SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
November 7, 2000 (November 6, 2000)
STORAGE TECHNOLOGY CORPORATION
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(Exact Name of Registrant As Specified In Its Charter)
Delaware 1-7534 84-0593263
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(State or jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One StorageTek Drive, Louisville, Colorado 80028-4309
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (303) 673-5151
Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
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The registrant, Storage Technology Corporation (the "Company"), announced that
the Company has made an exchange offer (the "Exchange") on November 6, 2000 to
approximately 1,300 employees of the Company to exchange stock options to
purchase common stock, par value $.10 per share, of the Company (the "Common
Stock") that have a per share exercise price of $17.50 or greater, whether or
not vested ("Eligible Options") for shares of restricted Common Stock, at an
exchange ratio of four option shares surrendered for each share of restricted
Common Stock received. The shares of restricted Common Stock will vest one-third
on each of the first, second and third annual anniversary dates of November 20,
2000, the date upon which the Exchange will close (the "Exchange Date"). The
Exchange specifically precludes the Chairman of the Board, President and Chief
Executive Officer of the Company and all corporate vice presidents of the
Company from participating in the Exchange. Both the stock options and the
restricted stock involved in the Exchange are subject to the Company's Amended
and Restated 1995 Equity Participation Plan (the "1995 Plan").
The purpose of the Exchange is to:
o provide retention and performance incentives for key employees;
o align better the interests of key employee with those of the stockholders; and
o provide for the return of shares subject to surrendered options to the 1995
Plan for use in future employee equity programs.
In order to be eligible to participate in the Exchange ("Eligible Participant"),
the employee must not have received any stock options in the six months
preceding the Exchange Date. An Eligible Participant must exchange all the
Eligible Options held. In general, if the employment of an employee who
participates in the Exchange terminates prior to the vesting of all the shares
of restricted Common Stock received in the Exchange, the employee shall forfeit
the unvested shares of restricted Common Stock. If the employment of such
employee is terminated as a result of death, Disability or a Reduction in Force
(as those terms are defined in the 1995 Plan) following a change of control, all
shares of Restricted Stock received by that employee in the Exchange will vest
immediately. Any Eligible Participants electing to participate in the Program
will be ineligible for any stock option grants, additional restricted stock
awards, stock appreciation rights or other equity-based awards by the Company
for a period of six months following the Exchange Date.
The Exchange is subject to acceptance by the Company on the Exchange Date. In
addition, if, on the Exchange Date, the closing price of the Company's Common
Stock is $15.00 per share or greater at the close of trading on the New York
Stock Exchange, as reported subsequently in The Wall Street Journal, the
Exchange will be automatically terminated and no options will exchanged for any
shares of restricted stock. This price provision was determined by the Company's
Board of Directors to be necessary in order to limit the amount of the deferred
compensation charge to be recognized by the Company. Based on the four-for-one
exchange ratio set forth above, if all of the Eligible
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Options are exchanged, the number of outstanding shares of Common Stock will
increase by approximately 1,410,000 as a result of the Exchange. However, the
overhang associated with unexercised stock options will be reduced because all
stock options surrendered under the Exchange will be available for re-issuance
under the 1995 Plan. Unexercised stock options, stated as a percentage of the
issued and outstanding shares, represented approximately 11.7% as of September
29, 2000. Assuming that all of the Eligible Options are exchanged, that
percentage would be reduced to approximately 5.5%. Further, assuming all of the
Eligible Options are exchanged, a pool of approximately 15,770,000 shares
(approximately 10,130,000 shares available as of September 29, 2000, plus
approximately 4,230,000 shares available as a result of the Program) would then
become available for future employee equity plans.
The non-cash deferred compensation associated with the Exchange is primarily
dependent upon the share price of the Common Stock on the Exchange Date and the
number of Eligible Options that are exchanged. If all of the Eligible Options
are exchanged and the price of the Common Stock on the Exchange Date is $10.00
per share, the Exchange would result in an aggregate of approximately $14.1
million non-cash deferred compensation on a pre-tax basis. The non-cash deferred
compensation will be recognized ratably over the three-year vesting schedule of
the restricted stock to be issued in the Exchange. The non-cash deferred
compensation will be recognized on an accelerated basis to the extent that
shares of the restricted stock vest on an accelerated basis in the situations
described above and will be reduced to the extent that a participant forfeits
his or her shares of restricted stock received in the Exchange prior to vesting.
The non-cash deferred compensation will reduce the Company's net income and may
result in a decrease of the market price of the Common Stock. The compensation
amount is unaffected by future changes in the price of the Common Stock.
Implementing the Exchange may restrict the Company's ability to engage in any
pooling-of-interests mergers for a future period. The Company has no present
intent to enter into any pooling-of-interests mergers.
None of the Eligible Options are included as outstanding shares in the
calculation of diluted earnings per share because all of the Eligible Options
have exercise prices in excess of the current fair market value of the Common
Stock. All issued and outstanding shares of restricted stock are included in the
calculation of diluted earnings per share, regardless of whether vested. The
Exchange will likely decrease the Company's diluted earnings per share, at least
in the short-term, and may result in a corresponding decrease in the market
price of the Common Stock.
The assumptions, expectations and forecasts contained herein regarding the
Company, and the potential effect of the Exchange upon the Company and its
results of operation constitute "forward looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements
involve a number of risks and uncertainties that could cause actual results to
differ materially, including the percentage of Eligible Options that are
actually exchanged and the price of the Common Stock on the Exchange Date.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: November 7, 2000 Storage Technology Corporation
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By: /s/ Thomas G. Arnold,
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Vice President,
Corporate Controller
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