<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):
[X] No fee required.
[_] 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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[_] 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>
Novell, Inc. Ph 801 861-7000
122 East 1700 South http://www.novell.com
Provo, UT 84606
March 28, 1997
[LOGO OF NOVELL]
Dear Shareholder:
You are cordially invited to attend the Company's 1997
Annual Meeting on Friday, May 2, 1997. Please note
that the Annual Meeting has been scheduled for May 2,
1997 not April 9, 1997.
At the meeting your management will review actions
taken during fiscal 1996. We will also present our
tactics for 1997 to make Novell stronger and more
competitive.
The meeting will begin promptly at 2:00 p.m., local
time, at our California location, 2275 Trade Zone
Boulevard, Building 6, the Forest Conference Room, San
Jose, California. Please note a map has been provided
for your convenience.
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
complete, sign, date and promptly mail your proxy (For
our registered shareholders holding stock in their own
name on the books of the Company, you may vote by
touch-tone telephone toll-free). Your cooperation will
be greatly appreciated.
Members of your Board of Directors and management look
forward to greeting personally those shareholders who
are able to attend.
Sincerely,
/s/ David R. Bradford
David R. Bradford
Senior Vice President, General Counsel and Corporate
Secretary
<PAGE>
[LOGO OF NOVELL]
NOVELL, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 2, 1997
TO THE SHAREHOLDERS OF NOVELL, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of NOVELL,
INC. will be held at the Company's California offices located at 2275 Trade
Zone Boulevard, Building 6, San Jose, California 95131, on Friday, May 2,
1997, at 2:00 p.m., local time, for the following purposes:
1. To elect seven directors;
2. 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 8,000,000 to 12,000,000;
3. To ratify the selection of Ernst & Young LLP as independent auditors for
Novell, Inc.; 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 March 21, 1997 will
be entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
By Order of the Board of Directors,
LOGO
David R. Bradford
Senior Vice President, General
Counsel and Corporate Secretary
March 28, 1997
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 1997 Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held at
the Company's California offices located at 2275 Trade Zone Boulevard, San
Jose, California 95131, on Friday, May 2, 1997, at 2:00 p.m., local time, and
any adjournment thereof. The Company's telephone number at that address is
(408) 434-2300. These proxy materials are being mailed on or about March 28,
1997, to all shareholders of record as of March 21, 1997, of the Company's
Common Stock. At the Annual Meeting, the Company's shareholders will be asked
to elect seven directors, to approve and ratify the adoption of an amendment
to the Novell, Inc. 1989 Employee Stock Purchase Plan (the "Purchase Plan"),
to ratify the appointment of independent auditors and to vote on such other
matters as may properly come before the Annual Meeting.
The Company's principal executive officers are located at 122 East 1700
South, Provo, UT 84606.
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 solicitation 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, at the close of business on March 21, 1997 (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, 347,654,776 shares of Common
Stock were outstanding and entitled to vote. Each outstanding share of Common
Stock entitles the holder thereof to one vote on all matters set forth in this
proxy statement. As of the Record Date, the closing price of the Common Stock
on the Nasdaq National Market was $10.31 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 and ratification of the adoption of an amendment to the Novell, Inc.
1989 Employee Stock Purchase Plan, FOR the ratification of independent
auditors 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>
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" or "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
The Company believes that abstentions should be counted for purposes of
determining both (i) the presence or absence of a quorum for the transaction
of business and (ii) the total number of Votes Cast with respect to a proposal
(other than the election of directors). In the absence of controlling
precedent to the contrary, the Company intends to treat abstentions in this
manner. Accordingly, abstentions will have the same effect as a vote against
the proposal.
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 on which the broker has expressly
not voted. Accordingly, the Company intends to treat non-votes in this manner.
Thus, a broker non-vote will not affect the outcome of the voting on a
proposal.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 28, 1997, 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 (the "Named
Officers"), and by all current 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)................................. 25,883,644 7.46%
899 West Center Street
Orem, UT 84057
Eric E. Schmidt(3)................................... 900,000 *
Joseph A. Marengi.................................... 243,762 *
Elaine R. Bond....................................... 84,500 *
Hans-Werner Hector................................... 28,997 *
Jack L. Messman(4)................................... 431,000 *
Larry W. Sonsini..................................... 54,100 *
Ian R. Wilson(5)..................................... 111,500 *
John A. Young........................................ 57,995 *
Mary M. Burnside..................................... 297,273 *
James R. Tolonen(6).................................. 344,149 *
Glenn Ricart......................................... 79,575 *
David R. Bradford.................................... 179,159 *
Robert J. Frankenberg(7)............................. 1,000 *
Steven Markman(7).................................... 29,200 *
All current directors and executive officers as a
group (18 persons)(8) ............................... 3,185,078 0.91%
</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 February 28,
1997: Ms. Bond 79,500, Mr. Hector 23,997, Mr. Messman
2
<PAGE>
119,5000, Mr. Sonsini 47,500, Mr. Wilson 103,500, Mr. Young 47,995, Mr.
Marengi 200,788, Ms. Burnside 239,688, Mr. Tolonen 199,938, Mr. Ricart
42,500 and Mr. Bradford 137,625, all current directors and executive
officers as a group 1,465,243.
(2) Of such shares, (i) 15,533,144 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) 10,350,500 shares are held by Dialogic Systems Corporation, a
corporation in which Mr. Noorda holds 100% of the stock.
(3) Under his employment contract, Dr. Schmidt was granted a right to buy
900,000 shares of restricted stock. Dr. Schmidt purchased said shares on
March 18, 1997. See "Executive Compensation--Employment Contract,
Termination of Employment and Change in Control Arrangements."
(4) Includes 31,500 shares held by Mr. Messman's adult children living at
home, as to which he disclaims beneficial ownership.
(5) Mr. Wilson holds 8,000 shares as trustee for his Defined Benefit Pension
Plan.
(6) Includes 8,472 shares held by Mr. Tolonen's adult child living at home, as
to which he disclaims beneficial ownership.
(7) Former executive officer.
(8) Dr. Schmidt is included even though he was not a director and executive
officer until April 7, 1996.
PROPOSAL ONE
ELECTION OF DIRECTORS
Since last year's annual meeting of shareholders, the Board of Directors has
adopted a resolution decreasing the number of authorized directors from eight
to seven effective April 7, 1997. Accordingly, a Board of seven 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>
DIRECTOR
NAME PRINCIPAL OCCUPATION SINCE AGE
---- -------------------- -------- ---
<C> <S> <C> <C>
Eric E. Schmidt Chief Executive Officer and Chairman of the 1997 41
Board
effective April 7, 1997(1)
Elaine R. Bond Retired Chase Fellow/Senior Consultant of 1993 61
The Chase Manhattan Bank, N.A.(2)
Hans-Werner Hector Cofounder and former Member of Advisory 1995 57
Board of SAP AG, Germany(3)
Jack L. Messman President and Chief Executive Officer of 1985 56
Union Pacific Resources Group, Inc.(4)
Larry W. Sonsini Member of the law firm of Wilson Sonsini 1988 56
Goodrich & Rosati, Professional
Corporation(5)
Ian R. Wilson Managing Partner of Dartford Partnership(6) 1989 67
John A. Young Retired President and Chief Executive 1995 64
Officer of Hewlett-Packard Company(7)
</TABLE>
- --------
3
<PAGE>
(1) Eric E. Schmidt
Dr. Schmidt entered into an employment contract with Novell on March 18,
1997 whereby he would become Chief Executive Officer and Chairman of the
Board on April 7, 1997. Since 1983, Dr. Schmidt has held various positions
at Sun Microsystems, Inc. (world class supplier of network computing
solutions) including Chief Technology Officer from February 1994 to March
1997 and president of Sun Technology Enterprises from February 1991 until
February 1994. Dr. Schmidt is also a director of Geoworks, Inc. and Siebel
Systems, Inc
(2) Elaine R. Bond
Ms. Bond retired in December 1994 as a Chase Fellow and Senior Consultant
for Chase Manhattan Bank (a New York based Money Center Bank), a position
held since December 1991. Ms. Bond is also a director of Washington
National Corporation.
(3) Hans-Werner Hector
Cofounder of SAP AG, Germany (an international provider of general purpose
software). Mr. Hector was a member of Advisory Board of SAP AG from June
1995 until December 1996. Mr. Hector also served as Chief Executive
Officer, President and Vice Chairman for SAP America, Inc., a fully owned
subsidiary of SAP AG, from February 1992 to January 1995. Mr. Hector was
also a Member of the Board of Directors of SAP AG from 1972 to June 1995.
(4) Jack L. Messman
Chief Executive Officer of Union Pacific Resources Group, Inc. (an oil and
gas company) since March of 1991. Mr Messman is also Chairman of Union
Pacific Resources Group, Inc. since October 1996. Mr. Messman previously
served as President of Union Pacific Resources Group, Inc. from March 1991
to October of 1996. Mr. Messman is also a director of Cambridge Technology
Partners, Inc., Tandy Corporation, Safeguard Scientific, Inc., U.S. Data,
Inc. and Union Pacific Resources Group, Inc.
(5) Larry W. Sonsini
Member and Chairman of the Executive Committee of Wilson Sonsini Goodrich &
Rosati (a law firm) for more than the last five years. Mr. Sonsini is also
a director of Lattice Semiconductor Corporation, Pixar, Inc., Pure Atria
Software and Silicon Valley Group, Inc.
(6) 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 is a director of New Age
Beverages Investments Limited, Golden State Foods, Corp., CAMAC Holdings,
Inc., Windy Hills Pet Food Company and Van de Kamp's, Inc.
(7) John A. Young
Mr. Young retired in 1992 from his position 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 also a director of Wells Fargo & Co.,
Chevron Corp., SmithKline Beecham plc, Shaman Pharmaceuticals, Inc.,
Affymetrix, Ciphergen Biosystems, Inc. and Lucent Technology, 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 ten meetings, including four telephone
conference call meetings during the fiscal year ended October 26, 1996.
The Board of Directors has three committees. The Audit Committee is
comprised of Directors Messman as chairman, Bond, Hector and Young. The
Compensation Committee is comprised of Directors Young as chairman, Bond and
Messman. The Corporate Governance Committee is comprised of Directors Wilson
as
4
<PAGE>
chairman and Sonsini and also included Director Ashton until he resigned from
his position as a director in November 1996. There is no nominating committee,
but the Corporate Governance Committee performs the function of a nominating
committee.
The Audit Committee of the Board of Directors met four times during fiscal
1996. 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 nine times during
fiscal 1996. The Compensation Committee establishes the Company's compensation
philosophy, determines CEO and other executive compensation, and administers
the Company Incentive Plan and the employee stock plans. See "Report of the
Compensation Committee of the Board of Directors on Executive Compensation."
The Corporate Governance Committee of the Board of Directors met twice
during fiscal 1996. The responsibilities of the Corporate Governance Committee
include establishing qualifications to serve on the Board and Committees of
the Board, identification of nominees for Board membership, reviewing
procedures for CEO succession and Board retirement policies, analyzing and
establishing Board compensation, and establishing general guidelines for the
operation of the Board of Directors. The Corporate Governance Committee
accepts nominations for Board membership, which nominations will be reviewed
in accordance with the procedures established for reviewing such nominations
by the Committee. Any such nomination should be submitted to the Secretary of
the Company. See "Report of the Corporate Governance Committee."
During the last fiscal year, all directors attended at least 75% of the
meetings of the Board and Committees of which they were members.
VOTE REQUIRED AND RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
SLATE OF NOMINEES SET FORTH ABOVE.
The seven nominees for director 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. Shareholders do not have the right to cumulate their votes in the
election of directors.
PROPOSAL TWO
APPROVAL AND RATIFICATION OF THE ADOPTION OF AN
AMENDMENT TO THE COMPANY'S 1989 EMPLOYEE STOCK PURCHASE PLAN
PROPOSED AMENDMENT
On December 5, 1996, 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 eight million (8,000,000) to twelve million (12,000,000).
At the 1997 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 this amendment to the Purchase Plan will encourage and
assist employees of Novell to acquire an equity interest in the Company, help
align employee interests with other shareholders, help provide for the future
financial security of Novell employees and foster good employee relations. The
Purchase Plan should thereby be helpful in attracting, retaining and
motivating employees. The terms 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.
5
<PAGE>
DESCRIPTION OF PURCHASE PLAN
The following is a brief summary of the material 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 and more than five
months per calendar year 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 (5%) or more of the
outstanding stock of the Company is entitled to participate in the Purchase
Plan. As of February 28, 1997, approximately 5,850 employees were eligible to
participate.
Participation in an Offering. 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 (10%) of regular base
salary (including sales commissions that are not in excess of target income).
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 February 28, 1997 there were approximately 2,950
participants in the Purchase Plan.
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 to be 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 require shareholder
approval under Section 423 of the Code, Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, or any other applicable law or
regulation.
6
<PAGE>
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 within two years after the date the option is
granted (i.e., the commencement date of the Offering to which the option
pertains).
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 holding
period 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%.
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 and more than five months
per calendar year, 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, 7,010,793 shares of Common Stock have
been acquired by employees of the Company through participation in the
Purchase Plan. The Company has received approximately $84.1 million from the
purchase of stock by employees through the Purchase Plan. Non-employee
directors are not eligible to participate in the Purchase Plan.
7
<PAGE>
The following table sets forth information with respect to purchases of
Common Stock by Named Officers, to all current executive officers as a group
and to all other employees as a group during the last fiscal year ended
October 26, 1996:
AMENDED PLAN BENEFITS
1989 EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF INDIVIDUAL OR PURCHASED UNDER DOLLAR
IDENTITY OF GROUP AND POSITION PURCHASE PLAN (#) VALUE ($)(1)
- ------------------------------ ---------------- ------------
<S> <C> <C>
Joseph A. Marengi,.............................. 0 --
President and Chief Operating Officer
Mary M. Burnside................................ 0 --
Executive Vice President Corporate Services
James R. Tolonen................................ 0 --
Executive Vice President and Chief Financial
Officer
Glenn Ricart.................................... 1,075 2,076
Executive Vice President Chief Technology
Officer
David R. Bradford............................... 246 414
Senior Vice President and General Counsel
Robert J. Frankenberg........................... 769 1,485
Former President, CEO and Chairman
Steven Markman.................................. 0 --
Former Executive Vice President
All current executive officers as a group (18
persons)........................................ 4,584 6,176
All other employees as a group.................. 1,689,607 2,863,617
</TABLE>
- --------
(1) Fair market value on date of purchase, minus the purchase price.
VOTE REQUIRED AND BOARD OF DIRECTOR'S RECOMMENDATION
Ratification and approval of the increase in shares reserved under the
Purchase Plan requires the affirmative vote of a majority of the Votes Cast.
Accordingly, abstentions will have the same effect as votes against this
proposal and broker non-votes 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 essential to the success of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE PURCHASE PLAN.
8
<PAGE>
PROPOSAL THREE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP
AS INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, which is composed entirely
of independent directors, the Board of Directors has appointed Ernst & Young
LLP ("Ernst & Young") as independent auditors for the Company to audit its
consolidated financial statements for fiscal 1997 and to perform audit-related
services and consultation in connection with various accounting and financial
reporting matters. Ernst & Young also performs non-audit services for the
Company.
The Board has directed that the appointment of Ernst & Young be submitted to
the shareholders for approval. The affirmative vote of a majority of the Votes
Cast is required for approval. If the shareholders do not approve the
selection of Ernst & Young, the Audit Committee and the Board will reconsider
the appointment.
Ernst & Young or its predecessors have audited the consolidated financial
statements of the Company since 1987.
The Company has been advised by Ernst & Young that it will have a
representative present at the Annual Meeting who will be available to respond
to appropriate questions. The representative will also have the opportunity to
make a statement if he or she desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during fiscal years 1996, 1995 and 1994 for (i)
all persons serving as Chief Executive Officer during fiscal 1996, (ii) the
four most highly compensated executive officers serving at fiscal year end and
(iii) one former executive officer who would have been included in the
category described in subsection (ii) had he still been an executive officer
at fiscal 1996 year end of the Company whose salary plus bonus exceeded
$100,000 in fiscal 1996 (the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
------------------------------------ ------------
SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
POSITION YEAR ($) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6)
- --------------- ---- ------- ------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph A.
Marengi....... 1996 403,980 193,819 -- 362,625 454,000 24,093
President and
Chief
Operating 1995 381,447 171,171 -- -- -- 20,374
Officer 1994 324,676 175,324 -- 315,500 95,000 4,500
Mary M.
Burnside ..... 1996 347,843 -- -- 362,625 200,000 14,839
Executive Vice
President 1995 354,061 135,428 -- -- -- 16,380
Corporate
Services 1994 298,857 147,000 -- 315,500 80,000 4,500
James R.
Tolonen....... 1996 347,200 -- -- 362,625 209,000 14,377
Executive Vice
President and 1995 360,600 137,929 -- -- -- 16,317
Chief
Financial
Officer 1994 295,509 147,000 -- 315,500 80,000 4,500
Glenn Ricart... 1996 273,896 -- 30,415 435,150 110,000 10,006
Executive Vice
President and 1995(7) -- -- -- -- -- --
Chief
Technology
Officer 1994 -- -- -- -- -- --
David R.
Bradford...... 1996 241,847 -- -- 181,313 86,000 9,705
Senior Vice
President and 1995 220,000 69,091 -- -- -- 12,386
General
Counsel 1994 186,141 74,000 -- 315,500 55,000 4,500
Robert J.
Frankenberg(8). 1996 641,052 -- -- -- 300,000 97,146
Former CEO,
President 1995 504,445 308,721 -- -- -- 21,577
and Chairman
of Board 1994 288,462 225,000 321,141 612,288 600,000 1,731
Steven
Markman(9) ... 1996 283,485 -- -- 302,188 239,000 10,006
Former
Executive
Vice
President 1995 200,000 62,458 -- -- -- 6,574
1994 42,308 -- -- -- 80,000 --
</TABLE>
- --------
(1) Compensation deferred at the election of the executive, pursuant to the
Novell, Inc. Retirement and Savings Plan and the Deferred Compensation
Plan, is included in the year earned.
As of 1996 fiscal year end each Named Officer had the following number of
restricted stock having a value as noted: Mr. Marengi, Ms. Burnside and Mr.
Tolonen 30,000 shares each, value of $300,000 per officer, Mr. Ricart
36,000 shares, value $360,000 and Mr. Bradford 15,000 shares, value
$150,000.
(2) Cash bonuses for services rendered in fiscal years 1995 and 1994 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. No bonuses were earned for
1996. The amount listed for Mr. Marengi is sales commission based on his
responsibilities until August 1996 as Executive Vice President of
Worldwide Sales. See "Report of the Compensation Committee of the Board of
Directors on Executive Compensation."
(3) Mr. Frankenberg received $190,500 in fiscal 1994 to cover expenses
relating to the relocation of his primary residence from California to
Utah. In addition, $110,196 was paid for the gross-up of taxes on the
total related relocation expenses. Mr. Ricart received $30,415 in fiscal
1996 to cover expenses in the relocation of his primary residence from
Maryland to Utah.
10
<PAGE>
(4) Restricted stock awards are valued in the Summary Compensation Table at
the Company's closing price on the date of grant less the purchase price
of $0.10 per share. Mr. Frankenberg received a Restricted Stock Grant of
36,500 shares on April 5, 1994. Such shares vest 50% per year on award
anniversary date. Named Officers Marengi, Burnside, Tolonen and Bradford
each received a restricted stock award of 20,000 shares on October 19,
1994. Such shares vest over a two-year period with 25% vested one year
from award date and the remaining 75% vested two years from award date. On
March 1, 1996, Named Officers Marengi, Burnside and Tolonen each received
a restricted stock award of 30,000 shares, Named Officers Ricart and
Bradford received a restricted stock award of 36,000 and 15,000
respectively. Former officer Markman received a restricted stock award in
December 1995 and March 1, 1996 of 20,000 and 25,000 respectively. Such
shares vest over a two-year period with 50% vested one year from award
date and the remaining 50% vested two years from award date. Officers have
the right to vote such shares and to receive cash dividends thereon (if
any) but any stock dividends bear the same vesting restrictions as the
shares with respect to which they are issued.
(5) In addition, the following stock options were granted in November 1996,
after fiscal year end, to Named Officers: Marengi 200,000, Burnside and
Tolonen, 75,000 each, Ricart 60,000 and Bradford 35,000 when their
performance for fiscal 1996 was reviewed.
(6) The stated amounts are Company matching contributions to the Novell, Inc.
Retirement and Savings Plan and the Deferred Compensation Plan. Mr.
Frankenberg's All Other Compensation for 1996 also includes $75,300
associated with his separation contract.
(7) Mr. Ricart was not an executive officer during fiscal 1995.
(8) Mr. Frankenberg resigned from the Company in August 1996.
(9) Mr. Markman resigned from the Company in September of 1996.
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; the
Committee chairman also receives an annual retainer of $2,500. In August 1996,
at the time Mr. Frankenberg resigned, Director Young entered into a consulting
agreement pursuant to which he became Chairman of the Board and agreed to
provide consulting services to the Company as needed. Director Young receives
a consulting fee of $10,000 a week and was granted a non-statutory stock
option, at fair market value to acquire 100,000 shares of Company Common Stock
under the Company 1991 Stock Plan. The shares become 100% vested on March 31,
1997 and must be exercised within twelve months from termination of the
consulting agreement. The consulting agreement shall terminate at the end of a
specified period after written notice has been provided by either party.
Under the Company's Stock Option Plan for Non-Employee Directors, as
amended, each non-employee Director who joins the Board will automatically
receive options to purchase 30,000 shares vesting as to 25% annually over four
years. In addition, each current non-employee Director will receive an Annual
Grant of options to purchase 15,000 shares vesting as to 50% annually over two
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 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 to
participating directors. Upon the death of a participating director, the
Company will
11
<PAGE>
donate $1,000,000 (paid in ten equal annual installments) 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.
On August 17, 1995, non-employee Directors Messman, Sonsini and Wilson
received a cash-only stock appreciation right relating to 13,333 shares of the
Company's Common Stock. Each right entitles the holder to a cash payment on
April 12, 1998, in an amount equal to the excess, if any, of the fair market
value per share of the Common Stock on that date over $20.9375, the closing
price of the Common Stock on the Nasdaq National Market on August 17, 1995.
The holder's right to receive the cash payment vests in three annual
installments, based upon the holder's continued status as a director of the
Company. Upon the holder's receipt of a cash payout of the right, the holder
will recognize compensation income for federal income tax purposes equal to
the amount actually received, and the Company will receive a corresponding
deduction.
STOCK OPTIONS GRANTS IN FISCAL YEAR 1996
The following table provides information with respect to stock options
granted during fiscal 1996 to the Named Officers. No stock appreciation rights
have been granted by the Company.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------ REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(1)
GRANTED IN FISCAL PRICE EXPIRATION -------------------
NAME (#)(2) YEAR (3) ($/SH) DATE 5% ($) 10%($)
- ------------------------ ---------- ----------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Marengi....... 75,000(4) 0.4 14.6250 12/22/05 689,819 1,748,136
75,000(5) 0.4 12.1875 03/01/06 574,849 1,456,780
54,000(4) 0.3 12.1875 03/01/06 413,891 1,048,882
250,000(4) 1.3 10.4375 09/06/06 1,641,022 4,158,672
Mary M. Burnside........ 75,000(4) 0.4 14.6250 12/22/05 689,819 1,748,136
75,000(5) 0.4 12.1875 03/01/06 574,849 1,456,780
50,000(4) 0.3 12.1875 03/01/06 383,233 971,187
James R. Tolonen........ 75,000(4) 0.4 14.6250 12/22/05 689,819 1,748,136
75,000(5) 0.4 12.1875 03/01/06 574,849 1,456,780
59,000(4) 0.3 12.1875 03/01/06 452,215 1,146,000
Glenn Ricart............ 40,000(5) 0.2 12.1875 03/01/06 306,586 776,949
70,000(4) 0.4 12.1875 03/01/06 536,526 1,359,662
David R. Bradford....... 56,000(4) 0.3 14.6250 12/22/05 515,065 1,305,275
4,000(5) 0.02 14.6250 12/22/05 36,790 93,234
26,000(5) 0.1 12.1875 03/01/06 199,281 505,017
Robert J.
Frankenberg(6).......... 300,000(4) 1.6 14.6250 12/22/05 2,759,275 6,992,545
Steven Markman(7)....... 75,000(4) 0.4 14.6250 12/22/05 689,819 1,748,136
75,000(5) 0.4 12.1875 03/01/06 574,849 1,456,780
89,000(4) 0.5 12.1875 03/01/06 682,154 1,728,713
</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 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. All options were granted at fair market value on date of grant and
vest over four years. In the event of a merger of the Company or the sale
of substantially all of the assets of the Company, unvested options shall
be assumed by the acquiring company. The Board of Directors has the right
to accelerate
12
<PAGE>
unvested options if the acquiring company is unwilling to assume the
options. In the event of a change in control, except as otherwise
determined by the Board prior to the occurrence of such change in control,
all options shall be fully exercisable and vested and shall be terminated
in exchange for a net cash payment. The plans provide for various methods
of exercise. The Company currently allows for cash, cashier's check or
cashless exercise.
(3) Options to purchase an aggregate of 18,527,866 shares were granted to
employees in fiscal 1996.
(4) Non-statutory option having an exercise price equal to the fair market
value on the date of grant, vesting 25 percent one year from grant date
and thereafter 6.25 percent per quarter over three years and having a term
of ten years.
(5) Non-statutory option having an exercise price equal to the fair market
value on the date of grant, vesting 25 percent one year from grant date
and thereafter 6.25 percent per quarter over three years and having a term
of ten years. Furthermore, if Novell stock closes at $18.00 per share or
higher for 30 consecutive days, any remaining unvested shares shall vest
at twice the rate of the prior stated schedule.
(6) Options have expired due to Mr. Frankenberg's resignation in 1996.
(7) Mr. Markman's options have expired due to his resignation in September
1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The number of options exercised and the value realized from any such
exercise during fiscal 1996 and the number and value of options held at fiscal
year end for the Named Officers are set forth in the following table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL AT FISCAL YEAR END (1)
SHARES VALUE YEAR END (#) ($)
ACQUIRED ON REALIZED -------------------------- -------------------------
NAME EXERCISE (#) ($) (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph A. Marengi....... 0 -- 135,100 511,500 0 0
Mary M. Burnside........ 30,000 322,750 175,000 255,000 0 0
James R. Tolonen........ 20,000 222,500 133,000 264,000 0 0
Glenn Ricart............ 0 -- 10,000 140,000 0 0
David R. Bradford....... 39,000 357,250 105,500 123,500 0 0
Robert J.
Frankenberg(3).......... 0 -- 300,000(4) 0 0 0
Steven Markman(3)....... 0 -- 227,500(5) 0 0 0
</TABLE>
- --------
(1) Value of unexercised options is (i) the fair market value of the Company's
Common Stock at fiscal 1996 year end less the option exercise price per
share of in-the-money options, times (ii) the number of shares subject to
such options. At fiscal year end 1996 fair market value of stock was
$10.00, therefore no options held by Named Officers had a reportable
value.
(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.
(3) Former Executive Officer.
(4) Mr. Frankenberg resigned in August 1996, these options have expired
thereafter unexercised.
(5) Mr. Markman resigned in September 1996, these options have expired
thereafter unexercised.
EMPLOYMENT CONTRACT, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
All current Named Officers of Novell are under employment contracts.
13
<PAGE>
Novell entered into employment contracts with Named Officers Marengi,
Burnside, Tolonen and Bradford at the end of fiscal 1994. The term of the
contracts is two years with an automatic renewal for 18 months, unless
terminated by either party. Novell entered into an employment contract with
Mr. Ricart in February 1996 upon his promotion to Executive Vice President and
Chief Technical Officer. Base salary is to be reviewed annually and is at
least the amount set forth: Marengi, $333,333; Burnside, $350,000; Tolonen,
$350,000; Ricart, $300,000 and Bradford, $220,000. All Named Officers will
participate in the incentive bonus program except Mr. Marengi. Based upon the
accomplishment of certain performance goals, Named Officers Burnside, Tolonen
and Bradford are eligible to earn a bonus of 40% of their base salaries and
Officer Ricart is eligible to earn a bonus of 60% of his base salary. Mr.
Marengi will participate in the sales commission program where commissions are
paid quarterly based on the achievement of actual versus target worldwide
sales. At 100% of achievement of target, Mr. Marengi's commission is $175,000.
As part of the employment agreement, Named Officers Marengi, Burnside and
Tolonen were each 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 Common
Stock. Such shares vest over four years with 25% vested one year from award
date and thereafter 6.25% quarterly. Additionally, each Named Officer was
awarded a Restricted Stock Grant with a purchase price of $0.10 per share and
vesting of 25% one year from award date and the remaining 75% two years from
award date.
In January 1996, Named Officers Marengi and Bradford each received an
increase of 9% of their base salary and Named Officers Burnside, Tolonen and
Bradford are now eligible to earn a bonus of 60%, 60% and 45%, respectively of
their base salary. Mr. Marengi's sales commissions increased to $225,000 at
100% achievement of worldwide sales target.
In August 1996, Mr. Marengi's contract was amended when he assumed new
responsibilities and was appointed President and Chief Operating Officer. His
new minimum base salary is $600,000 and he is eligible to participate in the
incentive bonus plan at 60% of his base salary. He was granted non-statutory
stock options to purchase an additional 250,000 shares.
In the event of termination without cause or constructive termination after
a change in control, Officer Marengi will receive 1.6 times his base annual
salary; Officers Burnside, Tolonen and Bradford will receive 1.4 times their
respective base annual salaries and Officer Ricart will receive 2 times his
base salary. In addition, in such event, all Named Officers will receive
accelerated vesting of an additional 12 months for unvested options. If said
termination should occur within the first year of a restricted stock vesting,
the Company will not exercise its repurchase right to 50% of the shares. If
said termination is within the second year of vesting, the Company will waive
all remaining repurchase rights.
Change of control is defined in the contract as: (i) the Company sells or
otherwise disposes of all or substantially all of its assets, (ii) the Company
merges or consolidates with another company where the shareholders of Novell
immediately after the transaction do not hold 50% of the voting power of the
new entity or (iii) any person or entity including any "person" as defined by
Section 13(d)(3) of Securities Exchange Act as amended becomes the beneficial
owner of Common Stock of Novell represented by 50% or more of the combined
voting power (excluding any persons who are now officers of Novell).
On March 18, 1997, the Company entered an employment contract with Dr. Eric
E. Schmidt whereby Dr. Schmidt would become Chief Executive Officer and
Chairman of the Board on April 7, 1997. During the interim period from March
18, 1997 until April 7, 1997, Dr. Schmidt would work on a part-time basis.
Pursuant to the employment contract Dr. Schmidt's annual base salary is
$600,000 with a bonus payment on October 31, 1997, provided he is still
employed by the Company, of approximately $375,000. Starting in Fiscal 1998,
Dr. Schmidt shall participate in the incentive bonus plan, where, based upon
the accomplishment of certain performance goals, Dr. Schmidt is eligible to
earn a bonus of 100% of his base salary plus additional bonus compensation if
such goals are exceeded.
14
<PAGE>
Upon entering into the employment contract Dr. Schmidt was granted, at fair
market value, a non-qualified stock option to purchase 2,750,000 shares of
Novell Common Stock. Said options vest 20% on the first year anniversary and
thereafter vest monthly over the next four years so as to be 100% vested five
years from the date of grant, conditioned upon employee's continued employment
or consulting relationship with Novell as of each vesting date. Dr. Schmidt
was also granted 900,000 shares of restricted stock at a purchase price of
$9,000. The shares shall vest annually, in accordance with the following
schedule: 30% on the first anniversary, 25% on the second anniversary, 20% on
the third anniversary, 15% on the fourth anniversary and 10% on the fifth
anniversary of the grant date, so as to be 100% vested five years following
the grant date, conditioned upon Employee's continued employment or consulting
relationship with Novell as of such vesting dates. Such restricted stock grant
was provided by Novell due in part to Dr. Schmidt's forfeiture of in-the-money
stock options held by him at his prior employment.
If Novell terminates Dr. Schmidt other than for cause or if a constructive
termination should occur, he shall be entitled to receive the following: (i)
one times his annual base salary and target bonus in such amounts which exist
at time of termination; (ii) an amount equal to the cost of COBRA for one
year; (iii) accelerated vesting of one year for all stock options; (iv)
waiving of repurchase rights on any restricted stock.
In the event of termination without cause due to change in control or
constructive termination within two months before or one year after change in
control, Dr. Schmidt will receive the following: (i) two times his annual base
salary and target bonus in such amounts which exist at time of termination;
(ii) an amount equal to the cost of COBRA for eighteen months; (iii)
accelerated vesting of one year for all stock options; (iv) waiving of
repurchase rights on restricted stock as to vesting of the greater of (a) the
number of shares that would have vested within one year after Dr. Schmidt's
terminate date, or (b) one-half of the number of shares not vested on his
termination date.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Novell, Inc. Non-Employee Directors Stock Option Plan, as amended
("Director 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 Director Plan and are not
subject to the discretion of the committee or any person. Only non-employee
directors may participate in the Director Plan. The Director Plan, which was
originally adopted in 1989 and subsequently amended in 1992, was most recently
amended by the Board of Directors in January 1996 and approved by shareholders
on April 10, 1996.
Under the Director Plan, all non-employee directors are automatically granted
an option to purchase 30,000 shares of the Company's Common Stock on the date
of their initial election or appointment to the Board of Directors ("Initial
Grant"). Prior to April 10, 1996, the Initial Grant covered 72,000 shares.
Current Non-employee Directors are automatically granted an option to purchase
15,000 shares annually on the date of the Annual Meeting ("Annual Grant"),
unless they hold an Initial Grant to purchase 72,000 shares granted within two
years prior to the Annual Grant. 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 and have a term of ten years. Initial Options
vest annually at the rate of 25 percent per year and Annual Options vest at
the rate of 50% per year. Upon a 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. Upon forced retirement at age 70, Director options become
fully vested and the Director has one year in which to exercise.
Director Hector, upon appointment to the Board in December 1995, was
automatically granted an option to purchase 72,000 shares having an exercise
price of $14.875 per share pursuant to the Director Plan prior to the most
recent amendment. Directors Bond, Messman, Sonsini and Wilson were each
granted an Annual Grant on April 10, 1996 having an exercise price of $13.50
per share.
On October 26, 1996, fiscal 1996 year end, options to purchase 596,000
shares of the Company's Common Stock under the Director Plan were outstanding
at a weighted average exercise price of $17.82 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 non-employee directors: Mr. Young, Chairman, Ms. Bond and
Mr. Messman. No member of the Compensation Committee has a relationship that
would constitute an interlocking relationship with executive officers or
directors of another entity. From time to time, Mr. Marengi, President,
certain officers of the Company, outside consultants and Mr. Frankenberg, when
he was Chief Executive Officer (the "CEO"), attended meetings of the
Committee. No officer of the Company is present during discussions or
deliberations regarding his or her own compensation.
RESPONSIBILITIES OF THE COMMITTEE
Acting on behalf of the Board of Directors, the Committee's responsibilities
include the following:
. Establishing the general Company compensation philosophy for all
employees including the CEO, President and other executive officers.
. Reviewing the performance of the CEO.
. Determining compensation levels and stock grants for the CEO and other
executive officers.
. Administering the Company's Incentive Plan (the "Incentive Plan") by
establishing Company performance objectives, approving target bonuses
and actual bonus payments for the CEO and other executive officers.
. Administering the Company's employee stock option and stock purchase
plans ("Stock Plans"), including determining eligibility, the number and
type of options to be granted and the terms of such grants.
EXECUTIVE OFFICER COMPENSATION PROGRAM
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, 26% to 38% of the cash compensation of each
executive officer is contingent upon Company performance and adjusted as
appropriate for individual performance.
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 independent outside consulting firms, has
developed executive compensation data from nationally recognized surveys from
a group of comparable companies selected on the basis of similarity in revenue
level, industry segment and competitive employment market to the Company. Most
of the companies included in this group for the 1996 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 21.
The Company's executive level positions, including the CEO, are matched to
comparable survey positions and competitive levels are determined for base
salary and target bonus incentives. The target incentive is the amount that
would be paid after the end of the fiscal year if the Company, and the
executive officer achieve the performance objectives established for the year.
Market practices with respect to stock option grants are also reviewed.
Factors considered in determining actual incentive bonus for each executive
officer include Company
16
<PAGE>
performance, individual performance, and the scope of executive officer's
responsibility. The relative weight given to such factors varies between
executive officers, based upon their respective responsibilities and capacity
to affect Company performance.
Grants under the Company's Stock Plans are designed to further strengthen
the linkage between executive compensation and shareholder return, to provide
additional incentives to executive officers tied to growth of stock price over
time and encourage continued employment with the Company. Stock option grants
are based upon industry survey data and individual executive performance.
Stock options generally become exercisable over a four-year period and are
granted at a price that is equal to the fair market value of the Company's
stock on the date of grant. Restricted stock purchase grants, which allow an
officer to purchase shares at a nominal cost, are generally subject to a two-
year vesting schedule.
1996 EXECUTIVE OFFICER COMPENSATION
In December 1995, the Committee reviewed industry survey data outlined
above, executive performance and the CEO's recommendations for the purpose of
determining base salary for 1996 for each executive officer (excluding the
CEO). The CEO recommended Company performance targets for revenue, expenses
and operating profit for fiscal 1996 to be used for the incentive compensation
plan. Stock option survey data, executive performance and current outstanding
stock options were reviewed. The Committee approved (i) individual executive
performance targets, (ii) base salary level to be effective January 7, 1996
(three of the Named Officers did not receive a base salary increase as their
current base salary fell within industry standards for similar corporate
positions), (iii) a target incentive based on achievement of recommended
targets for fiscal 1996, and (iv) a stock option grant for each executive
officer. The final 1996 target total cash compensation levels (base salary
plus target cash incentives) for the Named Officers (other than the CEO) fall
within the industry standards for comparable positions.
The Committee also reviewed and approved the Novell Incentive Plan for
fiscal 1996, establishing the Company and Business Unit revenues, earnings and
operating profit objectives and individual performance targets to be used at
year end for incentive determination.
In February 1996, the Committee reviewed a retention program presented by
management. The program requested that a stock option/restricted stock award
be granted to the Company's critically essential employees to encourage
retention. A stock option/restricted stock award program was used rather than
a cash program to further link management compensation to shareholder value.
The Committee approved the plan which included the granting of stock options
and restricted stock awards to the Named Officers (other than the CEO), all
executive officers and approximately 100 other key employees.
In October 1996, the Committee reviewed industry survey data, current
executive compensation, Company and Business Unit performance and executive
performance against prior established objectives. The Committee felt that the
executive salaries remained within the range of industry standards for
comparable positions and that no base salary increases would be approved for
January 1997 for the Named Officers. It was further decided based on industry
survey data and individual executive performance that stock options were to be
granted based on average industry standards for similar positions weighted by
individual performance.
In December 1996, the Committee reviewed total Company and Business Unit
performance that had been accomplished for fiscal 1996, following the process
and formula established in the Incentive Plan. The Incentive Plan has
incentive pay elements payable based on both total Company and Business Unit
performance, modified by individual performance. Due to the fact that the
Company performance for fiscal 1996 fell below the percentage required by the
Incentive Plan, no bonuses were paid to the Named Officers.
17
<PAGE>
1996 CEO COMPENSATION
In December 1995, the Committee reviewed Mr. Frankenberg's individual
performance for the past year and comparable CEO industry survey data, as
outlined above, for the purpose of determining Mr. Frankenberg's base
compensation for fiscal 1996. The Committee established individual performance
objectives for Mr. Frankenberg for fiscal 1996 and approved an increase to his
base salary. In addition, the Committee reviewed the approved Company
performance objectives for revenue, expenses and operating profit for 1996
that would have to be accomplished prior to payment of an incentive bonus and
approved a target incentive bonus whereby approximately 50% of Mr.
Frankenberg's total compensation was dependent upon the Company achieving
established revenue, expenses and operating profit objectives. Mr.
Frankenberg's base salary is comparable to industry standards for his
position.
Mr. Frankenberg resigned from the Company in August 1996. The Compensation
Committee, along with the other members of the Board of Directors including
the Corporate Governance Committee, reviewed various corporate structuring
alternatives and candidates to replace Mr. Frankenberg. After deliberation,
the Committee recommended that Mr. Marengi, then Executive Vice President of
Worldwide Sales, assume the responsibilities of President and Chief Operating
Officer, Mr. Young be appointed as Chairman of the Board and a search be
started immediately for a new Chief Executive Officer. Mr. Marengi is
currently performing the duties of a Chief Executive Officer.
Mr. Marengi's total current compensation was reviewed against comparable
industry standards for President and Chief Operating Officer and his increased
scope of responsibilities. Mr. Marengi's base salary was increased and
incentive targets were established (he had previously participated in the
sales commission program, not the Incentive Plan). See "Executive
Compensation--Employment Contract, Termination of Employment and Change in
Control Arrangements."
QUALIFYING COMPENSATION
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code ("Section 162(m)") adopted under the Federal Revenue
Reconciliation Act of 1993. Section 162(m) disallows a tax deduction for any
publicly-held corporation for certain executive officers' compensation
exceeding $1 million per person in any taxable year unless it is "performance
based" within the meaning of Section 162(m). 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 plan will meet the requirement of being performance-based under the
provisions of Section 162(m), the Committee believes that Section 162(m) 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 the applicable tax laws.
Respectfully submitted,
John A. Young, Chairman
Elaine R. Bond
Jack L. Messman
18
<PAGE>
REPORT OF CORPORATE GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
MEMBERSHIP OF THE COMMITTEE
The Corporate Governance Committee of the Board of Directors ("Governance
Committee") was established in August of 1995. Currently, the Governance
Committee is composed of two non-employee directors namely: Mr. Wilson and Mr.
Sonsini. Mr. Wilson serves as chairman of the Governance Committee. Mr. Ashton
was a member of the Governance Committee until he resigned from the Board in
November of 1996. The Governance Committee also performs the duties of a
nominating committee.
RESPONSIBILITIES OF THE COMMITTEE
Acting on behalf of the Board of Directors, the Governance Committee's
responsibilities include the following:
. Overseeing the functioning of the Board to ensure the implementation of
proper corporate governance policies and practices.
. Identifying and recommending nominees for election as directors.
. Establishing qualifications to serve on the Novell Board and on the
Committees of the Board.
. Considering and implementing CEO secession policies and procedures.
. Reviewing and recommending the organization and size of the full board
and the structure and size of the Board's committees.
. Recommending candidates for membership on Board Committees.
NOVELL BOARD GUIDELINES
The Governance Committee, working in connection with the full Board, has
adopted a series of Novell guidelines on significant Corporate Governance
issues. Issues considered as a part of those guidelines include, but are not
limited to, the following:
. Frequency and length of committee meetings.
. Rotation of committee members.
. Selection of agenda items for Board meetings.
. Executive sessions of outside directors.
. Board access to senior management.
. Size of the Board.
. Mix of inside and independent Directors.
. Formal evaluation of the Chief Executive Officer.
. Assessment of Board's performance.
19
<PAGE>
During the past year the Governance Committee reviewed and approved, among
other things, a Statement of Business Ethics to be distributed throughout the
Company. In addition, the Governance Committee recommended to the Board of
Directors that an executive committee of the Board of Directors be formed to
assist the CEO in times of urgent matters when it is not possible to assemble
the complete Board. Such a committee was formed in March of 1996 and typically
met on a biweekly basis from March to September of 1996. Finally, the
Governance Committee established a mandatory retirement age of 70 for Board
members.
Respectfully submitted,
Ian Wilson - Chairman
Larry Sonsini.
20
<PAGE>
COMPARISON OF FIVE- AND TEN-YEAR CUMULATIVE TOTAL RETURNS
The following two graphs compare the performance of the Company's common
stock with the performance of the Standard & Poor's 500 Composite Stock Price
Index and a peer group index over the periods from, respectively, November 1,
1991 and November 1, 1986. The graphs assume that $100 was invested on,
respectively, November 1, 1991 and November 1, 1986 in the Company's common
stock, the S&P 500 Index and the peer group index, and that all dividends were
reinvested.
The Company's peer group index is The Nasdaq Computer & Data Processing
Services Index, which 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.
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG NOVELL, INC., S&P 500 AND NASDAQ C&DPS
<TABLE>
<CAPTION>
BASE INDEXED/CUMULATIVE RETURNS
PERIOD ----------------------------------
COMPANY/INDEX NAME 1991 1992 1993 1994 1995 1996
------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Novell, Inc.......................... 100 143.53 101.18 81.76 70.00 47.06
S&P 500 Composite.................... 100 109.95 126.39 131.27 165.98 205.97
Nasdaq Computer & Data Processing
Services............................. 100 116.67 130.38 156.90 239.48 277.74
</TABLE>
PAST FIVE YEAR AVERAGE COMPOUNDED ANNUAL RETURN
<TABLE>
<S> <C>
Novell, Inc......................................................... (13.99)%
S&P 500 Composite................................................... 15.55 %
Nasdaq Computer & Data Processing Services.......................... 22.67 %
</TABLE>
21
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN
AMONG NOVELL, INC., S&P 500 AND NASDAQ C&DPS
<TABLE>
<CAPTION>
BASE INDEXED/CUMULATIVE RETURNS
PERIOD -------------------------------------------------------------------------------
COMPANY/INDEX NAME 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
------------------ ------ ------ ------ ------ ------ -------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Novell, Inc............. 100 164.29 272.62 259.52 452.36 1,619.05 2,323.81 1,638.10 1,323.81 1,133.33 761.90
S&P 500................. 100 106.40 122.14 154.39 142.84 190.70 209.68 241.00 250.33 316.51 392.77
Nasdaq C&DPS............ 100 110.01 118.39 159.29 141.27 315.72 368.34 411.63 495.36 756.08 876.68
</TABLE>
PAST TEN YEAR AVERAGE COMPOUNDED ANNUAL RETURN
<TABLE>
<S> <C>
Novell, Inc........................................................... 22.52%
S&P 500 Composite..................................................... 14.66%
Nasdaq Computer & Data Processing Services............................ 24.25%
</TABLE>
CERTAIN TRANSACTIONS
In April 1995, the Company provided Mr. Frankenberg with a loan of $122,400
to pay his tax withholding due to the vesting of his restricted stock shares.
The loan was due in April 1997 and was secured by shares of the Company's
Common Stock. In December of 1995, the loan was paid in full by Mr.
Frankenberg.
In fiscal 1996, 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 1997 for advice on legal matters.
Thanksgiving Point, a limited liability company substantially owned by Alan
C. Ashton, Ph.D., a director of the Company until his resignation in November
of 1996, provides grounds maintenance services to the Company. The contract for
such services expired in October 1996. During fiscal 1996 the Company paid
$585,000 to Thanksgiving Point for these services.
22
<PAGE>
Named Officer Burnside has two loans ($25,302.44 and $54,637.31) with the
Company for the payment of tax withholding due to vesting of restricted stock.
The loans are secured by shares of Company stock and have interest rates of
5.82% and 6.07% respectively. Each loan has a term of two years and is due on
October 17, 1997 and October 17, 1998, respectively. Both loans were
outstanding at fiscal 1996 year end.
Named Officer Bradford has two loans ($26,194.63 and $55,716.19) with the
Company for the payment of tax withholding due to vesting of restricted stock.
The loans are secured by shares of Company stock and have interest rates of
5.82%, 6.07% respectively. Each loan has a term of two years and is due on
October 17, 1997 and October 17, 1998, respectively. Both loans were
outstanding at fiscal 1996 year end.
SECTION 16(a) REPORTING DELINQUENCIES
The Company believes that all Forms 3, 4 and 5 required to be filed by its
directors, officers and 10% shareholders were filed on time during fiscal
1996, except for (i) Director Hector, whose Form 4 for the purchase of 5,000
shares was filed one week late and (ii) Mr. Frankenberg, whose Form 4 for the
purchase of 1,000 shares was filed two months late.
PROPOSALS OF SHAREHOLDERS
Proposals that shareholders desire to have included in the Company's proxy
materials for the 1998 Annual Meeting of Shareholders of the Company must be
received by the Secretary of the Company at its principal office (122 East
1700 South, Provo, UT 84606, Attention Corporate Secretary) no later than
October 23, 1997 in order to be considered for possible inclusion in such
proxy materials.
ADDITIONAL INFORMATION
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended
October 26, 1996, including the consolidated financial statements and related
notes thereto, together with the report of the independent auditors and other
information with respect to the Company, accompanies this Proxy Statement.
AMENDED AND RESTATED RIGHTS AGREEMENT
In December 1996, the Board of Directors adopted certain technical
amendments to its original Shareholder Rights Plan that was first adopted in
1988, including a change to the purchase price of each Right to reflect the
recent trading range of the Company's stock. As amended, each Right will
entitle the Company's shareholders to buy 1/1000th of a share of the Company's
Series A Junior Participating Preferred Stock at an exercise price of $65. The
amended Rights will become exercisable following the 10th day after any person
or group announces acquisition of 15% or more of the Company's Common Stock or
announces commencement of a tender offer the consummation of which would
result in ownership by the person or group of 15% or more of the Common Stock.
The amended Rights Plan is intended to ensure that the Company's shareholders
receive fair and equal treatment in the event of any proposed takeover of the
Company and to guard against partial tender offers and other abusive tactics
designed to gain control of the Company without paying all shareholders the
fair value of their shares, including a "control premium."
OTHER MATTERS
The Company is not aware of any other business to be presented at the Annual
Meeting. If matters other than those described herein should properly arise at
the meeting, the proxies will vote on such matters in accordance with their
best judgment.
23
<PAGE>
[MAP OF DIRECTIONS TO NOVELL]
DIRECTIONS TO NOVELL
FROM 680/280
Exit Capitol Ave. heading north. Left on
Trade Zone Blvd. Right on Lundy Ave.
Building 6 is first entrance on right.
(Direction signs will be posted)
FROM 880/17
Exit Montague Expwy. heading east. Right
on Trade Zone Blvd. Left on Lundy Ave.
Building 6 is first entrance on right.
(Direction signs will be posted)
FROM SAN JOSE INTERNATIONAL AIRPORT
Take 101 South to 880 North to Montague
Expwy. East. Right on Trade Zone Blvd.
Left on Lundy Ave. Building 6 is first
entrance on right. (Direction signs will
be posted)
<PAGE>
PROXY
NOVELL, INC.
122 EAST 1700 SOUTH
PROVO, UT 84606
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Joseph A. Marengi, 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
Company's California offices at 2275 Trade Zone Boulevard, San Jose, California
95131 on Friday, May 2, 1997, at 2 p.m. local time and 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 APPROVAL AND RATIFICATION OF THE
ADOPTION OF AN AMENDMENT TO THE NOVELL, INC. 1989 EMPLOYEE STOCK PURCHASE PLAN,
FOR RATIFICATION OF INDEPENDENT AUDITORS 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 OR VOTE BY TOUCH TONE TELEPHONE, SEE REVERSE SIDE FOR INSTRUCTIONS.
(Continued on reverse side)
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL
BE VOTED "FOR" THE PROPOSALS
THIS PROXY IS SELECTED ON BEHALF OF THE BOARD OF DIRECTORS.
<TABLE>
<CAPTION>
<S> <C> <C>
Finish mark
your votes as
indicated in
this example
[X]
Vote For Vote Against Abstain
1. ELECTION OF DIRECTORS: 2. APPROVE AND RATIFY the adoption of an [_] [_] [_]
amendment to the Novell, Inc. 1989 Employee
Stock Purchase Plan to increase the shares reserved
thereunder from 8,000,000 to 120,000,000.
(INSTRUCTION:
To withhold authority to
vote for any individual
Vote for Withhold nominee, strike a line
all nominees listed Authority through the nominee's
(except as marked) to vote for all name in the list below)
Vote For Vote Against Abstain
[_] [_] 3. RATIFICATION of Ernst & Young LLP as [_] [_] [_]
Independent auditors.
NOMINEES:
Vote For Vote Against Abstain
01 Eric E. Schmidt 02 Elaine R. Bond 4. IN THEIR DISCRETION to act upon such [_] [_] [_]
other business as may properly come before
03 Hans-Werner Hoctor 04 Jack L. Messman the meeting or any adjustments thereof.
05 Larry W. Sonsini 06 Ian R. Wilson
07 John A. Young
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.
Dated: _____________________________________________, 1997
__________________________________________________________
Signature of Shareholder(s)
__________________________________________________________
Signature of Shareholder(s)
</TABLE>
*** IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW***
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
HELP US SAVE MONEY - VOTE BY TELEPHONE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner if you marked, signed an returned your proxy card.
On a Touch Tone Telephone call TOLL FREE 1-888-457-2958 24 hours per day -7
days a week.
You will be asked to enter a Control Number.
OPTION #1: To vote as the Board of Directors recommends on ALL proposals,
press 1 now.
If you wish to vote on each proposal separately press 0 now.
WHEN YOU PRESS 1, YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF
CALL
OPTION #2: If you choose to vote on each proposal separately press 0 now and
you will hear these instructions.
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9;
TO WITHHOLD FOR AN INDIVIDUAL nominee, press 0. If you press 0, enter the two
digit number that precedes the nominee(s) for whom you withhold your vote;
then press 0.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The instructions are the same for all remaining proposal(s), IF NO SELECTION
IS MADE, YOUR VOTES WILL BE CAST AS THE BOARD OF DIRECTORS RECOMMENDS.
YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF CALL.
If you vote by telephone, there is no need to mail back your proxy card.
THANK YOU FOR VOTING
