<PAGE>   1
    As filed with the Securities and Exchange Commission on November 14, 1997
                                           Registration No. 333-________________

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ---------------
                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                                ---------------


                             NETWORK APPLIANCE, INC.
               (Exact name of issuer as specified in its charter)
        CALIFORNIA                                        77-0307520
(State or other jurisdiction                  (IRS Employer Identification No.)
of incorporation or organization)

            2770 SAN TOMAS EXPRESSWAY, SANTA CLARA, CALIFORNIA 95051
               (Address of principal executive offices) (Zip Code)
                                ---------------
                            1995 STOCK INCENTIVE PLAN
                   (AS AMENDED AND RESTATED ON JULY 17, 1997)
                      SPECIAL NON-OFFICER STOCK OPTION PLAN
                            (Full title of the plans)
                                ---------------
                              DANIEL J. WARMENHOVEN
                                    PRESIDENT
                             NETWORK APPLIANCE, INC.
            2770 SAN TOMAS EXPRESSWAY, SANTA CLARA, CALIFORNIA 95051
                     (Name and address of agent for service)
                                 (408) 367-3000
          (Telephone number, including area code, of agent for service)
                                ---------------
                         CALCULATION OF REGISTRATION FEE

================================================================================

<TABLE>
<CAPTION>
                                                                              Proposed        Proposed
  Title of                                                                     Maximum         Maximum
 Securities                                      Amount          Offering       Aggregate       Amount of
    to be                                         to be            Price         Offering      Registration
 Registered                                   Registered(1)     per Share(2)     Price(2)          Fee
 ----------                                   -------------     ------------     --------      ------------ 
<S>                                           <C>                <C>           <C>             <C>    
1995 Stock Incentive Plan
(as amended and restated on July 17, 1997)
Common Stock, $0.001 par value                1,600,000 shares     $50.50      $80,800,000      $ 24,485

Special Non-Officer
Stock Option Plan
Common Stock, $0.001 par value                  400,000 shares     $50.50      $20,200,000      $ 6,121

                                                                     Aggregate Filing Fee:      $30,606
</TABLE>


================================================================================

(1)     This Registration Statement shall also cover any additional shares of
        Common Stock which become issuable under the 1995 Stock Incentive Plan,
        as amended and restated on July 17, 1997 and the Special Non-Officer
        Stock Option Plan by reason of any stock dividend, stock split,
        recapitalization or other similar transaction effected without the
        receipt of consideration which results in an increase in the number of
        the Registrant's outstanding shares of Common Stock.

(2)     Calculated solely for purposes of this offering under Rule 457(h) of the
        Securities Act of 1933, as amended, on the basis of the average of the
        high and low selling prices per share of Common Stock of Network
        Appliance, Inc. on November 13, 1997 as reported by the Nasdaq National
        Market.


                                       2.



<PAGE>   2
                                     PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Certain Documents by Reference

        Network Appliance, Inc. (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):

        (a)     The Registrant's Annual Report on Form 10-K for the fiscal year
                ended April 25, 1997, filed with the Commission on July 23, 1997
                pursuant to Section 13 of the Securities Exchange Act of 1934
                (the "1934 Act");

        (b)     The Registrant's Quarterly Report on Form 10-Q for the quarter
                ended July 25, 1997, filed with the Commission on September 5,
                1997; and

        (c)     The Registrant's Registration Statement No. 00-27130 on Form 8-A
                filed with the Commission on November 1, 1995 in which there is
                described the terms, rights and provisions applicable to the
                Registrant's outstanding Common Stock.

        All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.


Item 4. Description of Securities

        Not Applicable.


Item 5. Interests of Named Experts and Counsel

        Not Applicable.


                                      II-1.



<PAGE>   3
Item 6. Indemnification of Directors and Officers

        Section 317 of the California Corporations Code authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit indemnification (including
reimbursement of expenses incurred) under certain circumstances for liabilities
arising under the Securities Act of 1933, as amended, (the "1933 Act"). The
Registrant's Restated Articles of Incorporation, as amended, and Amended and
Restated Bylaws provide for indemnification of its directors, officers,
employees and other agents to the maximum extent permitted by the California
Corporations Code. In addition, the Registrant has entered into Indemnification
Agreements with each of its directors and officers.

Item 7. Exemption from Registration Claimed

        Not Applicable.

Item 8. Exhibits



<TABLE>
<CAPTION>
 Exhibit Number                 Exhibit
 --------------                 -------
<S>             <C>
        4.0     Instruments Defining Rights of Shareholders. Reference is made
                to Registrant's Registration Statement No. 00-27130 on Form 8-A
                which is incorporated herein by reference pursuant to Item 3(d).

        5.0     Opinion of Brobeck, Phleger & Harrison LLP.

        23.1    Consent of Deloitte & Touche LLP, Independent Auditors.

        23.2    Consent of Brobeck, Phleger & Harrison LLP is contained in
                Exhibit 5.

        24.0    Power of Attorney. Reference is made to page II-4 of this
                Registration Statement.

        99.1    1995 Stock Incentive Plan, as Amended and Restated on July 17,
                1997.

        99.2    Special Non-Officer Stock Option Plan.

        99.3    Form of Notice of Grant.

        99.4    Form of Stock Option Agreement.
</TABLE>


Item 9. Undertakings

        A. The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference
into the Registration Statement; (2) that for the purpose of determining any
liability under the 1933 Act each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered therein
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and (3) to remove from registration by means
of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the Special Non-Officer Stock Option Plan.


                                      II-2.



<PAGE>   4
        B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into the Registration Statement shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

        C. Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers or controlling persons of the Registrant
pursuant to the indemnity provisions summarized in Item 6 or otherwise, the
Registrant has been informed that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.


                                      II-3.



<PAGE>   5
                                   SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Santa
Clara, State of California, on this 14th day of November, 1997.

                          NETWORK APPLIANCE, INC.

                          By /s/ Daniel J. Warmenhoven
                            -------------------------------
                              Daniel J. Warmenhoven
                              President and Chief Executive Officer



KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Daniel J. Warmenhoven and Jeffry R. Allen and each of
them acting individually, as such person's true and lawful attorneys-in-fact and
agents, each with full power of substitution, for such person, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his or her substitutes, may do or cause to be done by virtue
thereof.

       Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:




<TABLE>
<CAPTION>
Signatures                         Title                                       Date
- ----------                         -----                                       ----
<S>                                <C>                                        <C> 
/s/ Daniel J. Warmenhoven          President and Chief Executive               November 12 , 1997
- ----------------------------
Daniel J. Warmenhoven              Officer (Principal Executive Director)
</TABLE>



                                      II-4.



<PAGE>   6

<TABLE>
<CAPTION>
Signatures                         Title                                       Date
- ----------                         -----                                       ----
<S>                                <C>                                        <C> 

/s/ Jeffry R. Allen
- -------------------------------
Jeffry R. Allen                   Vice President Finance and Operations       November 12, 1997
                                  and Chief Financial Officer
                                  (Principal Financial and
                                  Accounting Officer)


/s/ Donald T. Valentine
- -------------------------------
Donald T. Valentine               Director                                    November 12, 1997



/s/ Carol A. Bartz
- -------------------------------
Carol A. Bartz                    Director                                    November 12, 1997



/s/ Michael R. Hallman            
- -------------------------------
Michael R. Hallman                Director                                    November 12, 1997



/s/ Larry R. Carter         
- ----------------------------
Larry R. Carter                   Director                                    November 12, 1997



/s/ Robert T. Wall          
- ----------------------------
Robert T. Wall                    Director                                    November 12, 1997  
</TABLE>



                                      II-5.



<PAGE>   7
                                  EXHIBIT INDEX



<TABLE>
<CAPTION>
 Exhibit Number       Exhibit
 --------------       -------
<S>             <C>
        4.0     Instruments Defining Rights of Shareholders. Reference is made
                to Registrant's Registration Statement No. 00-27130 on Form 8-A
                which is incorporated herein by reference pursuant to Item 3(d).

        5.0     Opinion of Brobeck, Phleger & Harrison LLP.

        23.1    Consent of Deloitte & Touche LLP Independent Auditors.

        23.2    Consent of Brobeck, Phleger & Harrison LLP is contained in
                Exhibit 5.

        24.0    Power of Attorney. Reference is made to page II-4 of this
                Registration Statement.

        99.1    1995 Stock Incentive Plan, as Amended and Restated on July 17,
                1997.

        99.2    Special Non-Officer Stock Option Plan.

        99.3    Form of Notice of Grant.

        99.4    Form of Stock Option Agreement.
</TABLE>








<PAGE>   1
             OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP

                                November 11, 1997


Network Appliance, Inc.
2770 San Tomas Expressway
Santa Clara, CA  95051


               Re:  Network Appliance, Inc. Registration Statement for
                    Offering of 2,000,000 shares of Common Stock

Ladies and Gentlemen:

        We refer to your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of (i) 1,600,00 shares of the
common stock ("Common Stock") of the company issuable under the 1995 Stock
Incentive Plan, as amended and restated on July 17, 1997 (the "Incentive Plan")
and (ii) 400,000 shares of the common stock of Network Appliance, Inc. (the
"Company") issuable under the Special Non-Officer Stock Option Plan (the
"Special Plan"). We advise you that, in our opinion, when such shares have been
issued and sold pursuant to the applicable provisions of the Incentive Plan and
the Special Plan and in accordance with the Registration Statement, such shares
will be validly issued, fully paid and nonassessable shares of Common Stock.

        We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

                                    Very truly yours,

                                    /s/ BROBECK, PHLEGER & HARRISON LLP

                                    BROBECK, PHLEGER & HARRISON LLP







<PAGE>   1
                                                                 EXHIBIT 23.1


INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in this Registration Statement of
Network Appliance, Inc. on Form S-8 of our report dated May 5, 1997, appearing
in the Annual Report on Form 10-K of Network Appliance, Inc. for the year ended
April 25, 1997.


/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP


San Jose, California
November 10, 1997





<PAGE>   1
                                                                    EXHIBIT 99.1

                             NETWORK APPLIANCE, INC.
                            1995 STOCK INCENTIVE PLAN

                   (AMENDED AND RESTATED AS OF JULY 17, 1997)

                                   ARTICLE ONE

                               GENERAL PROVISIONS


       I.      PURPOSE OF THE PLAN

               This 1995 Stock Incentive Plan is intended to promote the
interests of Network Appliance, Inc., a California corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.

               Capitalized terms shall have the meanings assigned to such terms
in the attached Appendix.

      II.      STRUCTURE OF THE PLAN

               A. The Plan shall be divided into four separate equity programs:

                           (i) the Discretionary Option Grant Program under
        which eligible persons may, at the discretion of the Plan Administrator,
        be granted options to purchase shares of Common Stock,

                          (ii) the Salary Investment Option Grant Program under
        which the Corporation's officers and other highly-compensated employees
        may elect to have a portion of their base salary reduced each year in
        return for options to purchase shares of Common Stock,

                         (iii) the Stock Issuance Program under which eligible
        persons may, at the discretion of the Plan Administrator,
 be issued
        shares of Common Stock directly, either through the immediate purchase
        of such shares or as a bonus for services rendered the Corporation (or
        any Parent or Subsidiary), and

                          (iv) the Automatic Option Grant Program under which
        Eligible Directors shall automatically receive option grants at periodic
        intervals to purchase shares of Common Stock.

               B. The provisions of Articles One and Six shall apply to all
equity programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.



<PAGE>   2
     III.      ADMINISTRATION OF THE PLAN

               A. The Primary Committee shall have sole and exclusive authority
to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The Primary
Committee shall also have the sole and exclusive authority to administer the
Salary Investment Option Grant Program and to select the eligible individuals
who are to participate in that program for one or more calendar years.

               B. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.

               C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs and
to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any stock option or stock issuance thereunder.

               D. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

               E. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.

     IV.       ELIGIBILITY

               A. The persons eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs are as follows:

                  (i) Employees,


                                       2.



<PAGE>   3
                  (ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and

                  (iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).

               B. Only the Corporation's officers and other highly-compensated
Employees shall be eligible to participate in the Salary Investment Option Grant
Program.

               C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, (i) with respect to the option grants
under the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be made,
the number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times when each option is to become exercisable, the vesting schedule (if any)
applicable to the option shares and the maximum term for which the option is to
remain outstanding and (ii) with respect to stock issuances under the Stock
Issuance Program, which eligible persons are to receive stock issuances, the
time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration to be paid for such shares. The Primary
Committee shall have sole and exclusive authority to select the individuals
eligible to participate in the Salary Investment Option Grant Program, but all
options granted under such program shall be made solely in accordance with the
express terms and conditions of Article Three of the Plan.

               D. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary Option Grant
Program or to effect stock issuances in accordance with the Stock Issuance
Program.

               E. The individuals eligible to participate in the Automatic
Option Grant Program shall be limited to (i) those individuals who first become
non-employee Board members on or after the Plan Effective Date, whether through
appointment by the Board or election by the Corporation's stockholders, and (ii)
those individuals who are re-elected as non-employee Board members at one or
more Annual Stockholders Meetings held after the Plan Effective Date, including
those individuals serving as non-employee Board members on the Plan Effective
Date. A non-employee Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be eligible to receive an
initial option grant under the Automatic Option Grant Program on the Plan
Effective Date or (if later) at the time he or she first becomes a non-employee
Board member, but such individual shall be eligible to receive periodic option
grants under the Automatic Option Grant Program upon his or her re-election as a
non-employee Board member at one or more Annual Stockholders Meetings.

       V.      STOCK SUBJECT TO THE PLAN


                                       3.



<PAGE>   4
               A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 5,006,262
shares. Such authorized share reserve includes the additional increase of
1,600,000 shares authorized by the Board on July 17, 1997, subject to
stockholder approval at the 1997 Annual Meeting.

               B. No one person participating in the Plan may receive options
and direct stock issuances for more than 500,000 shares of Common Stock in the
aggregate per calendar year, beginning with the 1995 calendar year.

               C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
In addition, any unvested shares issued under the Plan and subsequently
repurchased by the Corporation, at the option exercise or direct issue price
paid per share, pursuant to the Corporation's repurchase rights under the Plan
shall be added back to the number of shares of Common Stock reserved for
issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants or direct stock issuances under the
Plan. Should the exercise price of an option under the Plan (including any
option incorporated from the Predecessor Plan) be paid with shares of Common
Stock or should shares of Common Stock otherwise issuable under the Plan be
withheld by the Corporation in satisfaction of the withholding taxes incurred in
connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
issuance.

               D. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the maximum number and/or class of securities for which any
one person may be granted options and direct stock issuances per calendar year,
(iii) the number and/or class of securities for which automatic option grants
are to be made subsequently per Eligible Director under the Automatic Option
Grant Program and (iv) the number and/or class of securities and the exercise
price per share in effect under each outstanding option (including any option
incorporated from the Predecessor Plan) in order to prevent the dilution or
enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.


                                       4.



<PAGE>   5
                                   ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM


       I.      OPTION TERMS

               Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

               A.     Exercise Price.

                  1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date.

                  2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the forms
specified below:

                    (i) cash or check made payable to the Corporation,

                    (ii) shares of Common Stock held for the requisite period
            necessary to avoid a charge to the Corporation's earnings for
            financial reporting purposes and valued at Fair Market Value on the
            Exercise Date, or

                    (iii) to the extent the option is exercised for vested
            shares, through a special sale and remittance procedure pursuant to
            which the Optionee shall concurrently provide irrevocable
            instructions to (a) a Corporation-designated brokerage firm to
            effect the immediate sale of the purchased shares and remit to the
            Corporation, out of the sale proceeds available on the settlement
            date, sufficient funds to cover the aggregate exercise price payable
            for the purchased shares plus all applicable Federal, state and
            local income and employment taxes required to be withheld by the
            Corporation by reason of such exercise and (b) the Corporation to
            deliver the certificates for the purchased shares directly to such
            brokerage firm in order to complete the sale transaction.

               Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.


                                             5.



<PAGE>   6
            B. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

            C. Effect of Termination of Service.

                  1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

                (i) Any option outstanding at the time of the Optionee's
            cessation of Service for any reason shall remain exercisable for
            such period of time thereafter as shall be determined by the Plan
            Administrator and set forth in the documents evidencing the option,
            but no such option shall be exercisable after the expiration of the
            option term.

                (ii) Any option exercisable in whole or in part by the Optionee
            at the time of death may be exercised subsequently by the personal
            representative of the Optionee's estate or by the person or persons
            to whom the option is transferred pursuant to the Optionee's will or
            in accordance with the laws of descent and distribution.

                (iii) During the applicable post-Service exercise period, the
            option may not be exercised in the aggregate for more than the
            number of vested shares for which the option is exercisable on the
            date of the Optionee's cessation of Service. Upon the expiration of
            the applicable exercise period or (if earlier) upon the expiration
            of the option term, the option shall terminate and cease to be
            outstanding for any vested shares for which the option has not been
            exercised. However, the option shall, immediately upon the
            Optionee's cessation of Service, terminate and cease to be
            outstanding to the extent the option is not otherwise at that time
            exercisable for vested shares.

                (iv) Should the Optionee's Service be terminated for Misconduct,
            then all outstanding options held by the Optionee shall terminate
            immediately and cease to be outstanding.

                  2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                (i) extend the period of time for which the option is to remain
            exercisable following the Optionee's cessation of Service from the
            period otherwise in effect for that option to such greater period of
            time as the Plan Administrator shall deem appropriate, but in no
            event beyond the expiration of the option term, and/or


                                       6.



<PAGE>   7
                (ii) permit the option to be exercised, during the applicable
            post-Service exercise period, not only with respect to the number of
            vested shares of Common Stock for which such option is exercisable
            at the time of the Optionee's cessation of Service but also with
            respect to one or more additional installments in which the Optionee
            would have vested under the option had the Optionee continued in
            Service.

               D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

               E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.

               F. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, Non-Statutory Options
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.

      II.      INCENTIVE OPTIONS

               The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Six shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.

               A. Eligibility. Incentive Options may only be granted to
Employees.

               B. Exercise Price. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.


                                       7.




<PAGE>   8
               C. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

               D. 10% Stockholder. If any Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

     III.      CORPORATE TRANSACTION/CHANGE IN CONTROL

               A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option
shall not so accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), (ii) such option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such option or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
The determination of option comparability under clause (i) above shall be made
by the Plan Administrator, and its determination shall be final, binding and
conclusive.

               B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.

               C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).


                                       8.




<PAGE>   9
               D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options and
direct stock issuances under the Plan per calendar year.

               E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in whole or in part in the event the Optionee's Service
subsequently terminates by reason of an Involuntary Termination within a
designated period (not to exceed twelve (12) months) following the effective
date of any Corporate Transaction in which those options are assumed or replaced
and do not otherwise accelerate. Any options so accelerated shall remain
exercisable for fully-vested shares until the earlier of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination. In addition, the Plan
Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate in whole or in part,
and the shares subject to those terminated rights shall accordingly vest.

               F. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in whole or in part in the event the Optionee's Service
subsequently terminates by reason of an Involuntary Termination within a
designated period (not to exceed twelve (12) months) following the effective
date of any Change in Control. Each option so accelerated shall remain
exercisable for fully-vested shares until the earlier of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination. In addition, the Plan
Administrator may provide that one or more of the Corporation's outstanding
repurchase rights with respect to shares held by the Optionee at the time of
such Involuntary Termination shall immediately terminate in whole or in part,
and the shares subject to those terminated rights shall accordingly vest.

               G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Qualified
Option under the Federal tax laws.


                                       9.




<PAGE>   10
               H. The outstanding options shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

      IV.      CANCELLATION AND REGRANT OF OPTIONS

               The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.



                                       10.




<PAGE>   11
                                  ARTICLE THREE

                     SALARY INVESTMENT OPTION GRANT PROGRAM

        I. OPTION GRANTS

            The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Corporation's officers
and other highly compensated Employees who are to participate in the Salary
Investment Option Grant Program for those calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Primary Committee (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her salary for that calendar year.
The minimum amount of authorized salary reduction shall not be less than Fifteen
Thousand Dollars ($15,000), and the maximum salary reduction amount authorized
by any individual shall not exceed Seventy Five Thousand Dollars ($75,000). Each
selected individual who files a proper salary reduction authorization shall
automatically be granted an option under this Salary Investment Option Grant
Program on the first trading day in January of the calendar year for which that
salary reduction is to be in effect.

        II. OPTION TERMS

            Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Primary Committee; provided, however, that
each such document shall comply with the terms specified below.

            A. Exercise Price.

                  1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.

                  2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.


                                       11.



<PAGE>   12
            B. Number of Option Shares. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

                      X = A / (B x 66-2/3%), where

                      X is the number of option shares,

                      A is the dollar amount by which the Optionee's base salary
                      is to be reduced for the calendar year, and

                      B is the Fair Market Value per share of Common Stock on
                      the option grant date.

            C. Exercise and Term of Options. The option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year for
which the salary reduction is in effect. Each option shall have a maximum term
of ten (10) years measured from the option grant date.

            D. Effect of Termination of Service. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the expiration of the ten (10)-year option term. Should the
Optionee die while holding one or more options under this Article Three, then
each such option may be exercised, for any or all of the shares for which the
option is exercisable at the time of the Optionee's cessation of Service (less
any shares subsequently purchased by Optionee prior to death), by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. Such right of exercise shall lapse, and the
option shall terminate, upon the expiration of the ten (10)-year option term.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.

        III. CORPORATE TRANSACTION/CHANGE IN CONTROL

            A. Should any Corporate Transaction be effected while the Optionee
remains in Service, then each outstanding option held by such Optionee under the
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation (or parent
thereof) in the


                                       12.



<PAGE>   13
Corporate Transaction and shall remain exercisable for the fully-vested shares
until the expiration of the ten (10)-year option term.

            B. Should any Change in Control occur while the Optionee remains in
Service, then each outstanding option held by such Optionee under the Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Change in Control,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. The option shall remain so
exercisable until the expiration of the ten (10)-year option term.

            C. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

        III. REMAINING TERMS

            The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.


                                       13.



<PAGE>   14
                                  ARTICLE FOUR

                             STOCK ISSUANCE PROGRAM


        I. STOCK ISSUANCE TERMS

            Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below. Shares of Common Stock
may also be issued under the Stock Issuance Program pursuant to share right
awards which entitle the recipients to receive those shares upon the attainment
of designated performance goals.

            A. Purchase Price.

                  1. The purchase price per share of Common Stock subject to
direct issuance shall be fixed by the Plan Administrator, but shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the issuance date.

                  2. Shares of Common Stock may be issued under the Stock
Issuance Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

                (i) cash or check made payable to the Corporation, or

                (ii) past services rendered to the Corporation (or any Parent or
            Subsidiary).

            B. Vesting/Issuance Provisions.

                  1. The Plan Administrator may issue shares of Common Stock
under the Stock Issuance Program which are fully and immediately vested upon
issuance or which are to vest in one or more installments over the Participant's
period of Service or upon attainment of specified performance objectives. The
elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Stock Issuance Program, namely:

                (i) the Service period to be completed by the Participant or the
            performance objectives to be attained,

                (ii) the number of installments in which the shares are to vest,


                                       14.



<PAGE>   15
                (iii) the interval or intervals (if any) which are to lapse
            between installments, and

                (iv) the effect which death, Permanent Disability or other event
            designated by the Plan Administrator is to have upon the vesting
            schedule,

shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement. Alternatively, the Plan Administrator may issue share right
awards under the Stock Issuance Program which shall entitle the recipient to
receive a specified number of shares of Common Stock upon the attainment of one
or more performance goals established by the Plan Administrator. Upon the
attainment of such performance goals, fully-vested shares of Common Stock shall
be issued in satisfaction of those share right awards.

                  2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

                  3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.

                  4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for cash consideration, the Corporation shall repay that
consideration to the Participant at the time the shares are surrendered.

                  5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non- attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.


                                       15.



<PAGE>   16
                  6. Outstanding share right awards under the Stock Issuance
Program shall automatically terminate, and no shares of Common Stock shall
actually be issued in satisfaction of those awards, if the performance goals
established for such awards are not attained. The Plan Administrator, however,
shall have the discretionary authority to issue shares of Common Stock in
satisfaction of one or more outstanding share right awards as to which the
designated performance goals are not attained.

        II. CORPORATE TRANSACTION/CHANGE IN CONTROL

            A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are to be assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed in the Stock Issuance
Agreement.

            B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within twelve (12) months
following the effective date of any Corporate Transaction in which those
repurchase rights are assigned to the successor corporation (or parent thereof).

            C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights remain outstanding under the Stock Issuance
Program, to provide that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within twelve (12) months
following the effective date of any Change in Control.

        III. SHARE ESCROW/LEGENDS

            Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.


                                       16.



<PAGE>   17
                                  ARTICLE FIVE

                         AUTOMATIC OPTION GRANT PROGRAM


        I. OPTION TERMS

            A. GRANT DATES. Option grants shall be made on the dates specified
below:

                  1. Each individual who is first elected or appointed as a
non-employee Board member on or after the Plan Effective Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 24,000 shares of Common Stock, provided such
individual has not previously been in the employ of the Corporation (or any
Parent or Subsidiary).

                  2. On the date of each Annual Stockholders Meeting held after
the Plan Effective Date, each individual who is to continue to serve as an
Eligible Director shall automatically be granted a Non-Statutory Option to
purchase 6,000 shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six (6) months. There shall be no limit
on the number of such 6,000-share option grants any one Eligible Director may
receive over his or her period of Board service.

            B. EXERCISE PRICE.

                  1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.

                  2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

            C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.

            D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial 24,000-share grant shall vest,
and the Corporation's repurchase right shall lapse, in a series of four (4)
successive equal annual installments over the Optionee's period of continued
service as a Board member, with the first such installment to vest upon the
Optionee's completion of one (1) year of Board service measured from the option
grant date. Each annual 6,000-share grant made on or after July 17, 1997 shall
vest, and the Corporation's repurchase right shall lapse, upon the


                                       17.




<PAGE>   18
Optionee's continuation in Board service through the day immediately preceding
the next Annual Stockholders Meeting following the option grant date.

            E. EFFECT OF TERMINATION OF BOARD SERVICE. The following provisions
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:

                (i) The Optionee (or, in the event of Optionee's death, the
            personal representative of the Optionee's estate or the person or
            persons to whom the option is transferred pursuant to the Optionee's
            will or in accordance with the laws of descent and distribution)
            shall have a twelve (12)-month period following the date of such
            cessation of Board service in which to exercise each such option.

                (ii) During the twelve (12)-month exercise period, the option
            may not be exercised in the aggregate for more than the number of
            vested shares of Common Stock for which the option is exercisable at
            the time of the Optionee's cessation of Board service.

                (iii) Should the Optionee cease to serve as a Board member by
            reason of death or Permanent Disability, then all shares at the time
            subject to the option shall immediately vest so that such option
            may, during the twelve (12)-month exercise period following such
            cessation of Board service, be exercised for all or any portion of
            those shares as fully-vested shares of Common Stock.

                (iv) In no event shall the option remain exercisable after the
            expiration of the option term. Upon the expiration of the twelve
            (12)-month exercise period or (if earlier) upon the expiration of
            the option term, the option shall terminate and cease to be
            outstanding for any vested shares for which the option has not been
            exercised. However, the option shall, immediately upon the
            Optionee's cessation of Board service for any reason other than
            death or Permanent Disability, terminate and cease to be outstanding
            to the extent the option is not otherwise at that time exercisable
            for vested shares.

        II. CORPORATE TRANSACTION/CHANGE IN CONTROL

            A. The shares of Common Stock subject to each outstanding option at
the time of a Corporate Transaction but not otherwise vested shall automatically
vest in full so that each such option shall, immediately prior to the effective
date of that Corporate Transaction, become fully exercisable for all of the
shares of Common Stock at the time subject to such option and may be exercised
for all or any portion of those shares as fully-vested shares of Common Stock.
Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).


                                       18.



<PAGE>   19
            B. The shares of Common Stock subject to each outstanding option at
the time of a Change in Control but not otherwise vested shall automatically
vest in full so that each such option shall, immediately prior to the effective
date of that Change in Control, become fully exercisable for all of the shares
of Common Stock at the time subject to such option and may be exercised for all
or any portion of those shares as fully-vested shares of Common Stock. Each such
option shall remain exercisable for such fully-vested option shares until the
expiration or sooner termination of the option term.

            C. All repurchase rights of the Corporation outstanding under the
Automatic Option Grant Program at the time of a Corporate Transaction or Change
in Control shall automatically terminate at that time, and the shares of Common
Stock subject to those terminated rights shall immediately vest.

            D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.

            E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

        III. REMAINING TERMS

            The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.


                                       19.



<PAGE>   20
                                   ARTICLE SIX

                                  MISCELLANEOUS


        I. TAX WITHHOLDING

            A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of stock options or the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.

            B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:

                (i) Stock Withholding: The election to have the Corporation
            withhold, from the shares of Common Stock otherwise issuable upon
            the exercise of such Non-Statutory Option or the vesting of such
            shares, a portion of those shares with an aggregate Fair Market
            Value equal to the percentage of the Taxes (not to exceed one
            hundred percent (100%)) designated by the holder.

                (ii) Stock Delivery: The election to deliver to the Corporation,
            at the time the Non-Statutory Option is exercised or the shares
            vest, one or more shares of Common Stock previously acquired by such
            holder (other than in connection with the option exercise or share
            vesting triggering the Taxes) with an aggregate Fair Market Value
            equal to the percentage of the Taxes (not to exceed one hundred
            percent (100%)) designated by the holder.

        II. EFFECTIVE DATE AND TERM OF THE PLAN

            A. The Plan became effective on the Plan Effective Date and serves
as the successor to the Predecessor Plan, and no further option grants or direct
stock issuances are to be made under the Predecessor Plan after the Plan
Effective Date. All options outstanding under the Predecessor Plan as of such
date have been incorporated into the Plan and shall be treated as outstanding
options under the Plan. However, each outstanding option so incorporated shall
continue to be governed solely by the terms of the documents evidencing such
option, and no provision of the Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.


                                       20.



<PAGE>   21
            B. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.

            C. The Plan shall terminate upon the earliest of (i) August 31,
2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares pursuant to option exercises or
direct stock issuances under the Plan or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such Plan
termination, all outstanding stock options and unvested stock issuances shall
continue to have force and effect in accordance with the provisions of the
documents evidencing such options or issuances.

        III. AMENDMENT OF THE PLAN

            A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect any rights and obligations with respect
to options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.

            B. The Plan was amended and restated by the Board on July 17, 1997
(the "1997 Restatement") to effect the following changes: (i) increase the
maximum number of shares of Common Stock authorized for issuance over the term
of the Plan from 3,406,262 shares to 5,006,262 shares, (ii) modify the vesting
provisions to be in effect for future option grants made to non-employee Board
members under the Automatic Option Grant Program, (iii) render the non-employee
Board members who are serving as Plan Administrator eligible to receive option
grants and direct stock issuances under the Discretionary Option Grant and Stock
Issuance Programs, (iv) allow unvested shares issued under the Plan and
subsequently repurchased by the Corporation at the option exercise price or
direct issue price paid per share to be reissued under the Plan, (v) remove
certain restrictions on the eligibility of non-employee Board members to serve
as Plan Administrator, (vi) eliminate the stock appreciation right provisions
and loan features of the Plan and (vii) effect a series of additional changes to
the provisions of the Plan (including the stockholder approval requirements and
the transferability of Non-Statutory Options) in order to take advantage of the
recent amendments to Rule 16b-3 of the Securities and Exchange Commission which
exempts certain officer and director transactions under the Plan from the
short-swing liability provisions of the federal securities laws. The 1997
Restatement is subject to stockholder approval at the 1997 Annual Meeting, and
no option grants made on the basis of the 1,600,000-share increase shall become
exercisable in whole or in part unless and until the 1997 Restatement is
approved by the stockholders. Should such stockholder approval not be obtained,
then any options granted on the basis of the 1,600,000-share increase shall
terminate without ever becoming exercisable for those shares, and no further
option grants or direct stock issuances shall be made on the basis of such share
increase. In addition, none of the other


                                       21.



<PAGE>   22
changes effected by 1997 Restatement shall be implemented, except to the extent
the Plan Administrator otherwise deems it advisable to do so. However, in the
absence of such stockholder approval, option grants and direct stock issuances
may continue to be made pursuant to the provisions of the Plan as in effect
immediately prior to the 1997 Restatement. All option grants and direct stock
issuances made prior to the 1997 Restatement shall remain outstanding in
accordance with the terms and conditions of the respective instruments
evidencing those options or issuances, and nothing in the 1997 Restatement shall
be deemed to modify or in any way affect those outstanding options or issuances.
Subject to the foregoing limitations, the Plan Administrator may make option
grants and direct stock issuances under the Plan at any time before the date
fixed herein for the termination of the Plan.

            C. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
are held in escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess grants or issuances are
made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding and (ii) the Corporation
shall promptly refund to the Optionees and the Participants the exercise or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.

        IV. REGULATORY APPROVALS

            A. The implementation of the Plan, the granting of any option under
the Plan and the issuance of any shares of Common Stock either upon the exercise
of any option or under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the shares of Common Stock issued pursuant to it.

            B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.

        V. USE OF PROCEEDS

            Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.


                                       22.



<PAGE>   23
        VI. NO EMPLOYMENT/SERVICE RIGHTS

            Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.


                                       23.



<PAGE>   24
                                    APPENDIX

            The following definitions shall be in effect under the Plan:

            A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under the Plan.

            B. BOARD shall mean the Corporation's Board of Directors.

            C. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:

                (i) the acquisition, directly or indirectly, by any person or
            related group of persons (other than the Corporation or a person
            that directly or indirectly controls, is controlled by, or is under
            common control with, the Corporation), of beneficial ownership
            (within the meaning of Rule 13d-3 of the 1934 Act) of securities
            possessing more than fifty percent (50%) of the total combined
            voting power of the Corporation's outstanding securities pursuant to
            a tender or exchange offer made directly to the Corporation's
            stockholders, or

                (ii) a change in the composition of the Board over a period of
            thirty-six (36) consecutive months or less such that a majority of
            the Board members ceases, by reason of one or more contested
            elections for Board membership, to be comprised of individuals who
            either (A) have been Board members continuously since the beginning
            of such period or (B) have been elected or nominated for election as
            Board members during such period by at least a majority of the Board
            members described in clause (A) who were still in office at the time
            the Board approved such election or nomination.

            D. CODE shall mean the Internal Revenue Code of 1986, as amended.

            E. COMMON STOCK shall mean the Corporation's common stock.

            F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

                (i) a merger or consolidation in which securities possessing
            more than fifty percent (50%) of the total combined voting power of
            the Corporation's outstanding securities are transferred to a person
            or persons different from the persons holding those securities
            immediately prior to such transaction; or


                                      A-1.



<PAGE>   25
                (ii) the sale, transfer or other disposition of all or
            substantially all of the Corporation's assets in complete
            liquidation or dissolution of the Corporation.

            G. CORPORATION shall mean Network Appliance, Inc., a California
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Network Appliance, Inc. which shall by appropriate
action adopt the Plan.

            H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.

            I. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible
to participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.

            J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

            K. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.

            L. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

                (i) If the Common Stock is at the time traded on the Nasdaq
            National Market, then the Fair Market Value shall be the closing
            selling price per share of Common Stock on the date in question, as
            such price is reported by the National Association of Securities
            Dealers on the Nasdaq National Market or any successor system. If
            there is no closing selling price for the Common Stock on the date
            in question, then the Fair Market Value shall be the closing selling
            price on the last preceding date for which such quotation exists.

                (ii) If the Common Stock is at the time listed on any Stock
            Exchange, then the Fair Market Value shall be the closing selling
            price per share of Common Stock on the date in question on the Stock
            Exchange determined by the Plan Administrator to be the primary
            market for the Common Stock, as such price is officially quoted in
            the composite tape of transactions on such exchange. If there is no
            closing selling price for the Common Stock on the date in question,
            then the Fair Market Value shall be the closing selling price on the
            last preceding date for which such quotation exists.


                                      A-2.



<PAGE>   26
            M. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

            N. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:

                (i) such individual's involuntary dismissal or discharge by the
            Corporation for reasons other than Misconduct, or

                (ii) such individual's voluntary resignation following (A) a
            change in his or her position with the Corporation which materially
            reduces his or her level of responsibility, (B) a reduction in his
            or her level of compensation (including base salary, fringe benefits
            and participation in corporate-performance based bonus or incentive
            programs) by more than fifteen percent (15%) or (C) a relocation of
            such individual's place of employment by more than fifty (50) miles,
            provided and only if such change, reduction or relocation is
            effected by the Corporation without the individual's consent.

            O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

            P. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

            Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

            R. OPTIONEE shall mean any person to whom an option is granted under
the Discretionary Option Grant, Salary Investment Option Grant or Automatic
Option Grant Programs.

            S. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

            T. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.


                                      A-3.



<PAGE>   27
            U. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for the purposes of the Automatic Option
Grant Program, Permanent Disability or Permanently Disabled shall mean the
inability of the non-employee Board member to perform his or her usual duties as
a Board member by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.

            V. PLAN shall mean the Corporation's 1995 Stock Incentive Plan, as
set forth in this document.

            W. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

            X. PLAN EFFECTIVE DATE shall mean November 20, 1995, the date on
which the Underwriting Agreement was executed and the initial public offering
price of the Common Stock was established.

            Y. PREDECESSOR PLAN shall mean the Corporation's 1993 Stock
Option/Stock Issuance Plan.

            Z. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.

            AA. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the special
equity incentive program in effect under the Plan pursuant to which selected
individuals may apply a portion of their base salary to the acquisition of
below-market option grants.

            AB. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.

            AC. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

            AD. SERVICE shall mean the provision of services to the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.


                                      A-4.



<PAGE>   28
            AE. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.

            AF. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into
by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.

            AG. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.

            AH. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

            AI. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.

            AJ. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

            AK. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters who managed the initial public
offering of the Common Stock.


                                      A-5.





<PAGE>   1
                                                                    EXHIBIT 99.2

                             NETWORK APPLIANCE, INC.
                      SPECIAL NON-OFFICER STOCK OPTION PLAN

                                   ARTICLE ONE

                                     GENERAL

            A. This Special Non-Officer Stock Option Plan is intended to promote
the interests of Network Appliance, Inc., a California corporation, by
authorizing an additional reserve of shares of the Corporation's common stock
for issuance through long-term option grants to individuals in the employ of the
Corporation (or any Parent or Subsidiary) who are neither officers of the
Corporation nor members of the Board and who are not otherwise Section 16
Insiders.

            B. The Plan shall become effective immediately upon adoption by the
Board on April 30, 1997.

            C. This Plan shall supplement the authorized share reserve under the
Corporation's 1995 Stock Incentive Plan, and share issuances under this Plan
shall not reduce or otherwise affect the number of shares of the Corporation's
common stock available for issuance under the 1995 Stock Incentive Plan. In
addition, share issuances under the 1995 Stock Incentive Plan shall not reduce
or otherwise affect the number of shares of the Corporation's common stock
available for issuance under this Plan.

            Capitalized terms shall have the meanings assigned to such terms in
the
 attached Appendix.

        I. ADMINISTRATION OF THE PLAN

            A. The Plan Administrator shall have full power and discretion
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
provisions of the Plan and any outstanding option grants thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator shall be final
and binding on all parties who have an interest in the Plan or any outstanding
option thereunder.

            B. The individuals serving as Plan Administrator shall serve for
such period as the Board may determine and shall be subject to removal by the
Board at any time.

            C. Service as Plan Administrator shall constitute service as a Board
member, and each Board member serving as Plan Administrator shall accordingly be
entitled to full indemnification and reimbursement as a Board member for such
service. No individual serving as Plan Administrator shall be liable for any act
or omission made in good faith with respect to the Plan or any option granted
under the Plan.



<PAGE>   2
        II. ELIGIBILITY

            A. The persons eligible to participate in the Plan shall be limited
to those Employees who are neither officers of the Corporation nor members of
the Board and who are not otherwise Section 16 Insiders.

            B. The Plan Administrator shall have full authority to determine
which eligible Employees are to receive option grants under the Plan, the number
of shares to be covered by each such grant, the time or times at which each
granted option is to become exercisable and the maximum term for which the
option may remain outstanding. All options granted under the Plan shall be
Non-Statutory Options.

        III. STOCK SUBJECT TO THE PLAN

            A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock reserved for issuance over the term of the Plan shall be
limited to 400,000 shares, subject to adjustment from time to time in accordance
with the provisions of this Section III.

            B. Should one or more outstanding options under this Plan expire or
terminate for any reason prior to exercise in full (including any option
cancelled in accordance with the cancellation-regrant provisions of Section III
of Article Two), then the shares subject to the portion of each option not so
exercised shall be available for subsequent issuance under the Plan. Should the
exercise price of an outstanding option under the Plan be paid with shares of
Common Stock, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised, and not by the net number of shares of Common Stock
actually issued to the holder of such option.

            C. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, and (ii) the number and/or class of
securities and price per share in effect under each option outstanding under the
Plan. Such adjustments to the outstanding options are to be effected
in a manner which shall preclude the enlargement or dilution of rights and
benefits under such options. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.


                                       2.



<PAGE>   3
                                   ARTICLE TWO

                              OPTION GRANT PROGRAM


        I. OPTION TERMS

            Options granted under the Plan shall be authorized by action of the
Plan Administrator and shall be evidenced by one or more instruments in the form
approved by the Plan Administrator; provided, however, that each such instrument
shall comply with the terms and conditions specified below. All such granted
options shall be Non-Statutory Options.

            A. Exercise Price.

                  1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the grant date.

                  2. Full payment of the exercise price shall become immediately
due upon exercise of the option and shall be payable in one or more of the forms
specified below:

                (i) cash or check made payable to the Corporation's order,

                (ii) shares of Common Stock held for the requisite period
            necessary to avoid a charge to the Corporation's earnings for
            financial reporting purposes and valued at Fair Market Value on the
            Exercise Date, or

                (iii) through a special sale and remittance procedure pursuant
            to which the Optionee shall concurrently provide irrevocable
            instructions to (a) a Corporation-designated brokerage firm to
            effect the immediate sale of the purchased shares and remit to the
            Corporation, out of the sale proceeds available on the settlement
            date, sufficient funds to cover the aggregate exercise price payable
            for the purchased shares plus all applicable Federal, state and
            local income and employment taxes required to be withheld by the
            Corporation in connection with such purchase and to (b) the
            Corporation to deliver the certificates for the purchased shares
            directly to such brokerage firm in order to complete the sale
            transaction.

            Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.


            B. Term and Exercise of Options. Each option shall be exercisable at
such 


                                       3.



<PAGE>   4
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
such option. No option shall have a maximum term in excess of ten (10) years.
During the lifetime of the Optionee, the option shall be exercisable only by the
Optionee and shall not be assignable or transferable except for a transfer of
the option effected by will or by the laws of inheritance following the
Optionee's death.

            C. Effect of Termination of Service.

                  1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

                (i) Should Optionee cease to remain in Service for any reason
            (other than death, Permanent Disability or Misconduct) while this
            option is outstanding, then Optionee shall retain the right to
            exercise this option until the expiration of the earlier of (A) the
            three (3)-month period commencing with the date of such cessation of
            Service or (B) the ten (10)-year option term.

                (ii) If the Optionee dies while holding an outstanding option,
            then the personal representative of Optionee's estate or the person
            or persons to whom the option is transferred pursuant to Optionee's
            will or in accordance with the laws of inheritance shall have the
            right to exercise this option. Such right shall lapse, and this
            option shall cease to be outstanding, upon the expiration of the
            earlier of (A) the twelve (12)-month period measured from the date
            of Optionee's death or (B) the ten (10)-year option term.

                (iii) Should Optionee cease Service by reason of Permanent
            Disability while this option is outstanding, then Optionee shall
            retain the right to exercise this option until the expiration of the
            earlier of (A) the twelve (12)-month period commencing with the date
            of such cessation of Service or (B) the ten (10)-year option term.

                (iv) Should Optionee's Service be terminated for Misconduct,
            then this option shall terminate immediately and cease to remain
            outstanding.

                (v) During the applicable post-Service exercise period, the
            option may not be exercised in the aggregate for more than the
            number of shares for which the option is exercisable on the date of
            Optionee's cessation of Service. Upon the expiration of the
            applicable exercise period or (if earlier) upon the expiration of
            the option term, the option shall terminate and cease to be
            outstanding for any otherwise exercisable shares for which the
            option has not been exercised. However, the option shall,
            immediately upon Optionee's cessation of Service for any reason,
            terminate and cease to be outstanding with respect to any 


                                       4.



<PAGE>   5
            and all option shares for which the option is not otherwise at
            the time exercisable.

            2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:

                (i) extend the period of time for which the option is to remain
            exercisable following Optionee's cessation of Service or death from
            the limited period otherwise in effect for that option to such
            greater period of time as the Plan Administrator shall deem
            appropriate, but in no event beyond the expiration of the option
            term, and/or

                (ii) permit the option to be exercised, during the applicable
            post-Service exercise period, not only with respect to the number of
            shares of Common Stock for which such option is exercisable at the
            time of the Optionee's cessation of Service but also with respect to
            one or more additional installments for which the option would have
            become exercisable had the Optionee continued in Service.

            D. Shareholder Rights. A Optionee shall have none of the rights of a
shareholder with respect to any option shares until such person shall have
exercised the option and paid the exercise price for the purchased shares.

        II. CORPORATE TRANSACTION

            A. In the event of any Corporate Transaction, each option which is
at the time outstanding under the Plan shall automatically accelerate so that
each such option shall, immediately prior to the specified effective date for
such Corporate Transaction, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to that option and may be
exercised for all or any portion of those shares as fully-vested shares.
However, an outstanding option under the Plan shall NOT so accelerate if and to
the extent: (i) such option is, in connection with the Corporate Transaction, to
be assumed by the successor corporation or parent thereof, (ii) such option is
to be replaced with a cash incentive program of the successor corporation which
preserves the option spread existing at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same exercise schedule
applicable to such option or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant.

            B. The Plan Administrator shall have the discretionary authority to
structure one or more options under the Plan so that those options shall
immediately accelerate upon an Involuntary Termination of the Optionee's Service
within a designated period (not to exceed twelve (12) months) following the
effective date of a Corporate Transaction in which those options are assumed by
the successor corporation and accordingly do not accelerate at the time of such
Corporate Transaction.


                                       5.



<PAGE>   6
            C. Immediately following the consummation of the Corporate
Transaction, all outstanding options under the Plan shall terminate and cease to
remain outstanding, except to the extent assumed by the successor corporation or
its parent company.

            D. Each outstanding option which is assumed in connection with the
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issued to the Optionee, in consummation of the
Corporate Transaction, had such person exercised the option immediately prior to
such Corporate Transaction. Appropriate adjustments shall also be made to the
exercise price payable per share, provided the aggregate exercise price payable
for such securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan following the consummation of
the Corporate Transaction shall be appropriately adjusted.

            E. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

        III. CANCELLATION AND REGRANT OF OPTIONS

            The Plan Administrator shall have the sole and exclusive authority
to effect, at any time and from time to time, with the consent of the affected
Optionees, the cancellation of any or all outstanding options under the Plan and
to grant in substitution new options under the Plan covering the same or
different numbers of shares of Common Stock but with an exercise price per share
not less than the Fair Market Value of the Common Stock on the new grant date.


                                       6.



<PAGE>   7
                                  ARTICLE THREE

                                  MISCELLANEOUS

        I. AMENDMENT OF THE PLAN

            The Board has complete and exclusive power and authority to amend or
modify the Plan in any or all respects whatsoever. However, no such amendment or
modification shall adversely affect rights and obligations with respect to stock
options at the time outstanding under the Plan, unless the affected Optionees
consent to such amendment.

        II. TAX WITHHOLDING

            The Corporation's obligation to deliver shares of Common Stock upon
the exercise of stock options under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income tax and
employment tax withholding requirements.

        III. EFFECTIVE DATE AND TERM OF PLAN

            A. This Plan became effective upon approval by the Board at the
April 30, 1997 Board meeting and shall not be subject to shareholder approval.

            B. The Plan shall terminate upon the earlier of (i) December 31,
2007 or (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of options under the Plan. If
the date of termination is determined under clause (i) above, then all option
grants outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing those
grants.

        IV. USE OF PROCEEDS

            Any cash proceeds received by the Corporation from the sale of
shares pursuant to option grants under the Plan shall be used for general
corporate purposes.

        V. REGULATORY APPROVALS

            A. The implementation of the Plan, the granting of any option under
the Plan, and the issuance of Common Stock upon the exercise of the stock
options granted hereunder shall be subject to the Corporation's procurement of
all approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the stock options granted under it and the Common Stock issued
pursuant to it.

            B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 


                                       7.



<PAGE>   8
registration statement for the shares of Common Stock issuable under the Plan,
and all applicable listing requirements of any securities exchange on which the
Common Stock is then listed for trading.

        VI. NO EMPLOYMENT/SERVICE RIGHTS

            Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in
Service for any period of specific duration, and the Corporation (or any Parent
or Subsidiary employing such individual) may terminate such individual's Service
at any time and for any reason, with or without cause.


                                       8.



<PAGE>   9
                                    APPENDIX


               The following definitions shall be in effect under the Plan:

            A. BOARD shall mean the Corporation's Board of Directors.

            B. CODE shall mean the Internal Revenue Code of 1986, as amended.

            C. COMMON STOCK shall mean the Corporation's common stock.

            D. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:

                - a merger or consolidation in which securities possessing more
            than fifty percent (50%) of the total combined voting power of the
            Corporation's outstanding securities are transferred to a person or
            persons different from the persons holding those securities
            immediately prior to such transaction; or

                - the sale, transfer or other disposition of all or
            substantially all of the Corporation's assets in complete
            liquidation or dissolution of the Corporation.

            E. CORPORATION shall mean Network Appliance, Inc., a California
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Network Appliance, Inc. which shall by appropriate
action adopt the Plan.

            F. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

            G. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.

            H. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

                - If the Common Stock is at the time traded on the Nasdaq
            National Market, then the Fair Market Value shall be the closing
            selling price per share of Common Stock on the date in question, as
            such price is reported by the National Association of Securities
            Dealers on the Nasdaq National Market or any successor system. If
            there is no closing selling price for the Common Stock on the date
            in question, then the Fair Market Value shall be the closing selling
            price on the last preceding date for which such quotation exists.


                                       A-1.



<PAGE>   10
                - If the Common Stock is at the time listed on any national
            securities exchange, then the Fair Market Value shall be the closing
            selling price per share of Common Stock on the date in question on
            that exchange, as such price is officially quoted in the composite
            tape of transactions on such exchange. If there is no closing
            selling price for the Common Stock on the date in question, then the
            Fair Market Value shall be the closing selling price on the last
            preceding date for which such quotation exists.

            I. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:

                - such individual's involuntary dismissal or discharge by the
            Corporation for reasons other than Misconduct, or

                - such individual's voluntary resignation following (A) a change
            in his or her position with the Corporation which materially reduces
            his or her level of responsibility, (B) a reduction in his or her
            level of compensation (including base salary, fringe benefits and
            target bonuses under corporate-performance based bonus or incentive
            programs) by more than fifteen percent (15%) or (C) a relocation of
            such individual's place of employment by more than fifty (50) miles,
            provided and only if such change, reduction or relocation is
            effected by the Corporation without the individual's consent.

            J. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by the Optionee of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by the
Optionee adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee or other person in the Service of the Corporation (or any Parent
or Subsidiary).

            K. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

            L. OPTIONEE shall mean any person to whom an option is granted under
the Plan.

            M. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

            N. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the 


                                      A-2.



<PAGE>   11
Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.

            O. PLAN shall mean the Corporation's Special Non-Officer Stock
Option Plan, as set forth in this document.

            P. PLAN ADMINISTRATOR shall mean the committee comprised of one or
more Board members appointed by the Board to administer the Plan.

            Q. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit restrictions of Section 16 of the
1934 Act.

            R. SERVICE shall mean the provision of services on a periodic basis
to the Corporation (or any Parent or Subsidiary) in the capacity of an Employee
or an independent consultant or advisor, except to the extent otherwise
specifically provided in the applicable stock option agreement.

            S. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.


                                      A-3.





<PAGE>   1
                                                                    EXHIBIT 99.3

                             NETWORK APPLIANCE, INC.
               NOTICE OF GRANT OF SPECIAL NON-OFFICER STOCK OPTION

            Notice is hereby given of the following option grant (the "Option")
to purchase shares of the Common Stock of Network Appliance, Inc. (the
"Corporation"):

               OPTIONEE:___________________________________________

               GRANT DATE:_________________________________________

               VESTING COMMENCEMENT DATE:__________________________

               EXERCISE PRICE:  $__________________________________per share

               NUMBER OF OPTION SHARES:____________________________shares

               EXPIRATION DATE:____________________________________

               TYPE OF OPTION:  Non-Statutory Stock Option

               EXERCISE SCHEDULE: The Option shall become exercisable with
               respect to (i) twenty-five percent (25%) of the Option Shares
               upon Optionee's completion of one (1) year of Service measured
               from the Vesting Commencement Date and (ii) the balance of the
               Option Shares in thirty-six (36) successive equal monthly
               installments upon Optionee's completion of each additional month
               of Service over the thirty-six (36) month period measured from
               the first anniversary of the Vesting Commencement Date. In no
               event shall the Option become exercisable for any additional
               Option Shares after Optionee's cessation of Service.

               Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the Network Appliance, Inc.
Special Non-Officer Stock Option Plan (the "Plan"). Optionee further agrees
 to
be bound by the terms of the Plan and the terms of the Option as set forth in
the Special Non-Officer Stock Option Agreement (the "Option Agreement") attached
hereto as Exhibit A.

               Optionee hereby acknowledges receipt of a copy of the official
prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the
Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.

               No Employment or Service Contract. Nothing in this Notice or in
the attached Option Agreement or in the Plan shall confer upon Optionee any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining Optionee) or of Optionee, which





<PAGE>   2
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason, with or without cause.

               Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Option Agreement.

______________________  , 199__
        Date


                                   NETWORK APPLIANCE, INC.


                                   By:___________________________

                                   Title:________________________



                                   ------------------------------
                                   OPTIONEE

                                   Address:___________________________

                                   ___________________________________


ATTACHMENTS
EXHIBIT A - SPECIAL NON-OFFICER STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS


                                       2.



<PAGE>   3
                                    EXHIBIT A

                   SPECIAL NON-OFFICER STOCK OPTION AGREEMENT



<PAGE>   4
                                    EXHIBIT B

                           PLAN SUMMARY AND PROSPECTUS








<PAGE>   1
                                                                    EXHIBIT 99.4

                             NETWORK APPLIANCE, INC.
                   SPECIAL NON-OFFICER STOCK OPTION AGREEMENT

RECITALS

            A. The Board has adopted the Plan for the purpose of providing
additional incentive to selected Employees, consultants and other independent
advisors to continue in the Service of the Corporation (or any Parent or
Subsidiary).

            B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.

            C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

            NOW, THEREFORE, it is hereby agreed as follows:

                  1. GRANT OF OPTION. The Corporation hereby grants to Optionee,
as of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

                  2. OPTION TERM. This option shall have a term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance
 with
Paragraph 5 or 6.

                  3. LIMITED TRANSFERABILITY. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of inheritance
following the Optionee's death.

                  4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

                  5. CESSATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:

                (a) Should Optionee cease to remain in Service for any reason
            (other than death, Permanent Disability or Misconduct) while this
            option is outstanding, then 



<PAGE>   2
            Optionee shall have a period of three (3) months (commencing
            with the date of such cessation of Service) during which to
            exercise this option, but in no event shall this option be
            exercisable at any time after the Expiration Date.

                (b) Should Optionee die while this option is outstanding, then
            the personal representative of Optionee's estate or the person or
            persons to whom the option is transferred pursuant to Optionee's
            will or in accordance with the laws of inheritance shall have the
            right to exercise this option. Such right shall lapse, and this
            option shall cease to be outstanding, upon the earlier of (A) the
            expiration of the twelve (12)-month period measured from the date
            of Optionee's death or (B) the Expiration Date.

                (c) Should Optionee cease Service by reason of Permanent
            Disability while this option is outstanding, then Optionee shall
            have a period of twelve (12) months (commencing with the date of
            such cessation of Service) during which to exercise this option. In
            no event shall this option be exercisable at any time after the
            Expiration Date.

                (d) Should Optionee's Service be terminated for Misconduct, then
            this option shall terminate immediately and cease to remain
            outstanding.

                (e) During the applicable post-Service exercise period, the
            option may not be exercised in the aggregate for more than the
            number of shares for which the option is exercisable on the date of
            Optionee's cessation of Service. Upon the expiration of the
            applicable exercise period or (if earlier) upon the expiration of
            the option term, the option shall terminate and cease to be
            outstanding for any otherwise exercisable shares for which the
            option has not been exercised. However, the option shall,
            immediately upon Optionee's cessation of Service for any reason,
            terminate and cease to be outstanding with respect to any and all
            option shares for which the option is not otherwise at the time
            exercisable.

        6. SPECIAL ACCELERATION OF OPTION.

                  (a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
the Corporate Transaction, become exercisable with respect to the total number
of shares of Common Stock at the time subject to that option and may be
exercised for all or any portion of those shares as fully-vested shares.
However, an outstanding option under the Plan shall NOT so accelerate if and to
the extent: (i) such option is, in connection with the Corporate Transaction, to
be assumed by the successor corporation or parent thereof or (ii) such option is
to be replaced with a cash incentive program of the successor corporation which
preserves the option spread existing at the time of the Corporate Transaction
(the excess of the Fair Market Value of the Option Shares for which the option
is not otherwise at that time exercisable over the aggregate Exercise Price
payable for those Option Shares) and 


                                       2.



<PAGE>   3
provides for subsequent payout in accordance with the same exercise schedule
applicable to such option.

                  (b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.

                  (c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of the Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.

                  (d) This Agreement shall not in any way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

        7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude any dilution or enlargement of
benefits hereunder.

        8. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

        9. MANNER OF EXERCISING OPTION.

                  (a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                (i) Execute and deliver to the Corporation a Notice of Exercise
            for the Option Shares for which the option is exercised.

                (ii) Pay the aggregate Exercise Price for the purchased shares
            in one or more of the following forms:


                                       3.



<PAGE>   4
                    (A) cash or check made payable to the Corporation;

                    (B) shares of Common Stock held by Optionee (or any other
            person or persons exercising the option) for the requisite period
            necessary to avoid a charge to the Corporation's earnings for
            financial reporting purposes and valued at Fair Market Value on the
            Exercise Date; or

                    (C) through a special sale and remittance procedure pursuant
            to which Optionee (or any other person or persons exercising the
            option) shall concurrently provide irrevocable instructions (I) to a
            Corporation-designated brokerage firm to effect the immediate sale
            of the purchased shares and remit to the Corporation, out of the
            sale proceeds available on the settlement date, sufficient funds to
            cover the aggregate Exercise Price payable for the purchased shares
            plus all applicable Federal, state and local income and employment
            taxes required to be withheld by the Corporation by reason of such
            exercise and (II) to the Corporation to deliver the certificates for
            the purchased shares directly to such brokerage firm in order to
            complete the sale transaction.

                 Except to the extent the sale and remittance procedure is
            utilized in connection with the option exercise, payment of the
            Exercise Price must accompany the Notice of Exercise delivered to
            the Corporation in connection with the option exercise.

                (iii) Furnish to the Corporation appropriate documentation that
            the person or persons exercising the option (if other than Optionee)
            have the right to exercise this option.

                (iv) Make appropriate arrangements with the Corporation (or
            Parent or Subsidiary employing or retaining Optionee) for the
            satisfaction of all Federal, state and local income and employment
            tax withholding requirements applicable to the option exercise.

                (b) As soon as practical after the Exercise Date, the
            Corporation shall issue to or on behalf of Optionee (or any other
            person or persons exercising this option) a certificate for the
            purchased Option Shares, with the appropriate legends affixed
            thereto.

                    (c) In no event may this option be exercised for any
            fractional shares.

        10. COMPLIANCE WITH LAWS AND REGULATIONS.


                                       4.



<PAGE>   5
                  (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

                  (b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.

        11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.

        12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

        13. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

        14. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.

        15. LEAVE OF ABSENCE. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:

                  (a) The exercise schedule in effect under the Grant Notice
shall be frozen as of the first day of the authorized leave, and the option
shall not become exercisable for any additional installments of the Option
Shares during the period Optionee remains on such leave.


                                       5.



<PAGE>   6
                  (b) Should Optionee resume active Employee status within sixty
(60) days after the start date of the authorized leave, Optionee shall, for
purposes of the exercise schedule set forth in the Grant Notice, receive Service
credit for the entire period of such leave. If Optionee does not resume active
Employee status within such sixty (60)-day period, then no Service credit shall
be given for the period of the leave.

                  (c) In no event shall this option become exercisable for any
additional Option Shares or otherwise remain outstanding if Optionee does not
resume Employee status prior to the Expiration Date of the option term.


                                       6.



<PAGE>   7
                                    EXHIBIT I

                               NOTICE OF EXERCISE


        I hereby notify Network Appliance, Inc. (the "Corporation") that I elect
to purchase shares of the Corporation's Common Stock (the "Purchased Shares") at
the option exercise price of $ per share (the "Exercise Price") pursuant to that
certain option (the "Option") granted to me under the Corporation's Special
Non-Officer Stock Option Plan on           , 199 .

        Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

                             , 199
Date

                                    -------------------------------------------
                                    Optionee

                                    Address:
                                            -----------------------------------


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


Print name in exact manner
it is to appear on the
stock certificate:
                                    -------------------------------------------

Address to which certificate
is to be sent, if different
from address above:
                                    -------------------------------------------

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

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

Social Security Number:
                                    -------------------------------------------

Employee Number:
                                    -------------------------------------------



<PAGE>   8
                                    APPENDIX


                  The following definitions shall be in effect under the
Agreement:

            A. AGREEMENT shall mean this Special Non-Officer Stock Option
Agreement.

            B. BOARD shall mean the Corporation's Board of Directors.

            C. CODE shall mean the Internal Revenue Code of 1986, as amended.

            D. COMMON STOCK shall mean the Corporation's common stock.

            E. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:

                (i) a merger or consolidation in which securities possessing
            more than fifty percent (50%) of the total combined voting power of
            the Corporation's outstanding securities are transferred to a person
            or persons different from the persons holding those securities
            immediately prior to such transaction, or

                (ii) the sale, transfer or other disposition of all or
            substantially all of the Corporation's assets in complete
            liquidation or dissolution of the Corporation.

            F. CORPORATION shall mean Network Appliance, Inc., a California
corporation.

            G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

            H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.

            I. EXERCISE PRICE shall mean the exercise price per share as
specified in the Grant Notice.

            J. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.

            K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall determined in accordance with the following provisions:

                - If the Common Stock is at the time traded on the Nasdaq
            National Market, then the Fair Market Value shall be the closing
            selling price per share of 


                                      A-1.



<PAGE>   9
            Common Stock on the date in question, as such price is reported by
            the National Association of Securities Dealers on the Nasdaq
            National Market or any successor system. If there is no closing
            selling price for the Common Stock on the date in question, then the
            Fair Market Value shall be the closing selling price on the last
            preceding date for which such quotation exists.

                - If the Common Stock is at the time listed on any national
            securities exchange, then the Fair Market Value shall be the closing
            selling price per share of Common Stock on the date in question on
            that exchange, as such price is officially quoted in the composite
            tape of transactions on such exchange. If there is no closing
            selling price for the Common Stock on the date in question, then the
            Fair Market Value shall be the closing selling price on the last
            preceding date for which such quotation exists.

            L. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.

            M. GRANT NOTICE shall mean the Notice of Grant of Special
Non-Officer Stock Option accompanying the Agreement, pursuant to which Optionee
has been informed of the basic terms of the option evidenced hereby.

            N. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).

            O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

            P. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.

            Q. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.

            R. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

            S. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken  


                                      A-2.



<PAGE>   10
chain (other than the Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

            T. PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.

            U. PLAN shall mean the Corporation's Special Non-Officer Stock
Option Plan.

            V. PLAN ADMINISTRATOR shall mean the committee of one or more Board
members appointed by the Board to administer the Plan.

            W. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee or a
consultant or independent advisor.

            X. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.


                                      A-3.