<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
__________________
Date of Report (Date of earliest event reported): February 24, 1995
___________________
NETWORK SYSTEMS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-9691 41-1231031
-------- ------ ----------
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
7600 Boone Avenue North, Minneapolis, MN 55428
-----------------------------------------------
(Address of principal executive offices)
(612) 928-5000
-------------------------------
(Registrant's telephone number)
<PAGE>
Item 5. Other Events.
------------
On February 24, 1995, the Company mailed to its stockholders a Supplement to the
Proxy Statement/Prospectus dated January 9, 1995 and the Supplement to the
Proxy Statement/Prospectus dated February 10, 1995. The Supplement provided
additional information for consideration by the Company's Stockholders in
connection with their vote on the proposed Agreement and Plan of Merger
providing for the merger of the Company with a newly formed subsidiary of
Storage Technology Corporation. A copy of the Supplement is attached as an
exhibit to this Report and is incorporated by reference herein.
Item 7. Financial Statements and Exhibits.
---------------------------------
c. Exhibits.
--------
99.1 Supplement to Proxy Statement/Prospectus, mailed to Company
stockholders on February 24, 1995.
99.2 Network System Proxy Card
2
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETWORK SYSTEMS CORPORATION
(Registrant)
Dated: February 24, 1995 By /s/ Malcolm D. Reid,
----------------------------
Malcolm D. Reid,
Vice President, Secretary
and General Counsel
3
<PAGE>
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Method
Exhibit Item of Filing
- ------- ---- ---------
<C> <S> <C>
99.1 Supplement to Proxy Statement/Prospectus, Filed herewith.
mailed to Company stockholders on
February 24, 1995.
99.2 Network Systems Proxy Card Filed herewith.
</TABLE>
4
<PAGE>
SUPPLEMENT TO PROXY STATEMENT/PROSPECTUS DATED FEBRUARY 24, 1995
[LOGO OF NETWORK SYSTEMS CORPORATION APPEARS HERE]
FEBRUARY 24, 1995
Dear Network Systems Stockholder:
We have previously sent to you a Proxy Statement/Prospectus dated January 9,
1995 (the "Proxy Statement") and a Supplement to the Proxy Statement/Prospectus
dated February 10, 1995 (the "Prior Supplement"), both relating to a special
meeting of stockholders of Network Systems Corporation ("Network Systems") to
be held at 9:00 a.m. local time on Tuesday, March 7, 1995 at the Lutheran
Brotherhood Building, 625 Fourth Avenue South, Minneapolis, Minnesota 55415. As
described in the Proxy Statement/Prospectus, this special meeting has been
called to allow Network Systems stockholders to consider and vote upon a
proposed Agreement and Plan of Merger (the "Merger Agreement") providing for
the merger (the "Merger") of Network Systems with a newly formed subsidiary of
Storage Technology Corporation ("StorageTek").
The Board of Directors of Network Systems, at a meeting held on February 23,
1995, considered a revised 1995 operating plan presented by management. As
discussed in greater detail in the attached supplement to the Proxy
Statement/Prospectus (the "Supplement"), after considering the presentation by
management of a revised 1995 operating plan and other factors it believes to be
relevant, THE NETWORK SYSTEMS BOARD OF DIRECTORS REAFFIRMS ITS VIEW THAT THE
MERGER IS FAIR TO AND IN THE BEST INTERESTS OF NETWORK SYSTEMS AND ITS
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE MERGER.
Your vote is important, and we urge you to give the Proxy
Statement/Prospectus, the Prior Supplement and this Supplement your immediate
attention. You received with both the Proxy Statement/Prospectus and the Prior
Supplement a proxy card on which you could vote, and you may have already
returned one or both of these cards. However, we have enclosed a third proxy
card (and a return envelope) for your use.
Thank you for your cooperation.
Very truly yours,
[SIGNATURE OF MALCOLM D. REID
APPEARS HERE]
Malcolm D. Reid
Vice President, General
Counsel and Secretary
THIS SUPPLEMENT TO PROXY STATEMENT/PROSPECTUS IS DATED FEBRUARY 24, 1995 AND IS
FIRST BEING MAILED TO NETWORK SYSTEMS STOCKHOLDERS ON OR ABOUT FEBRUARY 24,
1995.
<PAGE>
This is a Supplement to the Proxy Statement/Prospectus and the Prior
Supplement. This Supplement contains additional information for your
consideration of the Merger of Network Systems with a newly formed subsidiary
of StorageTek described in the Proxy Statement/Prospectus and the Prior
Supplement. The capitalized terms used in this Supplement shall have the
meanings ascribed them in the Proxy Statement/Prospectus.
Information contained in this Supplement has been supplied by Network
Systems. The opinions, projections and predictions concerning StorageTek
contained or incorporated herein are not those of StorageTek and are solely
those of the persons or entities to whom they are attributed. StorageTek does
not adopt or endorse any of such opinions, projections or predictions.
As stated in the Prior Supplement, at the meeting of the Network Systems
Board of Directors on February 8, 1995 at which the Board reaffirmed its view
that the Merger was fair to and in the best interests of Network Systems and
its stockholders, one of the directors, Donald W. Feddersen, voted not to
reaffirm the Merger. In partial response to Mr. Feddersen's concerns
(summarized below), and to assure consideration of a balance of information
relevant to a decision either to reaffirm the Merger or to continue as an
independent company, a meeting of the Board was held on February 23, 1995. At
this meeting, management of Network Systems was asked to present to the Board
an operating plan for 1995 which, as compared with the 1995 operating plan
previously approved by the Board, would de-emphasize revenue growth, reduce
costs substantially and make personnel changes.
After considering management's revised operating plan for 1995 at the
February 23, 1995 meeting and the other matters discussed below, the Network
Systems Board of Directors unanimously voted to reaffirm its view that the
Merger is fair to and in the best interests of Network Systems and its
stockholders. At this meeting, Mr. Feddersen changed his vote from a negative
vote at the February 8, 1995 meeting to an affirmative vote.
Views of Mr. Feddersen
At the February 8 Board meeting, director Donald W. Feddersen voted not to
recommend the Merger to the stockholders. At that time, Mr. Feddersen expressed
concern about whether StorageTek is well positioned to meet price competition
in its various markets and stated his belief that Network Systems stockholders
could be disappointed in the performance of StorageTek Stock. Mr. Feddersen
also questioned whether Network Systems' could be restructured to improve its
near term performance, by de-emphasizing revenue growth and reducing costs,
including research and development budgets. Further, Mr. Feddersen stated that
Network Systems should rebuild its sales force and make changes in management.
In the view of Mr. Feddersen, positive results from such a restructuring could
have the effect of increasing Network Systems' earnings, which could lead to an
increase in value of Network Systems Stock above the value of the Merger
consideration.
Upon consideration of the presentation by management of Network Systems at
the February 23 meeting, Mr. Feddersen changed the conclusion he reached at the
February 8 meeting and voted with all other directors to recommend the Merger
to the Network Systems stockholders. Mr. Feddersen concluded that much of
Network Systems' existing business is in mature markets that are declining in
size and are subject to price erosion. Competing in these markets would
necessitate severe cost reductions of a nature and scope with which existing
management is not familiar and which could be difficult to implement. In
addition, Mr. Feddersen perceived that there are substantial risks associated
with the introduction of new products, a key part of the 1995 plan. Based upon
these factors and others he deemed relevant, Mr. Feddersen concluded that
receiving the Merger consideration would be preferable for the Network Systems
stockholders to continuing as stockholders of an independent company.
February 23, 1995 Board Meeting
The Network Systems Board of Directors asked the management of Network
Systems to present at a Board meeting on February 23, 1995 an operating plan
for 1995 for Network Systems on an independent basis which would reduce costs
substantially and consider the other factors suggested by Mr. Feddersen.
1
<PAGE>
The plan presented by management (the "Revised 1995 Plan") called for a
reorganization of certain functions within Network Systems and corresponding
cost reductions. The plan, like the prior plan approved by the Network Systems
Board of Directors, is highly dependent upon the successful introduction of new
products. The Revised 1995 Plan reflects significant losses in the first
quarter due to restructuring charges and improved performance and operating
margins in the latter part of the year, particularly in the fourth quarter.
Although management believes that Network Systems is positioned to be
successful in 1995 with the release of the company's new products, the Board of
Directors continues to believe that there is less risk and greater opportunity
to the stockholders of Network Systems in receiving the Merger consideration
than in continuing to own the stock of Network Systems as an independent
entity. Based on the details of the Revised 1995 Plan and the challenging
competitive environment in which the plan would be carried out, the Board of
Directors is of the view that the risks inherent in the successful execution of
the plan are such that the Merger remains in the best interests of the
stockholders of Network Systems.
BASED UPON FURTHER CONSIDERATION OF THE MERGER AND THE FACTORS DISCUSSED IN
THIS SUPPLEMENT, ON FEBRUARY 23, 1995 THE NETWORK SYSTEMS BOARD OF DIRECTORS
UNANIMOUSLY REAFFIRMED ITS VIEW THAT THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF NETWORK SYSTEMS AND ITS STOCKHOLDERS.
Board Consideration of Value of Network Systems and StorageTek
As summarized in the Proxy Statement/Prospectus (see "The Merger--Network
Systems' Reasons for the Merger; Recommendations of Network Systems' Board of
Directors") and the Prior Supplement (see "Reasons of Network Systems' Board of
Directors"), in reaching its decision on August 8, 1994 that the Merger was
fair to and in the best interests of Network Systems and its stockholders, and
in reaffirming this decision on January 5 and February 8, 1995, the Board of
Directors of Network Systems on each occasion considered a variety of factors
that it believed to be relevant.
Among the factors that the Network Systems Board of Directors considered in
connection with its deliberations concerning the Merger was a comparison of the
value of StorageTek Stock to be received by the Network Systems stockholders in
the Merger with the value of Network Systems Stock if Network Systems were to
remain an independent entity.
August 7 and 8, 1994 Meeting. On August 8, 1994, the business day prior to
the public announcement of the execution of the Merger Agreement, the reported
closing sale price per share of StorageTek Stock was $39.00, indicating that
the then value of the Merger consideration was $10.21 for each share of Network
Systems Stock (plus an additional $.05 per share in connection with the
redemption of outstanding preferred stock purchase rights (the "Rights
Payment")). Among the factors considered by the Network Systems Board of
Directors in approving the Merger at that time was the value of Network
Systems. Needham & Company, Inc. ("Needham"), which has advised the Network
Systems Board of Directors in connection with the Merger, analyzed the value of
Network Systems as a part of its presentation to the Board at the August 7 and
8, 1994 meeting. As part of its analysis, Needham compared historical and
projected operating and stock market data and operating and financial ratios
for Network Systems with the corresponding data and ratios of certain other
publicly traded networking companies deemed comparable to Network Systems'
business. Such data and ratios included total market capitalization to
historical and projected revenues, price per share to historical and projected
revenues and earnings per share and market value to historical book value. This
analysis resulted in values for Network System as an independent entity ranging
from $9.00 to $10.00 per share.
February 8, 1995 Meeting. Subsequent to the execution of the Merger Agreement
on August 8, 1994, the market price of StorageTek Stock declined from $39.00
per share on August 8, 1994 to a closing price of $23.00 per share on February
7, 1995, indicating that the value of the Merger consideration on that date was
$6.02 (plus the Rights Payment of $.05 per share). The market price of
StorageTek Stock was $21.875 on February 21, 1995, indicating that the current
value of the Merger consideration is $5.727 (plus the Rights Payment). Because
of this significant decline in the market price of StorageTek Stock, the
Network Systems
2
<PAGE>
Board of Directors reviewed the value of StorageTek Stock and Network Systems
Stock as part of its reconsideration of the Merger on January 5 and February 8,
1995.
As a part of its analysis presented to the Network Systems Board of Directors
at the February 8, 1995 meeting, Needham reviewed a range of hypothetical
trading prices of one share of StorageTek Stock and the resulting values of the
Merger consideration (based on the Exchange Ratio), using a range of projected
1995 earnings and a range of price/earnings multiples based upon multiples of
companies deemed generally comparable to StorageTek. This analysis resulted in
StorageTek Stock prices ranging from $24.50 per share to $32.00 per share.
Applying the Exchange Ratio of .2618 shares of StorageTek Stock for each share
of Network Systems Stock, this analysis resulted in a range of values for the
Merger consideration if the Merger is consummated ranging from $6.41 per share
to $8.38 per share. As part of this presentation, Needham also analyzed the
likely value of Network Systems Stock if Network Systems were to remain
independent. Needham reviewed a range of hypothetical trading prices of one
share of Network Systems Stock assuming that the Merger were not to occur using
a range of projected 1995 earnings and price/earnings multiples based upon
multiples of companies deemed generally comparable to Network Systems. This
analysis resulted in Network Systems Stock prices ranging from $3.12 per share
to $5.02 per share.
Iceberg
Subsequent to the January 24, 1995 press release attached to the Prior
Supplement, the Network Systems Board of Directors at the February 8, 1995
meeting gave further consideration to factors related to Iceberg and does not
believe that any of those factors preclude reaffirmation of its view that the
Merger is fair to and in the best interests of Network Systems and its
stockholders.
Developments in Stockholder Litigation
As discussed in the Prior Supplement under the heading "Stockholder
Litigation," two complaints were filed against Network Systems and members of
its Board of Directors in the state Chancery Court in Delaware. In one of the
complaints, StorageTek was also named as a defendant. A preliminary injunction
hearing has been scheduled for March 1, 1995 in Delaware Chancery Court. At
that hearing, the plaintiffs may seek to enjoin the Merger, amend the Merger
Agreement or ask for further disclosures concerning the Merger. Network Systems
continues to believe that the allegations contained in these complaints are
without merit and intends to defend the lawsuits vigorously.
3
<PAGE>
NETWORK SYSTEMS CORPORATION
7600 BOONE AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55428
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS
ON MARCH 7, 1995
The undersigned hereby appoints Michael F. G. Ashby and Malcolm Reid, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of common stock of Network Systems Corporation held of record by the
undersigned on January 6, 1995, at the special meeting of stockholders to be
held on March 7, 1995, or any adjournment thereof.
1. PROPOSAL TO APPROVE MERGER AGREEMENT
[_] FOR [_] AGAINST [_] ABSTAIN
2. PROPOSAL TO ADJOURN MEETING TO PERMIT FURTHER SOLICITATION OF PROXIES TO
APPROVE THE MERGER AGREEMENT
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSAL.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title. If stockholder is a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by an authorized person.
_______________________________
(Signature)
_______________________________
(Signature)
DATED: __________________, 1995
PLEASE MARK, SIGN, DATE AND
MAIL THE PROXY CARD PROMPTLY
USING THE RETURN ENVELOPE.
NS2266
