<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NOVELL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
NOVELL, INC.
1555 NORTH TECHNOLOGY WAY
OREM, UT 84057
February 17, 1995
Dear Shareholder:
You are cordially invited to attend the Company's 1995 Annual Meeting on
Wednesday April 12, 1995.
The meeting will begin promptly at 2 p.m. Mountain Time in the Auditorium at
our new Corporate Headquarters, 1555 North Technology Way, Orem, Utah. Please
note a map has been provided for your convenience on the bottom half of the
proxy card.
The official Notice of Meeting, proxy statement and form of proxy are
included with this letter. The matters listed in the Notice of Meeting are
described in detail in the proxy statement.
The vote of every shareholder is important. Mailing your completed proxy will
not prevent you from voting in person at the meeting if you wish to do so.
Please sign, date and promptly mail your proxy. Your cooperation will be
greatly appreciated.
Your Board of Directors and management look forward to greeting personally
those shareholders who are able to attend.
Sincerely,
Robert J. Frankenberg
Chairman, President and
Chief Executive Officer
<PAGE>
[LOGO OF NOVELL]
NOVELL, INC.
1555 NORTH TECHNOLOGY WAY
OREM, UT 84057
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, APRIL 12, 1995
TO THE SHAREHOLDERS OF NOVELL, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of NOVELL,
INC. will be held at the new Novell Corporate Headquarters located at 1555
North Technology Way, Orem, Utah 84057, on Wednesday, April 12, 1995, at 2:00
p.m. Mountain Time, for the following purposes:
1. To elect nine directors;
2. To approve the adoption of an amendment to the Company's Restated
Certificate of Incorporation to increase the number of shares of Common
Stock that the Company is authorized to issue to 600,000,000 from
400,000,000;
3. To approve and ratify the adoption of an amendment to the Novell, Inc.
1989 Employee Stock Purchase Plan to increase the shares reserved for
issuance thereunder from 4,000,000 to 8,000,000; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on February 13, 1995,
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
By Order of the Board of Directors,
/s/ DAVID R. BRADFORD
David R. Bradford
Senior Vice President, General Counsel
and Corporate Secretary
February 17, 1995
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
OF
NOVELL, INC.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are being furnished to the shareholders of Novell, Inc., a Delaware
corporation ("Novell" or the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the 1995 Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held at the
new Novell Corporate Headquarters located at 1555 North Technology Way, Orem,
Utah 84057, on Wednesday, April 12, 1995, at 2:00 p.m. Mountain Time, and any
adjournment thereof. These proxy materials are being mailed on or about
February 17, 1995, to all shareholders of record as of February 13, 1995, of
the Company's Common Stock. At the Annual Meeting, the Company's shareholders
will be asked to elect nine directors, to approve the adoption of an amendment
to the Company's Restated Certificate of Incorporation to increase the number
of shares of Common Stock that the Company is authorized to issue to
600,000,000 from 400,000,000, to approve and ratify the adoption of an
amendment to the Novell, Inc. 1989 Employee Stock Purchase Plan and to vote on
such other matters as may properly come before the Annual Meeting.
PERSONS MAKING THE SOLICITATION
All expenses of the Company in connection with this solicitation will be
borne by the Company. In addition to solicitation by mail, proxies may be
solicited by directors, officers and other employees of the Company by
telephone, telegraph, telefax, or telex, in person or otherwise, without
additional compensation. The Company will also request brokerage firms,
nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares held of record by such persons and will reimburse
such persons and the Company's transfer agent for their reasonable out-of-
pocket expenses in forwarding such material. Additionally, the Company has
elected to retain the services of Corporate Investor Communications, Inc. for
the purposes of broker nominee search, distribution of proxy materials to
banks, brokers, nominees and intermediaries and conduct a telephone campaign in
order to obtain voted proxies for the Annual Meeting at an estimated cost of
$6,500, plus out-of-pocket expenses.
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record, as of the close of business on February 13, 1995 (the
"Record Date"), of the Company's Common Stock, par value $.10 per share
("Common Stock"), are entitled to notice of and to vote at the Annual Meeting
and any adjournment thereof. On the Record Date, 366,209,441 shares of Common
Stock were outstanding and entitled to vote. Each outstanding share of Common
Stock entitles the holder thereof to one vote. As of the Record Date, the
closing price of the Common Stock on the NASDAQ National Market was $21.00 per
share.
REVOCABILITY OF PROXY
A proxy may be revoked by a shareholder prior to the voting at the Annual
Meeting by written notice to the Secretary of the Company, by submission of
another duly executed proxy bearing a later date or by voting in person at the
Annual Meeting. Such notice or later proxy will not affect a vote on any matter
taken prior to the receipt thereof by the Company or its transfer agent. The
mere presence at the Annual Meeting of the shareholder who has appointed a
proxy will not revoke the prior appointment. If not revoked, the proxy will be
voted at the Annual Meeting in accordance with the instructions indicated on
the Proxy Card by the shareholder or, if no instructions are indicated, will be
voted FOR the slate of directors described herein, FOR the approval of the
adoption of an amendment to the Company's Restated Certificate of
Incorporation, FOR the approval and ratification of the adoption of an
amendment to the Novell, Inc. 1989 Employee Stock Purchase Plan and as to any
other matter that may be properly brought before the Annual Meeting, in
accordance with the judgment of the proxy holders.
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All share amounts referred to in this Proxy Statement have been adjusted to
reflect the two-for-one stock split on August 26, 1992. The following table
sets forth, as of January 31, 1995, information relating to the beneficial
ownership of the Company's Common Stock by each person known to the Company to
be the beneficial owner of more than five percent of the outstanding shares of
Common Stock, by each director, by each of the executive officers named in the
Summary Compensation Table, and by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
COMMON STOCK(1)
----------------------
PERCENT OF
NUMBER OF OUTSTANDING
SHARES SHARES
---------- -----------
<S> <C> <C>
Raymond J. Noorda(2)............................ 28,364,144 7.76%
10050 North Wolfe Road
SW2-240
Cupertino, CA 95014
Bruce W. Bastian(3)............................. 25,678,490 7.02
P.O. Box 1571
Orem, UT 84059
Alan C. Ashton, Ph.D.(4)........................ 22,552,298 6.17
600 South Palisade Drive
Orem, UT 84058
Robert J. Frankenberg........................... 36,500 *
Kanwal S. Rekhi(5).............................. 715,434 *
Elaine R. Bond.................................. 48,000 *
Jack L. Messman(6).............................. 712,000 *
Larry W. Sonsini................................ 46,604 *
Ian R. Wilson(7)................................ 104,000 *
John A. Young................................... 0 *
Mary M. Burnside................................ 125,459 *
Joseph A. Marengi............................... 73,242 *
James R. Tolonen(8)............................. 174,907 *
All directors and executive officers as a group
(24 persons) 52,151,517 14.18
</TABLE>
- --------
* less than one percent
(1) Unless otherwise indicated, the persons named have sole voting and
investment power over the number of shares of the Company's Common Stock
shown as being beneficially owned by them. As to each person or group named
in the table, the table includes the following shares issuable upon
exercise of options that are exercisable within 60 days from January 31,
1995: Mr. Rekhi 101,250, Ms. Bond 48,000, Mr. Messman 112,000, Mr. Sonsini
40,000, Mr. Wilson 96,000, Ms. Burnside 97,500, Mr. Marengi 52,100, Mr.
Tolonen 65,000, all directors and executive officers as a group 2,093,962.
(2) Of such shares, (i) 16,468,144 are held by a trust (of which Mr. Noorda is
a co-trustee) for the benefit of members of Mr. Noorda's immediate family
and (ii)11,076,600 shares are held by Dialogic Systems Corporation, a
corporation in which Mr. Noorda is the sole shareholder and holds 100% of
the stock.
(3) Of such shares, (i) 5,497,756 are beneficially owned by Mr. Bastian's wife
not living in the same household, as to which shares Mr. Bastian disclaims
beneficial ownership, (ii) 399,744 shares are held in custodianship for the
benefit of his minor children, as to which he disclaims beneficial
ownership and (iii) 150,000 are held by a charitable trust (of which Mr.
Bastian is a co-trustee), as to which he disclaims beneficial ownership.
(4) Of such shares, (i) 5,316,890 are held in a trust (of which Dr. Ashton is
co-trustee and his wife as beneficial owner), (ii) 344,380 are held in
custodianship for benefit of his minor children, as to which he disclaims
beneficial ownership, (iii) 275,504 are held by his adult children living
at home, as to which
2
<PAGE>
shares he disclaims beneficial ownership, (iv) 170,000 are held in
charitable remainder unitrusts (of which Dr. Ashton is a co-trustee) and (v)
850,000 are held in the Family Foundation (of which Dr. Ashton is a co-
trustee).
(5) Includes 45,184 shares held by trusts for Mr. Rekhi's minor children under
Trust Agreements dated December 15, 1989, of which trusts he serves as a
co-trustee and as to which shares he disclaims beneficial ownership.
(6) Includes 40,000 shares held by Mr. Messman as custodian for his minor
children.
(7) Mr. Wilson holds 8,000 shares as trustee for his Defined Benefit Pension
Plan.
(8) Includes 8,472 shares held by Mr. Tolonen's adult child living at home, as
to which he disclaims beneficial ownership.
PROPOSAL ONE
ELECTION OF DIRECTORS
A Board of nine directors is to be elected at the Annual Meeting. Unless
otherwise indicated by the shareholder on the Proxy Card, the persons named in
the Proxy Card as proxies for this meeting will vote in favor of each of the
following nominees as directors of the Company. Directors elected at the Annual
Meeting will hold office until the next annual meeting of shareholders of the
Company, and until their successors are duly elected and qualified, except in
the event of their earlier death, resignation, or removal. Management has no
reason to believe that any of the nominees will be unable or unwilling to serve
if elected. If any nominee should become unavailable prior to the election, the
accompanying Proxy Card will be voted for the election in his or her stead of
such other person as the Board of Directors may recommend.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION DIRECTOR SINCE AGE
---- -------------------- -------------- ---
<C> <S> <C> <C>
Robert J. Franken- Chairman of the Board, President and
berg Chief Executive Officer of the
Company(1)........................... 1994 47
Alan C. Ashton Co-founder of former WordPerfect(2)... 1994 51
Bruce W. Bastian Co-founder of former WordPerfect(3)... 1994 46
Elaine R. Bond Retired(4)............................ 1993 59
Jack L. Messman President and Chief Executive Officer
of Union Pacific Resources
Company(5)........................... 1985 54
Kanwal S. Rekhi Technical Consultant to the 1989 48
Company(6)...........................
Larry W. Sonsini Member of the law firm of Wilson,
Sonsini, Goodrich & Rosati,
Professional Corporation(7).......... 1988 53
Ian R. Wilson Managing Partner of Dartford 1989 65
Partnership(8).......................
John A. Young Retired(9)............................ 1995 62
</TABLE>
- --------
(1) Robert J. Frankenberg
Chief Executive Officer, President and a Director of the Company since
April 1994 and Chairman of the Board of Directors since August 1994. Mr.
Frankenberg served as Vice President/General Manager, Personal Information
Products Group of Hewlett-Packard Company (an international computation and
measurement company) from April 1991 to April 1994. Mr. Frankenberg
previously served as Vice President General Manager, Information Networks
and Cooperative Computing Groups of Hewlett-Packard Company from November
1989 to April 1991. Mr. Frankenberg is a director of Electroglas, Inc.
(2) Alan C. Ashton, Ph.D.
Co-founder of former WordPerfect Corporation (a software applications
company) acquired by Novell on June 24, 1994. Dr Ashton served as Co-
Chairman of WordPerfect Board of Directors from January 1, 1994 until June
24, 1994. Dr. Ashton served as President and Chief executive officer from
January 1, 1993 until December 31, 1993. Dr Ashton also served as executive
officer and or director of WordPerfect and certain of its subsidiaries for
more than five years.
3
<PAGE>
(3) Bruce W. Bastian
Co-founder of former WordPerfect Corporation (a software applications
company) acquired by Novell on June 24, 1994. Mr. Bastian served as Co-
Chairman of WordPerfect Board of Directors from January 1, 1994 until June
24, 1994. Mr. Bastian served as Chairman of the Board of Directors from
January 1, 1993 until December 31, 1993. Mr. Bastian also served as
executive officer and or director of WordPerfect and certain of its
subsidiaries for more than five years.
(4) Elaine R. Bond
A Chase Fellow and Senior Consultant for Chase Manhattan Bank, (a New York
based Money Center Bank) from December 1991 until her retirement on
December 31, 1994. Ms. Bond previously served as Senior Vice President and
Senior Technology Officer for Chase Manhattan Bank from 1981 to December
1991. Ms. Bond is a director of Washington National Corporation.
(5) Jack L. Messman
President and Chief Executive Officer of Union Pacific Resources Company,
(an oil company) since March 1991. Mr. Messman previously served as
Chairman and Chief Executive Officer of U.S.P.C.I., Inc., (a hazardous
waste disposal company) from 1988 to March 1991. Mr. Messman is a director
of Cambridge Technology Partners, Inc. and Tandy Corporation.
(6) Kanwal S. Rekhi
A technical consultant to the Company since January 7, 1995. Mr. Rekhi
previously served as an Executive Vice President of the Company from June
1989 until January 6, 1995. Mr. Rekhi is a director of Gupta, Corp. and
Rexon Incorporated.
(7) Larry W. Sonsini
A Member of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation (a
law firm) for more than the last five years. Mr. Sonsini is a director of
ASK Computer Systems, Inc., LSI Logic Corporation, Lattice Semiconductor
Corporation and Silicon Valley Group.
(8) Ian R. Wilson
Managing partner of Dartford Partnership (a holding company) since August
1994. Mr. Wilson served as Chairman of the Board, Chief Executive Officer
and President of Windmill Holdings Corp., (a milling and baking company)
from February 1989 until January 1995. Mr. Wilson previously served as
Chairman of the Board, Chief Executive Officer and President of Wyndham
Foods, Inc., (a baking company) from 1985 to August 1990. Mr. Wilson also
served as Chairman of the Board of Wilson Bottling Corporation from 1982 to
August 1990. Mr. Wilson is a director of Aqua-Vie Beverage Corporation and
Golden State Foods, Inc.
(9) John A. Young
Mr. Young retired in 1992 as Chief Executive Officer of Hewlett-Packard
Company, (an international computation and measurement company), a position
he held for fifteen years. He has had a long association with
competitiveness issues having chaired President Reagan's Commission on
Industrial Competitiveness and founded the Council on Competitiveness in
1986. Mr. Young is a director of Wells Fargo & Co., Chevron Corp.,
SmithKline Beecham plc, Shaman Pharmaceuticals Inc., Affymetrix, Abiotic
Systems, General Magic, and is a member of The Business Council. He also is
chairman of the board of Smart Valley, Inc.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 17 meetings in fiscal 1994.
The Board of Directors has two committees. The Audit Committee is comprised
of Directors Messman as chairman, Bond and Wilson. The Compensation Committee
is comprised of Directors Wilson as chairman, Bond and Messman. There is no
Nominating Committee or any committee performing the function of a nominating
committee.
4
<PAGE>
The Audit Committee met once during fiscal 1994. The responsibilities of the
Audit Committee include recommending to the Board the selection of the
independent auditors and reviewing the Company's internal accounting controls.
The Audit Committee is authorized to conduct such reviews and examinations as
it deems necessary or desirable with respect to the practices and procedures of
the independent auditors, the scope of the audit, accounting controls,
practices and policies, and the relationship between the Company and its
independent auditors, including the availability of Company records,
information and personnel.
The Compensation Committee of the Board of Directors met three times during
fiscal 1994. The Compensation Committee focuses on executive compensation, the
administration of the Company's stock option and stock purchase plans and
making decisions on the granting of discretionary bonuses. See "Report of the
Compensation Committee of the Board of Directors on Executive Compensation".
During the last fiscal year, all directors, except Director Wilson, attended
at least 75 percent of the meetings of the Board and Committees of which they
were members. Director Wilson attended 71 percent of such meetings.
VOTE REQUIRED AND RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
SLATE OF NOMINEES SET FORTH ABOVE.
The nine nominees receiving the highest number of affirmative votes of the
shares present or represented by proxy and entitled to be voted for them shall
be elected as directors. Votes withheld from any director are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but have no other legal effect under Delaware law. While there is
no definitive statutory or case law authority in Delaware as to the proper
treatment of abstentions in the election of directors, the Company believes
that abstentions should be counted for purposes of determining whether a quorum
is present at the Annual Meeting for the transaction of business. In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions with respect to the election of directors in this manner. Broker
non-votes will also be counted as present or represented for purposes of
determining the presence or absence of a quorum for the transaction of
business. Shareholders do not have the right to cumulate their votes in the
election of directors.
PROPOSAL TWO
APPROVAL OF THE ADOPTION OF AN AMENDMENT
TO THE COMPANY'S CERTIFICATE OF INCORPORATION
DESCRIPTION OF PROPOSED AMENDMENT
On November 18, 1994, the Board of Directors approved an amendment (the
"Amendment") to the Company's Restated Certificate of Incorporation that would
increase the number of authorized shares of Common Stock from 400 million to
600 million. At the meeting, the shareholders will be asked to approve the
Amendment. Under the proposed Amendment, Article Fourth of the Company's
Certificate of Incorporation would be amended to read in full as follows:
Fourth: The corporation shall be authorized to issue Six Hundred Million
Five Hundred Thousand (600,500,000) shares, of which Six Hundred Million
(600,000,000) shares shall be Common Stock, par value $.10 per share, and
Five Hundred Thousand (500,000) shares shall be Preferred Stock, par value
$.10 per share. The optional or other special rights and the
qualifications, limitations or restrictions thereof with respect to the
Preferred Stock or any series thereof shall be fixed by resolution of the
Board of Directors of the corporation.
5
<PAGE>
PURPOSE AND EFFECT OF THE AMENDMENT
As of January 31, 1995, 365,584,705 shares of Common Stock were outstanding
and 53,892,346 shares of Common Stock were reserved for issuance upon the
exercise of options granted under the Company's stock option and purchase
plans. Thus, the Company does not have sufficient authorized shares of Common
Stock available to cover all shares that would otherwise be issuable under
existing stock option and purchase plans previously approved by the
shareholders. If the Amendment increasing the number of authorized shares of
Common Stock is approved by shareholders, the reserves under such plans will be
restored and there will also be additional shares of Common Stock reserved to
cover future increases pursuant to the shareholder approved evergreen provision
of the Company's 1991 Stock Plan and the proposed increase in shares reserved
under the Company's 1989 Employee Stock Purchase Plan (Proposal Three). The
purpose of the proposed Amendment to the Company's Certificate of Incorporation
to increase the authorized shares of Common Stock is to provide authorized
shares to cover reserves under existing stock plans and to make additional
shares available for use by the Board of Directors as it deems appropriate or
necessary. For example, such shares may be needed in connection with raising
additional capital through the sale of the Company's securities, providing
additional options or other stock incentives to the Company's employees or
consultants, acquiring another company or its business or assets, establishing
a strategic relationship with a corporate partner or declaring a stock
dividend.
Except as described above with respect to existing stock plans, the Board of
Directors has no present agreement, arrangement, plan or understanding with
respect to the issuance of any of the additional authorized shares. If the
Amendment is approved by the shareholders, the Board of Directors does not
intend to solicit further shareholder approval prior to the issuance of any
additional shares of Common Stock, except as may be required by applicable law.
Each additional share of Common Stock authorized by the proposed Amendment
will have the same rights and privileges as each share of Common Stock
currently authorized. Shareholders as such will have no statutory preemptive
rights to receive or purchase any of the Common Stock authorized by this
proposed Amendment.
The increase in authorized Common Stock will not have any immediate effect on
the rights of existing shareholders. To the extent that the additional
authorized shares are issued in the future, they will decrease the existing
shareholders' percentage equity ownership and, depending on the price at which
they are issued, could be dilutive to the existing shareholders.
POTENTIAL ANTI-TAKEOVER EFFECT; OTHER PROVISIONS IN EFFECT
The increase in the authorized number of shares of Common Stock could have an
anti-takeover effect. Shares of authorized and unissued Common Stock could
(within the limits imposed by applicable law) be issued in one or more
transactions that would make a takeover of the Company more difficult, and
therefore less likely. Any such issuance of additional stock could have the
effect of diluting the earnings per share and book value per share of
outstanding shares of Common Stock, and such additional shares could be used to
dilute the stock ownership or voting rights of persons seeking to obtain
control of the Company.
The Company has previously adopted certain measures that may have the effect
of helping it to resist an unfriendly takeover attempt. These includes (i) a
Shareholder Rights Plan, which was put into effect December 1988, providing for
the distribution of rights to purchase additional shares of the Company's stock
in the event of certain attempts to acquire control of the Company; and (ii)
provisions in the option plans and Directors' Plan providing for the
acceleration of vesting of outstanding options in the event of a "change of
control" of the Company, unless otherwise determined by the Board of Directors.
6
<PAGE>
VOTE REQUIRED AND BOARD RECOMMENDATION
The adoption of the Amendment to the Certificate of Incorporation requires
the affirmative vote of not less than a majority of the votes entitled to be
cast by all shares of Common Stock issued and outstanding on the Record Date.
If the proposed Amendment is approved by shareholders, it will become effective
upon filing and recording of a certificate of Amendment as required by the
Delaware General Corporation Law. If the Amendment is not so approved, the
Company's authorized capital stock will not change. The effect of an abstention
or a broker non-vote is the same as that of a vote against the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
THE APPROVAL OF THE PROPOSED INCREASE IN THE NUMBER OF SHARES OF AUTHORIZED
COMMON STOCK OF THE COMPANY.
PROPOSAL THREE
APPROVAL AND RATIFICATION OF THE ADOPTION OF AN
AMENDMENT TO THE COMPANY'S 1989 EMPLOYEE STOCK PURCHASE PLAN
PROPOSED AMENDMENT
On November 18, 1994, the Board of Directors of the Company approved an
amendment to the Novell, Inc. 1989 Employee Stock Purchase Plan ("Purchase
Plan") to increase the number of shares available for issuance under the
Purchase Plan from four million (4,000,000) to eight million (8,000,000). At
the 1994 Annual Meeting the shareholders are being asked to approve such
increase in shares under the Purchase Plan. The Board of Directors believes
that the adoption of the amendment to the Purchase Plan will foster good
employee relations, encourage and assist employees of Novell to acquire an
equity interest in the Company. In addition the Board believes the adoption of
the amendment will help align employee interest with other shareholders and
help provide for the future financial security of Novell employees. The
Purchase Plan should thereby be helpful in attracting, retaining and motivating
employees. The details of the Purchase Plan are described below. A copy of the
amended Purchase Plan will be furnished by the Company to any shareholder upon
written request to the Corporate Secretary.
DESCRIPTION OF PURCHASE PLAN, AS AMENDED.
The following is a brief summary of certain features of the Purchase Plan.
Eligibility. Any person who is employed by Novell (or by any of its
designated subsidiaries) for at least twenty hours per week is eligible to
participate in the Purchase Plan, subject to certain limitations imposed by
Section 423(b) of the Internal Revenue Code of 1986, as amended (the "Code").
No person who owns or hold options to purchase, or who, as a result of
participation in the Purchase Plan, would own or hold options to purchase five
percent or more of the outstanding stock of the Company is entitled to
participate in the Purchase Plan. As of January 31, 1995, approximately 7,900
employees were eligible to participate.
Participation in an Offering. After the initial offering period, each
offering of Common Stock under the Purchase Plan ("Offering") will be for a
period of approximately six months. The commencement of each Offering under the
Purchase Plan will start at the beginning of the Company's regular payroll
periods that fall closest to November 1 and May 1 of each year. To participate
in the Purchase Plan, eligible employees must authorize payroll deductions
pursuant to the Purchase Plan. Such payroll deductions may not exceed ten
percent of regular base salary. Once an employee becomes a participant in the
Purchase Plan, the employee will automatically participate in each successive
Offering until such time as the employee withdraws from the Purchase Plan or
the employee's employment terminates. As of January 31, 1995 there were
approximately 4,400 participants in the Purchase Plan.
7
<PAGE>
Purchase Price. The purchase price per share at which the shares of Common
Stock are acquired under the Purchase Plan will be equal to 85% of the lesser
of the fair market value of the Common Stock on (i) the first day of the
Offering or (ii) the last day of the Offering. The fair market value of the
Common Stock on any relevant date will be equal to the closing bid price per
share as reported on the NASDAQ National Market.
Shares Purchased. The number of shares of the Common Stock a participant
purchases in each Offering is determined by dividing the total amount of
payroll deductions withheld from the participant's paychecks during the
offering by the purchase price. In any calendar year, no participant may
purchase more than $25,000 worth of stock (determined at the fair market value
of the shares at the time the option is granted). At Novell's option, any cash
not applied to the purchase of fractional shares will either be returned to the
participant or applied toward the purchase of shares in subsequent offerings.
Withdrawal. A participant may withdraw from an Offering at any time without
affecting his or her eligibility to participate in future offerings. In effect,
therefore, a participant is given an option that he or she may or may not
exercise. However, once a participant withdraws from an Offering, that
participant may not participate in the same Offering.
Administration and Amendment. The Purchase Plan is administered, at the
Company's expense, by the Board of Directors or a committee appointed by the
Board, and is currently being administered by the Board's Compensation
Committee. All questions of interpretation or application of the Purchase Plan
are determined in the sole discretion of the committee, and its decisions are
final and binding upon all participants. Members of the Board of Directors or
its committee who are eligible employees are permitted to participate in the
Purchase Plan but may not vote on any matters that affect the administration of
the Purchase Plan. No member of the Board who is eligible to participate in the
Purchase Plan may be a member of the committee appointed to administer the
Purchase Plan. The committee may at any time amend or terminate the Purchase
Plan, except that such termination shall not affect options previously granted,
nor may any amendment make any change in an option previously granted that
would adversely affect the rights of any participant. No amendment may be made
to the Purchase Plan without the approval or ratification of the shareholders
of the Company if such amendment would increase the number of shares reserved
for issuance under the Purchase Plan, materially modify the eligibility
requirements, materially increase the benefits that may accrue to participants
under the Purchase Plan or permit payroll deductions at a rate in excess of ten
percent (10%) of the participants' compensation.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary is intended only as a general guide as to federal
income tax consequences under current law of participation in the Purchase Plan
and does not attempt to describe all potential tax consequences. Furthermore,
tax consequences are subject to change and a taxpayer's particular situation
may be such that some variation of the described rules is applicable.
Accordingly, participants have been advised to consult their own tax advisors
with respect to the tax consequences of participating in the Purchase Plan.
The Purchase Plan is intended to be an "Employee Stock Purchase Plan" within
the meaning of Section 423 of the Code. Under a plan that so qualifies, no
taxable income will be reportable by a participant, and no deductions will be
allowable to the Company, by reason of the grant of the option at the beginning
of an Offering or the purchase of shares at the end of an Offering. A
participant will, however, recognize taxable income in the year in which the
shares purchased under the Purchase Plan are sold or otherwise made the subject
of disposition.
A sale or other disposition of the purchased shares will be a disqualifying
disposition if it is made either within two years after the date the option is
granted (i.e., the commencement date of the Offering to which the option
pertains) or within one year from the last day of such Offering for the
particular shares involved in the disposition.
8
<PAGE>
If the participant makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction for the taxable
year of the Company in which such disposition occurs, equal to the amount by
which the fair market value of such shares on the date of purchase exceeds the
purchase price. In no other instance will the Company be allowed a deduction
with respect to the participant's disposition of the purchased shares.
If the participant disposes of the shares after satisfying the two-year and
one-year holding periods outlined above (a qualifying disposition), then the
participant will realize ordinary income in the year of disposition equal to
the lesser of (i) the amount by which the fair market value of the shares on
the date of disposition exceeds the purchase price or (ii) 15% of the fair
market value of the shares on the day the option relating to the disposed
shares was first granted. This amount of ordinary income will be added to the
basis in the shares and any gain (or loss) recognized upon the disposition will
be a long-term capital gain (or loss). Currently, the long-term capital gains
rate is capped at 28 percent.
If the shares are disposed of in a disqualifying disposition, then the excess
of the fair market value of the shares on the date of purchase over the
purchase price will be treated as ordinary income to the participant at the
time of such disposition. Even if the shares are disposed of for less than
their fair market value measured as of the date of purchase, the same amount of
ordinary income is attributed to a participant, and a capital loss is
recognized equal to the difference between the sales price and the fair market
value of the shares on such date of the purchase.
PARTICIPATION IN THE PURCHASE PLAN
Participation in the Purchase Plan is open to all employees of the Company
who work 20 hours or more during a normal work week, including the executive
officers named in the Summary Compensation Table (the "Named Officers").
Participation is voluntary and is dependent on each eligible employee's
election to participate and their respective determination as to the level of
payroll deductions. Accordingly, future purchases under the Purchase Plan are
not determinable. No purchases have been made under the Purchase Plan since the
amendment described above. As of the date of this proxy statement, 3,836,137
shares of Common Stock have been acquired by employees of the Company through
participation in the Purchase Plan. The Company has received approximately
$47.2 million from the purchase of stock by employees through the Purchase
Plan. Non-employee directors are not eligible to participate in the Purchase
Plan. The following table sets forth information with respect to purchases of
Common Stock by Named Officers, to all current executive officers as a group
and to all other employees as a group during the last fiscal year ended October
29, 1994:
9
<PAGE>
AMENDED PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF INDIVIDUAL OR PURCHASED UNDER DOLLAR
IDENTITY OF GROUP AND POSITION PURCHASE PLAN (#) VALUE ($)(1)
- ------------------------------ ----------------- ------------
<S> <C> <C>
Robert J. Frankenberg........................... 1,315 $ 3,403
Chief Executive Officer, President and Chairman
of the Board
Raymond J. Noorda............................... 0 0
Former Chief Executive Officer, President and
Chairman of the Board
Joseph A. Marengi............................... 805 2,204
Executive Vice President--World Wide Sales
Mary M. Burnside................................ 1,172 3,153
Executive Vice President and Chief Operations
Officer
James R. Tolonen................................ 1,172 3,153
Executive Vice President and Chief Financial
Officer
Kanwal S. Rekhi................................. 0 0
Executive Vice President--Corporate Technology
All current executive officers as a group (17
persons)....................................... 10,414 27,751
All other employees as a group (3,064).......... 940,639 2,504,413
</TABLE>
- --------
(1) Fair market value on date of purchase, minus the purchase price.
VOTE REQUIRED AND BOARD OF DIRECTOR'S RECOMMENDATION
Approval of the increase in shares reserved under the Purchase Plan requires
the affirmative vote of the holders of a majority of the shares of the
Company's Common Stock represented and voting in person or by proxy at the
Annual Meeting and "entitled to vote on the subject matter" (the "Votes Cast").
Votes that are cast against the proposal are counted both for purposes of
determining the presence or absence of a quorum for the transaction of business
and for purposes of determining the total number of Votes Cast with respect to
this proposal.
While there is no definitive statutory or case law in Delaware as to the
proper treatment of abstentions in the counting of votes with respect to a
proposal such as the approval of the amendment to the Purchase Plan, the
Company believes that abstentions should be counted for purposes of determining
both the presence or absence of a quorum for the transaction of business and
the total number of Votes Cast on this proposal. In the absence of controlling
precedent to the contrary, the Company intends to treat abstentions on this
proposal in this manner. In a 1988 Delaware case, Berlin v. Emerald Partners,
the Delaware Supreme Court held that, while broker non-votes should be counted
for purposes of determining the presence or absence of a quorum for the
transaction of business, broker non-votes should not be counted for purposes of
determining the number of Votes Cast with respect to the particular proposal
for which authorization to vote was withheld. Accordingly, broker non-votes
with respect to this proposal will not be considered as Votes Cast and,
accordingly, will not affect the outcome of voting on this proposal.
The Board of Directors believes that the opportunity for employees to acquire
shares pursuant to the Purchase Plan will be important to attract and retain
qualified employees and consultants essential to the success of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO
THE PURCHASE PLAN.
10
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during fiscal years 1994, 1993 and 1992 for the
Chief Executive Officers and the four most highly compensated executive
officers of the Company whose salary plus bonus exceeded $100,000 in 1994.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION(1) AWARDS
--------------- ------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6)
- --------------------------- ---- ------- ------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Frankenberg(7). 1994 288,462 225,000 321,141 612,288 600,000 1,731
Chief Executive Officer,
President and Chairman
of the Board
Raymond J. Noorda(8)..... 1994 105,742 -- -- -- -- 1,605
Former Chief Executive 1993 285,585 -- -- -- -- 4,285
Officer, President and 1992 198,830 -- -- -- -- 3,302
Chairman of the Board
Joseph A. Marengi........ 1994 324,676 175,324 -- 315,500 95,000 4,500
Executive Vice President 1993 178,400 171,660 -- -- 40,000 4,497
Worldwide Sales 1992 182,531 71,283 -- -- 39,000 4,364
Mary M. Burnside......... 1994 298,857 147,000 -- 315,500 80,000 4,500
Executive Vice President 1993 256,675 95,680 -- -- 60,000 4,497
and Chief Operations 1992 186,118 76,027 -- -- 90,000 4,364
Officer
James R. Tolonen......... 1994 295,509 147,000 -- 315,500 80,000 4,500
Executive President and 1993 238,014 88,320 -- -- 60,000 4,497
Chief Financial Officer 1992 191,931 76,027 -- -- 48,000 4,364
Kanwal S. Rekhi.......... 1994 237,607 95,000 -- 315,500 80,000 4,500
Executive Vice 1993 232,097 84,640 -- -- 55,000 4,497
President--Corporate 1992 191,971 76,027 -- -- 60,000 4,364
Technology
</TABLE>
- --------
(1) Compensation deferred at the election of the executive, pursuant to the
Novell, Inc. Retirement and Savings Plan, is included in the year earned.
(2) Cash bonuses for services rendered in fiscal years 1994, 1993 and 1992,
have been listed in the year earned, but were actually paid in the
following fiscal year. Bonuses were calculated based on the operating
results of the Company and performance of the individuals. See "Report of
the Compensation Committee of the Board of Directors on Executive
Compensation".
(3) Mr. Frankenberg received $190,500 to cover major expenses relating to the
relocation of his primary resident from California to Utah. Additionally
$110,196 was for the gross up of taxes on the total related relocation
expenses.
11
<PAGE>
(4) Restricted stock awards are valued in the Executive Compensation Table at
the Company's closing price on the date of grant less exercise price of
$.10 a share. Mr. Frankenberg received a Restricted Stock Grant on April 5,
1994. Such shares vest equally over two years on award date. As of 1994
fiscal year end, Mr. Frankenberg had 36,500 shares of unvested restricted
stock with a value of $634,188. Named Officers Marengi, Burnside, Tolonen
and Rekhi each received a Restricted Stock Grant on October 19, 1994. Such
shares vest over a two year period with 25 percent vested one year from
award date and the remaining 75 percent vested two years from award date.
As of 1994 fiscal year end, each Named Officer had 20,000 shares of
unvested restricted stock with a value of $347,500. Officers have the right
to vote such shares but do not receive dividends as Novell does not pay
dividends. No restricted shares vested in fiscal 1994.
(5) The Novell option plans are administered by the Compensation Committee of
the Board of Directors. The committee determines the eligibility of
employees and consultants, the number of shares to be granted and the terms
of such grants. Upon a change in control, unvested options shall be assumed
by the acquiring company. The Board of Directors has the right to
accelerate unvested options if the acquiring company is unwilling to assume
the options. The plans provide for various methods of exercise. The company
currently allows cash, cashier check or cashless exercises.
(6) The stated amounts are Company matching contributions to the Novell, Inc.
Retirement and Savings Plan.
(7) Mr. Frankenberg joined the Company as Chief Executive Officer and President
in April 1994 and was appointed Chairman of the Board in August 1994.
(8) Mr. Noorda resigned from his position as Chief Executive Office and
President in April 1994. Mr. Noorda resigned as Chairman of the Board in
August 1994 and resigned as a Board member in November 1994.
DIRECTOR COMPENSATION
Non-employee Directors of the Company receive an annual retainer of $20,000
plus a Board meeting fee of $1,200 for each Board meeting attended.
Additionally, the directors are reimbursed for their expenses incurred in
attending meetings of the Company's Board of Directors. Non-Employee Directors
receive $1,000 additional compensation for committee meetings attended with the
Committee chairman receiving an annual retainer of $2,500. All new non-employee
directors receive an option grant at fair market value under the Non-employee
Director Plan to purchase 72,000 shares of common stock, Directors Ashton and
Bastian received such a grant in October 1994 and Director Young received such
a grant in January 1995, when they were appointed to the Board of Directors.
Options vest over three years. Upon change in control an option will become
exercisable in full by a non-employee Director if within one year of such
change in control the non-employee Director ceases for any reason to be a
member of the Board. See also "Executive Compensation--Non-Employee Directors
Stock Option Plan".
Novell has established a Directors' Charitable Award Program (the "Award
Program") to acknowledge the service of directors to the Company and enhance
indirectly the ability of the Company to attract and retain directors of the
highest caliber. All members of the Board are eligible for the Award Program,
subject to vesting requirements. The Award Program is funded by life insurance
policies purchased by the Company which provide for a $1 million death benefit
on participating directors. Upon the death of a participating director, the
Company may donate $100,000 per year for ten years to non-profit organizations
recommended by the director. Individual directors derive no financial benefit
from the Award Program since all available insurance proceeds and tax
deductions accrue solely to the Company.
12
<PAGE>
STOCK OPTION GRANTS IN FISCAL YEAR 1994
The following table provides information with respect to stock options
granted during fiscal 1994 to the Named Officers. No stock appreciation rights
have been granted by the Company.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
------------------------------------------- ----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(2) YEAR(3) ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Frankenberg... 600,000(4) 2.91% 16.875 04/05/04 6,367,558 16,136,642
Raymond J. Noorda....... -- -- -- -- -- --
Joseph A. Marengi....... 15,000(5) .07 17.50 10/05/01 106,864 249,038
80,000(6) .39 15.875 10/19/04 798,696 2,024,053
Mary M. Burnside........ 80,000(6) .39 15.875 10/19/04 798,696 2,024,053
James R. Tolonen........ 80,000(6) .39 15.875 10/19/04 798,696 2,024,053
Kanwal S. Rekhi......... 80,000(6) .39 15.875 10/19/04 798,696 2,024,053
</TABLE>
- --------
(1) Potential realizable value is based on an assumption that the stock price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the seven-year or ten-
year term of the option. These numbers are calculated based on the
requirements promulgated by the Securities and Exchange Commission and do
not reflect the Company's estimate of future stock price growth.
(2) The Novell option plans are administered by a committee of the Board of
Directors. The committee determines the eligibility of employees and
consultants, the number of shares to be granted and the terms of such
grants. Upon change in control unvested options shall be assumed by the
acquiring company. The Board of Directors has the right to accelerate
unvested options if the acquiring company is unwilling to assume the
options. The plans provide for various methods of exercise. The Company
currently allows for cash, cashier check or cashless exercise.
(3) Options to purchase an aggregate of 20,602,634 shares were granted to
employees in fiscal 1994. Of such shares 7,430,961 shares were granted
based on the Company's Exchange Program for employees (excluding Named
Officers, other Company Officers and Directors) with options at prices
greater than current Fair Market Value.
(4) Non-statutory option has an exercise price equal to the fair market value
on the date of grant, vests at a rate of 25 percent per year on the first,
second, third and fourth anniversary of the grant date and has a term of
ten years.
(5) Non-statutory option has an exercise price equal to the fair market value
on the date of grant, vests at a rate of 25 percent per year on the first,
second, third and fourth anniversary of the grant date and has a term of
seven years.
(6) Non-statutory option has an exercise price equal to the fair market value
on the date of grant, vests over four years (with 25 percent vesting one
year from grant date and thereafter 6.25 percent vesting quarterly).
13
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The number of options exercised and the value realized from any such exercise
during fiscal 1994 and the number and value of options held at fiscal year end
for the Named Officers are set forth in the following table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FY-END (#) FY-END ($)(1)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Frankenberg... -- -- -- 600,000 -- $300,000
Raymond J. Noorda....... -- -- -- -- -- --
Joseph A. Marengi....... -- -- 49,700 153,100 $144,331 158,556
Mary M. Burnside........ -- -- 90,000 170,000 427,500 120,000
James R. Tolonen........ 20,000 $329,520 59,000 149,000 285,000 120,000
Kanwal S. Rekhi......... -- -- 93,750 151,250 712,500 120,000
</TABLE>
- --------
(1) Value of unexercised options is (i) the fair market value of the Company's
Common Stock at fiscal 1994 year end ($17.375 per share) less the option
exercise price per share, times (ii) the number of shares subject to the
option.
(2) Value realized upon exercise is (i) the fair market value of the Company's
Common Stock on the date of exercise, less the option exercise price per
share, times (ii) the number of shares exercised.
EMPLOYMENT CONTRACT, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
All Named Officers of Novell are currently under employment contracts.
Novell entered into an employment agreement with Mr. Frankenberg on April 4,
1994. Pursuant to the agreement Mr. Frankenberg (i) will receive a minimum
annual base salary of $500,000, such salary will be reviewed annually, (ii)
will participate in the executive incentive bonus program and be eligible to
earn an annual bonus of up to 80 percent of base salary based upon the
accomplishment of certain performance goals, (iii) was granted an option to
purchase 600,000 shares of Novell Common Stock on April 5, 1994 at an exercise
of $16.875 (the fair market value on such date), (iv) was awarded a restricted
stock grant for 36,500 shares of common stock, (v) was provided with a
relocation package to cover out of pocket expenses, (vi) was provided with an
apartment in California.
In the event of Mr. Frankenberg's involuntary termination other than for
cause within two years after commencement of employment or involuntary
termination at any time within 12 months after a change in control other than
for cause or constructive termination, he will receive a severance payment
equal to two years of current base salary and two years of incentive bonus. In
the event of involuntary termination other than for cause at any time after two
years after commencement of employment, he shall be entitled to a severance
payment equal to two years of current base salary.
Mr. Frankenberg's vesting of stock options and restricted shares shall be
affected in the following manner: Upon change of control within two year from
commencement of employment, 50 percent of unvested stock options and restricted
stock shall become vested and exercisable. If involuntary termination other
than for cause or constructive termination, within 12 months after change of
control, all unvested stock options and restricted stock shall become vested
and exercisable.
In the event that any payments received would be subject to the excise tax
imposed by Section 4999 of the Code, the Company will pay an additional gross-
up amount for any excise tax and federal, state and local income taxes, such
that the net amount retained by Mr. Frankenberg would be equal to the net
payments after income taxes, had the excise tax and resulting gross-up not been
imposed.
14
<PAGE>
Novell entered into employment contracts with Named Officers Marengi,
Burnside and Tolonen on November 1, 1994. The term of the contracts is for two
years with an automatic renewal for 18 months, unless terminated by either
party, with salary being reviewed annually. Base salary per the contract is as
follows: Officer Marengi's base salary is $333,333, Officers Burnside and
Tolonen base salary is $350,000. All Named Officers will participate in the
executive incentive bonus program. Based upon the accomplishment of certain
performance goals Named Officers Marengi, Burnside and Tolonen are eligible to
earn bonus of 50, 40, 40 percent, respectively, of their base salaries.
Each Named Officer was granted an option to purchase 80,000 shares of Common
Stock with an exercise price equal to the fair market value of the Company's
stock. Such shares vest over four years with 25 percent vested one year from
award date and thereafter 6.25 percent quarterly. Additionally each Named
Officer was awarded a Restricted Stock Grant with a purchase price of $.10 and
vesting of 25 percent one year from award date and the remaining 75 percent
vesting two years from award date.
In the event of termination without cause or constructive termination after a
change of control, Officer Marengi will receive 1.5 times his base annual
salary. Officers Burnside and Tolonen will received 1.4 times their base annual
salary. All Named Officers will receive an accelerated vesting of an additional
12 months for unvested options. If said termination should occur within the
first year of the restricted stock vesting, 50 percent of restricted stock
shares shall become vested and if within the second year all remaining unvested
restricted stock shares shall become immediately vested.
If any payment or benefit to be received by the Named Officers upon a Change
in Control would result in the payment being subject to excise tax (under
Section 4999 of the Code), the payment that the Named Officer would receive
will either be (i) the full payment or (ii) such lesser amount that would not
result in any portion of the payment being subject to excise tax, whichever
results in the receipt by the Named Officer of the greatest amount of the
payment (on an after-tax basis).
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Novell, Inc. Non-Employee Directors Stock Option Plan ("Directors Plan")
is administered by a committee of the Board of Directors. However, the time of
grant, number of shares granted, exercise price and vesting schedule are
established by the terms of the Directors Plan and are not subject to the
discretion of the committee or any person. Only non-employee directors may
participate in the Directors Plan.
Under the Directors Plan, all new non-employee directors are automatically
granted an option to purchase 72,000 shares (an "Initial Option") on the date
of their initial election or appointment to the Board of Directors. A similar
option was granted to directors serving on the date the Directors Plan was
approved by the shareholders. Pursuant to this provision, directors Alan Ashton
and Bruce Bastian were granted an Initial Option having an exercise price of
$15.875 per share upon their appointment to the Board of Directors on October
19, 1994. Director Young was granted an Initial Option having an exercise price
of $18.50 per share upon his appointment to the Board of Directors on January
23, 1995. All options are non-statutory options receiving no special tax
benefit, have an exercise price equal to the fair market value on date of
grant, vest annually at the rate of 33 1/3 percent per year and have a term of
ten years. Upon change in control, an option will become exercisable in full by
a non-employee Director if within one year of such change in control the non-
employee Director ceases for any reason to be a member of the Board.
On October 29, 1994, fiscal 1994 year end, options to purchase 464,000 shares
of the Company's Common Stock under the Directors Plan were outstanding at a
weighted average exercise price of $18.43 per share.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
MEMBERSHIP OF THE COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three independent non-employee directors: Mr. Wilson (Chairman),
Ms. Bond and Mr. Messman. Mr. Noorda, who served as the Company's Chief
Executive Officer until April 4, 1994, and his successor, Mr. Frankenberg, the
Chief Executive Officer of the Company since April 4, 1994, and certain other
executive officers of the Company may attend meetings of the Committee, but
are not present during discussions or deliberations regarding their own
compensation.
MERGER WITH WORDPERFECT CORPORATION
In June 1994, near the end of its fiscal third quarter, Novell acquired the
WordPerfect Corporation via a pooling of interests merger. Through the end of
Novell's 1994 fiscal year, each of the officers of Novell and WordPerfect
remained on their respective company's separate compensation plans. Incentive
compensation relating to corporate performance under these plans continued to
be based upon respective separate company results. However, certain executive
officers' specific objectives were expanded to include merger related
activities and post merger responsibilities.
Separate Novell performance exceeded incentive plan threshold levels of both
revenue and earnings. No payments were earned from the separate WordPerfect
year end incentive plan.
RESPONSIBILITIES OF THE COMMITTEE
Acting on behalf of the Board of Directors, the Committee's responsibilities
include the following:
. Establishing the general compensation policy of the Company for all
executive officers.
. Determining compensation levels for the Chief Executive Officer (the
"CEO") and other executive officers.
. Administering the Company's Senior Management Incentive Plan (the
"Incentive Plan"), including approving target bonuses, performance
objectives and actual bonus payments for executive officers.
. Administering the Company's Employee Stock Plans, including determining
eligibility, the number and type of options to be granted and the terms
of such grants.
The Company's executive compensation program is designed to support the
achievement of Company performance objectives, to ensure that executive
officers' interests are aligned with the success of the Company, and to
provide compensation opportunities that will attract, retain and motivate
superior executive personnel. Consistent with these objectives, the Committee
believes that the compensation of executive officers should be significantly
influenced by performance. Accordingly, a substantial portion of the
compensation of each executive officer is contingent upon Company performance
and adjusted as appropriate for individual performance.
1994 EXECUTIVE OFFICER COMPENSATION
The Company's compensation program for executive officers is structured to
be competitive within the high technology industry. The Company's Human
Resources Department, working with an independent outside consulting firm, has
developed executive compensation data from nationally recognized surveys for a
group of comparable companies, which are selected on the basis of similarity
in revenue level and industry segment to the Company. Approximately 50% of the
companies included in this group for the 1994 executive compensation analysis
are also included in the NASDAQ Computer and Data Processing Services index
used to compare the Company's stock price performance on the Performance Graph
on page 20.
16
<PAGE>
The Company's executive level positions, including the CEO's, are matched to
comparable survey positions and competitive levels are determined for base
salary, target incentives and target total compensation. Market practices with
respect to stock option grants are also reviewed. Factors considered in
determining a base salary and target incentive bonus for each executive officer
include Company performance, individual performance, survey data, and the scope
of the executive officer's responsibility. The relative weight given to such
factors varies as between executive officers, based upon their respective
responsibilities and capacity to affect Company performance.
Incentive bonuses for executive officers are determined according to the
Incentive Plan, based upon a combination of Company and individual performance.
In general, the Incentive Plan requires that at least 80% of each objective
must be achieved before any bonuses are paid to participants. In addition, each
participant must substantially meet the requirements of the objectives of his
or her position to receive an incentive bonus. After such minimum attainment is
achieved, the Committee has the discretion to determine the appropriate
percentage of the bonus to be paid to each participant, which may be greater
than or less than the target bonus, based upon actual corporate and individual
performance.
In December 1993, the competitive market data for each executive officer was
reviewed with the CEO. In addition, the responsibility level of each was
reviewed, together with the executive officer's individual performance for the
last fiscal year and objectives for fiscal 1994. The Company's performance was
compared to objectives for the last fiscal year and performance targets for
fiscal 1994 were also reviewed. The CEO recommended the Company's performance
targets for revenue, operating profit and earnings per share. Individual
performance targets were set after considering such factors as the specific
organizational or business unit responsibilities of each executive officer.
Based on the foregoing factors, the CEO recommended to the Committee a base
salary and target incentive bonus for fiscal 1994 for each executive officer,
excluding the CEO. The target incentive is the amount that would be paid after
the end of the fiscal year if both the Company and the executive officer
achieve the performance objectives established for the year.
The Committee reviewed the CEO's recommendations, performance evaluations and
survey data outlined above. The Committee approved a base salary level to be
effective January 1, 1994 and a target incentive for fiscal 1994 for each
Novell executive officer. The Committee reviewed and approved the Novell
Incentive Plan for fiscal 1994, including the Company earnings and revenue
objectives and individual performance targets to be used for incentive
determination. The fiscal 1994 target total cash compensation levels (base
salary plus target cash incentives) for the Named Officers (other than the CEO)
generally fall between the 50th and 75th percentiles of the comparable company
market data.
Grants under the Company's Stock Plan are designed to further strengthen the
linkage between executive compensation and shareholder return, to provide
additional incentives to executive officers tied to growth of share price over
time and encourage continued employment with the Company. Stock options
generally become exercisable over a four-year period at a price that is equal
to the fair market value of the Company's stock on the date of grant. The
restricted stock purchase grants allow each officer to acquire shares at a
nominal cost, are subject to a two year vesting schedule of 25% one year from
grant date and the remaining 75% two years from grant date, pursuant to which
each officer may take possession of such shares.
In October 1994, the CEO recommended to the Committee proposed fiscal 1995
base pay, target incentive compensation and stock option grants as well as
restricted stock purchase grants for executive officers, other than the CEO.
Executive officers now include certain previous WordPerfect executives. Base
pay and incentive compensation, stock option grants and restricted stock
purchase grants were determined, reviewed and approved by the Committee in the
context of the Company's performance to date relative to its fiscal 1994
objectives, the executive officers' responsibility level in the new merged
corporation, performance of the executive officer, survey based total
compensation targets, prior stock grants to each executive officer, and the
level and exercise price of outstanding vested and unvested options. The
relative weight given to each such factor varied as between executive officers.
In evaluating Company performance, the Committee gave
17
<PAGE>
consideration to the acquisition of WordPerfect Corporation which was
accounted for as a pooling of interests transaction and the effect that such
transaction, and the costs incurred in connection with such transaction, had
on the revenue and earnings targets of the Company for the year.
In December 1994, the Committee reviewed and approved incentive awards for
fiscal 1994 for executive officers. Incentive compensation based upon 1994
corporate performance was computed using each officer's respective separate
company results, as modified by their post merger individual objectives.
Individual performance evaluations of each executive officer for fiscal 1994
were made by the CEO and reviewed with the Committee. Incentive awards were
determined by adjusting each executive officer's target bonus based upon
actual separate company performance compared to objectives and individual
performance of the executive officer, following the process and formula
outlined in the respective incentive plans. Based on the Company's year-end
financial results, the separate Novell threshold performance levels of both
the earnings and revenue objectives were exceeded. No payments were earned
from the WordPerfect year end incentive plan.
1994 CEO COMPENSATION
Mr. Frankenberg's base and target incentive compensation, stock option
grant, restricted stock grant and relocation package were determined after
review of industry comparable compensation for CEO's, reference to Mr.
Frankenberg's previous compensation package at Hewlett-Packard Company and
negotiations with Mr. Frankenberg. Mr. Frankenberg joined the Company as
President and CEO on April 4, 1994. Base salary for the Company's CEO, Robert
J. Frankenberg, during that portion of fiscal year 1994 that he served as CEO
was set in the Company's offer of employment to Mr. Frankenberg, who
previously was Vice President and General Manager of the Personal Information
Products Group at Hewlett Packard. Mr. Frankenberg's actual incentive
compensation was determined using the criteria described above for executive
officers generally. Mr. Frankenberg's bonus payout amount in fiscal 1994 was
based on Company performance, (excluding the effect on financial results of
the WordPerfect acquisition), calculated by reference to the overall financial
results of the Company for the year, including revenue, operating profit and
earnings per share. In evaluating individual performance, the Committee gave
consideration to the successful completion of the acquisition of WordPerfect
Corporation and the effect that such transaction, and the costs incurred in
connection with such transaction, had on the revenue and earnings targets of
the Company for the year and on the progress made toward the integration of
the two companies. Mr. Frankenberg's base salary is at approximately the 50th
percentile of comparable company market data.
Raymond J. Noorda served as CEO of the Company through April 4, 1994, at
which time he retired and Mr. Frankenberg was hired. Mr. Noorda received a
base salary substantially below market competitive levels for comparable chief
executive officers. For the period in fiscal 1994 that Mr. Noorda served as
Chief Executive Officer, his base salary remained below the 25th percentile of
comparable company market data. In addition, Mr. Noorda did not receive any
cash incentives or stock option grants for fiscal 1994.
EXCHANGE PROGRAM
On September 7, 1994, the Board of Directors approved a Stock Option
Exchange Program pursuant to which all employees were given an opportunity to
exchange their outstanding options for new options at an exercise price of
$15.38, pursuant to which outstanding higher priced options could be exchanged
for a lesser number of new options on the basis of two new shares for three
old shares. All new option grants have approximately the same vesting as the
old grant but may not be exercised for a period of one year.
While the Company had not previously repriced any existing options, the
Board of Directors felt it was in the best interest of the Company and its
shareholders to do so in light of, among other things (i) the addition of
approximately 5,000 new employees resulting from the WordPerfect acquisition;
(ii) the need to grant Novell options to these new employees; and (iii) the
vast disparity in exercise price of options outstanding in the hands of
existing Novell employees as compared to such new grants to previous
WordPerfect employees. Executive officers and members of the Board of
Directors were not eligible for the exchange program.
18
<PAGE>
On Wednesday, October 19, 1994, the Board of Directors approved resolutions
relating to future option repricing. Those resolutions provided, among other
things, that from that date forward, no outstanding employee options under the
Company's existing stock option plans will be repriced through December 31,
1996 without first obtaining shareholder approval and if, during such period,
the Company submits to a vote of its stockholders any additional employee stock
option plans, that those plans will provide that there will be no repricing of
options issued thereunder except with prior stockholder approval.
QUALIFYING COMPENSATION
The Committee has considered the potential impact of Section 162(m) (the
"Section") of the Internal Revenue Code adopted under the federal Revenue
Reconciliation Act of 1993. The Section disallows a tax deduction for any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year for any of the named executive officers, unless compensation
is based within the meaning of the Section. Since the cash compensation of each
of the Company's executive officers is below the $1 million threshold and since
the Committee believes that any options granted under the Company's option
plans will meet the requirement of being performance-based under the provisions
of the Section, the Committee believes that the Section will not reduce the tax
deduction available to the Company. The Company's policy is, to the extent
reasonable, to qualify its executive officers' compensation for deductibility
under applicable tax laws.
Respectfully submitted,
Ian R. Wilson, Chairman
Elaine R. Bond
Jack L. Messman
19
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG NOVELL, INC., S&P 500 AND NASDAQ C&DPS
<TABLE>
<CAPTION>
INDEXED/CUMULATIVE RETURNS
----------------------------------
BASE
PERIOD
COMPANY/INDEX NAME 1989 1990 1991 1992 1993 1994
------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Novell, Inc.......................... 100 173.69 726.42 856.26 603.59 519.37
S&P 500.............................. 100 92.52 123.51 135.81 156.10 162.14
NASDAQ Computer & Data Processing
Services............................ 100 90.57 198.21 231.25 258.43 311.86
</TABLE>
The NASDAQ Computer & Data Processing Services Index is composed of all
NASDAQ companies with an SIC Code of # 737. A list of the companies included in
this index will be furnished by the Company to any shareholder upon written
request of the Corporate Secretary.
PAST FIVE YEAR AVERAGE COMPOUNDED ANNUAL RETURN
<TABLE>
<S> <C>
Novell, Inc............................ 39.03%
S&P 500................................ 10.15%
NASDAQ Computer & Data Processing
Services.............................. 25.54%
</TABLE>
20
<PAGE>
CERTAIN TRANSACTIONS
WordPerfect was co-founded in 1979 by Alan C. Ashton, Ph.D. (Dr. Ashton) and
Bruce W. Bastian (Mr. Bastian). Dr. Ashton and Mr. Bastian joined the Novell
Board of Directors in October 1994.
Prior to September 30, 1993, WordPerfect had been organized as numerous legal
entities under the common control of Dr. Ashton and Mr. Bastian. These
entities, including WordPerfect, WP Leasing, Inc., ABP Development, WordPerfect
Publishing Corporation, ComputerShow, WP Properties, WordPerfect International,
Reference Software International (RSI), and SoftCopy, Inc., owned the assets
and conducted the operations of WordPerfect. On September 30, 1993, the common
stock of RSI owned by the shareholders was contributed to WordPerfect. Also the
owner's interest in WP Properties was transferred to WordPerfect in exchange
for $5 million cash and notes of $75 million (the "Notes"), payable to Dr.
Ashton and Mr. Bastian, which represented WP Properties' net book value at the
date of the transfer. Under the terms of the merger with Novell the Notes ($75
million) together with accrued interest ($3 million) were due and payable
within 30 days of merger. Dr. Ashton and Mr. Bastian equally shared the
proceeds which were paid in July 1994.
WordPerfect entered into agreements with Mr. Lewis Bastian, a brother of Mr.
Bastian, in connection with the development and sale of DataPerfect, a general
purpose database software program, and TOOL, an object-oriented language used
for software development. Pursuant to these agreements, WordPerfect paid Mr.
Lewis Bastian consulting fees and royalty payments of $718,000 and $474,000 in
fiscal 1993 and 1992, respectively. In February 1994, WordPerfect agreed to pay
Mr. Lewis Bastian $3 million over four years in exchange for a termination of
these agreements. Novell assumed this obligation in the merger.
Prior to the merger with WordPerfect, Novell and Dr. Ashton and Mr. Bastian
entered into a Tax Matters Agreement, which provides among other things, that
Dr. Ashton and Mr. Bastian will severally and not jointly indemnify WordPerfect
and Novell with respect to any U.S. federal and Utah and New Mexico state
income tax liability (including interest and penalties) arising out of a
failure of WordPerfect or its affiliates to have been S corporations during any
taxable year (or that portion of any taxable year) for which such corporations
reported for federal and Utah and New Mexico state income tax purposes that
they were S corporations. Dr. Ashton's and Mr. Bastian's liability for purposes
of such indemnification is limited in certain respects pursuant to the terms of
the Tax Matters Agreement.
In December 1992, ABP Investments, L.C., a limited partnership owned by Dr.
Ashton (47.5%), Mr. Bastian (47.5%) and another individual (5%) transferred
certain real property directly related to WordPerfect's business to WP
Properties, initially owned by Dr. Ashton (50%) and Mr. Bastian (50%). The
remaining assets, which consisted of certain parcels of real property not
directly related to WordPerfect's business, were transferred to BAT
Investments, L.C., a limited liability company owned by Dr. Ashton (44.8%), Mr.
Bastian (44.8%) and Mr. R. Duff Thompson, a current executive officer of Novell
(10.4%). Aggregate lease payments from Novell to BAT Investments, L.C. after
the WordPerfect merger with respect to such properties were $98,000 in fiscal
1994.
UPA Associates, a limited liability company substantially owned by Dr. Ashton
and Mr. Bastian provides property maintenance services to WordPerfect. Since
the WordPerfect merger in June 1994, payments from Novell to UPA Associates
through October 29, 1994 were approximately $273,000.
In fiscal 1994, Wilson, Sonsini, Goodrich & Rosati, Professional Corporation,
a law firm in which Larry W. Sonsini, a director of the Company, is a senior
partner, performed legal services for the Company. The Company proposes to
continue to retain such law firm in fiscal 1995 for advice on legal matters.
On August 5, 1994 the Company provided Mr. Frankenberg with an interest free
bridge loan of $631,964 for the purchase of his home in Utah. On September 13,
1994 upon the sale of his home in California, as per the bridge loan agreement,
the loan was paid in full by Mr. Frankenberg.
21
<PAGE>
INDEPENDENT AUDITORS
The Board of Directors has approved a resolution retaining Ernst & Young LLP
as its independent auditors for fiscal 1995. Ernst & Young LLP has audited the
Company's financial statements since 1987. A representative of Ernst & Young
LLP will be present at the Annual Meeting and will have an opportunity at the
meeting to make a statement if he desires to do so and will be available to
respond to appropriate questions.
SECTION 16(A) REPORTING DELINQUENCIES
Each director, each 10 percent shareholder and each officer of the Company
who is subject to Section 16 of the Securities Exchange Act of 1934 is required
to report to the Securities and Exchange Commission by a specified date his or
her transactions in the Company's securities. Officer Stephen Wise timely filed
a required Form 4 for the month of January 1993 but a sale of 2,880 shares had
been inadvertently omitted. Upon discovering such error, he subsequently
amended such Form 4 to reflect such sale, which amendment was filed late.
PROPOSALS OF SHAREHOLDERS
Proposals that shareholders desire to be included in the Company's proxy
materials for the 1996 Annual Meeting of Shareholders of the Company must be
received by the Secretary of the Company at its principal office (1555 North
Technology Way, Orem, Utah 84057) no later than October 20, 1995 in order to be
considered for possible inclusion in such proxy materials.
LOGO
Recycled Paper
<PAGE>
NOVELL, INC.
1555 North Technology Way
Orem, UT 84057
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby constitutes and appoints Robert J. Frankenberg, James R.
Tolonen and David R. Bradford and each of them, his true and lawful agents and
proxies with full power of substitution in each, to represent the undersigned at
the Annual Meeting of Shareholders of Novell, Inc. to be held at the Corporate
Headquarters, 1555 North Technology Way, Orem, Utah on Wednesday, April 12,
1995, at 2 p.m. Mountain Time and at any adjournments thereof, to vote as
designated.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ALL NOMINEES TO THE BOARD OF DIRECTORS, FOR THE APPROVAL OF THE ADOPTION OF
AN AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION, FOR
APPROVAL AND RATIFICATION OF THE ADOPTION OF AN AMENDMENT TO THE NOVELL, INC.
1989 EMPLOYEE STOCK PURCHASE PLAN, AND AS THE PROXY HOLDER MAY DETERMINE IN HIS
DISCRETION WITH REGARD TO ANY OTHER MATTER PROPERLY BROUGHT BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
(Continued on reverse side)
- -------------------------------------------------------------------------------
1. Election of Directors:
Vote For Withhold (INSTRUCTION: To withhold authority to
all nominees listed Authority vote for any individual
(except as marked) to vote for all nominee, strike a line
through the nominee's name
in the list below)
Nominees: Robert J. Frankenberg, Alan C.
Ashton, Bruce W. Bastian, Elaine R. Bond,
Jack L. Messman, Kanwal S. Rekhi, Larry
W. Sonsini, Ian R. Wilson and John A.
Young
2. Approve the adoption of an amendment to the Company's Restated Certificate
of Incorporation.
Vote For Vote Against Abstain
3. Approve and ratify the adoption of an amendment to the Novell, Inc. 1989
Employee Stock Purchase Plan.
Vote For Vote Against Abstain
4. IN THEIR DISCRETION to act upon such other business as may properly come
before the meeting or any adjournments thereof.
Authorization granted: Authorization withheld
Dated: 1995
-------------------------
-----------------------------------
Signature of Shareholder(s)
-----------------------------------
Signature of Shareholder(s)
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership please sign in partnership
name by authorized person.
