Iomega, Class Act or Class Action?:
A Continuing Study
Into How Iomega Treats
Its Customers and Employees

During 1996, the Company introduced a number of promotions designed to expand the size of the market for its products. The Company also decreased the suggested retail prices of its Jaz and Ditto drives and announced a series of rebate programs for its Zip products, which offered qualifying purchasers of Zip products the choice of receiving a cash rebate or certain merchandise. During the summer of 1996, the Company engaged a third party firm (the "Administrator") to administer the Company's rebate programs. Many consumers have complained about delays in receiving their rebate checks or merchandise and difficulties in obtaining timely responses to rebate inquiries and certain customers have initiated litigation relating to the rebate programs. See "Item 3 -- Legal Proceedings." The Company has also received a number of letters from State Attorneys General, Consumer Protection Agencies and other governmental bodies concerning complaints about the rebate programs. In light of the difficulties experienced in managing the volume of 1996 rebate requests, the Company has added resources to assist the administrator in processing rebate requests and responding to rebate inquiries more quickly. The Company is monitoring the progress in achieving faster turnaround on issuing rebate checks and merchandise, and in answering rebate related questions.

Since July 1996, the Administrator has received several hundred thousand Zip rebate requests. The Company will, and has always intended to, pay every qualifying rebate request. In March 1997, the Company was informed by the Administrator of certain recently discovered shortcomings in the procedures relied on to process rebate requests. As a result of these shortcomings, a substantial number of customers whose rebate requests (for between $50 and $70) had been approved were not promptly paid by the Administrator. The Company has taken immediate steps to rectify this problem and rebate checks have been sent or will shortly be sent to all of these customers. The Company was also recently informed by the Administrator that a substantial number of customers whose 1996 rebate request submissions (or resubmissions after an initial determination of ineligibility) have not been notified of the status of their submissions. The Company is in the process of notifying each of these customers, as well as a group of customers whose requests for certain rebate merchandise (a carry-bag) have been delayed due to a supply shortage. The delays in fulfilling the Company's rebate obligations and in notifying customers of the status of their requests have resulted in customer dissatisfaction and frustration. Despite the Company's efforts to improve the administration of its rebate programs, customer dissatisfaction arising from thes programs could adversely affect the Company's reputation and its future marketing and sales efforts. The Company knows its future success depends in large measure on the loyalty of its customers -- in particular, the users of the more than 5,000,000 Zip drives shipped to date -- and is determined to preserve, or where necessary rebuild, that loyalty.

ITEM 3. LEGAL PROCEEDINGS:

Except as set forth below, in management's opinion, there are no material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject.

The Company has been named as a defendant in Pizzimenti, et al. v. Iomega Corporation, a class action filed in the Chancery Court of the State of Delaware in and for New Castle County on March 10, 1997. The named plaintiffs purport to represent all persons in the United States who bought Iomega Zip drives or Zip disks since July 1, 1996 and who were allegedly not paid timely rebates. The complaint alleges that the Company breached contracts with those consumers and violated the Delaware Consumer Fraud Act by failing to send rebates to them within the time period specified in the Company's rebate offer. The complaint seeks immediate payment of the rebates (which are in an amount of $50 per Zip drive purchased, up to $20 per 10-pack of Zip disks purchased and/or, at the customer's election, certain merchandise) plus interest to each putative class member, together with payment of plaintiffs' attorneys' fees. An adverse outcome in this class action suit would not, in the opinion of management, have a material adverse effect in financial terms on the Company's financial condition or results of operations. However, an adverse outcome, particularly if accompanied by negative publicity, could have an adverse effect on the Company's business by harming the Company's reputation and goodwill with current or prospective customers.

NAMES, ADDRESSES, & LINKS; PEOPLE AND GROUPS TO WHOM

YOU CAN WRITE

Perhaps the comment I need to make most often, when I read letters from people complaining about Iomega, is that it does no good for us to complain to each other. Please write to those in positions of authority, about such matters.

Correspondence can be found at the following pages:

April 1997

February 1997

January 1997

December 1996

Mail received 10OCT96 to 13NOV96

My responses to mail received 10OCT96 to 13NOV96

©Stephen A. Langford, Oro Valley, Arizona, 17 May 1997.  
ALL RIGHTS RESERVED.  
This document may be freely transmitted in its entirety, 
so long as no monies are earned during the transaction/s.  
Permission is required for any and all other pertinent circumstances.




 (Metering for this page was begun on 17 May 1997.)