SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________________________
to __________________________
----------------------------
COMMISSION FILE NUMBER
[Prior to March 7, 1995] : 0-9691
[As of March 7, 1995 and thereafter] : 1-7534
----------------------------
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
NETWORK SYSTEMS CORPORATION SAVINGS
AND STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive offices:
[Prior to March 7, 1995]:
NETWORK SYSTEMS CORPORATION
7600 Boone Avenue North
Minneapolis, Minnesota 55428
[As of March 7, 1995 and thereafter]:
STORAGE TECHNOLOGY CORPORATION
2270 South 88th Street
Louisville, Colorado 80028-4309
PAGE
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
DECEMBER 31, 1995 AND 1994
PAGE
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
TABLE OF CONTENTS
Page
Financial Statements:
Report of Independent Accountants 1
Statement of Net Assets Available for Benefits,
with Fund Informtion 2 - 3
Statement of Changes in Net Assets Available for
Benefits, with Fund Information 4 - 5
Notes to Financial Statements 6 - 14
Additional Information:*
Schedule I - Item 27a Form 5500 - Schedule of Assets
Held for Investment Purposes 15
Schedule II - Item 27b Form 5500 - Schedule of Loans
or Fixed Income Obligations in Default 16 - 17
Schedule III - Item 27d Form 5500 - Schedule of
Reportable Transactions 18
* Other schedules required by Section 2520.103-10 of the Department of
Labor Rules and Regulations for Reporting and Disclosure under ERISA have
not been presented because they are not applicable.
PAGE
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of
the Network Systems Corporation
Savings and Stock Ownership Plan
In our opinion, the accompanying statement of net assets available for
benefits, with fund information and the related statement of changes in net
assets available for benefits, with fund information present fairly, in all
material respects, the net assets available for benefits of the Network
Systems Corporation Savings and Stock Ownership Plan (the Plan) at December
31, 1995 and 1994 and the changes in net assets available for benefits for
the years then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Plan's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements
in accordance with generally accepted auditing standards which require that
we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the financial statements, the Board of Directors
of Network Systems Corporation, the Plan's sponsor, approved the termination
of the plan effective December 31, 1995. In accordance with generally
accepted accounting principles, the Plan has changed its basis of accounting
used to determine the amounts at which investments are stated from the
ongoing plan basis used in presenting the 1994 financial statements to the
liquidation basis used in presenting the 1995 financial statements.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included
in Schedules I, II and III is presented for purposes of additional analysis
and is not a required part of the basic financial statements but is
additional information required by ERISA. The Fund Information in the
statement of net assets available for benefits and the statement of changes
in net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and
the changes in net assets available for benefits of each fund. The
Supplemental Schedules and Fund Information have been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation
to the basic financial statements taken as a whole.
Price Waterhouse LLP
Denver, Colorado
June 27, 1996
PAGE
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------------------------------
Network IAI
Systems Blended Fidelity Regional
Stock Fund Rate Fund Fund Fund Loan Fund Total
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables:
Employer's
contributions $ 239,710 $ 258,969 $ 88,985 $ 587,664
Employees'
contributions 23,073 16,832 2,364 42,269
Employees'
loan repayments 43,012 37,098 9,623 $(57,968) 31,765
Accrued interest $ 95 162,850 107 39 158 163,249
----------- ----------- ----------- ----------- ----------- -----------
Total receivables 95 468,645 313,006 101,011 (57,810) 824,947
Investments (Note 4) 764,439 14,553,511 10,337,329 3,938,171 800,628 30,394,078
----------- ----------- ----------- ----------- ----------- -----------
Net assets available
for plan benefits $764,534 $15,022,156 $10,650,335 $4,039,182 $742,818 $31,219,025
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-2-
PAGE
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------------------------------------------
Fidelity Management Trust
First Trust Trust Company
------------------------------------------------------------------- -------------------------
Network IAI
Systems Blended Fidelity Regional Magellan Growth and
Stock Fund Rate Fund Fund Fund Loan Fund Fund Income Fund
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Receivables:
Employer's
contributions $ (1,241) $ 265,474 $ 228,760 $ 99,029
Employees' loan
repayments 34,317 21,001 7,946 $(63,264)
Accrued interest 68 237,594 239 159 241
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Receivables (1,173) 537,385 250,000 107,134 (63,023)
Investments (Note 4) 1,086,847 13,883,810 6,435,168 2,918,654 771,391 $906,813 $693,071
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets available
for plan benefits $1,085,674 $14,421,195 $6,685,168 $3,025,788 $708,368 $906,813 $693,071
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Fund Information
-------------------------------------------------------------------
Fidelity Management Trust Company
-------------------------------------------------------------------
Retirement Asset
Intermediate Money Manager
Bond Fund Market Fund Fund Loan Fund Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Receivables:
Employer's
contributions $ 592,022
Employees' loan
repayments 0
Accrued interest 238,301
----------- ----------- ----------- ----------- -----------
Total Receivables 830,323
Investments (Note 4) $139,050 $468,527 $14,173 $87,304 27,404,808
----------- ----------- ----------- ----------- -----------
Net assets available
for plan benefits $139,050 $468,527 $14,173 $87,304 $28,235,131
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-3-
PAGE
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------------------------------
Fidelity Management Trust
First Trust Trust Company
------------------------------------------------------------------- -------------------------
Network IAI
Systems Blended Fidelity Regional Magellan Growth and
Stock Fund Rate Fund Fund Fund Loan Fund Fund Income Fund
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Net realized and
unrealized appreciation
(depreciation) in fair
value of investments $ (95,561) $ 322,382 $ 1,622,208 $ 538,134 $ 200,054 $ 99,928
Interest and dividend
income 8,193 700,341 768,363 437,021 $ 458 1,778 3,696
Loan repayment interest 20,266 14,914 5,711
---------- ---------- ---------- ---------- ---------- ---------- ----------
(87,368) 1,042,989 2,405,485 980,866 458 201,832 103,624
Contributions:
By employer 239,710 258,969 88,985
By participants 1,417,788 1,613,978 550,932
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,657,498 1,872,947 639,917
Withdrawals by
participants (103,575) (2,862,267) (861,329) (343,569) (59,497) (739,016) (520,218)
Transfers:
Between funds (130,197) 746,905 547,406 (240,558) 86,721 (369,629) (276,477)
New loans (178,909) (95,516) (56,510) 330,935
Loan principal repayments 194,745 96,174 33,248 (324,167)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(130,197) 762,741 548,064 (263,820) 93,489 (369,629) (276,477)
Net increases (decreases) (321,140) 600,961 3,965,167 1,013,394 34,450 (906,813) (693,071)
Net assets at beginning
of year 1,085,674 14,421,195 6,685,168 3,025,788 708,368 906,813 693,071
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets at end of
year $ 764,534 $15,022,156 $10,650,335 $4,039,182 $ 742,818 $ 0 $ 0
========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fund Information
------------------------------------------------------
Fidelity Management Trust Company
------------------------------------------------------
Retirement Asset
Intermediate Money Manager
Bond Fund Market Fund Fund Loan Fund Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Net realized and
unrealized appreciation
(depreciation) in fair
value of investments $ 5,919 $ 1,021 $ 2,694,085
Interest and dividend
income 4,373 12,681 163 1,937,067
Loan repayment interest 40,891
----------- ----------- ----------- ----------- -----------
10,292 12,681 1,184 4,672,043
Contributions:
By employer 587,664
By participants 3,582,698
----------- ----------- ----------- ----------- -----------
4,170,362
Withdrawals by
participants (89,530) (278,854) (656) (5,858,511)
Transfers:
Between funds (59,812) (202,354) (14,701) $(87,304) 0
New loans 0
Loan principal repayments 0
----------- ----------- ----------- ----------- -----------
(59,812) (202,354) (14,701) (87,304) 0
Net increases (decreases) (139,050) (468,527) (14,173) (87,304) 2,983,894
Net assets at beginning
of year 139,050 468,527 14,173 87,304 28,235,131
----------- ----------- ----------- ----------- -----------
Net assets at end of
year $ 0 $ 0 $ 0 $ 0 $31,219,025
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
-4-
PAGE
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------------------------------------
Fidelity Management Trust
First Trust Trust Company
------------------------------------------------------------------- -------------------------
Network IAI
Systems Blended Fidelity Regional Magellan Growth and
Stock Fund Rate Fund Fund Fund Loan Fund Fund Income Fund
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Net realized and
unrealized appreciation
(depreciation) in fair
value of investments $ (210,932) $ 73,360 $ (241,607) $ (169,377) $ (85,130) $ (57,966)
Interest and dividend
income 786 944,336 399,559 186,900 $ 2,216 56,469 80,627
Loan repayment interest 2,066 22,911 13,292 4,712 2,155 1,742 1,794
----------- ----------- ----------- ----------- ----------- ----------- -----------
(208,080) 1,040,607 171,244 22,235 4,371 (26,919) 24,455
Contributions:
By employer 270,822 228,785 98,864
By participants 221,119 1,452,093 1,352,865 621,273 58,743 48,481
----------- ----------- ----------- ----------- ----------- ----------- -----------
221,119 1,722,915 1,581,650 720,137 58,743 48,481
Withdrawals by
participants (100,633) (1,284,055) (380,450) (216,294) (61,978) (687,363) (652,372)
Transfers:
Between funds 4,505 (1,111,771) 1,181,667 (74,401) (56,285) (25,007)
New loans (179,291) (94,277) (28,838) 302,406 (1,110)
Loan principal repayments 9,046 103,660 64,406 21,764 (198,876) 16,121 16,393
----------- ----------- ----------- ----------- ----------- ----------- -----------
13,551 (1,187,402) 1,151,796 (81,475) 103,530 (40,164) (9,724)
Net increases (decreases) (74,043) 292,065 2,524,240 444,603 45,923 (695,703) (589,160)
Transfer in of Vitalink
assets (Note 3) 1,602,516 1,282,231
Net assets at beginning
of year 1,159,717 14,129,130 4,160,928 2,581,185 662,445
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets at end of
year $1,085,674 $14,421,195 $6,685,168 $3,025,788 $ 708,368 $ 906,813 $ 693,071
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------
Fidelity Management Trust Company
-----------------------------------------------------
Retirement Asset
Intermediate Money Manager
Bond Fund Market Fund Fund Loan Fund Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Net realized and
unrealized appreciation
(depreciation) in fair
value of investments $ (26,618) $ (18,696) $ (736,966)
Interest and dividend
income 19,658 $ 25,232 7,783 $ 150 1,723,716
Loan repayment interest 385 648 49,705
----------- ----------- ----------- ----------- -----------
(6,575) 25,880 (10,913) 150 1,036,455
Contributions:
By employer 598,471
By participants 8,038 27,982 1,660 3,792,254
----------- ----------- ----------- ----------- -----------
8,038 27,982 1,660 4,390,725
Withdrawals by
participants (226,115) (367,261) (192,518) (6,670) (4,175,709)
Transfers:
Between funds (14,730) 98,679 (2,657) 0
New loans (4,667) (4,223) 10,000 0
Loan principal repayments 5,494 2,977 (40,985) 0
----------- ----------- ----------- ----------- -----------
(13,903) 97,433 (2,657) (30,985) 0
Net increases (decreases) (238,555) (215,966) (204,428) (37,505) 1,251,471
Transfer in of Vitalink
assets (Note 3) 377,605 684,493 218,601 124,809 4,290,255
Net assets at beginning
of year 22,693,405
----------- ----------- ----------- ----------- -----------
Net assets at end of
year $ 139,050 $ 468,527 $ 14,173 $ 87,304 $28,235,131
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
PAGE
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - DESCRIPTION OF PLAN
- ----------------------------
General
- -------
The Network Systems Corporation Savings and Stock Ownership Plan (the Plan)
is a defined contribution plan to which eligible employees of Network
Systems Corporation (the Company or NSC), may elect to contribute stated
percentages of their compensation. Participation by eligible employees is
voluntary. The Plan was sponsored and administered by Network Systems. The
following is not a comprehensive description of the Plan and, therefore,
does not include all situations and limitations covered by the Plan.
Participants should refer to the Plan agreement for more complete
information.
On March 7, 1995, Network Systems was acquired by Storage Technology
Corporation (StorageTek). Effective December 1995, the Plan will be
administered by StorageTek's Profit-Sharing Committee which consists of at
least three persons who are appointed by the Board of Directors of
StorageTek.
Plan Termination
- ----------------
In connection with the Company's merger with StorageTek, the Board of
Directors of Network Systems approved the termination of the Plan effective
December 31, 1995. Pursuant to the terms of the Plan, all participants as
of December 31, 1995, were fully vested in their account balances. Pending
approval of the Internal Revenue Service, all remaining plan assets will be
transferred into StorageTek's Employees' Profit Sharing and Thrift Plan.
This transfer is expected to be completed during 1997.
Contributions
- -------------
During 1995, employees could have their annual compensation reduced by 1% to
15%, not to exceed limitations under applicable IRS regulations, through
automatic payroll deductions (pretax saving contribution) and contributed to
the Plan. Employees could also make contributions through automatic payroll
deductions on an after-tax basis of from 1% to 8% of compensation. These
after-tax saving contributions did not reduce the employee's income for
federal or state income tax purposes. The Company could make a matching
contribution to the Plan as a percentage of the first 6% of the employee's
pretax savings contributions. For the 1995 and 1994 Plan years, the Company
made matching contributions amounting to $587,664 and $598,471,
respectively, based on matching percentages of 30% of the first 6%.
All contributions are held in trust and invested by the Plan's trustees,
First Trust and Fidelity Management Trust Company. Contributions are
initially deposited by the trustees in either the First American Prime
Obligations Fund or a short-term U.S. government fund. Contributions are
later reallocated in accordance with the options selected by the participant
or the requirements of promissory note agreements. Any Company
contributions on behalf of a participant are invested by the trustees in the
same fund or funds specified by the participant, in direct proportion to the
allocation of that individual's payroll deduction contributions.
-6-
PAGE
<PAGE>
Investment Fund Options
- -----------------------
The Plan offers the following investment options:
- --In connection with the Company's merger with StorageTek, each
outstanding share of NSC common stock was converted into .2618 shares of
StorageTek common stock. As a result of the merger, shares of NSC stock
held by the Network Systems Stock Fund were converted into StorageTek common
stock and investments in the First American Prime Obligations Fund,
effective March 7, 1995. Effective after October 31, 1994, the Plan was
amended so that no additional contributions or investment fund transfers
could be made to the Network Systems Stock Fund.
- --The Blended Rate Fund (formerly the Guaranteed Interest Fund) invests
in insurance investment contracts that provide a fixed rate of return at the
rates and for the time periods indicated below:
Applicable Fixed Interest Rate
For Years Ended December 31,
Year of ---------------------------------------
Contributions 1990 1991 1992 1993 1994 1995
------------- ---------------------------------------
1990 8.45 8.45 8.45 8.45 8.45 8.45
Contributions and earnings from the 1990 fixed rate insurance contract
were transferred effective January 3, 1995, to the other investment funds
in accordance with participants' investment allocation directions.
Contributions to the Blended Rate Fund are invested in a pooled fund with
a single blended interest rate. The single blended interest rate is
determined quarterly based on the combined earnings of the underlying
investments. The underlying investments consist primarily of insurance
investment contracts that generally provide a fixed interest rate for a
period up to five years and investments in the First Stable Value Fund, a
First Trust Collective Fund. The investment objective of the First
Stable Value Fund is to provide stable income relative to current
interest rates. The Fund invests primarily in high-quality fixed
interest rate contracts issued by insurance companies and banks.
- --The Fidelity Fund is a no-load fund managed by Fidelity Management
Trust Company. The Fidelity Fund seeks long-term capital growth by
investing primarily in common stock and securities convertible into common
stock. The Fidelity Fund may invest some of its assets in debt securities.
The percentage of assets invested in any one type of debt or equity security
may vary.
- --The IAI Regional Fund is a no-load fund managed by Investment Advisors,
Inc. The investment objective of the IAI Regional Fund is capital
appreciation with at least 80% of its equity investments in companies
headquartered in Minnesota, Illinois, Wisconsin, Iowa, Nebraska, Montana,
North Dakota, and South Dakota. The IAI Regional Fund may invest a portion
of its assets in short-term cash equivalents on a temporary basis.
-7-
PAGE
<PAGE>
Investment Fund Transfers
- -------------------------
Twice a year, participants may direct the Plan Administrator to transfer all
or a portion of their current account balances from one investment fund to
other investment funds in five percent increments.
Loans to Participants
- ---------------------
Participants may borrow from their pretax savings contribution accounts.
Loans may not be less than $1,000 or greater than $50,000. In addition,
loans may not exceed one-half of the participant's pretax savings
contribution account as of the most recent quarter-end valuation.
Participants are required to execute a promissory note and security
agreement giving the Plan a valid first lien against one-half of the
participant's title to their pretax savings contribution account.
Promissory notes provide for a repayment of principal and interest in equal
pay period installments over a period up to five years. Interest is based
on the local bank prime or reference rate and is fixed for the duration of
the loan.
The portion of a participant's account that is invested in the Network
Systems Stock Fund is not available for withdrawal or loan during the
employment of the participant. The restrictions do not apply to
distributions by the Network Systems Stock Fund on termination of
employment.
Loans made to participants are treated as a separate, segregated investment
of the participant. Accordingly, at the time the loan transaction is
consummated, the participant's allocated share of his pretax savings
contribution account is reduced on a pro rata basis by the principal amount
of the loan. Repayments of principal and payments of interest are credited
to the investment funds in which the participant's pretax savings
contribution account is invested in the same proportions specified by the
participant in his most recently filed investment direction.
Withdrawal by Participants
- --------------------------
Distribution may be made upon the occurrence of any of the following:
1. Termination of employment at or after attainment of age 65;
2. Termination of employment prior to attainment of age 65 when
occasioned by permanent or total disability;
3. Death; or
4. Any other termination of employment.
Vesting and Forfeitures
- -----------------------
Upon termination of employment, except for retirement, disability or death,
the participant's account and any related vested Company contributions
become payable to the participant. Company contributions vest in accordance
with the following schedule:
Vesting
Years of Vested Service Percentage
- ----------------------- ----------
Less than 2 years 0%
2 years 25%
3 years 50%
4 years 75%
5 or more years 100%
-8-
PAGE
<PAGE>
Company contributions which have not vested are forfeited by the employee
when a distribution is elected upon termination of employment. Forfeited
amounts are allocated to the accounts of all other participants in the same
manner as employer matching contributions for the Plan year in which the
forfeiture occurs. For participants who terminate employment and who do not
receive a distribution, the nonvested portions of their accounts will be
forfeited and reallocated after five consecutive one-year breaks in service
have been incurred. During 1995 and 1994, forfeitures with respect to the
Company's contributions for prior years were allocated to the accounts of
remaining participants in amounts totaling $22,482 and $18,286,
respectively. Withdrawals under the Plan are permitted due to age or
disability (as defined) and for financial hardship. There were no such
hardship withdrawals in 1995 or 1994.
Administrative Costs
- --------------------
Administrative expenses are paid by the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Method of Accounting
- --------------------
The 1995 Plan financial statements are prepared on a liquidation basis of
accounting, as the Board of Directors has approved the termination of the
Plan. On a liquidation basis, net assets available for benefits are
reflected at their liquidation value. Employees' contributions are recorded
when received by the Company, and employer contributions are recorded when
authorized by the Company. Investment income is recorded when earned.
Expenses are recorded when obligations are incurred. The 1994 Plan
financial statements are presented on the ongoing basis method of
accounting, and accordingly, net assets available for benefits are reflected
at their fair market value. Although the method of accounting for net
assets available for benefits changed in 1995, the liquidation value of the
investments approximates fair market value, and accordingly, the cumulative
effect of the accounting change is not significant.
Cash equivalents are short-term, highly liquid investments that are both
readily convertible to cash and have maturities of three months or less at
the time of acquisition.
Investment Valuation
- --------------------
Investments in common stock of Network Systems and StorageTek are valued at
the closing sales price on the last business day of the year based on the
NASDAQ national market system and NYSE composite closing quotations,
respectively. In connection with the merger with StorageTek, NSC redeemed
from its stockholders all of the rights outstanding under its Amended and
Restated Rights Agreement at a redemption price of $0.05 per right.
Investments in the First American Prime Obligations Fund (formerly the First
American Institutional Money Fund) are valued at the net asset value on the
last business day of the year based on quotations obtained from national
securities exchanges.
Investments in the Blended Rate Fund are valued as of the last business day
of the year at cost plus reinvested interest for group annuity contracts
with insurance companies and at net asset value for investments in the First
Stable Value Fund.
-9-
PAGE
<PAGE>
Investments in the Fidelity Fund and the IAI Regional Fund are valued at the
net asset value of the applicable fund on the last business day of the year.
Investments in the following Fidelity mutual funds are valued at the net
asset value of the applicable fund on the last business day of the year: the
Magellan Fund, the Growth and Income Fund, the Intermediate Bond Fund, the
Retirement Money Market Fund and the Asset Manager Fund.
Investments in the Loan Funds are valued at the amount of the participant
loan net of principal repayments.
Investments in the participant's account are valued upon withdrawal as of
the end of the quarter which next follows by at least 30 days the date on
which the Administrator receives a withdrawal application from the
participant. Investments in the participant's account are valued upon
distribution as of the end of the quarter which coincides with or last
precedes that date of distribution.
Loans to participants and investment values as reported in the financial
statements approximate liquidation value.
Investment Transactions
- -----------------------
Purchases and sales of securities are reflected on a trade date basis (the
date the order to buy or sell is executed). Realized gains and losses are
computed using the average cost method.
NOTE 3 - MERGER OF VITALINK COMMUNICATIONS CORPORATION 401(K) PLAN
- ------------------------------------------------------------------
Effective January 1, 1994, the Vitalink Communications Corporation 401(k)
Plan and Trust (the Vitalink Plan) was merged into the Network Systems
Corporation Savings and Stock Ownership Plan. The Vitalink Plan was a plan
maintained by a subsidiary of Network Systems Corporation. During 1994, the
number of employees participating in the Vitalink Plan fell below the
minimum number required under Section 401(a)(26) of the Internal Revenue
Code. Accordingly, as provided by the regulations, the Vitalink Plan was
retroactively merged into the Plan effective January 1, 1994.
The effect of the merger for 1994 was to include in the Plan additional
investment fund choices which are only available to the former participants
of the Vitalink Plan. The fund choices of the former Vitalink Plan were
available only through June 30, 1995 whereupon any amounts remaining in the
investment account balances for those funds were automatically rolled over
into the Blended Rate Fund.
The investment fund choices available to participants in the former Vitalink
Plan are the following Fidelity mutual funds:
- --The Magellan Fund sought capital appreciation by investing in common
stocks or securities convertible into common stocks.
- --The Growth and Income Fund sought long-term growth with a reasonable
level of current income by investing in common stocks of companies which
offer growth of earnings potential while paying current dividends.
-10-
PAGE
<PAGE>
NOTE 4 - INVESTMENTS
- --------------------
The following table presents the fair values of investments:
<TABLE>
<CAPTION>
Balance (Shares or Value at
Face Amount) Held at December 31,
Name of Issuers and Title of Issuers December 31, 1995 Cost 1995
- ----------------------------------------------- -------------------- ------------- ------------
<S> <C> <C> <C>
FIRST TRUST
Storage Technology Corporation common stock 31,161 shares $ 1,217,959 $ 743,969
First American Prime Obligations Fund 20,470 20,470 20,470
---------- ----------
Total Network Systems Stock Fund 1,238,429 764,439
---------- ----------
Sun Life Insurance Company of American Group
Annuity Contract 3,800,663 3,800,663 3,800,663
John Hancock Mutual Life Insurance Company Group
Annuity Contract 886,825 886,825 886,825
Metropolitan Life Insurance Company Group Annuity
Contract 1,478,911 1,478,911 1,478,911
Protective Life Insurance Company Group Annuity
Contract 1,348,231 1,348,231 1,348,231
First Stable Value Fund, a First Trust
Collective Fund 348,451 shares 5,610,855 5,957,084
First American Prime Obligations Fund 1,081,797 1,081,797 1,081,797
---------- ----------
Total Blended Rate Fund 14,207,282 14,553,511
---------- ----------
Fidelity Fund 450,936 shares 8,839,748 10,195,655
First American Prime Obligations Fund 141,674 141,674 141,674
---------- ----------
Total Fidelity Fund 8,981,422 10,337,329
---------- ----------
IAI Regional Fund 166,308 shares 3,593,371 3,938,171
Investments in loans to employee participants 742,511 742,511
First American Prime Obligations Fund 58,117 58,117 58,117
---------- ----------
Total loan fund 800,628 800,628
---------- ----------
Total investments $28,821,132 $30,394,078
========== ==========
</TABLE>
-11-
PAGE
<PAGE>
<TABLE>
<CAPTION>
Balance (Shares or Value at
Face Amount) Held at December 31,
Name of Issuers and Title of Issuers December 31, 1994 Cost 1994
- ----------------------------------------------- -------------------- ------------- ------------
<S> <C> <C> <C>
FIRST TRUST
Network Systems Corporation common stock 153,874 shares $ 1,569,201 $ 1,077,118
First American Prime Obligations Fund 9,729 9,729 9,729
---------- ----------
Total Network Systems Stock Fund 1,578,930 1,086,847
---------- ----------
New York Life Insurance Company Group Annuity
Contract 2,424,296 2,424,296 2,424,296
Sun Life Insurance Company of American Group
Annuity Contract 4,275,603 4,275,603 4,275,603
John Hancock Mutual Life Insurance Company Group
Annuity Contract 2,141,182 2,141,182 2,141,182
Metropolitan Life Insurance Company Group Annuity
Contract 1,698,847 1,698,847 1,698,847
Protective Life Insurance Company Group Annuity
Contract 1,548,123 1,548,123 1,548,123
First Stable Value Fund, a First Trust
Collective Fund 105,990 shares 1,643,610 1,707,132
First American Prime Obligations Fund 88,627 88,627 88,627
---------- ----------
Total Blended Rate Fund 13,820,288 13,883,810
---------- ----------
Fidelity Fund 345,492 shares 6,580,163 6,384,690
First American Prime Obligations Fund 50,478 50,478 50,478
---------- ----------
Total Fidelity Fund 6,630,641 6,435,168
---------- ----------
IAI Regional Fund 143,549 shares 3,027,323 2,892,508
First American Prime Obligations Fund 26,146 26,146 26,146
---------- ----------
Total IAI Regional Fund 3,053,469 2,918,654
---------- ----------
Investments in loans to employee participants 707,609 707,609
First American Prime Obligations Fund 63,782 63,782 63,782
---------- ----------
Total loan fund 771,391 771,391
---------- ----------
FIDELITY MANAGEMENT TRUST COMPANY
Magellan Fund 13,575 shares 928,826 906,813
Growth and Income Fund 32,863 shares 691,668 693,071
Intermediate Bond Fund 14,146 shares 147,420 139,050
Retirement Money Market Fund 468,527 shares 468,527 468,527
Asset Manager Fund 1,025 shares 14,597 14,173
Loan Fund 87,304 87,304
---------- ----------
Total investments $28,193,061 $27,404,808
========== ==========
</TABLE>
-12-
PAGE
<PAGE>
NOTE 5 - FEDERAL INCOME TAXES
The Plan has received a determination letter from the Internal Revenue
Service dated May 1, 1995 stating that the Plan is qualified under section
401(a) of the Internal Revenue Code of 1986 (the Code) and, therefore, is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code of ERISA to maintain its tax-exempt status. The
administrator is not aware of any course of action or series of events that
have occurred that might adversely affect the Plan's qualified status.
NOTE 6 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Form 5500:
December 31,
-----------------------------
1995 1994
-----------------------------
Net assets available for benefits
per the financial statements $31,219,025 $28,235,131
Amounts allocated to withdrawing
participants (1,755,852) (844,832)
---------- ----------
Net assets available for benefits
per the Form 5500 $29,463,173 $27,390,299
========== ==========
Amounts allocated to withdrawing participants by fund option is as follows:
December 31,
-----------------------------
1995 1994
-----------------------------
Network Systems Stock Fund $ 24,818 $ 7,277
Blended Rate (Guaranteed Interest) Fund 932,612 560,935
Fidelity Fund 702,906 126,886
IAI Regional Fund 67,267 12,574
Loan Fund 28,249 17,944
Magellan Fund 29,569
Growth and Income Fund 32,018
Intermediate Bond Fund 22,250
Retirement Money Market Fund 34,882
Asset Manager Fund 497
--------- -------
$1,755,852 $844,832
========= =======
-13-
PAGE
<PAGE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
December 31,
-----------------------------
1995 1994
-----------------------------
Benefits paid to participants per the
the financial statements $5,858,511 $4,175,709
Add: Amounts allocated to withdrawing
participants in current year 1,755,852 844,832
Less: Amounts allocated to withdrawing
participants in prior years (844,832) (495,383)
--------- ---------
Benefits paid to participants per
the Form 5500 $6,769,531 $4,525,158
========= =========
Amounts allocated to withdrawing participants are recorded on the Form 5500
for benefit claims that have been processed and approved for payment prior
to year-end but not yet paid.
-14-
PAGE
<PAGE>
SCHEDULE I
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27a FORM 5500 - SCHEDULE OF ASSETS
HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Balance (Shares or Value at
Face Amount) Held at December 31,
Name of Issuers and Title of Issuers December 31, 1995 Cost 1995
- ----------------------------------------------- -------------------- ------------- ------------
<S> <C> <C> <C>
FIRST TRUST
Storage Technology Corporation common stock 31,161 shares $ 1,217,959 $ 743,969
First American Prime Obligations Fund 20,470 20,470 20,470
---------- ----------
Total Network Systems Stock Fund 1,238,429 764,439
---------- ----------
Sun Life Insurance Company of American Group
Annuity Contract 3,800,663 3,800,663 3,800,663
John Hancock Mutual Life Insurance Company Group
Annuity Contract 886,825 886,825 886,825
Metropolitan Life Insurance Company Group Annuity
Contract 1,478,911 1,478,911 1,478,911
Protective Life Insurance Company Group Annuity
Contract 1,348,231 1,348,231 1,348,231
First Stable Value Fund, a First Trust
Collective Fund 348,451 shares 5,610,855 5,957,084
First American Prime Obligations Fund 1,081,797 1,081,797 1,081,797
---------- ----------
Total Blended Rate Fund 14,207,282 14,553,511
---------- ----------
Fidelity Fund 450,936 shares 8,839,748 10,195,655
First American Prime Obligations Fund 141,674 141,674 141,674
---------- ----------
Total Fidelity Fund 8,981,422 10,337,329
---------- ----------
IAI Regional Fund 166,308 shares 3,593,371 3,938,171
Investments in loans to employee participants 742,511 742,511
First American Prime Obligations Fund 58,117 58,117 58,117
---------- ----------
Total loan fund 800,628 800,628
---------- ----------
Total investments $28,821,132 $30,394,078
========== ==========
</TABLE>
-15-
PAGE
<PAGE>
SCHEDULE II
Page 1 of 2
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27b FORM 5500 - SCHEDULE OF LOANS OR FIXED
INCOME OBLIGATIONS IN DEFAULT
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Amount Received
Original During Reporting Year Unpaid
Party in Identity and Address Amount ----------------------- Balance at
Interest of Obligor of Loan Principal Interest End of Year
- -------- ------------------------ --------- --------- -------- -----------
<C> <S> <C> <C> <C> <C>
No Barbara Bakich $4,480.20 $ 0 $ 0 $4,480.20
1601 Koch Lane
San Jose, CA 95125
No Raymond Black 944.74 391.20 38.34 553.54
2352 Twin Lakes Drive
Ypsilenti, MI 48197
No Diane E. Erickson 3,000.00 0 0 30.64
16285 28th Ave. N.
Plymouth, MN 55447
No Thomas L. Fuehrer 4,000.00 450.79 19.02 167.77
5621 69th Ave N. Apt 304
Brooklyn Park, MN 55429
No Harley H. Grantham 8,400.00 3,563.00 117.34 9.41
11317 Rhode Island N.
Champlin, MN 55316
No Saturnina Mayo 767.82 0 0 767.82
6206 Thomas Ave.
Neward, CA 94560
</TABLE>
<TABLE>
<CAPTION>
Detailed Description of Loan (1)
------------------------------------- Amount Overdue
Identity Origination Interest Maturity ----------------------------
of Obligor Date Rate Date Principal Interest
- -------------- ----------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Barbara Bakich March 1994 6.0% August 1998 $4,480.20 $ --
Raymond Black September 1994 9.0% February 1995 553.54 --
Diane E. Erickson August 1988 8.5% August 1993 30.64 --
Thomas L. Fuehrer September 1990 10.0% August 1995 167.77 --
Harley H. Grantham December 1991 8.0% November 1996 9.41 --
Saturnina Mayo July 1993 6.5% July 1994 767.82 --
</TABLE>
-16-
PAGE
<PAGE>
SCHEDULE II
Page 2 of 2
<TABLE>
<CAPTION>
Amount Received
Original During Reporting Year Unpaid
Party in Identity and Address Amount ----------------------- Balance at
Interest of Obligor of Loan Principal Interest End of Year
- -------- ------------------------ --------- --------- -------- -----------
<C> <S> <C> <C> <C> <C>
No Theresa M. McNamara 1,000.00 402.90 14.09 24.48
1107 Galbreath Ave.
Boothwyn, PA 19061
No Joseph O'Donnell 3,228.31 0 0 1,288.97
36859-A Neward Blvd.
Newark, CA 94560-3163
No Lisa M. Olsen 7,000.00 0 0 6,599.18
16844 Upper 18th St.
Lake St. Croix Beach,
MN 55043
No James Pharr 6,985.78 0 0 6,985.78
48761 Kato Road
Fremont, CA 94538
No Harold G. Varnis 751.32 897.24 79.29 705.50
13867 85th Place N.
Maple Grove, MN 55369
</TABLE>
<TABLE>
<CAPTION>
Detailed Description of Loan (1)
------------------------------------- Amount Overdue
Identity Origination Interest Maturity ----------------------------
of Obligor Date Rate Date Principal Interest
- -------------- ----------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Theresa M. McNamara December 1991 8.0% November 1996 24.28 --
Joseph O'Donnell January 1992 10.0% October 1995 1,288.97 --
Lisa M. Olsen June 1994 6.75% May 1999 6,599.18 --
James Pharr August 1994 6.5% January 1996 6,985.78 --
Harold G. Varnis September 1995 8.5% May 1996 705.50 --
</TABLE>
(1) Loans consist of Promissory Notes with Plan participants
using their vested account balances under the Plan as collateral.
Loan defaults result primarily from employees terminated or
placed on non-active status during 1995. A termination
distribution will be made in 1996 to repay all outstanding loan
balances in default at December 31, 1995.
-17-
PAGE
<PAGE>
SCHEDULE III
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27d FORM 5500 - SCHEDULE OF REPORTABLE TRANSACTIONS*
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Identity of
Party Involved Description of Assets Purchase Price Selling Price
- -------------------- ------------------------------------------------------- -------------- -------------
<C> <S> <C> <C>
First Trust National First American Prime Obligations Fund;
Association Purchased 13,675,992 units in 364 transactions $13,675,992
Sold 12,612,696 units in 182 transactions $12,612,696
First Trust National First Stable Value Fund, a First Trust Collective Fund
Association Purchased 306,071 shares in 38 transactions 4,986,543
First Trust National Fidelity FD Inc. Com.;
Association Purchased 139,230 shares in 42 transactions 2,910,368
First Trust National New York Life Insurance Company
Association Maturity of Group Annuity Contract in 2 2,477,457
transactions
</TABLE>
<TABLE>
<CAPTION>
Current Value of
Cost of of Asset on Net Gain
Description of Assets Asset Transaction Date (Loss)
- ---------------------------------------------------- ----------- ----------------- ------------
<S> <C> <C> <C>
First American Prime Obligations Fund;
Purchased 13,675,992 units in 364 transactions $13,675,992
Sold 12,612,696 units in 182 transactions $12,612,696 12,612,696 --
First Stable Value Fund, a First Trust Collective Fund
Purchased 306,071 shares in 38 transactions 4,986,543
Fidelity FD Inc. Com.;
Purchased 139,230 shares in 42 transactions 2,910,368
New York Life Insurance Company
Maturity of Group Annuity Contract in
2 transactions 2,477,457 2,477,457 --
</TABLE>
* Transactions or series of transactions in excess of 5 percent of the current
value of the Plan's assets as of December 31, 1994 as defined in Section 2520-
103.6 of the Department of Labor Rules and Regulations for Reporting and
Disclosure under ERISA.
-18-
PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused the
annual report to be signed on its behalf by the undersigned thereunto duly
authorized.
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
BY: STORAGE TECHNOLOGY CORPORATION
(Administrator of the Plan)
11/28/96 /s/ DAVID E. LACEY
- ------------- -----------------------------
(Date) David E. Lacey
Executive Vice President
and Chief Financial Officer
