NOVELL INC, DEF 14A, 1998-02-23

NOVELL INC
DEF 14A, 1998-02-23
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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.
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(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:

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Novell, Inc. Ph 801 861-7000
122 East 1700 Southhttp://www.novell.com
Provo, UT 84606

February 20, 1998

[LOGO OF NOVELL]

Dear Shareholder:

It is my pleasure to invite you to attend the Annual
Meeting of Shareholders of Novell, Inc. on Tuesday,
April 7, 1998.

At the meeting the Novell management team will review
actions taken during fiscal 1997, and present our
tactics for 1998 to make Novell stronger and more
competitive.

The meeting will begin promptly at 2:00 p.m., local
time, at one of our Utah locations, 1555 North
Technology Way, Building J Auditorium, Orem, Utah.
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 (You
may be able to vote by phone or the Internet, refer to
instructions on your proxy card). Your cooperation
will be greatly appreciated.

On behalf of Novell's Board of Directors and
management team, I look forward to greeting you and
our other valued shareholders who are able to attend.

Sincerely,

/s/ ERIC E. SCHMIDT

Eric E. Schmidt
Chairman of the Board and
Chief Executive Officer
Novell, Inc.
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[LOGO OF NOVELL]

NOVELL, INC.

----------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, APRIL 7, 1998

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 Orem, Utah office located at 1555 North
Technology Way, Building J, Orem, Utah 84097, on Tuesday, April 7, 1998, at
2:00 p.m., local time, for the following purposes:

1. To elect six 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 12,000,000 to 18,000,000;

3. To ratify the selection of Ernst & Young LLP as independent auditors for
Novell, Inc.;

and to transact such other business as may properly come before the meeting or
any adjournments thereof.

Only shareholders of record at the close of business on February 13, 1998
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.

By Order of the Board of Directors,

/s/ DAVID R. BRADFORD
David R. Bradford
Senior Vice President, General
Counsel and Corporate Secretary

February 20, 1998

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. PLEASE CHECK YOUR
PROXY CARD, YOU MAY BE ELIGIBLE TO VOTE BY PHONE OR THE INTERNET.

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PROXY STATEMENT

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 1998 Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held in
Building J Auditorium at the Company's Orem, Utah office located at 1555 North
Technology Way, Orem, Utah 84097, on Tuesday, April 7, 1998, at 2:00 p.m.,
local time, and any adjournment thereof. The Company's telephone number at
that address is (801) 222-6000. These proxy materials are being mailed on or
about February 20, 1998, to all shareholders of record as of February 13,
1998, of the Company's Common Stock. At the Annual Meeting, the Company's
shareholders will be asked to elect six 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 offices 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, Internet, 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 February 13, 1998 (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, 351,304,421 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 $8.71875 per share.

REVOCABILITY OF PROXY

A proxy may be revoked by a shareholder at any time 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.
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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 will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business, broker non-
votes will 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, a broker non-vote will not affect the outcome of the
voting on any proposal set forth in this Proxy Statement.

SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of January 31, 1998, 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 7.37%
240 West Center Street
Orem, UT 84057
Eric E. Schmidt...................................... 1,451,673 *
John A. Young........................................ 182,000 *
Elaine R. Bond....................................... 84,500 *
Hans-Werner Hector................................... 52,995 *
Jack L. Messman(3)................................... 415,200 *
Larry W. Sonsini..................................... 54,100 *
James R. Tolonen(4).................................. 127,655 *
Glenn Ricart......................................... 24,673 *
Ronald E. Heinz, Jr.................................. 1,695 *
Richard A. Nortz..................................... 23,166 *
Joseph A. Marengi(5)................................. 486,412 *
All current directors and executive officers as a
group (16 persons).................................. 2,636,900 .75%
</TABLE>
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* less than one percent

(1) Unless otherwise indicated, the persons named have sole voting and
investment power over the number of shares of the Company's Common Stock
shown as being beneficially owned by them. As to each person or group
named in the table, the table includes the following shares issuable upon
exercise of options that are exercisable within 60 days from January 31,
1998: Dr. Schmidt 550,000, Mr. Young 172,000, Ms. Bond 79,500, Mr. Hector
47,995, Mr. Messman 119,500, Mr. Sonsini 47,500, Mr. Marengi 486,412. All
current directors and executive officers as a group 1,116,495. Most
executive officers have no options that are exercisable within 60 days due
to the terms of the July 1997 option exchange program whereby vested
options are not exercisable for one year. See "Executive Compensation--
Ten-Year Option Repricings" and "Report of the Compensation Committee of
the Board of Directors on Executive Compensation".

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(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) Includes 15,700 shares held by Mr. Messman's adult child living at home,
as to which he disclaims beneficial ownership.

(4) Of such shares, 6,047 are held by a trust (of which Mr. Tolonen is a co-
trustee) for the benefit of members of Mr. Tolonen's immediate family.

(5) Former executive officer.

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 seven
to six effective February 9, 1998. Accordingly, a Board of six 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 Chairman of the Board and Chief Executive 1997 42
Officer of Novell(1)
John A. Young Vice Chairman of the Board of Novell; 1995 65
Retired Chief Executive Officer of
Hewlett-Packard Company(2)
Elaine R. Bond Retired Chase Fellow/Senior Consultant of 1993 62
The Chase Manhattan Bank, N.A.(3)
Hans-Werner Hector Cofounder and former Member of Advisory 1995 58
Board of SAP AG, Germany(4)
Jack L. Messman Chairman and Chief Executive Officer of 1985 57
Union Pacific Resources Group, Inc.(5)
Larry W. Sonsini Member of the law firm of Wilson Sonsini 1988 57
Goodrich & Rosati, Professional
Corporation(6)
</TABLE>
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(1) Eric E. Schmidt

Dr. Schmidt became Chairman of the Board and Chief Executive Officer of the
Company on April 7, 1997. From 1983 until March 1997, Dr. Schmidt has held
various positions at Sun Microsystems, Inc. (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.

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(2) John A. Young

Mr. Young was acting Chairman of the Novell Board of Directors from August
1996 until April 1997 at which time he was appointed Vice Chairman of the
Board. Mr. Young retired in 1992 from his position as Chief Executive Offi-
cer of Hewlett-Packard Company (an international computation and measure-
ment company), a position he held for fifteen years. He has had a long as-
sociation with competitiveness issues, having chaired President Reagan's
Commission on Industrial Competitiveness and founded the Council on Compet-
itiveness in 1986. Mr. Young is also a director of Wells Fargo & Co., Chev-
ron Corp., SmithKline Beecham plc, Shaman Pharmaceuticals, Inc.,
Affymetrix, Ciphergen Biosystems, Inc. and Lucent Technology, and is a mem-
ber of The Business Council. He also is Chairman of the Board of Smart Val-
ley, Inc.

(3) 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.

(4) Hans-Werner Hector

Mr. Hector is a 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
wholly 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. Mr. Hector is also a director of CAMELOT IS2 International.

(5) Jack L. Messman

Mr. Messman has served as Chairman and Chief Executive Officer of Union
Pacific Resources Group, Inc. (an oil and gas company) since October 1996.
Mr. Messman previously served as President and Chief Executive Officer of
Union Pacific Resources Group, Inc. from October 1995 to October 1996. From
March 1991 to October 1995, Mr. Messman served as President and Chief
Executive Officer of Union Pacific Resources Company. 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.

(6) Larry W. Sonsini

Mr. Sonsini has been a Member and Chairman of the Executive Committee of
Wilson Sonsini Goodrich & Rosati, Professional Corporation (a law firm) for
more than the last five years. Mr. Sonsini is also a director of Lattice
Semiconductor Corporation and Pixar, Inc.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors held 14 meetings, including six telephone conference
call meetings, during the fiscal year ended October 31, 1997.

The Board of Directors has three committees. The Audit Committee is
comprised of Directors Messman as chairman, Bond and Hector and also included
Director Young until he resigned from the Committee in August 1997. The
Compensation Committee is comprised of Directors Young as chairman, Bond and
Messman. The Corporate Governance Committee is comprised of Director Messman
and also included Director Sonsini until he resigned from the committee in
December 1997 and Director Wilson until he resigned from the Board of
Directors in February 1998. The Corporate Governance Committee performs the
functions of a nominating committee.

The Audit Committee of the Board of Directors met six times during fiscal
1997. 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

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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 eight times during
fiscal 1997. The Compensation Committee establishes the Company's compensation
philosophy, determines executive compensation, and administers the Company's
Incentive Plan and its 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 once during
fiscal 1997. The responsibilities of the Corporate Governance Committee
include establishing qualifications to serve on the Board and Committees of
the Board, identifying 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 receives and reviews
shareholder suggestions for nominees for Board membership, which potential
nominees will be reviewed in accordance with the procedures established for
reviewing nominees by the Committee. Any such suggestion for a nominee should
be submitted to the Secretary of the Company.

During the last fiscal year, all current directors attended at least 75
percent of the meetings of the Board and Committees of which they were
members.

VOTE REQUIRED AND BOARD RECOMMENDATION

The six 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.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE SLATE OF
NOMINEES SET FORTH ABOVE.

PROPOSAL TWO

APPROVAL AND RATIFICATION OF THE ADOPTION OF AN AMENDMENT TO THE COMPANY'S
1989 EMPLOYEE STOCK PURCHASE PLAN

PROPOSED AMENDMENT

On December 10, 1997, the Board of Directors of the Company approved an
amendment to the Novell, Inc. 1989 Employee Stock Purchase Plan (the "Purchase
Plan") to increase the number of shares available for issuance under the
Purchase Plan from twelve million (12,000,000) to eighteen million
(18,000,000). At the 1998 Annual Meeting, the shareholders are being asked to
approve such increase in shares under the Purchase Plan.

The Board of Directors believes that the Purchase Plan encourages and
assists employees of Novell to acquire an equity interest in the Company,
helps align employee interests with other shareholders, helps provide for the
future financial security of Novell employees and fosters 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.

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During 1997, the Financial Accounting Standards Board issued Emerging Issues
Task Force No. 97-12 "Accounting for Increased Share Authorizations in an IRS
Section 423 Employee Stock Purchase Plan under APB Opinion No. 25, Accounting
for Stock Issued to Employees" (EITF 97-12). EITF 97-12 requires that
companies have a sufficient number of shares, approved by shareholders, at the
beginning of each offering period. Should additional shares need to be
approved by shareholders during the offering period, this could result in
compensation expense to the Company. Due to this new regulation the Company
must plan farther ahead in obtaining shareholder approval of a sufficient
number of shares to fund future offering periods, especially offering periods
that are scheduled to begin prior to the 1999 Shareholder Meeting.

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 six 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 holds 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 eligible to participate in the Purchase Plan. As of January
31, 1998, approximately 4,500 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 January 31, 1998 there were approximately 2,200 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 based on 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 subsequently 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

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<PAGE>

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, or any other applicable law or
regulation.

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, subject to the
limit on deductibility of compensation paid to certain others of the Company
under Section 162(m) of the Code. To the extent allowed, the Company's tax
deduction is generally measured as 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% (20% in the case of shares held for at least 18 months).

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 six months per
calendar year, including the Named Officers. Participation is voluntary and is
dependent on each eligible employee's election to participate and their
respective determination

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<PAGE>

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, 9,002,297 shares of Common Stock have been acquired by
employees of the Company through participation in the Purchase Plan. The
Company has received approximately $96.5 million from the purchase of stock by
employees through the Purchase Plan. Non-employee directors are not eligible
to participate in the Purchase Plan.

The following table sets forth information with respect to purchases of
Common Stock by Named Officers, to all current executive officers as a group
and to all other employees as a group during the last fiscal year ended
October 31, 1997:

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>
Eric E. Schmidt................................. 1,673 4,436
Chairman of the Board and Chief Executive
Officer
James R. Tolonen................................ -- --
Senior Vice President and Chief Financial
Officer
Glenn Ricart.................................... 1,673 4,436
Senior Vice President and Chief Technology
Officer
Ronald E. Heinz, Jr............................. 1,673 4,436
Senior Vice President Worldwide Sales
Richard A. Nortz................................ 2,661 5,492
Senior Vice President Customer Services
Joseph A. Marengi(2)............................ -- --
Former President and Chief Operating Officer
All current executive officers as a group (11 11,191 26,293
persons).......................................
All other employees as a group.................. 1,980,313 3,691,119
</TABLE>
- --------
(1) Fair market value on date of purchase, minus the purchase price.
(2) Former officer.

VOTE REQUIRED AND BOARD 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 Purchase Plan encourages and
assists employees of Novell to acquire an equity interest in the Company,
helps align employee interests with other shareholders, helps provide for the
future financial security of Novell employees and fosters good employee
relations. The opportunity for employees to acquire shares pursuant to the
Purchase Plan will be important to attract and retain qualified employees who
are 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 non-employee 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 1998 and to perform audit-related
services and consultation in connection with various accounting and financial
reporting matters. Ernst & Young also performs certain non-audit services for
the Company.

The Board has directed that the appointment of Ernst & Young be submitted to
the shareholders for ratification. The affirmative vote of a majority of the
Votes Cast is required for ratification. 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 1997, 1996 and 1995 for (i)
all persons serving as Chief Executive Officer during fiscal 1997, (ii) the
four most highly compensated executive officers serving at fiscal year end
whose salary plus bonus exceeded $100,000 in fiscal 1997 and (iii) one former
executive officer who would have been included in the category described in
subsection (ii) had he still been an executive officer of the Company at
fiscal 1997 year end (the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION AWARDS
--------------------------------- -----------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
POSITION YEAR ($) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6)
- -------------------------- ---- ------- ------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eric E. Schmidt(7)........ 1997 354,347 374,796 -- 7,697,250 2,750,000 6,400
Chairman of the Board and
Chief Executive Officer
James R. Tolonen.......... 1997 356,068 164,520 -- -- 500,000 15,612
Senior Vice President and 1996 347,200 -- -- 362,625 209,000 14,377
Chief Financial Officer 1995 360,600 137,929 -- -- -- 16,317
Glenn Ricart(8)........... 1997 305,193 134,685 -- -- 353,000 13,123
Senior Vice President and 1996 273,896 -- 30,415 435,150 110,000 10,006
Chief Technology Officer
Ronald E. Heinz, Jr.(9)... 1997 299,747 133,870 -- -- 476,160 13,500
Senior Vice President
Worldwide Sales
Richard A. Nortz(10)...... 1997 266,835 103,275 -- -- 424,000 10,591
Senior Vice President
Customer Services
Joseph A. Marengi(11)..... 1997 525,001 55,400 -- -- 200,000 992,252
Former President and 1996 403,980 193,819 -- 362,625 454,000 24,093
Chief Operating Officer 1995 381,447 171,171 -- -- -- 20,374
</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.

(2) Cash bonuses for services rendered in fiscal years 1997, 1996 and 1995
have been listed in the year earned. Bonuses earned in 1997 were paid
quarterly with fiscal fourth quarter and year-end bonuses paid in the
following fiscal year. Bonuses were calculated based on the
accomplishment of certain performance objectives. Dr. Schmidt's bonus was
calculated on a preset formula based on the terms of his employment
contract. Starting fiscal 1998, Dr. Schmidt's bonus will be earned based
on the accomplishment of certain performance objectives. See "Report of
the Compensation Committee of the Board of Directors on Executive
Compensation." No bonuses were earned for fiscal 1996. The amount listed
for Mr. Marengi in fiscal 1996 represents sales commissions. Bonuses
earned in 1995 were actually paid in the following fiscal year.

(3) Mr. Ricart received $30,415 in fiscal 1996 to cover expenses in the
relocation of his primary residence from Maryland to Utah. No other Named
Officer received perquisites in an amount greater than the lesser of (i)
$50,000 or (ii) 10 percent of such Named Officer's total salary plus
bonus.

(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
($0.01 per share for Dr. Schmidt and $0.10 per share for other Named
Officers). On March 18, 1997, Dr. Schmidt received a restricted stock
award of 900,000 shares. Such shares vest 30%, 25%, 20%, 15% and 10% on
grant anniversary in 1998, 1999, 2000, 2001 and 2002, respectively. On
March 1, 1996, Named Officers Tolonen, Ricart and Nortz received a
restricted stock award of 36,000, 30,000 and 20,000 shares, respectively.
Such shares vest over a two-year period with 50%

10
<PAGE>

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. As of
1997 fiscal year end, Named Officers had the following number of shares of
restricted stock having a value as noted: Mr. Tolonen 15,000 shares, value
$126,563; Mr. Ricart 18,000 shares, value $151,875; and Mr. Nortz 10,000
shares, value $84,376.

(5) Includes shares subject to options granted in connection with the July
1997 option exchange program. See "Executive Compensation--Ten-Year
Option Repricings" and "Report of the Compensation Committee of the Board
of Directors on Executive Compensation".

(6) The stated amounts for all Named Officers except Mr. Marengi are Company
matching contributions to the Novell, Inc. Retirement and Savings Plan
and the Deferred Compensation Plan. Mr. Marengi's amount for fiscal 1997
includes (i) a payment of $969,559 based on the terms of his separation
agreement and (ii) $23,695 of Company matching contributions.

(7) Dr. Schmidt joined the Company in March 1997.

(8) Mr. Ricart joined the Company in fiscal 1996.

(9) Mr. Heinz became an executive officer in fiscal 1997.

(10) Mr. Nortz became an executive officer in fiscal 1997.

(11) Mr. Marengi resigned from the Company in July 1997.

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; the vice
chairman receives an additional annual retainer of $100,000. 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. Pursuant to a consulting
agreement entered into by the Company with Mr. Young in August 1996, Director
Young received a consulting fee of $10,000 a week from the beginning of the
fiscal year until April 1997 while he was Chairman of the Board and provided
consulting services to the Company as needed. In addition, the option to
purchase 100,000 shares at $10.4375 per share granted to Mr. Young pursuant to
such agreement became fully vested on March 31, 1997 and will expire in April
1998. The consulting agreement was terminated in April 1997.

Under the Company's Stock Option Plan for Non-Employee Directors, as
amended, (the "Director Plan") each non-employee Director who joins the Board
will automatically receive options to purchase 30,000 shares vesting as to 25
percent 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 percent annually over two years. Upon a change in control,
options granted under the Director Plan 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 ".

On October 8, 1997, under the Company's 1991 Stock Plan, as amended, each
non-employee director was granted options to purchase 40,000 shares, except
the vice chairman who was granted an option to purchase 100,000 shares.
Options have an exercise price equal to the fair market value on date of grant
of $8.75 per share. These options vest 25 percent on the first year
anniversary date and thereafter 6.25 percent quarterly over three years.
Options expire ten years from grant date.

Novell has a Directors' Charitable Award Program (the "Charitable 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 Charitable Program,
subject to vesting requirements. The Charitable Program is funded by life
insurance policies purchased by the Company, which

11
<PAGE>

provide for a $1 million death benefit to participating directors. Upon the
death of a participating director, the Company will 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 Charitable
Program since all available insurance proceeds and tax deductions accrue
solely to the Company. The aggregate cost to the Company of the life insurance
premiums paid during fiscal 1997 to fund the Charitable Program was $76,000.

On August 17, 1995, non-employee Directors Messman, Sonsini and Wilson each
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 grant date. 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 Director Wilson's resignation from the Board in February
1998 his stock appreciation right had no value.

STOCK OPTIONS GRANTS IN FISCAL YEAR 1997

The following table provides information with respect to stock options
granted during fiscal 1997 to the Named Officers. No stock appreciation rights
have been granted by the Company.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR
OPTIONS EMPLOYEES EXERCISE OPTION TERM(1)
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (#)(2) YEAR (3) ($/SH) DATE 5% ($) 10% ($)
---- ------------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Eric E. Schmidt......... 2,750,000 (4) 5.70 $ 8.56 03/18/2007 14,801,952 37,499,220
James R. Tolonen........ 75,000 (5) .16 $10.50 11/21/2006 (9) (9)
19,200 (6) .04 $ 6.91 11/20/2001 31,279 67,387
19,200 (6) .04 $ 6.91 10/13/2002 38,351 85,337
48,000 (6) .10 $ 6.91 10/05/2003 117,216 267,812
64,000 (7) .14 $ 6.91 10/19/2004 190,362 445,088
60,000 (7) .13 $ 6.91 12/22/2005 210,181 509,643
60,000 (8) .13 $ 6.91 03/01/2006 216,306 527,197
47,200 (7) .10 $ 6.91 03/01/2006 170,161 414,901
60,000 (7) .13 $ 6.91 11/21/2006 270,830 549,652
47,400(10) .10 $ 8.34 08/07/2007 248,575 629,738
Glenn Ricart............ 60,000 (5) .13 $10.50 11/21/2006 (9) (9)
32,000 (7) .07 $ 6.91 09/18/2005 108,740 262,330
32,000 (8) .07 $ 6.91 03/01/2006 115,272 281,289
56,000 (7) .12 $ 6.91 03/01/2006 201,886 492,256
48,000 (7) .10 $ 6.91 11/21/2006 190,472 439,721
125,000(10) .27 $ 8.34 08/07/2007 655,524 1,660,703
</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR
OPTIONS EMPLOYEES EXERCISE OPTION TERM(1)
GRANTED IN FISCAL PRICE EXPIRATION -------------------
NAME (#)(2) YEAR (3) ($/SH) DATE 5% ($) 10% ($)
---- ----------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ronald E. Heinz, Jr..... 35,000 (5) .08 $10.50 11/21/2006 (9) (9)
25,000 (5) .05 $11.38 02/12/2007 (9) (9)
5,000 (5) .01 $ 9.63 03/11/2007 (9) (9)
4,800 (6) .01 $ 6.91 10/05/2003 11,722 26,781
5,400 (6) .01 $ 6.91 05/24/2004 14,937 34,757
6,000 (7) .01 $ 6.91 09/07/2004 17,166 40,112
16,000 (7) .03 $ 6.91 09/07/2004 44,998 106,965
5,760 (7) .01 $ 6.91 06/22/2005 18,428 44,710
8,000 (7) .02 $ 6.91 12/22/2005 28,002 67,952
47,200 (8) .10 $ 6.91 03/01/2006 170,026 414,901
16,000 (7) .03 $ 6.91 10/24/2006 63,491 146,574
28,000 (7) .06 $ 6.91 11/21/2007 111,109 256,504
20,000 (7) .04 $ 6.91 02/12/2007 82,579 192,579
4,000 (7) .01 $ 6.91 03/11/2007 16,730 39,140
250,000(10) .05 $ 8.34 08/07/2007 1,311,048 3,321,405
Richard A. Nortz........ 40,000 (5) .09 $10.50 11/21/2006 (9) (9)
40,000 (5) .09 $ 9.63 03/11/2007 (9) (9)
48,000 (7) .10 $ 6.91 10/20/2005 165,694 400,605
32,000 (8) .07 $ 6.91 03/01/2006 115,363 281,289
32,000 (7) .07 $ 6.91 11/21/2006 126,981 293,148
32,000 (7) .07 $ 6.91 03/11/2007 132,126 308,126
200,000(10) .43 $ 8.34 08/07/2007 1,048,838 2,657,124
Joseph A. Marengi....... 200,000(10) .43 $10.50 11/21/2007 1,320,480 3,345,300
</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 term of the option.
Options issued in the July 1997 option exchange program are shown as new
grants (the "Repriced Options"). The terms of the Repriced Options are
based on the expiration dates of the options surrendered, therefore, the
option term used in the above calculation varies from 4.3 to 9.6 years.
Other options have a ten-year term. The potential realizable value is (i)
the potential stock price at the end of the term based on the 5 percent
and 10 percent assumed rates of annual stock price appreciation less the
exercise price times (ii) the number of shares subject to 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,
consultants and non-employee Directors, the number of shares to be subject
to the options granted and the terms of such grants. All options shown in
the table have exercise prices equal to the 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 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 approximately 48,192,000 shares were
granted to employees (46,549,000 were cancelled) in fiscal 1997.

13
<PAGE>

(4) Non-statutory option having an exercise price equal to the fair market
value on the date of grant, vesting 20 percent one year from grant date
and thereafter 1.66 percent per month over four 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. These options were canceled at the request of the
optionee as part of the option exchange program.

(6) Non-statutory option having an exercise price equal to the fair market
value on the date of the option exchange, vested 25 percent a year from
grant date of the option surrendered in exchange. This option is
currently 100 percent vested. Has a term of ten years from original grant
date.

(7) Non-statutory option having an exercise price equal to the fair market
value on the date of the exchange grant, vesting 25 percent one year from
original grant date and thereafter 6.25 percent per quarter over three
years and having a term of ten years from original grant date.

(8) Non-statutory option having an exercise price equal to the fair market
value on the date of the exchange grant, vesting 25 percent one year from
original grant date and thereafter 6.25 percent per quarter over three
years and having a term of ten years from original grant date.
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.

(9) Stock options were canceled as part of the exchange program in July 1997
and therefore have no Potential Realizable Value.

(10) Non-statutory options having an exercise price equal to the fair market
value on date of grant, vesting 25 percent one year from grant date and
thereafter 6.25 percent quarterly over three years and having a term of
ten years.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The number of shares acquired upon exercise of options and the value
realized from any such exercise during fiscal 1997 and the number and value of
options held at 1997 fiscal year end for the Named Officers are set forth in
the following table.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES VALUE YEAR END (#) AT FISCAL YEAR END (1) ($)
ACQUIRED ON REALIZED ------------------------- -------------------------------
NAME EXERCISE (#) ($) (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ----------- -------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Eric E. Schmidt......... 0 -- 0 2,750,000 0 0
James R. Tolonen(3)..... 0 -- 0 425,000 0 507,400
Glenn Ricart(3)......... 0 -- 0 293,000 0 225,750
Ronald E. Heinz, Jr.(3). 0 -- 0 411,160 0 216,558
Richard A. Nortz(3)..... 0 -- 0 344,000 0 193,500
Joseph A. Marengi(4).... 0 -- 486,412 0 0 0
</TABLE>
- --------
(1) Value of unexercised in-the-money options is (i) the fair market value of
the Company's Common Stock at fiscal 1997 year end ($8.25 per share) less
the option exercise price per share of in-the-money options, times (ii)
the number of shares subject to such options.
(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) These Named Officers participated in the option exchange program in July
1997. The terms of this exchange program allowed for options to continue
vesting under the original grant terms but imposed a one-year suspension
of exercisability.
(4) Former Executive Officer. Exercisable options will cancel during fiscal
1998.

14
<PAGE>

TEN-YEAR OPTION REPRICINGS

In June 1997, the Board of Directors approved an option exchange program
whereby all employees, including the Named Officers (except for Dr. Schmidt),
were entitled to exchange their outstanding stock options for new stock
options to be granted at fair market value on July 18, 1997. See also "Report
of the Compensation Committee".

The following Ten-Year Option Repricings table shows options repriced during
the last ten fiscal years of the Company (November 1, 1987, to October 31,
1997) for persons who were executive officers at the time of the repricing of
such options.

<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE ORIGINAL OPTION
SECURITIES OF STOCK AT EXERCISE PRICE TERM REMAINING
UNDERLYING TIME OF AT TIME OF AT DATE OF
DATE OF OPTIONS REPRICING REPRICING NEW EXERCISE REPRICING
NAME AND POSITION REPRICING REPRICED(#) ($) ($/SH) PRICE ($/SH) (YEARS)
----------------- --------- ---------- ------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
James R. Tolonen........ 7/18/97 19,200 6.90625 23.2500 6.90625 1.3
Senior Vice President 7/18/97 19,200 6.90625 27.5000 6.90625 2.2
and Chief Financial 7/18/97 48,000 6.90625 18.0000 6.90625 3.2
Officer 7/18/97 64,000 6.90625 15.8750 6.90625 7.3
7/18/97 60,000 6.90625 14.6250 6.90625 8.4
7/18/97 60,000 6.90625 12.1875 6.90625 8.6
7/18/97 47,200 6.90625 12.1875 6.90625 8.6
7/18/97 60,000 6.90625 10.5000 6.90625 9.3
Glenn Ricart ........... 7/18/97 32,000 6.90625 19.0000 6.90625 8.2
Senior Vice President 7/18/97 32,000 6.90625 12.1875 6.90625 8.6
and Chief Technology 7/18/97 56,000 6.90625 12.1875 6.90625 8.6
Officer 7/18/97 48,000 6.90625 10.5000 6.90625 9.3
Ronald E. Heinz, Jr. ... 7/18/97 4,800 6.90625 18.0000 6.90625 3.2
Senior Vice President 7/18/97 5,400 6.90625 17.5000 6.90625 6.9
Worldwide Sales 7/18/97 6,000 6.90625 15.3750 6.90625 7.1
7/18/97 16,000 6.90625 15.3750 6.90625 7.1
7/18/97 5,760 6.90625 20.0000 6.90625 7.9
7/18/97 8,000 6.90625 14.6250 6.90625 8.4
7/18/97 47,200 6.90625 12.1875 6.90625 8.6
7/18/97 16,000 6.90625 10.2500 6.90625 9.3
7/18/97 28,000 6.90625 10.5000 6.90625 9.3
7/18/97 20,000 6.90625 11.3750 6.90625 9.6
7/18/97 4,000 6.90625 9.6250 6.90625 9.7
Richard A. Nortz ....... 7/18/97 48,000 6.90625 14.3750 6.90625 8.3
Senior Vice President 7/18/97 32,000 6.90625 12.1875 6.90625 8.6
Customer Services 7/18/97 32,000 6.90625 10.5000 6.90625 9.3
7/18/97 32,000 6.90625 9.6250 6.90625 9.6
David R. Bradford....... 7/18/97 19,200 6.90625 23.2500 6.90625 1.3
Senior Vice President 7/18/97 19,200 6.90625 27.5000 6.90625 2.2
and General Counsel 7/18/97 32,000 6.90625 18.0000 6.90625 3.2
7/18/97 44,000 6.90625 15.8750 6.90625 7.3
7/18/97 44,800 6.90625 14.6250 6.90625 8.4
7/18/97 3,200 6.90625 14.6250 6.90625 8.4
7/18/97 20,800 6.90625 12.1875 6.90625 8.6
7/18/97 28,000 6.90625 10.5000 6.90625 9.3
</TABLE>

15
<PAGE>

On March 18, 1997, the Company entered an employment contract with Dr. Eric
E. Schmidt whereby Dr. Schmidt agreed to become Chief Executive Officer and
Chairman of the Board of Novell on April 7, 1997. During the interim period
from March 18, 1997 until April 7, 1997, Dr. Schmidt agreed to work as an
employee of Novell on a part-time basis.

Pursuant to the employment contract, Dr. Schmidt's annual base salary is
$600,000 with a guaranteed bonus payment on October 31, 1997, of $374,796.
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.

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 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 unvested
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)
an amount equal to his annual base salary and target bonus at time of
termination; (ii) an amount equal to the cost of employee benefits for one
year; (iii) accelerated vesting of one year for all stock options; and (iv)
waiving of repurchase rights on any remaining unvested restricted stock.

In the event of termination without cause due to a change in control or
constructive termination within two months before or one year after a change
in control, Dr. Schmidt will receive the following: (i) an amount equal to
twice his annual base salary and target bonus at time of termination; (ii) an
amount equal to the cost of employee benefits for 18 months; (iii) accelerated
vesting of one year for all stock options; and (iv) waiving of

16
<PAGE>

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
termination date, or (b) one-half of the number of shares not vested on his
termination date.

In January 1998, all senior vice presidents of the Company, signed a Senior
Management Severance Plan (the "Severance Plan") agreement. Under the terms of
the Severance Plan, their prior contract was terminated. The Severance Plan
provides each participant, in the event of involuntary termination by the
Company, benefits of (i) 150 percent of their base annual salary, (ii)
payments to cover 18 months of employee benefits, (iii) accelerated vesting of
that portion of their stock options, if any, which would have vested within
one year, and (iv) waiving of repurchase rights as to the number of shares, if
any, of Restricted Stock that would vest on the next anniversary of the
Restricted Stock grant date.

The Severance Plan is effective for consecutive one year periods, unless the
Board chooses to terminate it. However, termination may only occur with regard
to future fiscal years, nor may termination occur after a change in control.
The Board also has authority to amend the Severance Plan prior to a change in
control, however, no such amendment shall reduce the benefits for which the
participant may be eligible. Change in control is defined in the Severance
Plan 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 at least 50 percent 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).

NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

The Novell, Inc. Non-Employee Directors Stock Option Plan, as amended (the
"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
(the "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
(the "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 percent 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, options
granted under the Director Plan become fully vested and the Director has one
year in which to exercise.

Directors Bond, Messman, Sonsini and Wilson were each granted an Annual
Grant on May 2, 1997 having an exercise price of $7.50 per share. Upon
Director Wilson's resignation in February 1998 no options under this grant
were exercisable.

On October 31, 1997, fiscal 1997 year end, options to purchase 599,000
shares of the Company's Common Stock under the Director Plan were outstanding
at a weighted average exercise price of $16.77 per share.

Non-employee directors have also been granted options under the Company's
1991 Stock Plan. See "Executive Compensation--Director Compensation".

Non-employee directors were not permitted to participate in the July 1997
option exchange program.

17
<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, Dr. Schmidt, Chairman and
Chief Executive Officer (the "CEO"), certain officers of the Company and
outside consultants, attend 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 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 for
the CEO and other executive officers.

. Administering the Company's employee stock option and stock purchase
plans (the "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 33% of the cash compensation of each
executive officer (except for the CEO in fiscal 1997) 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 1997 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 each fiscal quarter if both the Company and the executive
officer achieve the performance objectives established for that quarter.
Factors considered in determining actual incentive bonus for each executive
officer include Company performance and individual performance.

18
<PAGE>

Market practices with respect to stock option grants are also reviewed based
on survey data. 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 to five-year vesting schedule.

1997 EXECUTIVE OFFICER COMPENSATION

The Committee reviewed and approved the Novell Incentive Plan for fiscal
1997, to be used for all employees including the Named Officers. The Committee
established the Company revenues, earnings and operating profit objectives and
performance targets to be used for incentive determination.

A program was established to provide a future cash payment to the Company's
key employees below the title of Senior Vice President to encourage retention.
The Company had to achieve certain earnings target and the employee had to be
an active employee as of December 31, 1997 in order for the incentive to be
paid. The Committee approved the plan which included awards to two current
executive officers and approximately 80 other key employees, no awards were
approved for the Named Officers or CEO. In January 1998, such awards were
paid.

The Committee reviewed the exercise prices of all stock options in light of
the current stock trading price. The Committee believed that in order to
retain and motivate employees during this critical period that it would be in
the best interest of the Company to provide an exchange program for stock
options. In June 1997, the Committee approved a stock option exchange program.
The program was open to all employees of the Company, including the Named
Officers, but excluding the CEO and members of the Board of Directors. The
terms were as follows: (i) options surrendered would be regranted at the fair
market value on July 18, 1997; (ii) a new option to purchase four shares would
be granted for every old option to purchase five shares surrendered; (iii) the
Repriced Options would retain the vesting schedule of the options surrendered;
(iv) the expiration date of the Repriced Options would be ten years from grant
date of options surrendered; and (v) the Repriced Options would be subject to
a one year "blackout" period during which no options could be exercised. If
the Company was the moving party and the employee lost their job due to
restructuring the blackout would be lifted.

During fiscal 1997, the Committee reviewed industry survey data and current
executive responsibility. The Committee felt certain executive salaries were
below the range of industry standards for comparable positions and adjustments
were made to some executives' base salary, including two of the Named
Officers' salaries. Stock options were also reviewed based on survey data.
Most executive officers, including the Named Officers, were granted a stock
option.

1997 CEO COMPENSATION

The Committee, with the help of outside legal counsel, reviewed market data
for the position of Chairman and Chief Executive Officer and on March 18,
1997, entered into an employment contract with Dr. Eric E. Schmidt whereby Dr.
Schmidt would become Chairman of the Board and Chief Executive Officer on
April 7, 1997. During the interim period from March 18, 1997 until April 7,
1997, Dr. Schmidt worked on a part-time basis. See "Employment Contracts,
Termination of Employment and Change in Control".

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

19
<PAGE>

per person in any taxable year unless it is "performance based" within the
meaning of Section 162(m). Since to date the cash compensation plus restricted
stock vesting of each of the Company's executive officers has been 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 for fiscal 1997 or prior years. The Company's policy is, to the
extent reasonable, to qualify its executive officers' compensation for
deductibility under the applicable tax laws. However, it appears that non-
option compensation of the CEO will exceed $1 million in fiscal 1998.

Respectfully submitted,

John A. Young, Chairman
Elaine R. Bond
Jack L. Messman

20
<PAGE>

COMPARISON OF FIVE-YEAR 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 (the "S&P 500 Index") and an industry index over the periods from,
respectively, November 1, 1992 and November 1, 1987. The graphs assume that
$100 was invested on, respectively, November 1, 1992 and November 1, 1987 in
the Company's Common Stock, the S&P 500 Index and the industry index, and that
all dividends were reinvested.

The Company's industry 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

[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
BASE INDEXED/CUMULATIVE RETURNS
PERIOD ----------------------------------
COMPANY/INDEX NAME 1992 1993 1994 1995 1996 1997
------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Novell, Inc.......................... 100 70.49 56.97 48.77 32.79 27.66
S&P 500 Index........................ 100 114.94 119.39 150.95 187.32 247.47
Nasdaq Computer & DataProcessing
Services............................ 100 111.75 134.53 205.33 238.05 321.18
</TABLE>

PAST FIVE YEAR AVERAGE COMPOUNDED ANNUAL RETURN
<TABLE>
<S> <C>
Novell, Inc............................................................ (22.66)%
S&P 500 Index.......................................................... 19.87 %
Nasdaq Computer & Data Processing Services............................. 26.26 %
</TABLE>

21
<PAGE>

PERFORMANCE GRAPH
COMPARISON OF TEN-YEAR CUMULATIVE TOTAL RETURN
AMONG NOVELL, INC., S&P 500 AND NASDAQ C&DPS

[PERFORMANCE GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
BASE INDEXED/CUMULATIVE RETURNS
PERIOD -----------------------------------------------------------------------
COMPANY/INDEX NAME 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------------------ ------ ------ ------ ------ ------ ------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Novell, Inc. ........... 100 165.94 157.97 275.36 985.51 1414.49 997.10 805.80 689.86 463.77 391.30
S&P 500 Index........... 100 114.80 145.11 134.25 179.23 197.07 226.51 235.27 297.48 369.15 487.68
Nasdaq C&DPS............ 100 107.62 144.79 131.14 286.98 334.82 374.17 450.43 687.50 796.03 1075.39
</TABLE>

PAST TEN YEAR AVERAGE COMPOUNDED ANNUAL RETURN
<TABLE>
<S> <C>
Novell, Inc.............................................................. 14.62%
S&P 500 Index............................................................ 17.17%
Nasdaq Computer & Data Processing Services............................... 26.81%
</TABLE>

22
<PAGE>

CERTAIN TRANSACTIONS

In fiscal 1997, 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 1998 for advice on legal matters.

Named Officer Nortz has one loan for $37,231.44 with the Company for the
payment of tax withholding due to vesting of restricted stock. The loan is
secured by shares of Company stock and has an interest rate of 5.83%. The loan
has a term of two years and is due on March 3, 1999. The loan was outstanding
at fiscal 1997 year end. Mr. Nortz had an additional loan for $100,000 with
the Company to assist in his relocation. The loan had a term of 18 months and
is due on July 1, 1997. The loan plus interest was paid-in-full on July 1,
1997.

Executive Officer Bradford has three loans ($26,194.63, $55,716.19 and
$28,305.67) 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% and 5.83%, respectively. Each loan has a term
of two years and is due on October 17, 1997, October 17, 1998 and March 3,
1999, respectively. The loan for $26,194.63 plus interest was paid-in-full on
October 17, 1997. The two remaining loans were outstanding at fiscal 1997 year
end.

Former Executive Officer Burnside had three loans ($25,302.44, $54,637.31
and $53,307.94) with the Company for the payment of tax withholding due to
vesting of restricted stock. The loans were secured by shares of Company stock
and had interest rates of 5.82%, 6.07% and 5.83%, respectively. Each loan had
a term of two years and was due in October 1997, October 1998 and March 1999.
All three loans plus interest were paid-in-full in April 1997 at the time of
Ms. Burnside's resignation.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Company believes that all Forms 3, 4 and 5 required to be filed by its
directors, officers and greater than 10% shareholders were filed on time
during fiscal 1997.

PROPOSALS OF SHAREHOLDERS

Proposals that shareholders desire to have included in the Company's proxy
materials for the 1999 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, 1998 in order to be considered for possible inclusion in such
proxy materials.

23
<PAGE>

ADDITIONAL INFORMATION

ANNUAL REPORT

The Company's Annual Report to Shareholders for the fiscal year ended
October 31, 1997, 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.

ANNUAL MEETING SUMMARY

The Company will provide a summary of the activities, including the final
vote on all proposals, of the Annual Meeting to Shareholders.

The summary will be available on the Novell Investor Relations web site at
www.novell.com/corp/ir/index.html approximately one week after the meeting.
Shareholders may also obtain a copy by calling (408) 577-8400.

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.

24
<PAGE>

[MAP APPEARS HERE]

DIRECTIONS TO NOVELL

From the Salt Lake Airport follow the signs that direct you to
Provo. You will first travel on I-80 East which will take you
to I-215 East. Then you will travel along I-215 towards Provo
and exit on the South I-15 Exit. You will drive approximately
30 miles on I-15, taking the Lindon Exit which is Exit 276.
Turn left or east onto 1600 North in Orem. Continue straight,
this takes you through a street light (State Street), about
1/2 mile from the light on the right hand side of the road is
Novell, Inc.

Annual Meeting held in auditorium, Building J.

[Logo of Recycled Paper]
<PAGE>

FRONT OF CARD
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 Eric E. Schmidt, 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
Utah office at 1555 North Technology Way, Orem, Utah 84097 on Tuesday April 7,
1998, at 2 p.m. local time and at any adjournments thereof, to vote as
designated.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ALL NOMINEES TO THE BOARD OF DIRECTORS, FOR 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 VOTE BY TELEPHONE OR THE INTERNET OR MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE

(Continued on reverse side)

YOUR VOTE IS IMPORTANT!

YOU CAN VOTE IN ONE OF THREE WAYS:

1. Call toll-free 1-800-840-1208 on a Touch-Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.

or
--

2. Vote by Internet at our Internet Address: http://novell.proxyvoting.com

or
--

3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.

It is not necessary to mail your proxy card, if you vote by telephone or
Internet.

PLEASE VOTE

<PAGE>

BACK OF CARD
- - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
1. ELECTION OF DIRECTORS:
<S> <C> <C>
Nominees: 01 Eric E. Schmidt, 02 John A. Young, 03 Elaine R. Bond,
04 Hans-Werner Hector, 05 Jack L. Messman, 06 Larry W. Sonsini

Vote For Withhold For all except _______________
all nominees Authority except nominees written above
to vote for all

</TABLE>

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
12,000,000 to 18,000,000.

Vote For Vote Against Abstain

3. RATIFICATION of Ernst & Young LLP as independent auditors.
Vote For Vote Against Abstain

and to vote on such other business as may properly come before the meeting
<TABLE>
<S> <C>
Dated:_________________________1998

__________________________________
Signature of Shareholder(s)

__________________________________

Signature of Shareholder(s)

Please sign exactly as name appears hereon. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership please sign
in partnership name by authorized person.
</TABLE>

VOTE BY TELEPHONE OR INTERNET

QUICK *** EASY *** IMMEDIATE

Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.

VOTE BY PHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE 1-800-840-1208
ANYTIME.
THERE IS NO CHARGE TO YOU FOR THIS CALL.
You will be asked to enter the 11-digit Control Number located
in the lower right of this form.

-------------------------------------------------------------------------
OPTION A: To vote as the Board of Directors recommends on ALL items,
press 1.
-------------------------------------------------------------------------

-------------------------------------------------------------------------
OPTION B: If you choose to vote on each item separately, press 0.
You will hear these instructions:
-------------------------------------------------------------------------

Item 1: To vote FOR ALL nominees, press 1: to WITHHOLD FOR
ALL nominees, press 9. To WITHHOLD FOR AN INDIVIDUAL nominee,
press 0 and listen to the instructions.

Item 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press
0. The instructions are the same for all remaining items to
be voted.

When asked, you must confirm your vote by pressing 1.

VOTE BY INTERNET: THE WEB ADDRESS IS http://novell.proxyvoting.com

THANK YOU FOR VOTING.