SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[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)
Novell, Inc.
..............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: _/
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4) Proposed maximum aggregate value of transaction:
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_/ Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] 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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4) Date Filed:
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Notes:
[COMPANY LOGO]
NOVELL, INC.
122 EAST 1700 SOUTH
P.O. BOX 5900
PROVO, UT 84606
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, MARCH 9, 1994
TO THE SHAREHOLDERS OF NOVELL, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of NOVELL,
INC. will be held at the Novell Corporate Headquarters located at 122 East 1700
South, Provo, Utah 84606, on Wednesday, March 9, 1994, at 2:00 p.m. Mountain
Standard Time, for the following purposes:
1. To elect six directors;
2. To approve and ratify the adoption of amendments to the Novell, Inc.
1991 Stock Plan; and
3. 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 January 11, 1994,
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
Secretary
January 20, 1994
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.
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 1994 Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held at the
Novell Corporate Headquarters located at 122 East 1700 South, Provo, Utah
84606, on Wednesday, March 9, 1994, at 2:00 p.m. Mountain Standard Time, and
any adjournment thereof. These proxy materials are being mailed on or about
January 20, 1994, to all shareholders of the Company's Common Stock of record
as of January 11, 1994. At the Annual Meeting, the Company's shareholders will
be asked to elect six directors, to approve and ratify the adoption of
amendments to the Novell, Inc. 1991 Stock Plan and to vote on such other
matters as may properly come before the Annual Meeting.
PERSONS MAKING THE SOLICITATION
All expenses of the Company in connection with this solicitation will be
borne by the Company. In addition to solicitation by mail, proxies may be
solicited by directors, officers and other employees of the Company by
telephone, telegraph, telefax, or telex, in person or otherwise, without
additional compensation. The Company will also request brokerage firms,
nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares held of record by such persons and will reimburse
such persons and the Company's transfer agent for their reasonable out-of-
pocket expenses in forwarding such material. Additionally, the Company has
elected to retain the services of Corporate Investor Communications, Inc. for
the purpose of soliciting proxies to be voted at the Annual Meeting at an
estimated cost of $12,500, plus out of pocket expenses.
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on January 11, 1994 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
that date, 308,833,023 shares of Common Stock were outstanding and entitled to
vote. Each outstanding share of Common Stock entitles the holder thereof to one
vote. As of record date, January 11, 1994, the closing stock price was $22.00
per share.
REVOCABILITY OF PROXY
A proxy may be revoked by a shareholder prior to the voting at the Annual
Meeting by written notice to the Secretary of the Company, by submission of
another 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. 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 amendments to the
Novell, Inc. 1991 Stock Plan and as to any other matter that may be properly
brought before the Annual Meeting, in accordance with the judgment of the
proxy.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All share amounts referred to in this Proxy Statement have been adjusted to
reflect the two-for-one stock splits on August 12, 1991, and August 26, 1992.
The following table sets forth, as of December 15, 1993, 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 directors and executive officers as a group.
COMMON STOCK(1)
----------------------
PERCENT OF
NUMBER OF OUTSTANDING
SHARES SHARES
---------- -----------
Raymond J. Noorda(2).............................. 30,939,744 11.14
Novell, Inc.
122 East 1700 South
Provo, UT 84606
Kanwal S. Rekhi(3)................................ 617,684 *
Elaine R. Bond.................................... 26,000 *
Jack L. Messman(4)................................ 685,332 *
Larry W. Sonsini.................................. 19,932 *
Ian R. Wilson(5).................................. 77,332 *
Mary M. Burnside.................................. 67,345 *
Joseph A. Marengi................................. 22,587 *
James R. Tolonen(6)............................... 142,000 *
All directors and executive officers as a group
(15 persons)..................................... 32,969,661 11.96
- --------
*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 which are exercisable within 60 days from December 15,
1993: Mr. Rekhi 72,500, Ms. Bond 24,000, Mr. Messman 85,332, Mr. Sonsini
13,332, Mr. Wilson 69,332, Ms. Burnside 60,000, Mr. Marengi 22,250, Mr.
Tolonen 58,000, all directors and executive officers as a group 693,146.
(2) Of such shares (i) 16,468,144 shares 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) 13,651,600 shares are held by Dialogic Systems
Corporation, a corporation in which Mr. Noorda holds 100% of the stock.
(3) Includes 45,184 shares held by a trust for Mr. Rekhi's minor children under
Trust Agreements dated December 15, 1989, of which trust he serves as a co-
trustee and as to which shares he disclaims beneficial ownership.
(4) Includes 40,000 shares held by Mr. Messman as custodian for his minor
children.
(5) Mr. Wilson holds 8,000 shares as trustee for his Defined Benefit Pension
Plan.
(6) Includes 8,472 shares held by Mr. Tolonen as custodian for his minor child.
2
PROPOSAL ONE
ELECTION OF DIRECTORS
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 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.
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE HAS BEEN A
NAME DURING THE LAST FIVE YEARS DIRECTOR SINCE AGE
---- --------------------------------- -------------- ---
Raymond J. Noorda Chairman of the Board, President and
Chief Executive Officer of the
Company(1).............................. 1983 69
Elaine R. Bond Chase Fellow and Senior Consultant for
Chase Manhattan Bank(2)................. 1993 58
Jack L. Messman President and Chief Executive Officer of
Union Pacific Resources Company(3)...... 1985 53
Kanwal S. Rekhi Executive Vice President Corporate
Technology of the Company(4)............ 1989 47
Larry W. Sonsini Member of the law firm of Wilson,
Sonsini, Goodrich & Rosati, Professional
Corporation(5).......................... 1988 52
Ian R. Wilson Chairman of the Board, President and
Chief Executive Officer of Windmill
Holdings Corp.(6)....................... 1989 64
- --------
(1) Mr. Noorda, a founder of the Company, has been Chief Executive Officer and
President of the Company since March 1983 and Chairman of the Board of the
Company since January 1986. Mr. Noorda is also a director of Dialogic
Systems Corporation, Alpnet, Inc., Micro Technology, Inc., and Business
Systems Group.
(2) From December 1991 to present, Ms. Bond has served as a Chase Fellow and
Senior Consultant for Chase Manhattan Bank, a New York based Money Center
Bank. From 1981 to December 1991, Ms. Bond served as Senior Vice President
and Senior Technology Officer for Chase Manhattan Bank. Prior to this time,
she worked for 24 years in a variety of positions for International
Business Machines Corporation (IBM). Ms. Bond is also a director of
Washington National Corporation, a health, life, and disability insurance
company located in Lincolnshire, Illinois.
(3) From March 1991 to present, Mr. Messman has served as President and Chief
Executive Officer of Union Pacific Resources Company, an oil company. From
1988 to March 1991, Mr. Messman served as Chairman and Chief Executive
Officer of U.S.P.C.I., Inc., a hazardous waste disposal company. From 1986
to 1988, Mr. Messman served as Managing Director of Mason Best Company, an
investment banking firm. Mr. Messman is also a director of Cambridge
Technology Partners, Inc. and Tandy Corporation.
(4) From June 1989 to present, Mr. Rekhi has been an Executive Vice President
and a director of the Company. Currently, Mr. Rekhi is Executive Vice
President Corporate Technology. Mr. Rekhi, a founder and executive officer
of Excelan, Inc., a LAN corporation acquired by Novell in June 1989, served
as Excelan's President and Chief Executive Officer from February 1988 to
June 1989 and as Executive Vice President of Business Development from 1986
to February 1988. Mr. Rekhi was also Secretary of Excelan from 1982 to
February 1988 and a member of its Board of Directors from 1986 to June
1989. Mr. Rekhi is also a director of Gupta Corporation.
3
(5) Mr. Sonsini has been with the law firm of Wilson, Sonsini, Goodrich &
Rosati, Professional Corporation since 1966. He is also a director of
Lattice Semiconductor Corporation and Silicon Valley Group.
(6) From February 1989 to present, Mr. Wilson has served as Chairman of the
Board, Chief Executive Officer and President of Windmill Holdings Corp., a
milling and baking company. From 1985 until August 1990, Mr. Wilson served
as Chairman of the Board, Chief Executive Officer and President of Wyndham
Foods, Inc., a baking company. From 1982 to August 1990, Mr. Wilson also
served as Chairman of the Board of Wilson Bottling Corporation. He is also
a director of Aqua-Vie Beverage Corporation and Golden State Foods, Inc.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held ten meetings in fiscal 1993.
The Board of Directors has two committees. The Audit Committee is comprised
of Directors Messman as chairman, Bond and Wilson. The Compensation Committee
is comprised of Directors Wilson as chairman, Bond and Messman. There is no
Nominating Committee or any committee performing the function of a nominating
committee.
The Audit Committee met twice during fiscal 1993. 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 five times during
fiscal 1993. The Compensation Committee focuses on executive compensation, the
administration of the Company's stock option and stock purchase plans and
making decisions on the granting of discretionary bonuses.
All directors attended at least 75% of the meetings of the Board and
Committees of which they were members.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
SLATE OF NOMINEES SET FORTH ABOVE. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS.
The six nominees receiving the highest number of affirmative votes of the
shares present or represented 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 legal effect under Delaware law. While there is no
definitive statutory or case law authority in Delaware as to the proper
treatment of abstentions in the election of directors, the Company believes
that abstentions should be counted for purposes of determining whether a quorum
is present at the Annual Meeting for the transaction of business. In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions with respect to the election of directors in this manner. In a 1988
Delaware case, Berlin v. Emerald Partners, the Delaware Supreme Court held that
broker non-votes may be counted as present or represented for purposes of
determining the presence or absence of a quorum for the transaction of
business. Accordingly, the Company intends to treat broker non-votes with
respect to the election of directors in this manner. Shareholders do not have
the right to cumulate their votes in the election of directors.
4
PROPOSAL TWO
APPROVAL AND RATIFICATION OF THE ADOPTION OF
AMENDMENTS TO THE NOVELL, INC. 1991 STOCK PLAN
GENERAL INFORMATION
At the meeting, there will be presented to the shareholders a proposal to
approve and ratify the adoption by the Board of Directors of certain amendments
to the Novell, Inc. 1991 Stock Plan (the "1991 Stock Plan"). The 1991 Stock
Plan was originally adopted by the Board of Directors in October 1991 and
approved by shareholders in March 1992. The 1991 Stock Plan initially provided
for the issuance of Stock Options, Stock Appreciation Rights, Stock Purchase
Rights and Long-Term Performance Awards to purchase up to 20,000,000 shares (as
adjusted to reflect the two-for-one stock split in August 1992) of the
Company's Common Stock.
PROPOSED AMENDMENTS
On October 5, 1993, the Board of Directors of the Company approved an
automatic annual increase in the number of shares available for issuance under
the 1991 Stock Plan on each November First by 2.9 percent of the outstanding
Shares of Common Stock as of the Company's preceding fiscal year end for the
next six years and to make certain other amendments.
The principal changes in the Company's 1991 Stock Plan that the shareholders
are being asked to approve at the 1994 Annual Meeting are summarized below and
set forth in more detail under "Description of the 1991 Stock Plan, as
amended". A copy of the amended 1991 Stock Plan will be furnished by the
Company to any shareholder upon written request to the Corporate Secretary.
1. The total number of shares of Common Stock available for issuance under
the 1991 Stock Plan has been increased from 20,000,000 to 28,933,478 on
November 1, 1993 based on an increase equal to 2.9 percent of the Company's
outstanding shares of Common Stock on October 30, 1993, the preceding fiscal
year end. The shares issuable under the 1991 Stock Plan shall continue to
increase each subsequent November First for the next five years by 2.9 percent
of outstanding shares of Common Stock as of the Company's preceding fiscal year
end (last Saturday of October). Incentive stock options are limited to
20,000,000 shares.
2. No employee shall be granted, in any fiscal year of the Company, options
and SARs to acquire in the aggregate more than 500,000 shares of Common Stock.
The Company may, however, make an additional one-time grant to newly hired
employees of up to 1,000,000 shares.
The above limitations shall adjust proportionately in connection with any
change in recapitalization.
The Omnibus Budget Reconciliation Act of 1993 ("OBRA") added Section 162(m)
to the Internal Revenue Code of 1986. Under Section 162(m), the allowable
deduction for compensation paid or accrued with respect to the chief executive
officer and each of the four most highly compensated employees of a publicly-
held corporation is limited to no more than $1,000,000 per year for fiscal year
beginning on or after January 1, 1994. This limitation does not apply to
compensation attributable to stock options or SARs if, among other things, the
option plan includes limits on option and SAR grants to employees such as the
limitations described above (see discussion below of "Performance-Based
Compensation Limitations").
DESCRIPTION OF 1991 STOCK PLAN, AS AMENDED
General. The 1991 Stock Plan is not a qualified deferred compensation plan
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), nor is it subject to the Employee Retirement Income Security Act of
1974, as amended.
Purpose. The purpose of the 1991 Stock Plan is to provide an incentive to
eligible employees, consultants and officers of the Company whose present and
potential contributions are important to the continued success of the Company,
to afford these individuals the opportunity to acquire a proprietary interest
in the Company and to enable the Company to enlist and retain the best
available talent for the conduct of its business. It is intended that this
purpose will be effected through the granting of (i) Stock Options, (ii) Stock
Appreciation Rights, (iii) Stock Purchase Rights and (iv) Long-Term Performance
Awards.
5
Eligibility. Officers, consultants and other employees of the Company or any
parent or subsidiary of the Company whom the administrators deem to have the
potential to contribute to the success of the Company are eligible to receive
awards under the 1991 Stock Plan. The 1991 Stock Plan provides that
Nonstatutory Stock Options, Stock Appreciation Rights, Stock Purchase Rights
and Long-Term Performance Awards may be granted to employees (including
officers) and consultants of the Company or any parent or subsidiary of the
Company. Incentive Stock Options may be granted only to employees (including
officers) of the Company or any parent or subsidiary of the Company.
Administration. The 1991 Stock Plan must be administered by the Board of
Directors of the Company or a committee thereof. With respect to grants of
Stock Options, Stock Purchase Rights, Stock Appreciation Rights and Long-Term
Performance Awards to employees or consultants who are subject to Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the 1991
Stock Plan is to be administered in such a manner as to comply with Rule 16b-3
promulgated under the Exchange Act or any successor rule thereto ("Rule 16b-3")
with respect to a plan intended to qualify thereunder as a discretionary grant
or award plan. If permitted by Rule 16b-3, the 1991 Stock Plan may be
administered by different bodies with respect to (i) directors who are
employees, (ii) officers who are not directors and (iii) employees who are
neither directors nor officers. The administrators of the 1991 Stock Plan have
full power to select, from among the persons eligible for awards, the
individuals to whom awards will be granted, to make any combination of awards
to any participant and to determine the specific terms of each award, subject
to the provisions of the 1991 Stock Plan. The interpretation and construction
of any provision of the 1991 Stock Plan by the administrators shall be final
and conclusive. Members of the Board of Directors will receive no additional
compensation for their services in connection with the administration of the
1991 Stock Plan.
Reserved Shares. The total number of shares of Common Stock, $.10 par value
("Common Stock"), reserved and available for distribution under the 1991 Stock
Plan as of November 1, 1993 is 28,933,478 shares. Such amount shall increase
each November First by 2.9 percent of the Company's outstanding Common Stock as
of the preceding fiscal year end (last Saturday of October) for the next five
years. All shares of Common Stock issued pursuant to the 1991 Stock Plan will
also include one preferred stock purchase right ("Right") pursuant to the
Company's Preferred Shares Rights Plan as amended (the "Rights Plan") adopted
in December 1988. The Rights Plan provides for a dividend of Rights, which
cannot be exercised until certain events occur, to purchase shares of Preferred
Stock of the Company or, after certain events, shares of Common Stock of the
Company. Each shareholder of record receives one Right for each share of Common
Stock that he or she owns, and until the occurrence of certain events, such
Rights trade with the shares of Common Stock. The Rights Plan was adopted to
ensure that all shareholders of the Company receive fair value for their Common
Stock in the event of any proposed takeover of the Company and to guard against
coercive tactics to gain control of the Company without offering fair value to
the Company's shareholders.
Stock Options. The 1991 Stock Plan permits the granting of non-transferable
stock options that either qualify as incentive stock options under Section 422
of the Code ("Incentive Stock Options" or "ISOs") or do not so qualify
("Nonstatutory Stock Options" or "NSOs"). The term of each option will be fixed
by the administrators but may not exceed ten years from the date of grant in
the case of ISOs. The administrators will determine the time or times each
option may be exercised. Options may be made exercisable in installments,
exercisability may be suspended during certain leaves of absence or reductions
in work hours and the exercisability of options may be accelerated by the
administrators. The option exercise price for each share covered by an ISO will
not be less than 100% of the fair market value of a share of Common Stock on
the date of grant of such option. The option exercise price for each share
covered by an NSO will be determined by the administrators.
The consideration to be paid for shares issued upon exercise of options
granted under the 1991 Stock Plan, including the method of payment, shall be
determined by the administrators and may consist entirely of (i) cash, (ii)
check, (iii) promissory note, (iv) other shares of Common Stock, (v) the
delivery of a properly executed notice together with such other documentation
as the administrators and the broker, if applicable, shall require to effect an
exercise of the option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, (vi) any combination of the foregoing
methods, or (vii) such other consideration and methods as are permitted by
applicable laws.
6
Under the 1991 Stock Plan, in the event of an optionee's termination of
employment or consulting relationship for any reason other than death or total
and permanent disability, an option may thereafter be exercised, to the extent
it was exercisable at the date of such termination, for such period of time as
the administrator shall determine at the time of grant (not to exceed six
months, or three months in the case of Incentive Stock Options), but only to
the extent that the term of the option has not expired. However, if an
optionee's employment or consulting relationship is terminated as a result of
the optionee's permanent and total disability, the option will be exercisable
for twelve months following such termination, but only to the extent it was
exercisable at the date of termination and to the extent that the term of the
option has not expired. If an optionee's employment or consulting relationship
is terminated by reason of the optionee's death, the option will be exercisable
by the optionee's estate or successor for twelve months following death, but
only to the extent it was exercisable at the date of death and to the extent
that the term of the option has not expired.
The administrators of the 1991 Stock Plan may at any time offer to buy out
for a payment in cash or shares of Common Stock of the Company an option
previously granted, based on such terms and conditions as the administrators
shall establish and communicate to the optionee at the time that such offer is
made.
All options granted under the 1991 Stock Plan shall be evidenced by a stock
option agreement between the Company and the optionee to whom such option is
granted. Options granted to persons subject to Section 16 of the Exchange Act
may impose additional restrictions necessary to comply with Rule 16b-3.
Stock Appreciation Rights. The 1991 Stock Plan also permits the granting of
nontransferable stock appreciation rights ("SARs"). SARs may be granted in
connection with all or any part of an option, either concurrently with the
grant of the option or at any time thereafter during the term of the option. A
SAR granted in connection with an option shall entitle the optionee to exercise
the SAR by surrendering to the Company unexercised a portion of the related
option. The optionee shall receive in exchange from the Company an amount equal
to the excess of the fair market value, on the date of exercise of the SAR, of
the Common Stock covered by the surrendered portion of the related option over
the exercise price of the Common Stock covered by the surrendered portion of
the related option. Notwithstanding the foregoing, the administrators of the
1991 Stock Plan may place limits on the aggregate amount that may be paid upon
exercise of a SAR, provided, however, that such limits shall not restrict the
exercisability of the related option. When a SAR granted in connection with an
option is exercised, the related option, to the extent surrendered, shall cease
to be exercisable. A SAR granted in connection with an option shall be
exercisable until, and shall expire no later than, the date on which the
related option ceases to be exercisable or expires. A SAR granted in connection
with an option may only be exercised at a time when the fair market value of
the Common Stock covered by the related option exceeds the exercise price of
the Common Stock covered by the related option.
SARs may also be granted without related options. In such an event, the SAR
will entitle the optionee, by exercising the SAR, to receive from the Company
an amount equal to the excess of the fair market value of the Common Stock
covered by the exercised portion of the SAR as of the date of such exercise,
over the fair market value of the Common Stock covered by the exercised portion
of the SAR, as of the last market trading date prior to the date on which the
SAR was granted. Notwithstanding the foregoing, the administrators of the 1991
Stock Plan may place limits on the aggregate amount that may be paid upon
exercise of a SAR. A SAR granted without a related option shall be exercisable,
in whole or in part, at such time as the administrators shall specify in the
recipient's SAR agreement.
The Company's obligation arising upon the exercise of a SAR may be paid in
Common Stock or in cash, or any combination thereof, as the administrators may
determine. Shares issued upon the exercise of a SAR shall be valued at their
fair market value as of the date of exercise. SARs granted to persons subject
to Section 16 of the Exchange Act may impose additional restrictions necessary
to comply with Rule 16b-3.
7
Performance-Based Compensation Limitations. The following limitations will
apply to grants of Options and SARs under the Plan:
No employee shall be granted in any fiscal year of the Company, Options and
SARs to acquire in the aggregate more than 500,000 shares of Common Stock. The
Company may, however, make an additional one-time grant of up to 1,000,000
shares to newly-hired employees.
The foregoing limitations which shall adjust proportionately in connection
with any change in the Company's capitalization, are intended to satisfy the
requirements applicable to Options and SARs intended to qualify as
"performance-based compensation" within the meaning of Section 162 (m) of the
Code. In the event that the Committee determines that such limitations are not
required to qualify Options and SARs as performance-based compensation, the
Committee may modify or eliminate such limitations.
Stock Purchase Rights. The 1991 Stock Plan permits the Company to grant stock
purchase rights to purchase Common Stock of the Company ("Stock Purchase
Rights") either alone, in addition to, or in tandem with other awards under the
1991 Stock Plan or cash awards made outside the Plan. Upon the granting of a
Stock Purchase Right under the 1991 Stock Plan, the offeree shall be advised in
writing of the terms, conditions and restrictions related to the offer,
including the number of shares of Common Stock that the offeree shall be
entitled to purchase, the price to be paid and the time within which the
offeree must accept such offer (which shall in no event exceed 30 days from the
date upon which the administrators made the determination to grant the Stock
Purchase Right). The offer shall be accepted by execution of a restricted stock
purchase agreement between the Company and the offeree.
Unless the administrators of the 1991 Stock Plan determine otherwise, the
restricted stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with the Company for any reason
(including death or permanent and total disability). The purchase price for
shares repurchased pursuant to the restricted stock purchase agreement shall be
the original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the administrators may determine. Upon exercise of a Stock
Purchase Right, the purchaser shall have rights equivalent to those of a
shareholder of the Company. Stock Purchase Rights granted to persons subject to
Section 16 of the Exchange Act, and shares of Common Stock purchased in
connection with such Stock Purchase Rights, may impose or be subject to
additional restrictions necessary to comply with Rule 16b-3.
Long-Term Performance Awards. The 1991 Stock Plan also permits the granting
of Long-Term Performance Awards. Such awards shall be based upon Company,
subsidiary, parent, or individual performance over designated periods based on
such performance factors or other criteria as the administrators deem
appropriate. Performance objectives may vary from participant to participant,
group to group, and period to period. Such awards shall be granted for no cash
consideration. The administrators may adjust Long-Term Performance Awards as
they deem necessary or appropriate in order to avoid windfalls or hardships or
to compensate for changes in tax, accounting or legal rules. Long-Term
Performance Awards will be payable in cash or Common Stock.
Nontransferability. Options, SARs, Stock Purchase Rights and Long-Term
Performance Awards granted pursuant to the 1991 Stock Plan are nontransferable
by the participant, other than by will or by the laws of descent and
distribution, and may be exercised, during the lifetime of the participant,
only by the participant.
Acceleration of Awards. Subject to the 1991 Stock Plan's Change-in-Control
provisions (see below), in the event of a sale of substantially all of the
assets of the Company or the merger of the Company with or into another
corporation, each outstanding Stock Option, SAR, Stock Purchase Right and Long-
Term Performance Award shall be assumed or substituted by such successor
corporation or a parent or subsidiary of such successor corporation. In the
event that the successor corporation does not agree to such assumption
8
or substitution, the administrators shall, in lieu of such assumption or
substitution, provide for the participant to have the right to exercise the
Stock Option, SAR, Stock Purchase Right and Long-Term Performance Award as to
all or a portion of the shares subject to such Stock Option, SAR, Stock
Purchase Right and Long-Term Performance Award (including shares as to which
the Stock Option, SAR, Stock Purchase Right and Long-Term Performance Award
would not otherwise be exercisable). If the administrators make Stock Options,
SARs, Stock Purchase Rights and Long-Term Performance Awards fully exercisable
in lieu of assumption or substitution, the administrators shall notify the
participant that the Stock Option, SAR, Stock Purchase Right and Long-Term
Performance Award shall be exercisable for a period of 15 days from the date of
such notice and the Stock Option, SAR, Stock Purchase Right and Long-Term
Performance Award will terminate upon the expiration of such period.
Change-in-Control Provisions. The 1991 Stock Plan provides that in the event
of a "Change-in-Control" of the Company (as defined below) the following
acceleration and valuation provisions shall apply, except as otherwise
determined by the Board in its discretion prior to the Change-in-Control: (i)
all Stock Options, SARs, Stock Purchase Rights and Long-Term Performance Awards
granted under the 1991 Stock Plan, outstanding on the date such Change-in-
Control is determined to have occurred, that are not yet exercisable and vested
on such date, will become immediately vested and fully exercisable; (ii) to the
extent they are exercisable and vested, all outstanding Stock Options, SARs,
Stock Purchase Rights and Long-Term Performance Awards will be cashed out at
the "Change-in-Control Price" (as defined below) reduced by the exercise price,
if any, applicable to such Stock Options, SARs, Stock Purchase Rights and Long-
Term Performance Awards. A "Change-in-Control" means the occurrence of (i) the
acquisition, directly or indirectly, by a person (as defined in the 1991 Stock
Plan, and other than the Company, one of its subsidiaries, or a Company
employee benefit plan or trustee thereof) of securities representing 50% or
more of the combined voting power of the Company's then outstanding securities
entitled to vote generally in the election of directors, or (ii) shareholder
approval of the Company's merger or consolidation with any other corporation,
other than a merger or consolidation that would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) at least 50% of the total voting power represented by
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or shareholder approval of an
agreement for the sale or disposition of all or substantially all of the
Company's assets, or (iii) a change in the composition of the Board of
Directors of the Company, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" means directors who
either (a) are directors of the Company as of the date the Plan is approved by
the shareholders, or (b) are elected, or nominated for election, to the Board
of Directors of the Company with the affirmative votes of at least a majority
of the Incumbent Directors at the time of such election or nomination (but
shall not include an individual whose election or nomination is in connection
with an actual or threatened proxy contest relating to the election of
directors to the Company). The "Change-in-Control Price" shall be, as
determined by the Board of Directors, (i) the highest closing sale price of a
share of Common Stock as quoted on any established stock exchange or a national
market system as reported in The Wall Street Journal at any time within the 60-
day period immediately preceding the date of determination of the Change-in-
Control Price by the Board of Directors, (ii) the highest price paid or offered
per share of Common Stock, as determined by the Board, in any bona fide
transaction or bona fide offer related to the Change-in-Control of the Company
at any time within such 60-day period, or (iii) some lower price, as the Board,
in its discretion, determines to be a reasonable estimate of the fair market
value of a share of Common Stock.
Adjustment Upon Changes in Capitalization. Subject to any required action by
the shareholders of the Company, in the event any change, such as a stock split
or dividend, is made in the Company's capitalization which results in an
increase or decrease in the number of issued shares of Common Stock without
receipt of consideration by the Company, an appropriate adjustment shall be
made in the number of shares that have been reserved for issuance under the
1991 Stock Plan (including shares subject to an option or right) and the price
per share covered by each outstanding Stock Option, SAR, Stock Purchase Right
and Long-Term Performance Award. In the event of the proposed dissolution or
liquidation of the Company, all outstanding
9
Stock Options, SARs, Stock Purchase Rights and Long-Term Performance Awards
will terminate immediately prior to the consummation of such proposed action.
However, the Board of Directors may, in its discretion, make provision for
accelerating the exercisability of shares subject to Stock Options, SARs, Stock
Purchase Rights and Long-Term Performance Awards under the 1991 Stock Plan in
such event.
Amendment and Termination. The Board may amend, alter, suspend or discontinue
the 1991 Stock Plan at any time, but such amendment, alteration, suspension or
discontinuation shall not adversely affect any Stock Option, SAR, Stock
Purchase Right or Long-Term Performance Award then outstanding under the 1991
Stock Plan, without the written consent of the participant. To the extent
necessary and desirable to comply with Rule 16b-3 or Section 422 of the Code
(or any other applicable law or regulation), the Company shall obtain
shareholder approval of any amendment to the 1991 Stock Plan in such a manner
and to such a degree as required. Subject to applicable laws and the specific
terms of the 1991 Stock Plan, the administrators may accelerate any option,
right or award or waive any condition or restriction pertaining to such option,
right or award at any time. The administrators may also substitute new options,
rights or awards for previously granted options, rights or awards, including
previously granted options, rights or awards having higher option, right or
award prices and may reduce the exercise price of any option, right or award.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief summary of the federal income tax consequences of
transactions under the 1991 Stock Plan based on federal securities and income
tax laws in effect on January 1, 1994. This summary is not intended to be
exhaustive and does not discuss the tax consequences of a participant's death
or provisions of the income tax laws of any municipality, state or foreign
country in which an optionee may reside.
Options granted under the 1991 Stock Plan may be either "Incentive Stock
Options," as defined in Section 422 of the Code, or Nonstatutory Stock Options.
Incentive Stock Options. No taxable income is recognized, by the optionee
upon grant or exercise of an Incentive Stock Option unless the alternative
minimum tax rules apply. If Common Stock is issued to an optionee pursuant to
the exercise of an Incentive Stock Option, and if no disqualifying disposition
of such shares is made by such optionee within two years after the date of
grant or within one year after the transfer of such shares to such optionee,
then (i) upon sale of such shares, any amount realized in excess of the option
exercise price will be treated as a long-term capital gain and any loss
sustained will be a long-term capital loss, and (ii) no deduction will be
allowed to the Company for federal income tax purposes. The exercise of an
incentive stock option may result in alternative minimum tax liability for the
optionee.
If Common Stock acquired upon the exercise of an Incentive Stock Option is
disposed of before the expiration of either holding period described above,
generally (i) the optionee will recognize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of the shares at exercise (or, if less, the amount realized on the disposition
of the shares) over the option exercise price paid for such shares, and (ii)
the Company is entitled to a tax deduction in the same amount. Any further gain
or loss realized by the participant will be taxed as short-term or long-term
capital gain or loss, as the case may be, and will not result in any deduction
by the Company. Different rules may apply if shares are purchased by an
optionee who is also an officer, director or more than 10% shareholder. See
discussion below of "Special Rules Applicable to Corporate Insiders and
Restricted Stock Purchasers."
Nonstatutory Stock Options. Except as noted below, with respect to
Nonstatutory Stock Options, (i) no income is recognized by the optionee at the
time the option is granted; (ii) generally, at exercise, ordinary income is
recognized by the optionee in an amount equal to the difference between the
option exercise price paid for the shares and the fair market value of the
shares on the date of exercise, and the Company is entitled to a tax deduction
in the same amount; and (iii) at disposition, any gain or loss is treated as
capital gain or loss. In the case of an optionee who is also an employee, any
income recognized upon exercise of a Nonstatutory Stock Option will constitute
wages for which withholding will be required. However, different rules may
apply if restricted stock is purchased or if shares are purchased by an
optionee who is also an officer, director or more than 10% shareholder. See
discussion below of "Special Rules Applicable to Corporate Insiders and
Restricted Stock Purchasers."
10
Stock Appreciation Rights. No income will be recognized by a recipient in
connection with the grant of a SAR. When the SAR is exercised, the recipient
will generally be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any Common Stock received on the exercise. In the case of a recipient
who is also an employee, any income recognized upon exercise of a SAR will
constitute wages for which withholding will be required. The Company will be
entitled to a tax deduction in the same amount. If the optionee receives Common
Stock upon the exercise of a SAR, any gain or loss on the sale of such stock
will be treated in the same manner as discussed above under "Nonstatutory Stock
Options." See also "Special Rules Applicable to Corporate Insiders and
Restricted Stock Purchasers."
Stock Purchase Rights. Stock Purchase Rights will generally be taxed in the
same manner as Nonstatutory Stock Options.
Long-Term Performance Awards. Generally, no income will be recognized by a
recipient in connection with the grant of a Long-Term Performance Award, unless
an election under Section 83(b) of the Code is filed with the Internal Revenue
Service within 30 days of the date of grant. Otherwise, at the time the Long-
Term Performance Award vests, the recipient will generally recognize
compensation income in an amount equal to the fair market value of the award at
the time of vesting. Generally, the recipient will be subject to the tax
consequences discussed under "Nonstatutory Stock Options." In the case of a
recipient who is also an employee, any amount included in income will
constitute wages for which withholding will be required. The Company will be
entitled to a tax deduction in the same amount and at the time the recipient
recognizes ordinary income with respect to a Long-Term Performance Award.
Special Rules Applicable to Corporate Insiders and Restricted Stock
Purchasers. Generally, individuals subject to Section 16(b) of the Exchange Act
("Insiders") and individuals who purchase restricted stock may have their
recognition of compensation income and the beginning of their capital gains
holding period deferred for up to six months after option exercise (for
Insiders), or until the restrictions lapse (for restricted stock purchasers)
(the "Deferral Date"), with the excess of the fair market value of the stock
determined as of the Deferral Date over the purchase price being taxed as
ordinary income, and the tax holding period for any subsequent gain or loss
beginning on the Deferral Date. However, an Insider or restricted stock
purchaser who so elects under Code Section 83(b) on a timely basis may instead
be taxed on the difference between the excess of the fair market value on the
date of transfer over the purchase price, with the tax holding period beginning
on such date. Similar rules apply for alternative minimum tax purposes with
respect to the exercise of an Incentive Stock Option by an Insider.
Capital Gains. Generally, under law in effect as of January 1, 1994, net
capital gain (net long-term capital gain minus net short-term capital loss) is
taxed at a maximum rate of 28%. Capital losses are allowed in full against
capital gains plus up to $3,000 of other income.
PARTICIPATION IN THE 1991 STOCK PLAN
The grant of Stock Options, Stock Purchase Rights, Stock Appreciation Rights
and Long-Term Performance Awards under the 1991 Stock Plan to employees,
including the executive officers named in the Summary Compensation Table (the
"Named Officers"), is subject to the discretion of the Administrator. As of the
date of this proxy statement, the only awards that have been granted under the
1991 Stock Plan are options, each of which has a term of seven years and an
exercise price equal to the fair market value of the underlying Common Stock on
the date of grant of the option. There has been no determination made by the
Administrator with respect to future awards under the 1991 Stock Plan.
Accordingly, future awards are not determinable. Non-employee directors are not
eligible to participate in the 1991 Stock Plan. The following table sets forth
information with respect to the grant of the options under the 1991 Stock Plan
to the Named Officers, to all current executive officers as a group and to all
other employees as a group during the last fiscal year:
11
AMENDED PLAN BENEFITS
NAME OF INDIVIDUAL OR
IDENTITY OF GROUP AND NUMBER OF SHARES AGGREGATE
POSITION SUBJECT TO EXERCISE
- --------------------- OPTIONS GRANTED (#) PRICE ($)
------------------ -----------
Raymond J. Noorda.............................. 0 0
Joseph A. Marengi.............................. 79,000 1,792,500
Mary M. Burnside............................... 150,000 3,427,500
James R. Tolonen............................... 108,000 2,298,000
Kanwal S. Rekhi................................ 115,000 2,512,500
All current executive officers as a group (11
persons)...................................... 922,000 20,485,500
All other employees as a group................. 15,973,713 402,617,864
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENTS
TO THE 1991 STOCK PLAN; THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A
VOTE AGAINST THE APPROVAL OF AMENDMENTS TO THE 1991 STOCK PLAN.
Approval of the 1991 Stock Plan requires the affirmative vote of the holders
of a majority of the shares of the Company's Common Stock represented and
voting in person or by proxy at the Annual Meeting (the "Votes Cast"). Votes
cast against the proposal are counted for purposes of determining the presence
or absence of a quorum for the transaction of business and for purposes of
determining the total number of Votes Cast.
While there is no definitive statutory or case law in Delaware as to the
proper treatment of abstentions in the counting of votes with respect to a
proposal such as the approval of amendments to the 1991 Stock Plan, the Company
believes that abstentions should be counted for purposes of determining both
the presence or absence of a quorum for the transaction of business and the
total number of Votes Cast. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions on this proposal in this
manner. In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware
Supreme Court held that, while broker non-votes may be counted as present or
represented for purposes of determining the presence or absence of a quorum for
the transaction of business, broker non-votes should not be counted for
purposes of determining the number of Votes Cast with respect to the particular
proposal for which authorization to vote was withheld. Accordingly, broker non-
votes with respect to this proposal will not be considered as Votes Cast and,
accordingly, will not affect the outcome of voting on this proposal.
The Board of Directors believes that the opportunity to acquire shares
pursuant to Stock Options, Stock Appreciation Rights, Stock Purchase Rights and
Long-Term Performance Awards granted under the 1991 Stock Plan will be
important to attract and retain qualified employees and consultants essential
to the success of the Company.
12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during fiscal years 1993, 1992 and 1991 for the
Chief Executive Officer and the four most highly compensated executive officers
of the Company whose salary plus bonus exceeded $100,000 in fiscal 1993.
LONG-TERM
COMPENSATION(3)
---------------
ANNUAL
COMPENSATION(1)(2) AWARDS
------------------- ---------------
(A) (B) (C) (D) (G) (I)
SECURITIES
NAME AND PRINCIPAL SALARY BONUS UNDERLYING ALL OTHER
POSITION YEAR ($) ($)(4) OPTIONS (#)(5) COMPENSATION ($)(6)
------------------ ---- --------- --------- --------------- -------------------
Raymond J. Noorda.......
Chief Executive 1993 285,585 0 0 4,285
Officer, President and 1992 198,830 0 0 3,302
Chairman of the Board 1991 37,370 0 0 --
Joseph A. Marengi....... 1993 178,400 171,660 40,000 4,497
Senior Vice President-- 1992 182,531 71,283 39,000 4,364
Worldwide Sales 1991 168,417 82,503 0 --
Mary M. Burnside........
Office of President and 1993 256,675 95,680 60,000 4,497
Chief Operations 1992 186,118 76,027 90,000 4,364
Officer 1991 151,560 77,438 0 --
James R. Tolonen........ 1993 238,014 88,320 60,000 4,497
Office of President and 1992 191,931 76,027 48,000 4,364
Chief Financial Officer 1991 163,023 82,503 0 --
Kanwal S. Rekhi.........
Executive Vice 1993 232,097 84,640 55,000 4,497
President-- 1992 191,971 76,027 60,000 4,364
Corporate Technology 1991 180,304 87,994 0 --
- --------
(1) The Company has not paid any Other Annual Compensation as defined in the
regulations promulgated by the Securities and Exchange Commission (the
"SEC") to the above named executive officers. Therefore, the Other Annual
Compensation column has not been included in this table.
(2) Compensation deferred at the election of the executive, pursuant to the
Novell, Inc. Retirement and Savings Plan, is included in the year earned.
(3) The Company has not granted any stock appreciation rights or restricted
stock awards and does not have any Long-Term Incentive Plans as that term
is defined in regulations promulgated by the SEC.
(4) Cash bonuses for services rendered in fiscal years 1993, 1992 and 1991,
have been listed in 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.
(5) 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 stock options granted in fiscal year 1993 are non-statutory
options receiving no special tax benefit, have an exercise price equal to
the fair market value on the date of grant, vest at a rate of 25 percent
per year, and have a term of seven years. Upon acquisition of the Company,
vesting of options accelerates if the acquiring company is unwilling to
assume options. The plans also provide for cashless exercises.
(6) The stated amounts are Company matching contributions to the Novell, Inc.
Retirement and Savings Plan.
13
DIRECTOR COMPENSATION
Non-employee Directors of the Company received an annual retainer of $8,000
plus a Board meeting fee of $1,000. Additionally, the directors are reimbursed
for their expenses incurred in attending meetings of the Company's Board of
Directors. Non-Employee Directors do not receive additional compensation for
committee meetings. See also "Executive Compensation--Non-Employee Directors
Stock Option Plan".
STOCK OPTION GRANTS IN FISCAL YEAR 1993
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
----------------------------------------- -----------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(2) YEAR(3) ($/SH) DATE 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- ------- ---------
Raymond J. Noorda....... 0 0 -- -- -- --
Joseph A. Marengi....... 40,000 0.30 18.00 10/5/00 293,112 683,076
Mary M. Burnside........ 60,000 0.45 18.00 10/5/00 439,668 1,024,614
James R. Tolonen........ 60,000 0.45 18.00 10/5/00 439,668 1,024,614
Kanwal S. Rekhi......... 55,000 0.41 18.00 10/5/00 403,029 939,220
- --------
(1) Potential realizable value is based on an assumption that the stock price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the seven-year option
term. 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) All options shown in the table were granted on October 5, 1993. 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 stock
options granted in fiscal year 1993 are non-statutory options receiving no
special tax benefit, have an exercise price equal to the fair market value
on the date of grant, vest at a rate of 25 percent per year, on the first,
second, third and fourth anniversary of the grant date and have a term of
seven years. Upon the acquisition of the Company, vesting of options is
accelerated if the acquiring company is unwilling to assume options. The
plans also provide for cashless exercises.
(3) Options to purchase an aggregate of 13,467,214 shares were granted to
employees in fiscal 1993.
14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FY-END (#) FY-END ($)(1)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------- ----------- ------------- ----------- -------------
Raymond J. Noorda....... 0 0 0 0 0 0
Joseph A. Marengi....... 2,632 76,948 19,850 87,950 98,828 312,858
Mary M. Burnside........ 30,000 746,250 22,500 157,500 0 761,250
James R. Tolonen........ 35,000 896,875 52,000 96,000 0 945,000
Kanwal S. Rekhi......... 50,000 1,162,500 15,000 150,000 0 1,111,250
- --------
(1) Potential unrealized value is (i) the fair market value at fiscal 1993 year
end ($21.50 per share) less the option exercise price, times (ii) the
number of shares subject to the option.
(2) Value realized is (i) the fair market value on the date of exercise, less
the option exercise price, times (ii) the number of shares exercised.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Novell, Inc. Non-Employee Directors Stock Option Plan ("Directors Plan")
is administered by a committee of the Board of Directors. However, the time of
grant, number of shares granted, exercise price and vesting schedule are
established by the terms of the Directors Plan and are not subject to the
discretion of the committee or any person. Only non-employee directors may
participate in the Directors Plan.
Under the Directors Plan, all new non-employee directors receive an option to
purchase 72,000 shares (an "Initial Option") on the date of their initial
election or appointment to the Board of Directors. A similar option was granted
to directors serving on the date the Directors Plan was approved by the
shareholders. Pursuant to this provision, director Elaine Bond was granted an
Initial Option having an exercise price of $31.25 per share upon her
appointment to the Board of Directors on February 3, 1993. All options are non-
statutory options receiving no special tax benefit, have an exercise price
equal to the fair market value on date of grant, vest annually at the rate of
33% per year and have a term of ten years.
On October 30, 1993, options to purchase 320,000 shares of the Company's
Common Stock under the Directors Plan were outstanding at a weighted average
exercise price of $19.58.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORSON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three independent non-employee directors, Ms. Bond, Mr. Messman and
Mr. Wilson. Mr. Noorda, the Chief Executive Officer ("CEO") of the Company, and
certain other executive officers of the Company may attend meetings of the
Committee, but are not present during discussions or deliberations regarding
their own compensation.
OVERVIEW
Acting on behalf of the Board of Directors, the Committee's responsibilities
include the following:
. Establishing the general compensation policy of the Company for all
executive officers.
15
. Determining compensation levels for the CEO and other executive officers.
. Administering the Company's Senior Management Incentive Plan (the
"Incentive Plan"), including approving target bonuses, performance
objectives and actual bonus payments for executive officers (other than
the CEO, who does not participate in the Incentive Plan).
. Administering the Company's Stock Option Plans, including determining
eligibility, the number of shares to be granted under option and the terms
of such grants.
The Company's executive compensation program is designed to support the
achievement of Company performance objectives, to ensure that executive
officers' interests are aligned with the success of the Company, and to provide
compensation opportunities that will attract, retain and motivate superior
executive personnel. Consistent with these objectives, the Committee believes
that the compensation of executive officers should be significantly influenced
by performance. Accordingly, a substantial portion of the compensation of each
executive officer is contingent upon Company performance and adjusted as
appropriate upon individual performance.
1993 EXECUTIVE OFFICER COMPENSATION
The Company's compensation program for executive officers is structured to be
competitive within the high technology industry. The Company's Human Resources
Department, working with an independent outside consulting firm, has developed
executive compensation data from a nationally recognized survey for a group of
comparable companies, which are selected on the basis of similarity in revenue
level and industry segment to the Company. Approximately 50% of the companies
included in this group for the 1993 executive compensation analysis are also
included in the NASDAQ Computer and Data Processing Services (NASDAQ C&DPS)
index for stock price performance on page 18. The Company's executive level
positions, including the CEO, were matched to comparable survey positions and
competitive levels were determined for base salary, target incentives and
target total compensation. Market practices with respect to stock option grants
were also reviewed.
The competitive market data for each executive officer was reviewed with the
CEO. In addition, the responsibility level of each was reviewed, together with
the executive officer's individual performance for the last fiscal year and
objectives for fiscal 1993. The Company's performance compared to objectives
for the last fiscal year and performance targets for fiscal 1993 were also
reviewed.
In the context of such individual performance, Company performance, survey
data, and the executive officer's responsibility level, the CEO recommended to
the Committee a base salary and target incentive bonus for fiscal 1993 for each
executive officer, excluding the CEO. The target incentive is the incentive
that would be paid after the end of the fiscal year if both the executive
officer and the Company achieve the performance objectives established for the
year.
Incentive bonuses for executive officers are determined according to the
Incentive Plan, based upon a combination of Company and individual performance.
The CEO recommended to the Committee Novell's performance targets in terms of
(a) earnings before interest and taxes and (b) revenue, both of which were to
be included in the Incentive Plan for fiscal 1993. In general, the Incentive
Plan requires that at least 80% of each objective must be achieved before any
bonuses are paid to participants. In addition, each participant must
substantially meet the requirements and objectives of his or her position to
receive an incentive bonus.
In October 1992, the Committee reviewed the recommendations, performance
evaluations and survey data outlined above. The Committee approved a base
salary level to be effective January 1, 1993 and a target incentive for fiscal
1993 for each executive officer, other than the CEO. The Committee reviewed and
approved the Incentive Plan for fiscal 1993, including the Company earnings and
revenue objectives to be used for incentive determination.
16
The fiscal 1993 target total cash compensation levels (base salary plus
target incentives) for the four named executive officers generally fall between
the 50th and 75th percentiles of the comparable company market data.
In October 1993, the CEO recommended to the Committee proposed stock option
grants for executive officers, other than the CEO. Stock option grants were
reviewed and approved by the committee in the context of the Company's
performance to date relative to its fiscal 1993 objectives, the responsibility
level and performance of the executive officer, prior stock grants to the
executive officer and the level of outstanding vested and unvested options.
Option grants under the 1991 Stock Plan are designed to further strengthen the
linkage between executive compensation and stockholder return and to provide
additional incentives to executive officers to continue their employment with
the Company. Stock options generally become exercisable over a four-year period
at a price that is equal to the fair market value of the Company's stock on the
date of grant.
In December 1993, the Committee reviewed and approved incentive awards for
fiscal 1993 for executive officers, other than the CEO. Such incentive awards
were determined by adjusting each executive officer's target bonus based upon
actual Company performance compared to objectives and individual performance of
the executive officer, following the process and formula outlined in the
Incentive Plan. Based on the Company's year-end financial results, the
threshold performance levels of both the earnings and revenue objectives were
exceeded. Individual performance evaluations of each executive officer for
fiscal 1993 were made by the CEO and reviewed with the Committee. According to
such performance evaluations, each of the four named executive officers met or
exceeded the objectives and requirements of his or her position for the year.
1993 CEO COMPENSATION
The CEO has traditionally received a base salary substantially below market
competitive levels for similar positions. The CEO's base salary was not
increased in fiscal 1993 and remains below the 25th percentile of the
comparable company market data. In addition, the CEO customarily has not
received cash incentives or stock option grants, did not receive an incentive
for fiscal 1993 and was not awarded any stock option grants in fiscal 1993.
Respectfully submitted,
Ian R. Wilson, Chairman
Elaine R. Bond
Jack L. Messman
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
Directors Wilson, Bond and Messman comprise the Compensation Committee.
Raymond J. Noorda, Chief Executive Officer of the Company, was a member of
the Compensation Committee until June 1993 and participated in discussions
regarding compensation for executive officers. Mr. Noorda was not present
during discussions regarding compensation of the Chief Executive Officer.
Mr. Sonsini is a member of the law firm of Wilson, Sonsini, Goodrich &
Rosati, Professional Corporation and was a member of the Company's Compensation
Committee until June 1993. Such law firm performed services for Novell during
fiscal 1993 and Novell proposes to retain the services of such firm in fiscal
1994.
In fiscal 1992, the Company purchased an aircraft from Dialogic Systems
Corporation (DSC), a company which is owned 100 percent by Mr. Noorda, for
$1,500,000. Based on analysis prior to purchase, said price was the fair market
value at the time of purchase. During fiscal 1993, pursuant to rental
agreements with DSC, Novell used certain business aircraft of DSC and paid
approximately $115,000.
17
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG NOVELL, INC.
S&P 500 AND NASDAQ C&DPS(1)
[GRAPH APPEARS HERE]
INDEXED/CUMULATIVE RETURNS
BASE ----------------------------------
PERIOD RETURN RETURN RETURN RETURN RETURN
COMPANY/INDEX NAME 1988 1989 1990 1991 1992 1993
- ------------------ ------ ------ ------ ------ ------ ------
Novell, Inc.......................... 100 98.26 170.68 713.79 841.38 593.10
S&P 500.............................. 100 126.40 116.94 156.12 171.66 197.31
NASDAQ Computer & Data Process
Service............................. 100 134.54 121.86 266.67 311.16 347.79
- --------
(1) Weighted by the year-end market value of each company.
INDEPENDENT AUDITORS
The Board of Directors has approved a resolution retaining Ernst & Young as
its independent auditors for fiscal 1994. Ernst & Young has audited the
Company's financial statements since 1987. A representative of Ernst & Young
will be present at the Annual Meeting and will have an opportunity at the
meeting to make a statement if he desires to do so and will be available to
respond to appropriate questions.
SECTION 16(A) REPORTING
Each director and each officer of the Company who is subject to Section 16 of
the Exchange Act of 1934 is required by Section 16(a) of the Exchange Act to
report to the Securities and Exchange Commission by a specified date his or her
transactions in the Company's securities. During the period from November 1,
1992 to fiscal 1993 year end, Director Elaine Bond filed her Form 3 upon
joining the Board of Directors in a timely manner but inadvertently omitted a
derivative security that she beneficially owned. She subsequently amended such
Form 3 to reflect such ownership, which amendment was filed late.
18
PROPOSALS OF SHAREHOLDERS
Proposals that shareholders desire to be included in the Company's proxy
materials at the 1995 Annual Meeting of Shareholders of the Company must be
received by the Secretary of the Company at its principal office (122 East 1700
South, P.O. Box 5900, Provo, Utah 84606) no later than September 22, 1994 in
order to be considered for inclusion in such proxy materials.
ADDITIONAL INFORMATION
The Company's Annual Report to Shareholders for the fiscal year ended October
30, 1993, 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.
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.
By Order of the Board of Directors
/s/ David R. Bradford, Corporate
--------------------------------
David R. Bradford, Corporate
Secretary
DATED: January 20, 1994
19
NOVELL, INC.
PROXY 122 EAST 1700 SOUTH
P.O. BOX 5900
PROVO, UTAH 84606
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby constitutes and appoints Raymond J. Noorda, 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 Novell
Corporate Headquarters, 122 East 1700 South, Provo, Utah 84606, on Wednesday,
March 9, 1994, at 2:00 p.m. Mountain Standard 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 AMENDMENTS TO THE NOVELL, INC. 1991 STOCK PLAN AND AS THE
PROXY HOLDER MAY DETERMINE IN HIS DISCRETION WITH REGARD TO ANY OTHER MATTER
PROPERLY BROUGHT BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued on reverse side)
. FOLD AND DETACH HERE .
1. Election of Directors:
VOTE FOR WITHHOLD (INSTRUCTION: To withhold authority to vote
all nominees AUTHORITY for any individual nominee, strike a line
listed (except to vote for all through the nominee's name in the list
as marked to the nominees below.)
contrary)
Nominees: Raymond J. Noorda, Elaine R. Bond,
Jack L. Messman, Kanwal S. Rekhi, Larry W.
Sonsini, and Ian R. Wilson
2. To approve and ratify the adoption 3. IN THEIR DISCRETION to act upon such
of amendments to the Novell, Inc. other business as may properly come
1991 Stock Plan. before the meeting or any adjournments
thereof.
AUTHORIZATION AUTHORIZATION
FOR AGAINST ABSTAIN GRANTED WITHHELD
/ / / / / /
DATED: _____________________ , 1994
-----------------------------------
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.
-----------------------------------
"PLEASE MARK INSIDE BLUE BOXES SO
THAT DATA PROCESSING EQUIPMENT WILL
RECORD YOUR VOTES"
-----------------------------------
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .