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 [NO FEE REQUIRED]
For the Fiscal Year Ended December 31, 1997
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 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:
STORAGE TECHNOLOGY CORPORATION
2270 South 88th Street
Louisville, Colorado 80028-4309
<PAGE>
NETWORK SYSTEMS CORPORATION
---------------------------
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
FINANCIAL STATEMENTS
--------------------
AND ADDITIONAL INFORMATION
--------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
<PAGE>
NETWORK SYSTEMS CORPORATION
---------------------------
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
FINANCIAL STATEMENTS
--------------------
DECEMBER 31, 1997 AND 1996
--------------------------
TABLE OF CONTENTS
------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements:
Report of Independent Accountants 1
Statement of Net Assets Available for Benefits, with Fund Information 2 - 3
Statement of Changes in Net Assets Available for Benefits, with Fund Information 4 - 5
Notes to Financial Statements 6 - 12
Additional Information:*
Schedule I - Item 27a Form 5500 - Schedule of Assets Held for Investment Purposes 13
Schedule II - Item 27b Form 5500 - Schedule of Loans or Fixed Income Obligations in
Default 14 - 15
Schedule III - Item 27d Form 5500 - Schedule of Reportable Transactions 16 - 17
</TABLE>
* 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>
REPORT OF INDEPENDENT ACCOUNTANTS
----------------------------------
To the Participants and Administrator of
the Network Systems Corporation
Savings and Stock Ownership Plan
In our opinion, the accompanying statements of net assets available for
benefits, with fund information, and the related statements 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, 1997 and
1996 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 used the liquidation basis of accounting in
presenting the 1997 and 1996 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 plan benefits and 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 18, 1998
<PAGE>
NETWORK SYSTEMS CORPORATION
---------------------------
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
---------------------------------------------------------------------
DECEMBER 31, 1997
----------------
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------------------------------
IAI
Blended Fidelity Regional
Rate Fund Fund Fund Loan Fund Total
------------- ------------ -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Receivables:
Employees' loan repayments $ 1,753 $ 34 $ 23 $ (1,810) $ 0
Accrued interest 557 1,098 225 37 1,917
--------- ---------- --------- ------- ----------
Total receivables 2,310 1,132 248 (1,773) 1,917
Due from (to) other funds 16 (5) (11) 0
Investments (Note 3) 7,097,274 19,409,170 5,149,611 598,968 32,255,023
--------- ---------- --------- ------- ----------
Net assets available for plan
benefits $7,099,600 $19,410,297 $5,149,848 $597,195 $32,256,940
========= ========== ========= ======= ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-2-
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
---------------------------------------------------------------------
DECEMBER 31, 1996
----------------
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------------------------------
Network IAI
Systems Blended Fidelity Regional
Stock Rate Fund Fund Fund Loan Fund Total
------------- ------------ -------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Receivables:
Employees' loan repayments $ 12,548 $ 9,558 $ 2,533 $ (24,596) $ 43
Accrued interest $ 43 15,202 6 8 56 15,315
---------- ----------- -------- ---------- -------- ----------
Total receivables 43 27,750 9,564 2,541 (24,540) 15,358
Due from (to) other funds 5,295 3,460 (3,737) (5,018) 0
Investments (Note 3) 999,809 9,233,137 13,881,841 4,776,727 738,551 29,630,065
--------- --------- ---------- --------- ------- ----------
Net assets available for plan
benefits $1,005,147 $9,264,347 $13,887,668 $4,774,250 $714,011 $29,645,423
========= ========= ========== ========= ======= ==========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-3-
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
----------------
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------------------------
First Trust
---------------------------------------------------------------------------
Network IAI
Systems Blended Fidelity Regional
Stock Fund Rate Fund Fund Fund Loan Fund Total
------------- ------------ -------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Net realized and unrealized appreciation
(depreciation) in fair value of
investments $ (26,001) $ 326,723 $ 3,136,132 $ 257,336 $ 3,694,190
Interest and dividend income 1,797 162,062 1,676,049 581,236 2,421,144
Loan repayment interest 16,188 15,933 4,140 $ 2,128 38,389
---------- ---------- ---------- --------- -------- ----------
(24,204) 504,973 4,828,114 842,712 2,128 6,153,723
Withdrawals by participants (158,729) (1,186,824) (1,654,903) (527,500) (14,250) (3,542,206)
Transfers:
Between funds (822,214) (1,545,577) 2,321,311 46,480 0
New loans (60,722) (64,121) (12,934) 137,777 0
Loan principal repayments 123,403 92,228 26,840 (242,471) 0
---------- ---------- ---------- --------- -------- ---------
(822,214) (1,482,896) 2,349,418 60,386 104,694 0
Net increases (decreases) (1,005,147) (2,164,747) 5,522,629 375,598 (116,816) 2,611,517
Net assets at beginning of year 1,005,147 9,264,347 13,887,668 4,774,250 714,011 29,645,423
---------- ---------- ---------- --------- -------- ----------
Net assets at end of year $ 0 $ 7,099,600 $19,410,297 $5,149,848 $ 597,195 $32,256,940
========== ========== ========== ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
- --------------------------------------------------------------------------------
DECEMBER 31, 1996
----------------
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------------------------
First Trust
---------------------------------------------------------------------------
Network IAI
Systems Blended Fidelity Regional
Stock Fund Rate Fund Fund Fund Loan Fund Total
------------- ------------ -------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Net realized and unrealized appreciation
(depreciation) in fair value of
investments $ 576,871 $ 343,226 $ 1,133,953 $ (92,506) $ 1,961,544
Interest and dividend income 1,309 348,869 1,165,576 732,337 2,248,091
Loan repayment interest 25,619 20,818 7,374 $ 872 54,683
--------- ----------- ---------- ---------- --------- ----------
578,180 717,714 2,320,347 647,205 872 4,264,318
Contributions (Refunds):
By participants (5,278) (2,392) 3,437 (4,233)
Withdrawals by participants (66,614) (2,942,684) (2,056,186) (713,849) (54,354) (5,833,687)
Transfers:
Between funds (270,953) (3,495,207) 2,982,381 783,779 0
New loans (170,356) (108,308) (24,036) 302,700 0
Loan principal repayments 138,002 101,491 38,532 (278,025) 0
--------- ---------- ---------- --------- -------- ----------
(270,953) (3,527,561) 2,975,564 798,275 24,675 0
Net increases (decreases) 240,613 (5,757,809) 3,237,333 735,068 (28,807) (1,573,602)
Net assets at beginning of year 764,534 15,022,156 10,650,335 4,039,182 742,818 31,219,025
--------- ---------- ---------- --------- -------- ----------
Net assets at end of year $1,005,147 $ 9,264,347 $13,887,668 $4,774,250 $ 714,011 $29,645,423
========= ========== ========== ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
------------------------------
DECEMBER 31, 1997 AND 1996
--------------------------
NOTE 1 - DESCRIPTION OF PLAN
General
- -------
The Network Systems Corporation Savings and Stock Ownership Plan (the Plan) is a
defined contribution plan to which, prior to 1996, eligible employees of Network
Systems Corporation (the Company or NSC) could elect to contribute stated
percentages of their compensation. Participation by eligible employees was
voluntary. 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, NSC was acquired by Storage Technology Corporation
(StorageTek). Effective December 1995, the Plan is 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 NSC 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. On March 20, 1998, the Plan
received a favorable determination letter from the Internal Revenue Service
approving the termination of the Plan. The transfer of all remaining Plan
assets to the StorageTek Profit-Sharing and Thrift Plan and termination of the
Plan is expected to occur in 1998.
Contributions
- -------------
In connection with the merger and termination of the Plan in 1995, no employee
or Company matching contributions were made in 1997 or 1996.
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 all 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. In 1994, the Plan
was amended so that no additional contributions or investment fund transfers
could be made to the Network Systems Stock Fund.
Effective September 30, 1997, the Network Systems Stock Fund was eliminated
from the Plan as an investment option. All amounts invested in the Network
Systems Stock Fund on
-6-
<PAGE>
September 30, 1997 were sold and reinvested in the other investment options
as directed by the participants or pro-rata, based upon previous participant
election percentages.
. 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. As of December 31, 1997, the Blended Rate Fund has investments
only in the First Stable Value Fund.
. 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.
Investment Fund Transfers
- -------------------------
Effective September, 1996, 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 on a quarterly basis.
Prior to September, 1996, such transfers could be made twice a year.
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 was invested in the Network Systems
Stock Fund was not available for withdrawal or loan during the employment of the
participant. The restrictions did 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 pretax savings contribution account is
reduced on a pro rata basis by the principal amount of
-7-
<PAGE>
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;
4. Financial Hardship (as defined); or
5. 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. Pursuant to the terms of the Plan, all participants
became fully vested in the balance of Company contributions when the Plan was
effectively terminated (i.e. December 31, 1995). Therefore, there were no
forfeitures of nonvested accounts during 1997 or 1996.
In 1996, the Company determined that certain participants who had requested to
withdraw from the Plan at the end of 1995 and received distribution payments
during 1996, were owed additional amounts with respect to vested Company
contributions. Such amounts, aggregating $19,386, were distributed to the
applicable former participants in 1997 and are reflected within the
reconciliation of the financial statements to the Form 5500 in Note 5.
Administrative Costs
- --------------------
Administrative expenses are paid by the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Method of Accounting
- --------------------
The 1997 and 1996 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.
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.
-8-
<PAGE>
Investment Valuation
- --------------------
Investments in common stock of StorageTek are valued at the closing sales price
on the last business day of the year based on the NYSE composite closing
quotation. 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 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.
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 Loan Fund 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).
-9-
<PAGE>
NOTE 3 - INVESTMENTS
- --------------------
The following tables present 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, 1997 Cost 1997
- ---------------------------------------------------- -------------------- ------------ --------------
<S> <C> <C> <C>
FIRST TRUST
First Stable Value Fund, a First Trust collective fund 299,838 shares $ 5,056,131 $ 5,744,170
First American Prime Obligations Fund (Cash equivalent) 4,544 4,544 4,544
Cash Balance 1,348,560 1,348,560 1,348,560
---------- ----------
Total Blended Rate Fund 6,409,235 7,097,274
---------- ----------
Fidelity Fund 650,953 shares 14,606,889 19,404,931
First American Prime Obligations Fund 4,239 4,239 4,239
---------- ----------
Total Fidelity Fund 14,611,128 19,409,170
---------- ----------
IAI Regional Fund 210,666 shares 4,810,964 5,148,678
First American Prime Obligations Fund 933 933 933
---------- ----------
Total IAI Regional Fund 4,811,897 5,149,611
---------- ----------
Investments in loans to employee participants 597,210 597,210 597,210
First American Prime Obligations Fund 1,758 1,758 1,758
---------- ----------
Total Loan Fund 598,968 598,968
---------- ----------
Total investments $26,431,228 $32,255,023
========== ==========
</TABLE>
-10-
<PAGE>
NOTE 3 - INVESTMENTS (CONT.)
- ----------------------------
<TABLE>
<CAPTION>
Balance (Shares or Value at
Face Amount) Held at December 31,
Name of Issuers and Title of Issuers December 31, 1996 Cost 1996
- ----------------------------------------------- ----------------------- ------------ ----------------
<S> <C> <C> <C>
FIRST TRUST
Storage Technology Corporation common stock 20,670 shares $ 803,288 $ 989,576
First American Prime Obligations Fund 10,233 10,233 10,233
------------ ------------
Total Network Systems Stock Fund 813,521 999,809
------------ ------------
Metropolitan Life Insurance Company Group Annuity
Contract (Maturity 12/31/97, Interest 6.66%) 1,422,355 1,422,355 1,422,355
Protective Life Insurance Company Group Annuity
Contract (Maturity 6/30/97, Interest 6.7%) 1,297,271 1,297,271 1,297,271
First Stable Value Fund, a First Trust collective 310,372 shares 4,997,697 5,616,311
fund
First American Prime Obligations Fund 897,200 897,200 897,200
------------ ------------
Total Blended Rate Fund 8,614,523 9,233,137
------------ ------------
------------ ------------
Fidelity Fund 562,018 shares 11,683,433 13,881,841
------------ ------------
------------ ------------
IAI Regional Fund 205,982 shares 4,598,942 4,776,727
------------ ------------
Investments in loans to employee participants 714,012 714,012 714,012
First American Prime Obligations Fund 24,539 24,539 24,539
------------ ------------
Total Loan Fund 738,551 738,551
------------ ------------
Total investments $26,448,970 $29,630,065
============ ============
</TABLE>
NOTE 4 - TAX STATUS
- -------------------
The Plan has received a determination letter from the Internal Revenue Service
dated July 19, 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.
The Plan filed Form 5310, Application for Determination for Terminating Plan,
dated April 22, 1997 with the Internal Revenue Service. On March 20, 1998, the
Internal Revenue Service determined that the termination of the Plan does not
adversely affect its qualification for federal tax purposes. The transfer of
all remaining Plan assets to the StorageTek Profit-Sharing and Thrift Plan and
termination of the Plan is expected to occur in 1998.
-11-
<PAGE>
NOTE 5 - 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:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
Net assets available for benefits per the financial statements $ 32,256,940 $ 29,645,423
Amounts allocated to withdrawing participants (832,687) (644,393)
----------- ----------
Net assets available for benefits per the Form 5500 $ 31,424,253 $ 29,001,030
=========== ===========
</TABLE>
Amounts allocated to withdrawing participants by fund option is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
Network Systems Stock Fund $ 58,384
Blended Rate (Guaranteed Interest) Fund $ 148,758 211,007
Fidelity Fund 537,519 229,693
IAI Regional Fund 140,673 138,245
Loan Fund 5,737 7,064
----------- ------------
$ 832,687 $ 644,393
=========== ============
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
Benefits paid to participants per the financial statements $ 3,542,206 $ 5,833,687
Add: Amounts allocated to withdrawing participants in current
year 832,687 644,393
Less: Amounts allocated to withdrawing participants in prior
years (644,393) (1,755,852)
---------- ----------
Benefits paid to participants per the Form 5500 $ 3,730,500 $ 4,722,228
========== ==========
</TABLE>
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.
-12-
<PAGE>
SCHEDULE I
----------
NETWORK SYSTEMS CORPORATION
---------------------------
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
ITEM 27a FORM 5500 - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
--------------------------------------------------------------------
DECEMBER 31, 1997
----------------
<TABLE>
<CAPTION>
Balance (Shares or Value at
Face Amount) Held at December 31,
Name of Issuers and Title of Issuers December 31, 1997 Cost 1997
- ------------------------------------------------- ----------------------- ------------ --------------
<S> <C> <C> <C>
FIRST TRUST
First Stable Value Fund, a First Trust collective fund* 299,838 shares $ 5,056,131 $ 5,744,170
First American Prime Obligations Fund* 4,544 4,544 4,544
Cash Balance 1,348,560 1,348,560 1,348,560
---------- ----------
Total Blended Rate Fund 6,409,235 7,097,274
---------- ----------
Fidelity Fund 650,953 shares 14,606,889 19,404,931
First American Prime Obligations Fund* 4,239 4,239 4,239
---------- ----------
Total Fidelity Fund 14,611,128 19,409,170
---------- ----------
IAI Regional Fund 210,666 shares 4,810,964 5,148,678
First American Prime Obligations Fund* 933 933 933
---------- ----------
Total IAI Regional Fund 4,811,897 5,149,611
---------- ----------
Investments in loans to employee participants 597,210 597,210 597,210
First American Prime Obligations Fund* 1,758 1,758 1,758
---------- ----------
Total Loan Fund 598,968 598,968
---------- ----------
Total investments $26,431,228 $32,255,023
========== ==========
</TABLE>
- ------------------------------------------------------------------
* Party-in-interest, because an affiliate is trustee of the Plan.
-13-
<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
- -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
----------------------------
<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
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
No Saturnina Mayo $ 767.82 $ 0 $ 0 $ 767.82
6206 Thomas Ave.
Newark, CA 94560
No Joeseph O'Donnell 3,228.31 0 0 1,288.97
36859-A Neward Blvd.
Newark, CA 19061
No Lisa M. O'Halloran 2,300.00 429.87 101.38 972.10
12200 Marion Lane W #5308
Minnetonka, MN 55305
No Lisa Olsen 7,000.00 1,255.64 338.28 4,567.27
2337 Lake Elmo Ave. N
Lake Elmo, MN 55042
No Anne M. Salsman 5,000.00 240.96 146.31 3,849.92
104 Heights Rd., E.
St. Michael, MN 55367
No Alan Sulik 2,600.00 532.88 38.71 44.41
262 Green Street
Souderton, PA 18964
</TABLE>
<TABLE>
<CAPTION>
Detailed Description of Loan (1)
------------------------------------------- Amount Overdue
Identity and Address Origination Interest Maturity ----------------------
of 0bligor Date Rate Date Principal Interest
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Saturnina Mayo July 1993 6.50% July 1994 $ 767.82 --
Joeseph O'Donnell January 1992 10.00% October 1995 1,288.97 --
Lisa M. O'Halloran September 1994 7.25% August 1999 127.50 --
Lisa Olsen June 1994 6.75% May 1999 2,772.00 --
Anne M. Salsman November 1995 8.75% October 2000 956.80 --
Alan S. Sulik January 1993 6.00% November 1997 44.41 --
</TABLE>
-14-
<PAGE>
SCHEDULE II
----------
Page 2 of 2
NETWORK SYSTEMS CORPORATION
---------------------------
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
ITEM 27b FORM 5500 - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS IN DEFAULT
- -----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
----------------------------
<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
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
No Robert A. Taylor $18,101.12 $3,454.98 $1,280.92 $10,875.49
1311 Denise
Planfield, IL 60544
No Allen F. Zweig 3,052.12 762.29 108.67 1,344.50
25039-101st St.
Zimmerman, MN 55398
</TABLE>
<TABLE>
<CAPTION>
Detailed Description of Loan (1)
------------------------------------------- Amount Overdue
Identity and Address Origination Interest Maturity ----------------------
of 0bligor Date Rate Date Principal Interest
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert A. Taylor September 1995 9.00% June 2000 $546.54 --
Alan F. Zweig September 1995 6.75% May 1999 72.58 --
</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
1997 and 1996. A termination distribution is expected to be made in 1998
to repay outstanding loan balances in default at December 31, 1997, prior
to the transfer of assets and termination of the Plan in 1998.
-15-
<PAGE>
SCHEDULE III
Page 1 of 2
NETWORK SYSTEMS CORPORATION
---------------------------
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
ITEM 27d FORM 5500 - SCHEDULE OF REPORTABLE TRANSACTIONS*
---------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
----------------------------
<TABLE>
<CAPTION>
Identity of Purchase Selling Cost of
Party Involved Description of Assets Price Price Asset
- -------------------- ------------------------------------------- -------------- --------- --------
<S> <C> <C> <C> <C>
SECURITIES PURCHASED AND SOLD IN EXCESS OF 5% OF PRIOR PERIOD'S ENDING ASSET MARKET VALUE
First Trust National First American Prime Obligations Fund **;
Association Purchased 10,693,005 units in 282 transactions $10,693,005
Sold 11,613,502 units in 107 transactions $11,613,502 $11,613,502
First Trust National Metropolitan Life Insurance Co., GIC 1992;
Association Purchased 81,146 shares in 11 transactions 81,147
Sold 1,503,502 shares in 4 transactions 1,503,502 1,503,502
First Trust National First Stable Value Fund **;
Association Purchased 101,524 shares in 9 transactions 1,919,351
Sold 112,058 shares in 5 transactions 2,118,215 1,860,917
First Trust National Fidelity Fund Inc. Com.;
Association Purchased 158,893 shares in 21 transactions 4,428,392
Sold 69,948 shares in 12 transactions 2,041,151 1,504,652
First Trust National IAI Regional Fund Inc. Com.;
Association Purchased 50,036 shares in 18 transactions 1,228,878
Sold 45,352 shares in 11 transactions 1,114,262 1,016,855
</TABLE>
<TABLE>
<CAPTION>
Current Value Net
Identity of of Asset on Gain
Party Involved Description of Assets Transaction Date (Loss)
- -------------------- ------------------------------------------- ------------------ --------
<S> <C> <C> <C>
SECURITIES PURCHASED AND SOLD IN EXCESS OF 5% OF PRIOR PERIOD'S ENDING ASSET MARKET VALUE
First Trust National First American Prime Obligations Fund **;
Association Purchased 10,693,005 units in 282 transactions $10,693,005
Sold 11,613,502 units in 107 transactions 11,613,502 --
First Trust National Metropolitan Life Insurance Co., GIC 1992;
Association Purchased 81,146 shares in 11 transactions 81,147
Sold 1,503,502 shares in 4 transactions 1,503,502 --
First Trust National First Stable Value Fund **;
Association Purchased 101,524 shares in 9 transactions 1,919,351
Sold 112,058 shares in 5 transactions 2,118,215 $257,298
First Trust National Fidelity Fund Inc. Com.;
Association Purchased 158,893 shares in 21 transactions 4,428,392
Sold 69,948 shares in 12 transactions 2,041,151 536,499
First Trust National IAI Regional Fund Inc. Com.;
Association Purchased 50,036 shares in 18 transactions 1,228,878
Sold 45,352 shares in 11 transactions 1,114,262 97,407
</TABLE>
- -------------------------------------
* Transactions or series of transactions in excess of 5 percent of the current
market value of the Plan's assets as of December 31, 1996 as defined in
Section 2520-103.6 of the Department of Labor Rules and Regulations for
Reporting and Disclosure under ERISA.
** Party-in-interest, because an affiliate is trustee of the Plan.
-16-
<PAGE>
SCHEDULE III
-----------
Page 2 of 2
NETWORK SYSTEMS CORPORATION
---------------------------
SAVINGS AND STOCK OWNERSHIP PLAN
--------------------------------
ITEM 27d FORM 5500 - SCHEDULE OF REPORTABLE TRANSACTIONS*
---------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
----------------------------
<TABLE>
<CAPTION>
Identity of Purchase Price Selling Cost of
Party Involved Description of Assets Price Asset
- ---------------------- ----------------------------------------- -------------- --------- -------
<S> <C> <C> <C> <C>
SINGLE SECURITY TRANSACTIONS IN EXCESS OF 5% OF PRIOR PERIOD'S ENDING ASSET MARKET VALUE
First Trust National First American Prime Obligations Fund **;
Association Sold 1,726,508 units in 1 transaction $1,726,508 $1,726,508
First Trust National First Stable Value Fund **;
Association Purchased 91,281 shares in 1 transaction $1,726,508
</TABLE>
<TABLE>
<CAPTION>
Current Value
Identity of of Asset on Net Gain
Party Involved Description of Assets Transaction Date (Loss)
- ---------------------- ----------------------------------------- -------------- ---------
<S> <C> <C> <C>
SINGLE SECURITY TRANSACTIONS IN EXCESS OF 5% OF PRIOR PERIOD'S ENDING ASSET MARKET VALUE
First Trust National First American Prime Obligations Fund **;
Association Sold 1,726,508 units in 1 transaction $1,726,508 --
First Trust National First Stable Value Fund **;
Association Purchased 91,281 shares in 1 transaction 1,726,508
</TABLE>
- -------------------------------------
* Transactions or series of transactions in excess of 5 percent of the current
market value of the Plan's assets as of December 31, 1996 as defined in
Section 2520-103.6 of the Department of Labor Rules and Regulations for
Reporting and Disclosure under ERISA.
** Party-in-interest, because an affiliate is trustee of the Plan.
-17-
<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)
06/26/98 /s/ DAVID E. LACEY
---------- -------------------------------
(Date) David E. Lacey
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
