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                                                                   Exhibit 10.33

                               BAY NETWORKS, INC.

                         SIGN-ON STOCK OPTION AGREEMENT


           1. Grant of Option. Bay Networks, Inc. (the "Company"), hereby grants
an option (the "Option") to purchase 500,000 shares of common stock of the
Company to David L. House (the "Optionee") on the October 30, 1996 (the "Grant
Date"), with an exercise price of $18.375, purchasable as set forth in and
subject to the terms and conditions of this Option. Except where the context
otherwise requires, the term "Company" shall include the parent and all present
and future subsidiaries of the Company as defined in Sections 424(e) and 424(f)
of the Internal Revenue Code of 1986, as amended or replaced from time to time
(the "Code"). The shares covered by this Option shall be registered by the
Company on Form S-8 prior to the date of any vesting.

           2. Non-Statutory Stock Option. This Option is not intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

           3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Company's Board of Directors (the
"Board") and/or by a duly appointed committee of the Board. Any subsequent
reference to the Board shall also mean the committee if such committee has been
appointed. All determinations by the Board shall be final and binding upon all
persons having an interest in the Option.

           4. Term of Option, Continuous Relationship with the Company Required.

               (a) Term of Option. The Option term is 18 months from the date of
grant of the Option, subject to automatic 90 day extensions, which may be
multiple, upon notice to the Company by Optionee that Optionee has reasonably
deemed it imprudent to exercise the option or sell the shares covered by the
Option by virtue of such actions potentially giving rise to liability to
litigation (the "Expiration Date").

               (b) Except as otherwise provided in this Section 4, this Option
may not be exercised unless the Optionee, at the time he exercises this Option,
is, and has been at all times since the of grant of this Option, an employee,
officer of, or consultant or advisor to, the Company (an "Eligible Optionee").

           5. Exercise and Vesting of Option.

               (a) Right to Exercise. The Option shall be immediately
exercisable in its entirety, subject to the Optionee's agreement that any
unvested shares purchased upon exercise are subject to the Company's repurchase
right set forth in Section 11 


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below ("Unvested Share Repurchase Option"). Except as provided in Section 5(e)
below, the Option may be exercised on or before the Expiration Date and only in
accordance with the terms of this Option Agreement. The certificate or
certificates for the shares as to which the Option shall be exercised shall be
registered in the name of the person or persons exercising the Option.

               (b) Vesting of Shares. Shares subject to the Option shall vest in
the Optionee on the date occurring one year after the Grant Date ("the Vesting
Date"). Unless otherwise set forth in this Agreement, prior to the Vesting Date
no shares subject to the Option shall vest in the Optionee. Accordingly, prior
to the Vesting Date all shares acquired by the Optionee shall be subject to the
Unvested Share Repurchase Option.

               In the event of (a) a merger in which the Company is not the
surviving corporation; (b) a merger in which the Company is the surviving
corporation where the stockholders before such merger do not retain, directly or
indirectly, at least a majority of the beneficial interest in the voting stock
of the Company; or (c) the sale or exchange of all or substantially all of the
Company's assets (other than a sale or transfer to a subsidiary of the Company
as defined in Section 424(f) of the Code) (a "Change of Control"), then all of
the Option shares shall become vested.

               If Optionee's employment with the Company terminates
involuntarily or if Optionee terminates his employment with the Company
voluntarily for "Good Reason" as defined in section 6 of Optionee's Employment
Agreement with the Company dated October 29, 1996, or if the Optionee dies or
becomes partially or permanently disabled while employed by the Company and the
Company appoints a new Chairman of the Board, President or Chief Executive
Officer or takes any action that would constitute "Good Reason" under the
Employment Agreement, prior to the Option shares becoming vested, then all of
the Option shares shall become vested immediately.

               (c) Exercise Procedure. Subject to the conditions set forth in
this Agreement, this Option shall be exercised by the Optionee's delivery of
written notice of exercise to the Company, specifying the number of shares to be
purchased and the purchase price to be paid therefor and accompanied by payment
in full in accordance with Section 6 of this Agreement. Such exercise shall be
effective upon receipt by the Company of such written notice together with the
required payment. The Optionee may purchase less than the number of shares
covered hereby, provided that no partial exercise of this Option may be for any
fractional share.

               (d) Exercise Period Upon Termination of Relationship with the
Company. If the Optionee ceases to be an Eligible Optionee for any reason, then,
except as provided in paragraphs 5(e) below, the right to exercise this Option
shall terminate three months after such cessation (but in no event after the
Expiration Date), provided 


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that this Option shall be exercisable only to the extent that the Option was
unexercised and vested on the date of such cessation. The Company's obligation
to deliver shares upon the exercise of this Option shall be subject to the
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements, arising by reason of this Option being treated as
a nonstatutory stock option or otherwise.

               (e) Exercise Period Upon Death or Disability. If the Optionee
dies or becomes disabled (within the meaning of Section 422(e)(3) of the Code)
prior to the Expiration Date while he is an Eligible Optionee, or if the
Optionee dies within three months after the Optionee ceases to be an Eligible
Optionee, this Option shall be exercisable, within the period of one year
following the date of death or disability of the Optionee (whether or not such
exercise occurs before the Expiration Date), by the Optionee, the Optionee's
guardian or legal representative, or by the person to whom this Option is
transferred by will or the laws of descent and distribution, provided that this
Option shall be exercisable only to the extent that this Option was exercisable
by the Optionee and vested on the date of his death or disability. Except as
otherwise indicated by the context, the term "Optionee", as used in this Option,
shall be deemed to include the Optionee's legal guardian or the estate of the
Optionee or any person who acquires the right to exercise this Option by bequest
or inheritance or otherwise by reason of the death of the Optionee.

           6.  Payment of Purchase Price.

               (a) Method of Payment. Payment of the purchase price for shares
purchased upon exercise of this Option shall be made (i) by delivery to the
Company of cash or a check made payable to the order of the Company in an amount
equal to the purchase price of such shares, (ii) subject to the consent of the
Company, by delivery to the Company of shares of common stock of the Company
then owned by the Optionee having a fair market value equal in amount to the
purchase price of such shares being acquired, (iii) by cash for a portion of the
purchase price not less than the par value of the shares being acquired and the
Optionee's promissory note for the balance of the purchase price, (iv) by
Immediate Sales Proceeds, as defined below, or (v) by any combination of the
foregoing. If the Option being exercised is not vested, written notice shall
also be accompanied by an executed copy of the then current form of escrow
instructions as required pursuant to Section 10.

           "Immediate Sales Proceeds" shall mean the assignment in a form
acceptable to the Company of the proceeds of a sale of some or all of the shares
acquired upon the exercise of the Option pursuant to a program and/or procedure
approved by the Company (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System). The Company reserves,
at any and all times, the right, in the Company's sole and absolute discretion,
to decline to approve any such program and/or procedure.


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           Notwithstanding the foregoing, the Option may not be exercised by the
tender of the Company's stock to the extent such tender of stock would
constitute a violation of applicable law, and unless otherwise specified by the
Board at the time the Option is granted, the promissory note permitted in (iii)
above shall be a full recourse note in a form satisfactory to the Company, with
principal payable in four equal annual installments with the first installment
due on the Vesting Date and the last installment due three years from the
Vesting Date, provided, however, that the Optionee shall tender payment of, and
the principal balance of the promissory note shall be reduced by, all principal
which is due and payable as of the date on which the Option is exercised.
Interest on the principal balance of the promissory note shall be payable in
annual installments at the minimum interest rate necessary to avoid imputed
interest pursuant to all applicable sections of the Code. Such recourse
promissory note shall be secured by the shares of stock acquired pursuant to the
then current form of joint escrow instructions as approved by the Company and
subject to Optionee entering into a restricted stock purchase agreement with the
Company with respect to any unvested shares. At any time the Company is subject
to the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations. Except as the Company in its sole discretion shall determine, the
Optionee shall pay the unpaid principal balance of the promissory note and any
accrued interest thereon upon termination of the Optionee's employment with the
Company for any reason, with or without cause. Except as the Company and the
Optionee otherwise agree, exercise of the Option following the Optionee's
termination of employment with the Company may not be made by delivery of a
promissory note as provided in this Section 6(a).

               (b) Valuation of Shares or Other Non-Cash Consideration Tendered
in Payment of Purchase Price. For the purposes hereof, the fair market value of
any share of the Company's common stock or other non-cash consideration which
may be delivered to the Company in exercise of this Option shall be determined
in good faith by the Board.

               (c) Delivery of Shares Tendered in Payment of Purchase Price. If
the Optionee exercises Options by delivery of shares of common stock of the
Company, the certificate or certificates representing the shares of common stock
of the Company to be delivered shall be duly executed in blank by the Optionee
or shall be accompanied by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares of common
stock of the Company will not be accepted in payment of the purchase price of
shares acquired upon exercise of this Option.

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               (d) Restrictions on Use of Option Stock. Notwithstanding the
foregoing, no shares of common stock of the Company may be tendered in payment
of the purchase price of shares purchased upon exercise of this Option if the
shares to be so tendered were acquired within 12 months before the date of such
tender, through the exercise of an Option granted under this Agreement or any
stock option or restricted stock plan of the Company.

            7. Delivery of Shares; Compliance With Securities Laws, Etc.

               (a) General. Upon payment of the Option price for the number of
shares purchased, the Company shall make prompt delivery of such shares to the
Optionee, provided that if any law or regulation requires the Company to take
any action with respect to such shares before the issuance thereof, then the
date of delivery of such shares shall be extended for the period necessary to
complete such action.

               (b) Listing, Qualification, Etc. This Option shall be subject to
the requirement that if counsel to the Company shall determine that the listing,
registration or qualification of the shares subject hereto upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
hereunder, this Option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, disclosure or
satisfaction of such other condition shall have been effected or obtained on
terms acceptable to the Board of Directors.

           8. Nontransferability of Option. This Option is personal and no
rights granted hereunder may be transferred, assigned, pledged or hypothecated
in any way (whether by operation of law or otherwise) nor shall any such rights
be subject to execution, attachment or similar process, except that this Option
may be transferred (i) by will or the laws of descent and distribution or (ii)
pursuant to a qualified domestic relations order as defined in Section 414(p) of
the Code. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of this Option or of such rights contrary to the provisions hereof, or
upon the levy of any attachment or similar process upon this Option or such
rights, this Option and such rights shall, at the election of the Company,
become null and void.

           9. No Special Employment or Similar Rights. Nothing contained in this
Option shall be construed or deemed by any person under any circumstances to
bind the Company to continue the employment or other relationship of the
Optionee with the Company for the period within which this Option may be
exercised.

           10. Rights as a Stockholder. The Optionee shall have no rights as a
stockholder with respect to any shares which may be purchased by exercise of
this 

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Option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) unless and until a
certificate representing such shares is duly issued and delivered to the
Optionee. No adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 12 of this Agreement.

           11. Unvested Share Repurchase Option. In the event the Optionee's
employment with the Company is terminated for any reason, with or without cause,
or if the Optionee or the Optionee's legal representative or other holder of
shares acquired pursuant to the Option attempts to sell, exchange, transfer,
pledge or otherwise dispose of any shares acquired upon exercise of the Option
which have not vested in the Optionee pursuant to Section 4(c), other than
pursuant to a "Sale of the Company" as defined below, the Company shall have the
right to repurchase the unvested shares under the terms and subject to the
conditions set forth in this Section 11.

            (a) Escrow. To ensure that the unvested shares will be available for
repurchase, the Optionee shall deposit the certificates evidencing the shares
which the Optionee purchases upon exercise of an option with an escrow agent
designated by the Company under the terms and conditions of an escrow agreement
approved by the Company. The Company shall bear the expenses of the escrow.

            (b) Exercise of Unvested Share Repurchase Option. The Company may
exercise the Unvested Share Repurchase Option by written notice to the escrow
agent and to the Optionee or the Optionee's legal representative within 60 days
after such termination (or exercise of the Option, if later) or after the
Company has received notice of the attempted disposition. If the Company fails
to give notice within such 60 day period, the Unvested Share Repurchase Option
shall terminate unless the Company and the Optionee have extended the time for
the exercise of the Unvested Share Repurchase Option. The Unvested Share
Repurchase Option must be exercised, if at all, for all of the Unvested Shares
except as the Company and the Optionee otherwise agree.

            (c) Payment for Shares and Return of Shares. Payment by the Company
to the escrow agent on behalf of the Optionee or the Optionee's legal
representative shall be made in cash within 60 days after the date of the
mailing of the written notice of exercise of the Unvested Share Repurchase
Option. For purposes of the foregoing, cancellation of any promissory note of
the Optionee to the Company shall be treated as payment to the Optionee in cash
to the extent of the unpaid principal and any accrued interest canceled. The
purchase price per share of stock being purchased by the Company shall be an
amount equal to the Optionee's original cost per share as adjusted pursuant to
Section 12. Within 30 days after payment by the Company, the escrow agent shall
deliver the shares which the Company has purchased to the Company and shall
deliver the payment received from the Company to the Optionee.

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            (d) Assignment of Unvested Share Repurchase Option. The Company
shall have the right to assign the Unvested Share Repurchase Option at any time,
whether or not such option is then exercisable, to one or more persons as may be
selected by the Board.

            (e) Transfers Not Subject to the Unvested Share Repurchase Option.
The Unvested Share Repurchase Option shall not apply to a transfer to the
Optionee's ancestors, descendants or spouse or to a trustee for the benefit of
the Optionee or the Optionee's ancestors, descendants or spouse, provided that
such transferee shall agree in writing (in a form satisfactory to the Board) to
take the stock subject to all the terms and conditions of this Section 11
providing for an Unvested Share Repurchase Option.

            (f) Release from Escrow. As soon as practicable after the expiration
of the Unvested Share Repurchase Option and after full repayment of any
promissory note secured by the shares in escrow, the escrow agent shall deliver
to the Optionee the shares no longer subject to such restriction and no longer
security for any promissory note.

            (g) Stock Dividends Subject to Stock Option Agreement. If there is
any stock dividend, stock split or other change in the character or amount of
any of the outstanding stock of the corporation the stock of which is subject to
the provisions of this Option Agreement, then in such event any and all new,
substituted or additional securities to which Optionee is entitled by reason of
Optionee's ownership of the shares acquired upon exercise of the Option shall be
immediately subject to the Unvested Share Repurchase Option and any security
interest held by the Company with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and such security interest
immediately before such event.

           12. Adjustment Provisions.

            (a) General. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the outstanding shares of
common stock are increased or decreased or are exchanged for a different number
or kind of shares or other securities of the Company, or (ii) additional shares
or new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of common stock or other
securities, an appropriate and proportionate adjustment may be made in the
number and kind of shares or other securities subject to any then outstanding
options under this Agreement, and the price for each share subject to any then
outstanding options, without changing the aggregate purchase price as to which
such options remain exercisable.

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               (b) Board Authority to Make Adjustments. Any adjustments under
this Section 12 will be made by the Board of Directors, whose determination as
to what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued pursuant to this
Option on account of any such adjustments.

           13. Mergers, Consolidation, Distributions, Liquidations, Etc. In the
event of a merger or consolidation or sale of all or substantially all of the
assets of the Company in which outstanding shares of common stock are exchanged
for securities, cash or other property of any other corporation or business
entity, or in the event of a liquidation of the Company (a "Sale of the
Company"), prior to the Expiration Date or termination of this Option, the Board
of Directors of the Company, in its sole discretion, may arrange with the
surviving, continuing, successor, or purchasing corporation, as the case may be,
that such corporation assume the Company's rights and obligations under this
Stock Option Agreement. Any Options which are neither exercised as of the date
of the Sale of the Company nor assumed by the surviving, continuing, successor,
or purchasing corporation, as the case may be, shall terminate effective as of
the date of the Sale of the Company.

           14. Withholding Taxes. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and other amounts payable to the
Optionee by the Company, and otherwise shall make adequate provision for
federal, state and local tax withholding obligations of the Company, if any,
which arise in connection with the Option including, without limitation,
obligations arising upon (i) the exercise of the Option in whole or in part,
(ii) any transfer, in whole or in part, of any shares acquired on exercise of
the Option, (iii) the operation of any federal or state law providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option.

           15. Legends. The Company may at any time place legends referencing
the Unvested Share Repurchase Option set forth in Section 11, and any applicable
federal and/or state securities restrictions on all certificates representing
shares of stock subject to the provisions of this Agreement. The Optionee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to this Option in the
possession of the Optionee in order to effectuate the provisions of this Section
15. Unless otherwise specified by the Company, legends placed on such
certificates may include but shall not be limited to the following:

               "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
UNVESTED SHARE REPURCHASE OPTION SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION."

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           16. Binding Effect. This Option Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.

           17. Amendment or Termination. The Board may at any time amend or
terminate the Option; provided, however, that no such amendment or termination
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee.

           18. Integrated Agreement. This Option Agreement constitutes the
entire understanding and agreement of the Optionee and the Company with respect
to the subject matter contained herein, and there are no agreements,
understandings, restrictions, representations or warranties among the Optionee
and the Company other than those as set forth or provided for herein.

           19. Applicable Law. This Agreement shall be governed by the laws of
the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within
California.


Optionee's signature below indicates acceptance of the grant and the terms of
the Agreement.


/s/  ARTHUR CARR                                              EFFECTIVE 10/29/96
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For Bay Networks, Inc.                                        Date


/s/  DAVID L. HOUSE                                           EFFECTIVE 10/29/96
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Optionee                                                      Date

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