NOVELL INC, S-8, 1996-05-30

NOVELL INC
S-8, 1996-05-30
COMPUTER INTEGRATED SYSTEMS DESIGN

Previous: NOVELL INC, S-8, 1996-05-30

Next: NOVELL INC, S-8 POS, 1996-05-30

<PAGE> 1
As filed with the Securities and Exchange Commission on May 30, 1996
Registration No. 333-_______

================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

NOVELL, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 87-0393339
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

1555 NORTH TECHNOLOGY WAY
OREM, UT 84057
(Address, including zip code, of
Registrant's principal executive offices)

NOVELL, INC. STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(FULL TITLE OF THE PLAN)

DAVID R. BRADFORD, ESQ.
SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND CORPORATE SECRETARY
NOVELL, INC.
1555 NORTH TECHNOLOGY WAY
OREM, UT 84057
(801) 222-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

COPIES TO:

Tor R. Braham, Esq.
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(415) 493-9300

================================================================================
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Proposed
Title of Amount Maximum Proposed Maximum Amount of
Securities to To Be Offering Price Aggregate Registration
Be Registered Registered Per Share Offering Price Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.10 par value

- - Upon exercise of options 700,000(1) $14.75(2) $10,325,000(2) $3,560.34
under Novell, Inc. Stock
Option Plan for Non-
Employee Directors

- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The remaining 800,000 shares reserved for issuance under the Novell,
Inc. Stock Option Plan for Non-Employee Directors were registered under
the Registration Statement on Form S-8 (File No. 33-41717) filed with
the Commission on July 15, 1991. Pursuant to Rule 429 under the
Securities Act of 1933, as amended, the prospectus relating hereto also
relates to shares registered under such Form S-8 Registration
Statement.

(2) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457(c), on the basis of the average
of the high and low sale prices reported in the Nasdaq National Market
System on May 29, 1996, which average was $14.75.
<PAGE> 3
PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.

There are hereby incorporated by reference into this Registration
Statement the following documents and information heretofore filed with the
Securities and Exchange Commission (the "Commission"):

1. The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 8-A dated April 3, 1985,
and the description of the Registrant's Preferred Shares Rights Plan
and the Series A Junior Participating Preferred Shares issuable
thereunder contained in the Registration Statement on Form 8-A dated
December 12, 1988, filed pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including any
amendment or report filed for the purpose of updating such
descriptions.

2. The Registrant's Annual Report on Form 10-K for the year ended October
28, 1995, filed pursuant to Section 13(a) of the Exchange Act.

3. The Registrant's Quarterly Report on Form 10-Q for the quarter ended
January 27, 1996 filed pursuant to Section 13 of the Exchange Act.

All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, after the date of this Registration
Statement and prior to the filing of a post-effective amendment indicating that
all securities offered have been sold or deregistering all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be part hereof from the date of filing of such
documents.

ITEM 4. DESCRIPTION OF SECURITIES.

Not applicable.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.

Counsel for the Registrant, Wilson Sonsini Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304, has
rendered an opinion to the effect that the Common Stock offered hereby will,
when issued in accordance with the Registrant's Stock Option Plan for
Non-Employee Directors, be legally and validly issued, fully paid and
nonassessable. Larry W. Sonsini, a member of such law firm, is a director of the
Registrant and owns 6,600 shares of Registrant's Common Stock plus options to
purchase an additional 55,000 shares of Registrant's Common Stock.

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law authorizes a court
to award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such

II-1
<PAGE> 4
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Further, in accordance with the Delaware
General Corporation Law, the Registrant's Certificate of Incorporation
eliminates the liability of a director of the Registrant to the Registrant and
its stockholders for monetary damages for breaches of such director's fiduciary
duty of care in certain instances. Article VII of the Bylaws of the Registrant
provides for indemnification of certain agents to the maximum extent permitted
by the Delaware General Corporation Law. Persons covered by this indemnification
provision include any current or former directors, officers, employees and other
agents of the Registrant, as well as persons who serve at the request of the
Registrant as directors, officers, employees or agents of another enterprise.

In addition, the Registrant has entered into contractual agreements
with certain directors and officers of the Registrant designated by the Board to
indemnify such individuals to the full extent permitted by law. These agreements
also resolve certain procedural and substantive matters that are not covered, or
are covered in less detail, in the Bylaws or by the Delaware General Corporation
Law.

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.

Not applicable.

II-2
<PAGE> 5
ITEM 8. EXHIBITS.

Number Document
------ --------------------------

4.1 Novell, Inc. Stock Option Plan for Non-Employee Directors (as
amended January 12, 1996) and form of agreement currently used
thereunder.

5.1 Opinion of Wilson Sonsini Goodrich & Rosati with respect to
the securities being registered.

23.1 Consent of Independent Auditors (Ernst & Young LLP) (see page
II-7).

23.2 Consent of Independent Auditors (Price Waterhouse LLP) (see
page II-8).

23.3 Consent of Counsel (contained in Exhibit 5.1).

24.1 Power of Attorney (see page II-6).

ITEM 9. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement.

(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.

(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(h) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in Item 6 hereof, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being

II-3
<PAGE> 6
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-4
<PAGE> 7
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in San Jose, California, on May 29, 1996.

NOVELL, INC.

By: /s/ Robert J. Frankenberg
____________________________________
Robert J. Frankenberg
Chairman of the Board, President,
Chief Executive Officer and Director

II-5
<PAGE> 8
POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert J. Frankenberg and David R.
Bradford, jointly and severally, his or her attorneys-in-fact, each with the
power of substitution, for him or her in any and all capacities, to sign any
amendments to this Registration Statement on Form S-8, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------ ---------------------------------------- ------------------------------
<S> <C> <C>
/s/ Robert J. Frankenberg Chairman of the Board, President, May 29, 1996
- ------------------------------------
Robert J. Frankenberg Chief Executive Officer and Director
(Principal Executive Officer)

/s/ James R. Tolonen Executive Vice President and Chief May 29, 1996
- ------------------------------------
James R. Tolonen Financial Officer (Principal Financial
Officer)

/s/ Stephen C. Wise Senior Vice President, Finance May 29, 1996
- ------------------------------------
Stephen C. Wise (Chief Accounting Officer)

/s/ Alan C. Ashton Director May 29, 1996
- ------------------------------------
Alan C. Ashton

/s/ Elaine R. Bond Director May 29, 1996
- ------------------------------------
Elaine R. Bond

/s/ Hans-Werner Hector Director May 29, 1996
- ------------------------------------
Hans-Werner Hector

/s/ Jack L. Messman Director May 29, 1996
- ------------------------------------
Jack L. Messman

Director May 29, 1996
- ------------------------------------
Larry W. Sonsini

/s/ Ian R. Wilson Director May 29, 1996
- ------------------------------------
Ian R. Wilson

/s/ John A. Young Director May 29, 1996
- ------------------------------------
John A. Young
</TABLE>

II-6
<PAGE> 9
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the Stock Option Plan for Non-Employee
Directors of Novell, Inc. of our report dated December 12, 1995, with respect to
the consolidated financial statements of Novell, Inc. incorporated by reference
in the Annual Report (Form 10-K) for the year ended October 28, 1995 and the
related financial statement schedule included therein, filed with the Securities
and Exchange Commission.

ERNST & YOUNG LLP

San Jose, California
May 29, 1996

II-7
<PAGE> 10
EXHIBIT 23.2

CONSENT OF PRICE WATERHOUSE LLP

We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement on Form S-8 of
Novell, Inc. of our report dated March 22, 1994 appearing on page 17 of the Form
10-K for the year ended October 28, 1995.

PRICE WATERHOUSE LLP

Salt Lake City, Utah
May 30, 1996

II-8
<PAGE> 11
INDEX TO EXHIBITS

Exhibit
Number Description
- ------------------------ ------------------------------------------------------
4.1 Novell, Inc. Stock Option Plan for Non-Employee
Directors (as amended January 12, 1996) and form of
agreement currently used thereunder.

5.1 Opinion of Wilson Sonsini Goodrich & Rosati with
respect to the securities being registered.

23.1 Consent of Independent Auditors (Ernst & Young LLP)
(see page II-7).

23.2 Consent of Independent Auditors (Price Waterhouse LLP)
(see page II-8).

23.3 Consent of Counsel (contained in Exhibit 5.1).

24.1 Power of Attorney (See page II-6).

<PAGE> 1
EXHIBIT 4.1

NOVELL, INC.

STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS

(AS AMENDED JANUARY 12, 1996)

1. Purpose of the Plan. The purpose of the Plan is to promote the
interests of the Company and its shareholders by attracting and retaining
highly-qualified Outside Directors (as defined herein) with an investment
interest in the future success of the Company.

All options granted hereunder shall be nonstatutory stock
options.

2. Definitions. As used herein, the following definitions shall
apply:

(a) "Board" means the Board of Directors of the Company.

(b) "Code" means the Internal Revenue Code of 1986, as
amended.

(d) "Company" means Novell, Inc., a Delaware corporation.

(e) "Director" means a member of the Board.

(f) "Employee" means any person, including officers and
Directors, employed by the Company or any Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.

(g) "Exchange Act" means the Securities Exchange Act of
1934, as amended.

(h) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:

(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the date immediately

-1-
<PAGE> 2
preceding the date of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable, or;

(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.

(i) "Inside Director" means a Director who is an
Employee.

(j) "Option" means a stock option granted pursuant to the
Plan.

(k) "Optioned Stock" means the Common Stock subject to an
Option.

(l) "Optionee" means a Director who holds an Option.

(m) "Outside Director" means a Director who is not an
Employee.

(n) "Plan" means this Stock Option Plan for Non-Employee
Directors, as amended January 12, 1996.

(o) "Prior Option" means an Option that is outstanding on
April 10, 1996, but excluding Option grants that are effective as of that date.

(p) "Retirement" means termination of an Optionee's
status as a Director at or after age seventy (70) other than upon the Optionee's
death or total and permanent disability (as defined in Section 22(e)(3) of the
Code).

(q) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 10 of the Plan.

(r) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Internal
Revenue Code of 1986.

3. Stock Subject to the Plan. Subject to the provisions of
Section 10 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 1,500,000 Shares of Common Stock (the
"Pool"). The Shares may be authorized, but unissued, or reacquired Common Stock.

If an Option expires or becomes unexercisable without having
been exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.

4. Administration and Grants of Options under the Plan.

(a) Procedure for Grants. The provisions set forth in
this Section 4(a) shall not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. All grants of Options
to Outside Directors under this Plan shall be automatic and nondiscretionary and
shall be made strictly in accordance with the following provisions:

-2-
<PAGE> 3
(i) No person shall have any discretion to
select which Outside Directors shall be granted Options or to determine the
number of Shares to be covered by Options granted to Outside Directors.

(ii) Each person who first becomes an Outside
Director on or after April 10, 1996 shall be automatically granted an option to
purchase 30,000 Shares, as adjusted in accordance with Section 10 (the "Initial
Option"), on the date such person first becomes an Outside Director, whether
through election by the shareholders of the Company or appointment by the Board
to fill a vacancy; provided, however, that an Inside Director who ceases to be
an Inside Director but who remains a Director shall not receive an Initial
Option.

(iii) Effective with the annual meeting of the
Company's shareholders on April 10, 1996 and on the date of each subsequent
annual meeting of the Company's shareholders during the term of this Plan, each
Outside Director shall be automatically granted an Option to purchase 15,000
Shares (an "Annual Option") provided he or she is then an Outside Director;
provided, however, that (A) no Annual Option shall be granted to an Outside
Director who received an Initial Option in the preceding nine months; and (B) an
Outside Director with a Prior Option to purchase 72,000 Shares shall be
ineligible to receive an Annual Option pursuant to this subsection (iii) unless
such Prior Option was granted at least two years prior to the applicable Annual
Option grant date.

(iv) Notwithstanding the foregoing, the Option
grants described in subsections (ii) and (iii) hereof shall be subject to and
conditioned upon shareholder approval of the Plan amendments adopted by the
Board in January 1996.

(v) The terms of an Initial Option granted
hereunder shall be as follows:

(A) the term of the Initial Option
shall be ten (10) years.

(B) the Initial Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.

(C) the exercise price per Share shall
equal the Fair Market Value per Share determined as of the date of grant of the
Initial Option.

(D) subject to Sections 8(d) and 10
hereof, the Initial Option shall become exercisable as to twenty-five percent
(25%) of the Shares subject to the Initial Option on each anniversary of its
date of grant, provided that the Optionee continues to serve as a Director on
such dates.

(vi) The terms of the Annual Option granted
hereunder shall be as follows:

(A) the term of the Annual Option shall
be ten (10) years.

(B) the Annual Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.

(C) the exercise price per Share shall
equal the Fair Market Value per Share determined as of the date of grant of the
Annual Option.

-3-
<PAGE> 4
(D) subject to Sections 8(d) and 10
hereof, the Annual Option shall become exercisable as to fifty percent (50%) of
the Shares subject to the Annual Option on each anniversary of its date of
grant, provided that the Optionee continues to serve as a Director on such
dates.

(vii) In the event that any Option granted under
the Plan would cause the number of Shares subject to outstanding Options plus
the number of Shares previously purchased under Options to exceed the Pool, then
the remaining Shares available for Option grant shall be granted under Options
to the Outside Directors on a pro rata basis. No further grants shall be made
until such time, if any, as additional Shares become available for grant under
the Plan through action of the Board or the shareholders to increase the number
of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.

(b) Prior Options. Notwithstanding the foregoing, subject
to Section 10 hereof, Prior Options shall become exercisable in three (3) equal
installments of a whole number of Shares on the first, second and third
anniversaries of the date of grant of such Prior Options, provided that the
Optionee continues to serve as a Director on such dates.

5. Eligibility. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof.

The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.

6. Term of Plan. The Plan was adopted by the Board and approved
by the shareholders of the Company in 1989. In 1992 the Plan was amended by the
Board, which amendments were approved by the shareholders of the Company on
March 5, 1992. Subject to shareholder approval of the Plan amendments adopted by
the Board in January 1996, the term of the Plan shall terminate on April 9,
2003, unless sooner terminated under Section 11 of the Plan.

7. Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of payment,
shall consist of (i) cash, (ii) check, (iii) other shares which (x) in the case
of Shares acquired upon exercise of an Option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (iv) delivery of a
properly executed exercise notice together with such other documentation as the
Company and the broker, if applicable, shall require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price, or (v) any combination of the foregoing methods of
payment.

8. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof.

An Option may not be exercised for a fraction of a Share.

-4-
<PAGE> 5
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.

Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) Rule 16b-3. Options granted to Outside Directors must
comply with the applicable provisions of Rule 16b-3 promulgated under the
Exchange Act or any successor thereto and shall contain such additional
conditions or restrictions as may be required thereunder to qualify Plan
transactions, and other transactions by Outside Directors that otherwise could
be matched with Plan transactions, for the maximum exemption from Section 16 of
the Exchange Act.

(c) Termination of Continuous Status as a Director.
Subject to Section 10 hereof, in the event an Optionee's status as a Director
terminates (other than upon the Optionee's Retirement as provided in Section
8(d) below or upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her
Option, but only within six (6) months (thirty (30) days in the case of a Prior
Option) following the date of such termination, and only to the extent that the
Optionee was entitled to exercise it on the date of such termination (but in no
event later than the expiration of its ten (10) year term). To the extent that
the Optionee was not entitled to exercise an Option on the date of such
termination, and to the extent that the Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.

(d) Retirement of Optionee. In the Optionee's status as a
Director terminates as a result of Retirement, the Optionee's Options (excluding
any Prior Options) shall become fully exercisable, including as to Shares for
which the Options would not otherwise be exercisable. Such Options shall remain
exercisable for a period of twelve (12) months following the date of such
termination (but in no event later than the expiration of its ten (10) year
term. To the extent that the Optionee does not exercise any such Option within
the time specified herein, the Option shall terminate.

(e) Disability of Optionee. In the event Optionee's
status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or
her Option, but only within twelve (12) months (ninety (90) days in the case of
a Prior Option) following the date of such termination, and only to the extent
that the Optionee was entitled to exercise it on the date of such termination
(but in no event later than the expiration of its ten (10) year term). To the
extent that the Optionee was not entitled to exercise an Option on the date of
termination, or if he or she does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.

-5-
<PAGE> 6
(f) Death of Optionee. In the event of an Optionee's
death, the Optionee's estate or a person who acquired the right to exercise the
Option by bequest or inheritance may exercise the Option, but only within twelve
(12) months (ninety (90) days in the case of a Prior Option) following the date
of death, and only to the extent that the Optionee was entitled to exercise it
on the date of death (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of death, and to the extent that the Optionee's estate or a
person who acquired the right to exercise such Option does not exercise such
Option (to the extent otherwise so entitled) within the time specified herein,
the Option shall terminate.

9. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

10. Adjustments Upon Changes in Capitalization, Dissolution,
Merger or Asset Sale.

(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.

(b) Changes in Control. In the event of a change in
control (hereinafter defined) of the Company, an Optionee's Options will become
exercisable in full if, within one year of such change in control, such Optionee
ceases for any reason to be a Director. A change in control will be deemed to
have occurred if (i) there is consummated (X) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation or
pursuant to which Shares are converted into cash, securities or other property,
other than a merger of the Company in which the holders of Shares immediately
prior to the merger have the same proportionate ownership of Common Stock of the
surviving corporation immediately after the merger, or (Y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company; or
(ii) the shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the
"1934 Act")) becomes the beneficial owner (within the meaning of Rule 13d-3
under the 1934 Act) of, or commences a tender offer for, 30% or more of the
outstanding Shares. Any exercise of an Option permitted in the event of a change
of control must be made within thirty (30) days of the related Optionee's
termination as a Director.

(c) Company Reorganizations. In the event that the
Company is to be dissolved or liquidated, or the Company is a party to a merger
or consolidation with another corporation in which the Company will not be the
surviving entity or in which the outstanding Shares will be converted into

-6-
<PAGE> 7
cash, securities or other property, or in the event that the Company is a party
to a reorganization, then upon exercise of the Options, the holder thereof shall
be entitled only to receive for the exercise price per share thereof the amount
of cash, securities or other property into or for which one Share was converted
or exchanged multiplied by the number of Shares subject to such Option.

11. Amendment and Termination of the Plan.

(a) Amendment and Termination. Except as set forth in
Section 4, the Board may at any time amend, alter, suspend, or discontinue the
Plan, but no amendment, alteration, suspension, or discontinuation shall be made
which would impair the rights of any Optionee under any grant theretofore made,
without his or her consent. In addition, to the extent necessary and desirable
to comply with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.

(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been amended or terminated.

12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section 4
hereof.

13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

14. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

-7-
<PAGE> 8
16. Shareholder Approval. The Plan was originally adopted by the
Board and approved by the Company's shareholders in 1989. In 1992 the Plan was
amended by the Board, which amendments were approved by the shareholders of the
Company on March 5, 1992. The Plan was most recently amended by the Board in
January 1996, subject to shareholder approval of such amendments at the April
10, 1996 meeting of shareholders. Such shareholder approval has been obtained in
the degree and manner required under applicable state and federal law.

-8-
<PAGE> 9
NOVELL, INC. [Initial Option]

STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

STOCK OPTION AGREEMENT

THIS AGREEMENT is entered into this ___ day of ______________, 19__ by
and between Novell, Inc., a Delaware corporation (the "Company"), and the
Optionee identified below.

1. Definitions: As used in this Agreement, the following terms shall have
the following meanings:

1.1 Optionee:
-------- -------------------------------------

1.2 Option Shares:
------------- -------------------------------------

1.3 Agreement Date:
-------------- -------------------------------------

1.4 Option Price: $
------------ -------------------------------------

2. Incorporation by Reference: This Agreement shall include the Specific
Terms of the Stock Option Plan for Non-Employee Directors, as amended, attached
hereto as Exhibit A, which is incorporated herein by reference.

3. Grant of Option. Pursuant to the provisions of Novell, Inc.'s Stock
Option Plan for Non-Employee Directors, as amended, (the "Plan"), the Company
hereby grants to the Optionee, subject to the terms and conditions of the Plan
and subject further to the terms and conditions herein set forth, the right and
option to purchase from the Company all or any part of the aggregate of the
Option Shares at the Option Price per share, such option to be exercisable as
hereinafter provided (such option herein sometimes referred to as the "Option").

4. Terms and Conditions. The Option is subject to the following terms and
conditions:

4.1 Expiration and Termination. If not terminated earlier as
provided below, this Option shall expire on the tenth anniversary of the
Agreement Date. This Option shall terminate automatically on the earliest of the
following events:

(a) Six (6) months after the Optionee ceases to be a
director of the Company as defined in the Plan for any reason other than
retirement, death or disability;

(b) Twelve (12) months from the date of the Optionee's
death or disability;

(c) Twelve (12) months after the Optionee ceases to be a
director as a result of the Optionee's retirement, as defined in the Plan.
<PAGE> 10
4.2 Exercise of Option. Subject to the Optionee's continued
service as a director, the Option shall be exercisable, prior to its expiration
or earlier termination, to the extent of 0% of the Option Shares at any time
prior to the first anniversary of the Agreement Date; twenty-five percent (25%)
of the Option Shares at any time thereafter and prior to the second anniversary
of the Agreement Date; fifty percent (50%) of the Option Shares at any time
thereafter and prior to the third anniversary of the Agreement Date;
seventy-five (75%) of the Option Shares at any time thereafter and prior to the
fourth anniversary of the Agreement Date; and one hundred percent (100%) of the
Option Shares at any time thereafter provided however that no such installment
shall vest after the date of the Optionee's death or disability or the date the
Optionee ceases to be a director for any reason. Notwithstanding the prior
sentence, the Option will become exercisable in full in the event the Optionee's
status as a director terminates as a result retirement as defined in the Plan or
under certain circumstances following a Change in Control of the Company
pursuant to Section 10 of the Plan.

The Option may be exercised, to the extent exercisable by its terms, in
whole or from time to time in part at any time prior to its expiration or
termination. The Option shall be exercised by a written notice to the Corporate
Secretary of the Company or such other person designated from time to time by
the Corporate Secretary indicating the exercise of the Option and specifying the
number of Option Shares desired at the Option Price and accompanied by the
purchase price for such Option Shares which shall be payable in full in cash,
check, surrendering (at fair market value) of unrestricted shares of the Common
Stock of the Company which have been held by the Optionee for a period of six
(6) months or more, delivery of a properly executed exercise notice together
with such other documentation as the Company and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price, or by a
combination of the foregoing.

4.3 Nontransferability. Pursuant to Section 9 of the Plan, the
Option may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution. During the lifetime of the Optionee, the Option shall be
exercisable only by him or her.

4.4 Adjustments. Pursuant to Section 10 of the Plan and subject to
the terms thereof, the number and class of shares subject to the Option and the
Option Price are subject to proportionate adjustment in the event of a change in
the number or class of Company shares outstanding by reason of a stock dividend,
stock split, subdivision or combination of shares and such shares are subject to
conversion upon certain corporate reorganizations.

4.5 No Rights as Shareholder. The Optionee shall have no rights as
a shareholder with respect to any shares of Common Stock subject to the Option
prior to the date of issuance to the Optionee of a certificate or certificates
for such shares.

-2-
<PAGE> 11
any certificates for shares of Common Stock prior to (i) the listing or approval
for listing of such shares on any stock exchange on which the Common Stock may
then be listed and (ii) the completion of any registration or qualification of
such shares under any federal or state law or regulation or other qualification
which the Board shall, upon the advice of counsel, deem of any government body
with the Company, in its sole discretion, necessary or advisable; (iii) the
obtaining of any other required consent, approval or permit from a state or
federal government agency; and (iv) the execution by the Optionee (or the
Optionee's legal representative) of such written representation that counsel for
the Company shall advise is necessary or advisable to the effect that the Option
Shares are being purchased for investment with no present intention or reselling
or otherwise disposing of such shares in any manner which may result in a
violation of the Securities Act of 1933, as amended, and the placement upon
certificates for such shares of an appropriate restrictive legend.

5. Optionee Bound by Plan. The Optionee acknowledges receipt of a copy of
the Plan and agrees to be bound by all the terms and provisions thereof.

6. Notices. Any notice under the Agreement to the Company shall be
addressed to Shareholder Services, 2180 Fortune Drive, San Jose, California
95131, Attention: Assistant Corporate Secretary, and any notice hereunder to the
Optionee shall be addressed to him or her at his or her address set forth on the
first page of the Agreement, subject to the right of either party to designate
at any time hereafter in writing some other address. Notice shall be deemed to
be given or made when properly addressed and posted by registered or certified
mail, postage prepaid.

7. Counterparts. The Agreement may be executed in one or more
counterparts, each of which shall constitute one and the same agreement.

NOVELL, INC.

____________________________________
Betty DePaola
Assistant Corporate Secretary

By: ________________________________
__________________________, Optionee

-3-
<PAGE> 12
NOVELL, INC. [Annual Option]