $ 0
Former President and 1998 $ 110,769 $ 210,769 -- 2,100,000 $ 0
Chief Executive Officer
</TABLE>
- ----------
(1) In accordance with SEC rules, other compensation in the form of
perquisites and other personal benefits has been omitted in those
instances where such perquisites and other personal benefits constituted
less than the lesser of $50,000 or ten percent of the total of annual
salary and bonus for the Named Executive Officer for such year.
(2) Reflects the number of shares covered by options to purchase common stock
granted during the year indicated. Iomega has never granted stock
appreciation rights.
(3) Except as otherwise noted, represents the Company's matching contribution
under the Iomega Retirement and Investment Savings Plan.
(4) Mr. Dunn commenced serving as an executive officer of Iomega in August
1999. Mr. Dunn did not receive a salary from Iomega, but Idanta Partners,
Mr. Dunn's employer then and currently, was reimbursed this amount
15
<PAGE>
for Mr. Dunn's services while he served as an executive officer of the
Company. The amount paid represented reimbursement of the cost of Mr.
Dunn's current salary, retirement benefits and health insurance at Idanta
Partners. Mr. Dunn also received an option to purchase 100,000 shares of
the Company's common stock in February 2000 in recognition of his service
as Chief Executive Officer of Iomega.
(5) This amount represents the payment of Board service fees. Mr. Dunn was not
paid his Board fees while he served as President and Chief Executive
Officer of Iomega.
(6) Mr. Albertson commenced serving as an executive officer of Iomega in
November 1999.
(7) This amount represents a signing bonus of $225,000 paid pursuant to the
offer of employment letter between Iomega and Mr. Albertson and the
guaranteed portion of his 2000 bonus compensation of $300,000 paid at the
time Mr. Albertson was hired.
(8) Mr. Conely commenced serving as an executive officer of Iomega in June
1999.
(9) The amount represents the value received by Mr. Conely for a cruise
vacation paid for under the Company's 100% Club, for his role in
supporting the sales and marketing department during fiscal year 1999.
(10) Mr. Husby commenced serving as an executive officer of Iomega in August
1999.
(11) This amount represents a guaranteed bonus paid pursuant to the offer of
employment letter between Iomega and Mr. Husby.
(12) The amount disclosed constitutes payment or reimbursement of relocation
expenses.
(13) Mr. Radman ceased serving as an executive officer of Iomega in January
2000.
(14) Mr. Flaig retired from Iomega in June 1999.
(15) Mr. Taylor served as an executive officer of Iomega from his hire date of
April 1998 through April 1999. In January 2000, Mr. Taylor was paid a
special one-time sum of $400,000 upon the cancellation by the Company of a
consulting agreement between him and the Company. The amount paid was
payable pursuant to the terms of the consulting agreement and represented
the amounts payable for the remainder of the agreement's term.
(16) Mr. Glore commenced serving as President and Chief Executive Officer in
October 1998 and resigned in August 1999.
OPTION GRANTS
The following table contains information about options granted to the Named
Executive Officers during 1999 and the potential realizable value of those
options as determined in accordance with SEC rules.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SHARES PERCENT OF TOTAL EXERCISE OF STOCK APPRECIATION FOR
UNDERLYING OPTIONS GRANTED PRICE PER EXPIRA- OPTION TERM(3)
OPTIONS TO EMPLOYEES IN SHARE TION --------------------------
GRANTED FISCAL YEAR (1) DATE(2) 5% 10%
------------ --------------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
David J. Dunn..................... 1,000 (4) 0.02% $ 8.125 04/22/08 $ 5,110 $ 12,949
David J. Dunn..................... 4,000 (5) 0.09% $ 5.125 04/21/09 $ 12,892 $ 32,672
David J. Dunn..................... 6,000 (6) 0.13% $ 5.125 04/21/09 $ 19,339 $ 49,008
Bruce R. Albertson................ 1,250,000 (7) 27.83% $ 3.375 11/10/09 $2,653,149 $6,723,601
John L. Conely, Sr. .............. 50,000 (8) 1.11% $ 3.90625 06/18/09 $ 122,831 $ 311,278
Philip G. Husby................... 75,000 (9) 1.67% $ 4.03125 08/02/09 $ 190,142 $ 481,858
Anton J. Radman, Jr............... 10,000 (10) 0.22% $ 3.90625 06/18/09 $ 24,566 $ 62,256
L. Scott Flaig.................... -- -- -- -- -- --
James A. Taylor................... -- -- -- -- -- --
Jodie D. Glore.................... -- -- -- -- -- --
</TABLE>
- ----------
16
<PAGE>
(1) Exercise price is equal or greater than the fair market value of the
Common Stock on the date of grant.
(2) Outstanding options are subject to acceleration or cash out of the value
of the outstanding options if such options are not assumed or substituted
upon a change of control of Iomega.
(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.
(4) The option vests in five annual installments beginning on April 21, 1999.
(5) The option vests in two annual installments beginning on April 21, 2000.
(6) The option vests in three annual installments beginning on April 21, 2002.
(7) Consists of the following: (i) an option for 250,000 shares fully vested
on the date of grant and (ii) an option for 1,000,000 shares vesting in
four equal installments beginning November 11, 2000.
(8) The option vests fully on June 18, 2003. The vesting may be accelerated if
certain stock performance criteria are met as determined by the Board of
Directors.
(9) The option vests in four annual installments beginning on August 2, 2000.
(10) The option vests fully on June 18, 2003. The vesting may be accelerated if
certain stock performance criteria are met as determined by the Board of
Directors. Mr. Radman may forfeit 50% of the shares underlying this option
as he will cease to be a full-time employee of the Company on April 1,
2000.
Mr. Dunn also received an option to purchase 100,000 shares of the Company's
common stock in February 2000 in recognition of his service as Chief Executive
Officer of Iomega.
OPTION EXERCISES AND YEAR-END VALUES
The following table contains information regarding options exercised by the
Named Executive Officers during 1999 and options held by the Named Executive
Officers on December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL FISCAL YEAR-END (2)
ACQUIRED YEAR-END -------------------------
ON VALUE -------------------------
NAME EXERCISE REALIZED (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
David J. Dunn.................................... 0 -- 6,000/24,000 $0/$0
Bruce R. Albertson............................... 0 -- 250,000/1,000,000 $7,813/$31,250
John L. Conely, Sr. ............................. 0 -- 18,900/92,100 $0/$28,125
Philip G. Husby.................................. 0 -- 0/75,000 $0/$0
Anton J. Radman, Jr.............................. 0 -- 147,500/102,500 $17,811/$5,625
L. Scott Flaig................................... 0 -- 0/0 -- /--
James A. Taylor.................................. 0 -- 15,000/185,000 $0/$0
Jodie K. Glore................................... 15,000 $17,344 0/0 -- /--
----------
</TABLE>
(1) Based on the fair market value of the common stock on the date of
exercise, less the option exercise price.
(2) Based on the fair market value of Iomega's common stock on December 31,
1999 ($3.34375 per share), less the total option exercise price.
EMPLOYMENT AND SEVERANCE AGREEMENTS
EMPLOYMENT AGREEMENT WITH MR. ALBERTSON. In November 1999, Iomega entered
into an employment agreement with Mr. Albertson. Iomega agreed to pay Mr.
Albertson an annual base salary of $500,000 and a sign-on
17
<PAGE>
bonus of $225,000, which must be repaid to the Company in full should Mr.
Albertson resign before November 11, 2000. Mr. Albertson's annual bonus for 2000
is targeted at 100 percent of base salary, of which $300,000 was guaranteed. Mr.
Albertson received the guaranteed portion of his bonus at the time of his
hiring. Mr. Albertson's annual bonus may vary from the target based on the
achievement of specific Company goals and performance. If Mr. Albertson is
terminated, without cause, the Company will continue his salary, annual
incentive bonus, and benefits for a period of one year. The employment agreement
contains a change of control provision which provides for payment of up to 24
months of base salary, annual incentive and benefits if, within one year from
the date of the change of control, his employment is terminated by the Company
other than for cause or if Mr. Albertson exercises an option to leave within 30
days following the one year anniversary of the date of change of control. Change
of control benefits would be reduced if subsequent employment were obtained
during the 24-month period.
EMPLOYMENT AGREEMENT WITH MR. GLORE. In October 1998, Iomega entered into an
employment agreement with Mr. Glore. Iomega agreed to pay Mr. Glore an annual
base salary of $600,000. Mr. Glore's annual cash bonus was targeted at 100
percent of base salary and he was guaranteed a cash bonus for 1999 of $600,000,
although the actual bonus payments may have been higher or lower based upon the
achievement of specific Company goals and performance. The agreement provided
for payment of up to 24 months of Mr. Glore's base salary and target bonus if he
was discharged by the Company other than for cause before October 2001, and
payment of up to 36 months of Mr. Glore's base salary and target bonus if he was
discharged by the Company following a change in control. Mr. Glore's benefits
included a split dollar life insurance policy, which was intended to replace
death benefits that Mr. Glore forfeited as a result of his departure from his
prior employer. Mr. Glore resigned in August 1999 and was not eligible to
receive a cash bonus for 1999. Mr. Glore did not receive any severance payments.
SEVERANCE AGREEMENT WITH MR. RADMAN. In November 1998, Iomega entered into a
severance agreement with Mr. Radman. The agreement provided for the payment of
one year's base salary, benefits and estimated bonus (but less amounts received
from any subsequent employment) if Mr. Radman was terminated without cause
before November 1, 1999. The agreement expired on November 1, 1999. Mr. Radman
did not receive any severance payments under the agreement.
CONSULTING AGREEMENT WITH MR. TAYLOR. In June 1999 Iomega entered into a
consulting agreement with Mr. Taylor. The agreement provided that Mr. Taylor
would act in the role of a consultant to the Company no more than eight days
per month at the direction of Mr. Glore, then Chief Executive Officer of the
Company. Under the agreement, Mr. Taylor was to be paid $200,000 per year. The
agreement also provided that if the Company terminated the agreement on or
prior to January 1, 2000, the Company would pay Mr. Taylor a one-time payment
of $400,000, which amount represented all payments due him if the agreement had
remained in effect until January 1, 2002. The Company agreed to terminate the
consulting agreement with Mr. Taylor on or prior to January 1, 2000 and as a
result, Mr. Taylor was paid a special one-time sum of $400,000.
TRANSACTION WITH MANAGEMENT
In July 1998, Iomega borrowed $40.0 million from Idanta Partners Ltd. and a
trust affiliated with Mr. Dunn, Iomega's Chairman of the Board, pursuant to a
series of three senior subordinated notes. Idanta Partners holds approximately
eight percent of Iomega's common stock. Mr. Dunn acts as Idanta's managing
general partner through the affiliated trust. Mr. Dunn was president and chief
executive officer of Iomega from August 1999 through November 1999 and chief
executive officer from November 1999 through January 2000. The principal and
interest associated with the three subordinated notes were payable on March 31,
1999. The interest rate on the loan was graduated from 8.7 percent to 12.7
percent per annum. Iomega used the proceeds of this loan to acquire Nomai,
S.A., a French manufacturer of removable storage systems. In March 1999, Iomega
repaid the total amount of the loan consisting of $40.0 million in principal
and $3.1 million in interest.
Mr. Dunn commenced serving as an executive officer of Iomega in August
1999. Mr. Dunn did not receive a salary from Iomega, but Idanta Partners,
Mr. Dunn's employer then and currently, was reimbursed $267,559 for Mr. Dunn's
services while he served as an executive officer of the Company. The amount
paid represented reimbursement of the cost of Mr. Dunn's current salary,
retirement benefits and health insurance at Idanta Partners.
The Company reimbursed Idanta Partners $44,765 for services performed by
Mr. Huberman from August 1999 to December 1999. The amount paid represented
reimbursement of the cost of Mr. Huberman's salary, retirement benefits and
health insurance at Idanta Partners.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, none of the members of the Management Development and
Compensation Committee is or was an officer or employee of the Company, except
Mr. Sierk who had served as President and Chief Executive Officer of the
Company from March 1998 through October 1998. Mr. Sierk served on the
Management Development and Compensation Committee from January 1998 through
February 1999.
18
<PAGE>
STOCK PERFORMANCE GRAPH
Iomega's common stock has been listed for trading on the New York Stock
Exchange under the symbol IOM since November 1996. Before that, 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
Iomega's common stock for the last five fiscal years with the cumulative total
return of (i) the CRSP (CENTER FOR RESEARCH IN SECURITY PRICES) Total Returns
Index for the New York Stock Exchange Stock Market (U.S. Companies); and (ii)
the CRSP Total Returns Index for New York Stock Exchange Computer and Office
Equipment Stocks (U.S. and Foreign).
This graph assumes the investment of $100 on December 31, 1994 in Iomega'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, 1995, 1996, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
[Graphic Omitted]
- -------------------------------------------- -------------- --------------- -------------- --------------- -------------- ----------
12/31/94 12/31/95 12/30/96 12/29/97 12/31/98 12/31/99
- -------------------------------------------- -------------- --------------- -------------- --------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Iomega Corporation $100.0 $1496.2 $3207.7 $4592.3 $2700.0 $1246.2
- -------------------------------------------- -------------- --------------- -------------- --------------- -------------- ----------
NYSE Stock Market (US Companies) $100.0 $ 135.6 $ 164.4 $ 218.4 $ 262.0 $ 288.0
- -------------------------------------------- -------------- --------------- -------------- --------------- -------------- ----------
NYSE Stocks Computer and Office Equipment $100.0 $ 130.8 $ 174.7 $ 212.8 $ 352.6 $ 513.9
- -------------------------------------------- -------------- --------------- -------------- --------------- -------------- ----------
</TABLE>
19
<PAGE>
MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Iomega's executive compensation program is administered by the Management
Development and Compensation Committee of the Board of Directors. Mr. Myers
served as Chair of the Committee throughout 1999. In February 1999, Mr. Puckett
and Mr. Seidl joined the Committee. Mr. Sierk ceased serving on the Committee
in February 1999 and Mr. Puckett ceased serving on the Committee in November
1999.
During 1999, the Committee was responsible for recommending the
compensation package of each existing and newly recruited executives at the
vice president level or higher. In making decisions regarding executive
compensation, the Committee considered the input of the Company's other
directors, including the input of Jodie K. Glore, who served as the Company's
President and Chief Executive Officer from October 1998 to August 1999. The
Committee also retained the services of Pearl Meyer & Partners, Inc., an
independent compensation consulting firm to assist it in evaluating the
Company's compensation programs. Additionally, the Committee reviewed
benchmarking data obtained from other compensation consultants to assess the
Company's compensation programs.
In order to attract, retain and motivate the talented personnel it needs to
meet corporate objectives, Iomega has structured its executive compensation
program to provide its employees with cash compensation competitive with
comparable companies if its corporate objectives are achieved and if such
objectives are exceeded, to deliver compensation that may be, in some cases,
above the seventy-fifth percentile for total compensation paid by comparable
companies. Bonuses are primarily based on corporate performance, with actual
awards varying greatly according to the Company's overall performance and the
individual's impact on that performance.
The Company's executive compensation program consists of a mixture of base
salary, cash bonuses and stock option awards. All three components are intended
to attract and retain outside executives and motivate management to achieve or
exceed Company objectives, with a particular emphasis on achieving net income
objectives. In determining the total amount and mix of the compensation package
for each executive officer, the committee members subjectively consider the
overall value to the Company of each executive in light of numerous factors such
as contributions to the Company's competitive position in the marketplace,
individual performance, and the past and expected contribution by each executive
officer toward the achievement of the Company's performance objectives.
BASE SALARY
The Company's base salaries are structured to be within the median range of
salaries paid by similar companies for comparable positions. The Committee
believes that the Company's most direct competitors for executive positions are
not necessarily the same as the companies included in the Stock Performance
Graph included elsewhere in this proxy statement. The Company commissioned a
survey of twenty-three comparable companies with similar revenue and industry
focus from Aon Consulting/Radford Division, the 1999 Radford Benchmark Salary
Survey (the "Radford Survey"). Some of the comparable companies surveyed were
Cisco Systems, Dell Computer, Maxtor, Quantum, Read-Rite and Seagate
Technologies. Some of the comparable companies surveyed are also included in
the Stock Performance graph included elsewhere in this proxy statement.
In 1998, the Committee determined that it would conduct annual reviews of
data from broad-based compensation surveys of high technology companies to
ensure that the Company's compensation structure remained competitive. The
Committee also determined at that time to increase executive base salaries every
other year, assuming the absence of market pressures to do otherwise.
Accordingly, executive base salaries were increased in 1998 and were expected to
be increased again in 2000.
During 1999, the Committee reviewed the data from the Radford Survey and
determined that the data demonstrated that for certain executive positions,
other similar high technology companies' base salary compensation levels were
significantly higher than the Company's. Based on the survey data reviewed by
the Committee, the Committee determined that it would be appropriate to
increase the base salaries of certain executive officers prior to the scheduled
increase in 2000. Accordingly, the Committee, in its subjective judgment,
increased base salaries for two Executive Officers because of additional job
20
<PAGE>
responsibilities and in order to ensure that the positions held by these
executives remained above the fiftieth percentile for base compensation paid by
similar high technology companies for comparable positions.
CASH BONUSES
For 1999, the Committee originally adopted a cash bonus plan with two
components. The first component of the cash bonus program was based on the
Company's year-end financial performance in relation to a net income goal. The
second component was based on the achievement of key operational metrics. The
target bonus for executives, which included each of the Named Executive Officers
(other than Mr. Albertson who did not join the Company until November 1999 and
Mr. Dunn) ranged from 38% to 100% of each executive's 1999 gross salary. These
specific targets are set based on the potential impact on the Company's
performance and are set at a fixed dollar target (versus percentage of salary)
so as to not increase automatically as cash compensation increases.
By September 1999, it became apparent to the members of the Committee that
the Company would not achieve the net income goal set for 1999 in light of
losses reported for the fiscal quarters ended March 31 and June 30 and, thus,
that no payments would be made with respect to the financial performance
component of the cash bonus program. In light of this fact and due to executive
retention concerns, in November 1999 the Committee authorized a supplemental
bonus pool for 1999 which enabled the Company to make limited discretionary
bonus payments to executive officers and certain key employees for
extraordinary contributions to the Company. These discretionary bonus payments
were only to be paid if the Company met certain net income requirements which
were lower than the net income goals originally set under the cash bonus
program. The total amount under this supplemental bonus pool was equal to
one-third the amount previously allocated to the financial performance
component of the cash bonus pool and approximately 66% of the amount previously
allocated to both components of the cash bonus pool. No Named Executive Officer
received a bonus payment under this supplemental bonus pool because the net
income goal for the Company was not achieved. Two of the Named Executive
Officers did receive their guaranteed bonuses, as detailed in the Summary
Compensation Table found in this proxy statement.
STOCK OPTIONS AND STOCK OPTION REPRICING
The Committee believes it is in the best interests of the Company and its
shareholders to grant stock options as the long-term component of executive and
key employee compensation. Stock option grants to executive officers and other
key employees are intended to bring employee financial interest in line with
long-term shareholder value.
Stock option awards are made at the discretion of the Committee, after
taking into account the individual's performance and contribution in meeting
the goals of the Company. From January 1999 through May 1999, stock options
were granted to certain key employees. These options were granted at an
exercise price equal to the fair market value of the Company's common stock on
the date of grant and provide for vesting over a period of five years. Further
grants of stock options were made in June 1999 to Named Executive Officers.
These options were also granted at an exercise price equal to the fair market
value of the Company's common stock on the date of grant. The options vest
fully on June 18, 2003 and the vesting may be accelerated if certain stock
performance criteria are met as determined by the Committee. In September 1999,
after taking into account survey data presented by Pearl Meyer, the Committee
determined that a four year vesting schedule was more competitive with the
vesting schedules offered by similar high technology companies and thus
determined that a four year vesting schedule would generally apply with respect
to new grants.
The market price of the Company's common stock has fluctuated in recent
years. As a result, a significant portion of the Company's outstanding stock
options are exercisable at a price per share higher than recent trading prices.
Accordingly, these options are no longer providing an effective incentive for
the Company's employees. In October 1999, the Committee recommended to the
Board of Directors that it would be in the best interests of the Company to
implement an Employee Stock Option Exchange Program, subject to shareholder
approval of the program. A description of the Employee Stock Option Exchange
Program can be found below in this proxy statement under the heading "Item
Two - Approval of Employee Stock Option Exchange Program."
21
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICERS
Mr. Glore was hired as President and Chief Executive Officer in October
1998. Pursuant to an employment agreement negotiated with the Company, his base
salary for 1999 was established at $600,000 with a target bonus for 1999 equal
to 100% of his base salary. In August 1999, Mr. Glore resigned from the Company.
Mr. Glore was not paid any severance upon his resignation nor did he receive a
bonus for 1999.
Upon Mr. Glore's departure, David Dunn, chairman of the Board of Directors,
was appointed Chief Executive Officer, to serve while the Company searched for a
new Chief Executive Officer. Mr. Dunn's compensation was based on his salary,
retirement and health benefits at Idanta Partners Ltd., where he serves as
managing partner. Moreover, Mr. Dunn's compensation was reimbursed directly to
Idanta Partners. In February 2000 the Company also granted Mr. Dunn an option,
which became fully vested on the date of grant, to purchase 100,000 shares of
the Company's common stock in recognition of Mr. Dunn's tremendous contributions
to the Company.
In November 1999, Mr. Bruce Albertson was appointed President and Chief
Operating Officer of the Company. On January 20, 2000, Mr. Albertson assumed the
position of President and Chief Executive Officer. Pursuant to an employment
agreement negotiated with the Company, Mr. Albertson's base salary was
established at $500,000. Mr. Albertson's target bonus for 2000 is equal to his
base salary, with $300,000 of this bonus paid in advance. Mr. Albertson also
received a signing bonus of $225,000, which must be repaid to the Company in
full should Mr. Albertson resign within one year from his original date of hire.
If Mr. Albertson is terminated without cause, the Company will continue his
salary, target annual bonus and benefits for twelve months. His long-term
compensation also includes options to purchase 1,250,000 shares of the Company's
common stock which were granted at an exercise price equal to the fair market
value of the stock on the date of grant, as reflected in the table of option
grants set forth in this proxy statement. Of the shares subject to these
options, 250,000 shares vested immediately upon the date of grant and the
remainder vest in equal installments over four years.
IMPACT OF SECTION 162 (m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for certain compensation in excess of one million
dollars paid to the Company's chief executive officer and four other most
highly compensated executive officers. There can be no assurance that
compensation attributable to stock options granted under the 1997 Stock
Incentive Plan will be treated as qualified performance-based compensation
under Section 162(m). Moreover, because the Company's cash bonus program is not
operated in a manner designed to qualify as performance-based compensation
under Section 162(m), some or all of the payments under this program may not be
deductible for federal income tax purposes. 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).
John R. Myers
John M. Seidl
James E. Sierk
22
<PAGE>
ITEM TWO -- APPROVAL OF EMPLOYEE STOCK OPTION EXCHANGE PROGRAM
THE SECOND AGENDA ITEM TO BE VOTED ON IS THE APPROVAL OF AN EMPLOYEE STOCK
OPTION EXCHANGE PROGRAM. THE BOARD RECOMMENDS THAT YOU VOTE FOR SUCH
PROPOSAL.
The Company's Board of Directors has determined that it would be in the best
interest of the Company and its shareholders to implement an Employee Stock
Option Exchange Program under which the Company will grant new stock options in
exchange for currently outstanding stock options of the Company.
Stock options represent an important component of the Company's compensation
program for its employees. Stock options are intended to provide employees with
an incentive to continue in their employment relationship with Iomega and to
align employee financial interests with long-term shareholder value.
As a result of the fluctuations in the market price of Iomega's common stock
during recent years, however, a significant portion of the Company's outstanding
stock options have exercise prices that are higher than recent trading prices.
Accordingly, these options are no longer effectively providing the incentive to
employees that they were intended to provide.
The Employee Stock Option Exchange Program is intended to realign the
exercise price of previously granted options with the current market price of
the Company's common stock and thereby better enable the Company to motivate and
retain its employees and achieve the Company's business goals.
In addition, because an employee participating in the Exchange Program will
receive new options for a smaller number of shares than the employee surrenders,
the Exchange Program is designed to limit the dilution to public shareholders
commonly associated with stock option repricings.
The Company's corporate governance policy provides that the Board will not
approve repricing of options without shareholder approval. Accordingly, the
Company is seeking stockholder approval of the Exchange Program so that it can
be implemented.
For future grant awards, employees will be considered to have their
original grant of options and will not receive larger grants because of their
participation in the Exchange Program.
BACKGROUND
The Company's general policy has been to grant options to employees at the
time of their initial employment, to make annual grants of options to employees,
and to make additional grants of options from time to time to incent or reward
extraordinary performance. At the time an option grant is made, the Company
specifies the number of shares of the Company's common stock that can be
purchased upon exercise of the option and the price per share which the employee
must pay in order to exercise the option.
As of December 31, 1999, options to purchase an aggregate of 9,387,903
shares of Common Stock which may be eligible for exchange under the Exchange
Program were outstanding. The exercise prices for these options are indicated
in the following table:
<TABLE>
<CAPTION>
Range of Number Outstanding
Exercise Price ------------------
--------------
<S> <C>
$0.13 to $4.13 5,223,883
$4.18 to $9.56 3,881,670
$9.75 to $14.42 365,300
23
<PAGE>
$15.30 to $22.94 267,050
$22.94 to $23.07 100,000
</TABLE>
Existing options that have an exercise price which is less than the market
price of the Company's common stock on the date that new options are granted
under the Exchange Program will not be eligible for exchange in the Exchange
Program. As of February 18, 2000, the average of the high and low trading prices
of Iomega's common stock on the New York Stock Exchange was $4.09.
The new options will be granted under the Company's 1997 Stock Incentive
Plan regardless of the Company stock option plan under which the surrendered
options were originally granted. As of December 31, 1999, 12,159,559 shares were
available for grant under the 1997 Stock Incentive Plan. All new options granted
in connection with the Exchange Program will be nonstatutory stock options for
U.S. federal income tax purposes.
DESCRIPTION OF THE EXCHANGE PROGRAM
GRANT OF NEW OPTIONS. Under the Exchange Program, employees of the Company
may elect to exchange some or all of their existing options and to receive a
new option with an exercise price equal to the market price of common stock as
of the grant date of the new option. Participation in the Exchange Program is
completely voluntary.
NUMBER OF SHARES TO BE COVERED BY NEW OPTIONS. The Exchange Program
provides that an employee may elect to exchange his or her existing options as
follows:
- existing options for up to 10,000 shares of common stock may be exchanged
for new options at the rate of 1 new share of common stock for every 1.5
shares of common stock issuable upon exercise of surrendered options;
- existing options for up to an additional 10,000 shares of common stock may
be exchanged for new options at the rate of 1 new share of common stock
for every 2 shares of common stock issuable upon exercise of surrendered
options; and
- existing options for any additional shares of common stock may be
exchanged for new options at the rate of 1 new share of common stock for
every 2.5 shares of common stock issuable upon exercise of surrendered
options.
For example, if an employee elects to exchange options previously granted
with respect to a total of 25,000 shares of common stock, she would receive new
options for 13,667 shares of common stock. This number is calculated in the
following manner:
<TABLE>
<S> <C>
10,000 DIVIDED BY 1.5 = 6,667
10,000 DIVIDED BY 2.0 = 5,000
5,000 DIVIDED BY 2.5 = 2,000
------- -------
25,000 13,667
</TABLE>
VESTING AND EXERCISABILITY OF NEW OPTIONS. The Exchange Program provides
that new options that are granted with respect to existing options that are
vested or scheduled to vest within one year from the date of grant of the new
option will vest on the first anniversary of the date of grant of the new
options. All other shares granted under new options will have vesting terms
identical to the surrendered options that they replace.
For example, assume an employee was granted an option to purchase 15,000
shares of Iomega's common stock on January 27, 1998 with 20% of the shares
vesting on each of January 27, 1999, 2000, 2001, 2002 and 2003 and that the
employee has not exercised the vested portion of the option. If the employee
elects to exchange this option, he would receive a new option for 9,167 shares
(determined as follows: (10,000 DIVIDED BY 1.5) + (5,000 DIVIDED
BY 2.0) = 9,167). Of these 9,167 shares, 6,000 shares would vest one year from
the date of grant of the new option; 1,667 shares would vest on January 27,
2002; and 1,500 shares would vest on January 27, 2003.
24
<PAGE>
EXERCISE PRICE OF NEW OPTIONS. All new options will be granted with an
exercise price that is equal to the average of the high and low trading prices
of Iomega's common stock on the date the new options are granted, which is
expected to be shortly after receipt of shareholder approval at the meeting.
EXPIRATION DATE OF NEW OPTIONS. All new options will have a term of ten
years from the date of grant.
IMPLEMENTATION OF THE EXCHANGE PROGRAM. The Exchange Program was authorized
by the Board of Directors in October 1999, upon the recommendation of the
Management Development and Compensation Committee, subject to receipt of
shareholder approval at the meeting. The Board delegated the authority to
implement the Exchange Program to the Management Development and Compensation
Committee.
If shareholders approve the Exchange Program, shortly after the meeting the
Management Development and Compensation Committee will grant to all employees
eligible to participate in the Exchange Program an option for the maximum number
of shares of common stock they could receive if they elected to exchange all of
their options which have an exercise price greater than the exercise price of
the new options. Employees will then be given a short period of time in which to
accept, in whole or in part, the grant of the new option in exchange for the
surrender of some or all of their existing options.
PARTICIPATION IN THE EXCHANGE PROGRAM
The Exchange Program is open to all active, full-time employees of the
Company. However, current employees who have been informed that their employment
with the Company will terminate prior to the first anniversary of the date of
grant of the new options are not eligible to participate.
Non-employee directors and consultants are not eligible to participate in
the Exchange Program.
The following table sets forth for each of the Named Executive Officers
information about each outstanding option that may be eligible for exchange in
the Exchange Program:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Number of Shares of
Common Stock
Underlying Existing Exercise Price of Expiration
Name Date of Grant Options Existing Option Date
----------------------- ---------------------- ----------------------- --------------------- -------------
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
Dunn (1) -- -- -- --
----------------------------------------------------------------------------------------------------------
Albertson (2) -- -- -- --
----------------------------------------------------------------------------------------------------------
Conely 10/20/97 30,000 $ 13.203125 10/20/07
----------------------------------------------------------------------------------------------------------
04/15/98 15,000 $ 7.375 04/15/08
----------------------------------------------------------------------------------------------------------
08/04/98 12,000 $ 5.25 08/04/08
----------------------------------------------------------------------------------------------------------
10/30/98 4,000 $ 5.4375 10/30/08
----------------------------------------------------------------------------------------------------------
06/18/99 50,000 $ 3.90625 06/18/09
----------------------------------------------------------------------------------------------------------
Husby 08/02/99 75,000 $ 4.03125 08/02/09
----------------------------------------------------------------------------------------------------------
Radman (3) -- -- -- --
----------------------------------------------------------------------------------------------------------
Flaig (4) -- -- -- --
----------------------------------------------------------------------------------------------------------
Taylor (4) -- -- -- --
----------------------------------------------------------------------------------------------------------
Glore (4) -- -- -- --
----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Dunn, Chairman of the Board of Directors, is not eligible to
participate in the Exchange Program.
(2) Mr. Albertson has elected not to be eligible to participate in the
Exchange Program.
(3) This Named Executive Officer is not eligible to participate in the
Exchange Program because he will cease being a full time employee
effective April 1, 2000.
(4) This Named Executive Officer is not eligible to participate in the
Exchange Program because he is no longer employed by the Company.
The following table indicates the number of new options that would be
issued to each of the Named Executive Officers and the indicated groups,
assuming the person or group elects to exchange all outstanding options for new
options:
25
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Aggregate Number of
Shares of Common Stock Weighted Average Aggregate Number of
Underlying Existing Exercise Price of Shares of Common Stock
Name Options Existing Options Underlying New Options
------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Dunn (1) -- -- --
------------------------- -------------------------- -------------------------- --------------------------
Albertson (2) -- -- --
------------------------- -------------------------- -------------------------- --------------------------
Conely 111,000 $0.48 48,067
------------------------- -------------------------- -------------------------- --------------------------
Husby 75,000 $0.18 33,667
------------------------- -------------------------- -------------------------- --------------------------
Radman (3) -- -- --
------------------------- -------------------------- -------------------------- --------------------------
Flaig (4) -- -- --
------------------------- -------------------------- -------------------------- --------------------------
Taylor (4) -- -- --
------------------------- -------------------------- -------------------------- --------------------------
Glore (4) -- -- --
------------------------- -------------------------- -------------------------- --------------------------
All Executive Officers
as a group 1,642,000 $4.79 675,135
------------------------- -------------------------- -------------------------- --------------------------
All employees (other
than Executive
Officers) as a group 9,837,903 $5.67 5,048,983
----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Dunn, Chairman of the Board of Directors, is not eligible to
participate in the Exchange Program.
(2) Mr. Albertson has elected not to be eligible to participate in the
Exchange Program.
(3) This Named Executive Officer is not eligible to participate in the
Exchange Program because he will cease being a full time employee
effective April 1, 2000.
(4) This Named Executive Officer is not eligible to participate in the
Exchange Program because he is no longer employed by the Company.
Because each employee's decision as to whether or not to participate in the
Exchange Program is completely at the discretion of the employee, the Company is
not able to predict how many options any particular person or group will elect
to exchange. Employees who elect to participate in the Exchange Program can
elect to surrender all or part of their existing options.
Other than as contemplated by the Exchange Program, the Company has not
repriced options at any time during the last ten years.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to the Exchange Program.
INCENTIVE STOCK OPTIONS
In general, an employee holding incentive stock options will not recognize
taxable income upon implementation of the Exchange Program. Outstanding
incentive stock options exchanged in the Exchange Program will be terminated,
and the employee will receive new non-statutory stock options in exchange for
the terminated incentive stock options. See NON-STATUTORY STOCK OPTIONS below.
In the case of outstanding incentive stock options that are eligible for
exchange under the Exchange Program but that, at the discretion of an employee,
are not exchanged, such options will be deemed for U.S. federal income tax
purposes to have been re-granted on the date that the Company grants the
employee the right to participate in the Exchange Program. As a result of such
a deemed change of grant date, a portion of the employee's options may be
converted from incentive stock options into non-statutory stock options (the
taxation of which is described under NON-STATUTORY STOCK OPTIONS below) to the
extent that such options (and any other outstanding incentive stock options
granted by the Company) first become exercisable in any one year for stock with
a fair market value (determined on the grant date) in excess of $100,000. In
addition, the incentive stock option holding period described below will be
restarted.
Employees whose incentive stock options are not converted into
non-statutory stock options will recognize taxable income with respect to an
incentive stock option only upon the sale of the common stock acquired through
the exercise of the incentive stock option ("ISO Stock"). The exercise of the
incentive stock option may, however, subject the employee to alternative
minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the employee has owned the ISO Stock at the time that it is
sold. If the employee sells the ISO Stock after having owned it for at least
two years from the date the incentive stock option was granted (or deemed to
have been granted) and one year from the date the incentive stock option was
exercised (the "Exercise Date"), then the employee will recognize long-term
capital gain in an amount equal to the excess of the sale price of the ISO
Stock over the exercise price.
If the employee sells the ISO Stock for more than the exercise price prior
to having owned it for at least two years from the grant date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the employee will be ordinary income and the remaining gain,
if any, will be capital gain. This capital gain will be a long-term capital
gain if the employee has held the ISO Stock for more than one year prior to the
date of the sale.
If the employee sells the ISO Stock for less than the exercise price, then
the employee will recognize capital loss in an amount equal to the excess of
the exercise price over the sale price of the ISO Stock. This capital loss will
be a long-term capital loss if the employee has held the ISO Stock for more than
one year prior to the date of the sale.
NON-STATUTORY STOCK OPTIONS
As in the case of an incentive stock option, an employee holding a
non-statutory stock option generally will not recognize taxable income upon
implementation of the Exchange Program. An employee holding non-statutory stock
options who does not elect to participate in the Exchange Program will have no
tax consequences as a result of the Exchange Program. Outstanding non-statutory
stock options and incentive stock options exchanged in the Exchange Program
will be terminated, and the employee will receive new non-statutory stock
options in exchange for the terminated options. An employee will not recognize
taxable income upon the grant of a non-statutory stock option. Unlike the case
of an incentive stock option, however, an employee who exercises a
non-statutory stock option generally will recognize ordinary compensation
income in an amount equal to the excess of the fair market value of the common
stock acquired through the exercise of the option ("NSO Stock") on the Exercise
Date over the exercise price.
With respect to NSO Stock, an employee will have a tax basis equal to the
exercise price plus any income recognized upon the exercise of the option. Upon
selling NSO Stock, an employee generally will recognize capital gain or loss in
an amount equal to the difference between the sale price of the NSO Stock and
the employee's tax basis in the NSO Stock. The capital gain or loss will be a
long-term capital gain or loss if the employee has held the NSO Stock for more
than one year prior to the date of the sale.
TAX CONSEQUENCES TO THE COMPANY
The grant of options pursuant to the Exchange Program generally will have
no tax consequences to the Company. Moreover, in general, neither the exercise
of an incentive stock option nor the sale of any common stock acquired pursuant
to the exercise of an option will have any 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 an employee
pursuant to an option, including as a result of the exercise of a non-statutory
stock option or a Disqualifying Disposition. Any such deduction will be subject
to the limitations of Section 162(m) of the Code.
For purposes of complying with Section 162(m), if an option (either an
incentive stock option or a non-statutory stock option) is terminated or
treated as being terminated as a result of the Exchange Program, the terminated
option continues to be counted against the maximum number of shares for which
options may be granted to an employee under the 1997 Stock Incentive Plan.
Thus, both the terminated option (if it is not granted this year) and the new
option granted under the Exchange Program reduce the maximum number of shares
for which options may be granted per calendar year to an employee under the
1997 Stock Incentive Plan.
ACCOUNTING CONSEQUENCES
The Company accounts for stock options issued to employees in accordance
with Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES. Under APB No. 25, as interpreted as of the date of this proxy
statement the Exchange Program would not be considered compensatory since the
exercise price on the new options granted under the Exchange Program will be at
market price. In addition, the Exchange Program would not trigger variable plan
accounting. The options would continue to be accounted for as a fixed award.
The Financial Accounting Standards Board (the "FASB"), has proposed a new
interpretation of APB No. 25. The following discussion of the expected
accounting consequences of the Exchange Program under the proposed new
interpretation is based on the Company's review of publicly available
information about the FASB's pending
26
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proceedings, including the Exposure Draft issued by the FASB in March 1999 and a
FASB prepared summary of the status of its proceedings as of the FASB's January
12, 2000 meeting. The FASB has not published its final interpretation.
Accordingly, although the Company assumes the interpretation will be adopted in
its current proposed form, there can be no assurance that the accounting
consequences described below will become effective. The FASB has stated that it
plans to issue a final interpretation in the first quarter of 2000. This final
interpretation is expected to become effective on July 1, 2000.
Under the proposed new interpretation, if the term of a stock option which
was originally accounted for as fixed award (as is the case with respect to
Iomega's existing stock options) is modified during the option term to change
the exercise price, the modified option must be accounted for as a variable
award. Accordingly, because the Exchange Program will constitute a "repricing"
under the proposed new interpretation, the new option issued pursuant to the
Exchange Program will be subject to variable award accounting. Under variable
award accounting, the Company is required to recognize compensation expense in
its statement of operations for any increase in the market price of the
Company's common stock above the repriced exercise price. This compensation
expense must be recorded on a quarterly basis until the option is exercised,
forfeited or expires unexercised. Any subsequent decreases in the market value
of the Company's common stock would result in a reversal of compensation expense
previously recognized. Compensation expense can be reversed only to the extent
previously recognized for each option. For exchanged options that are vested,
the increase or decrease in value, as the case may be, is recorded currently in
income each quarter. For exchanged options that are not vested, the increase or
decrease in value, as the case may be, is recorded as deferred compensation and
amortized into income over the option's vesting period based on the ratio of the
number of periods outstanding over the vesting period. This calculation requires
that the beginning period in the ratio equal the original option grant date,
thereby decreasing the amount to be deferred into later periods. The charges
will be non-cash items.
The new interpretation of APB No. 25 is expected to be applicable to all
options repriced after December 15, 1998. However, under proposed transition
rules, the Company will not begin recording compensation expense for new options
granted under the Exchange Program until the new interpretation becomes
effective (which is expected to be July 1, 2000).
The impact of the new options granted under the Exchange Program on the
Company's financial statements will depend on the number of options exchanged,
quarterly fluctuations in the Company's common stock price and the date of
exercise of the new options by employees. Depending on these factors, the
Company could be required to record significant compensation expense during the
next ten years. Moreover, because the precise amount of the compensation expense
will depend on the market price of the Common Stock at the end of each quarterly
period, the Company will not be able to forecast in advance the amount of
compensation expense that it will incur in any period.
Implementation of the Exchange Program could in certain circumstances
impede the Company's ability to use pooling accounting in connection with any
future business combination transactions.
27
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ITEM THREE -- RATIFICATION OF SELECTION OF AUDITOR
THE THIRD AND FINAL AGENDA ITEM TO BE VOTED ON IS RATIFICATION OF THE SELECTION
OF ARTHUR ANDERSEN LLP AS IOMEGA'S INDEPENDENT AUDITORS FOR THE CURRENT YEAR.
THE BOARD RECOMMENDS THAT YOU VOTE FOR SUCH RATIFICATION.
The Board of Directors, at the recommendation of the Audit Committee, has
selected Arthur Andersen LLP, a firm of independent public accountants, as
auditors, to examine and report to shareholders on the consolidated financial
statements of Iomega and its subsidiaries for the fiscal year 2000.
Arthur Andersen LLP has served as Iomega's independent auditors since the
Company's inception in 1980. If ratification of this selection of auditors is
not approved by a majority of shares voting on the matter, 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
shareholders.
Audit services performed by Arthur Andersen LLP during 1999 included
examination of the consolidated financial statements of Iomega, services related
to filings made with the SEC, and certain services related to the Company's
consolidated quarterly and annual reports as well as other periodic reports at
international locations. Arthur Andersen LLP also performs tax-related and
consulting services for Iomega. Total fees for all audit and non-audit services
provided by Arthur Andersen LLP during 1999 were approximately $857,377.
The Audit Committee meets at least twice a year with Arthur Andersen LLP and
reviews both audit and non-audit services performed by Arthur Andersen LLP as
well as fees charged by Arthur Andersen LLP for such services. The Audit
Committee also reviews the annual audit plan and the results of the annual
audit. Non-audit services are reviewed by the Audit Committee, which considers,
among other things, the anticipated effect, if any, the performance of such
services would have on the auditors' independence.
ADDITIONAL INFORMATION
SOLICITATION EXPENSES
Iomega will bear all costs of the solicitation of proxies by the Board of
Directors. In addition to solicitations by mail, Iomega's directors, officers
and employees, without additional pay, may solicit proxies by telephone or
personal meetings. Iomega has retained Georgeson Shareholder Communications to
assist in the solicitation of proxies, at a cost of approximately $6,500 plus
reimbursement of reasonable expenses. The Company reserves the right to retain
other outside agencies for the purpose of soliciting proxies. Iomega will
request brokers, custodians and fiduciaries to forward proxy soliciting material
to the owners of stock held in their names, and, as required by law, Iomega will
reimburse them for their out-of-pocket expenses in this regard.
DIRECTOR NOMINATIONS
The Nominating and Governance Committee will consider nominees recommended
by shareholders. Shareholders who wish to recommend nominees for director should
submit such recommendations to the Secretary of the Company, at Iomega's
principal offices.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any proposal that a shareholder wishes to be considered for inclusion in the
Company's proxy statement and proxy card for the 2001 Annual Meeting of
Shareholders must be received by Iomega's Secretary at our principal offices not
later than November 23, 2000.
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ADVANCE NOTICE PROCEDURES
Iomega's bylaws require shareholders to give advance notice of any
shareholder nominations of directors and of any other matter shareholders wish
to present for action at an annual meeting of shareholders (other than matters
to be included in our proxy statement, which are discussed in the previous
paragraph). The required notice must be given within a prescribed time frame,
which is generally calculated by reference to the date of the most recent annual
meeting. Assuming that Iomega's 2001 Annual Meeting of Shareholders is held
after April 17, 2001 and before June 30, 2001 (as we currently anticipate), the
bylaws would require notice to be provided to Iomega's Secretary at Iomega's
principal offices no earlier than January 19, 2001 and no later than February 8,
2001. If a shareholder fails to provide timely notice of a proposal to be
presented at the 2001 Annual Meeting, the proxies designated by the Board of
Directors of the Company will have discretionary authority to vote on any such
proposal which may come before the meeting.
By the order of the Board of Directors,
ROBERT D. MURRILL, JR.
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
29
<PAGE>
- --------------------------------------------------------------------------------
PROXY IOMEGA CORPORATION PROXY
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 19, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF IOMEGA
The undersigned, revoking all prior proxies, hereby appoint(s) Bruce R.
Alberston and Robert D. Murrill, Jr., 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 that the undersigned would be entitled to
vote if personally present at Iomega's 2000 Annual Meeting of Shareholders to be
held at the Marriott Hotel, 75 South West Temple, Salt Lake City, Utah 84101 on
Wednesday, April 19, 2000 at 10:00 a.m., local time, and at any adjournment
thereof.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/X/ PLEASE MARK YOUR VOTE AS IN THE EXAMPLE TO THE LEFT.
1. To elect the persons listed below as Class III Directors: WITHHOLD
(except as marked below): FOR all AUTHORITY to vote
nominees for either nominee
ROBERT P. BERKOWITZ
JOHN R. MYERS
------- --------
FOR all nominees except the following: (to withhold
authority to vote for one nominees, write the
nominee's name below):
- ------------------------------------------------------------
2. To approve the Employee Stock Option Exchange Program. FOR AGAINST ABSTAIN
------ ---------- ---------
3. To ratify the selection of Arthur Andersen LLP as Iomega's FOR AGAINST ABSTAIN
independent accountants 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 OF THE
MEETING. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR THE TWO DIRECTOR NOMINEES AND FOR PROPOSALS 2 AND
3. ATTENDANCE OF THE UNDERSIGNED AT THE MEETING OR ANY ADJOURNMENT THEREOF
WILL NOT BE DEEMED TO REVOKE THIS PROXY UNLESS THE UNDERSIGNED SHALL REVOKE
THIS PROXY IN WRITING OR AFFIRMATIVELY INDICATE THE INTENT TO VOTE IN
PERSON.
SIGNATURE DATE
------------------ -------
SIGNATURE DATE (if held jointly)
------------------ -------
NOTE: Please sign exactly as name appears on this card. 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.
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