SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e) (2))
NETSPEAK CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
NETSPEAK CORPORATION
902 Clint Moore Road, Suite 104
Boca Raton, Florida 33487
-------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 18, 1998
-------------------------------
To the Shareholders of NetSpeak Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of NetSpeak Corporation, a Florida corporation (the
"Company"), will be held at the Embassy Suites Hotel, 661 Northwest 53rd
Street, Boca Raton, Florida 33487 at 9:00 A.M. on June 18, 1998 for the
following purposes:
1. To elect ten directors of the Company for the ensuing year;
2. To consider and vote upon a proposal to approve an amendment to the
Company's 1995 Stock Option Plan to increase the number of shares of the
Company's Common Stock reserved for issuance thereunder from an aggregate
of 2,700,000 shares to an aggregate of 5,500,000 shares;
3. To consider and vote upon a proposal to approve the adoption of an
Employee Stock Purchase Plan;
4. To consider and vote upon a proposal to approve an amendment to the
Company's Articles of Incorporation to increase the number of authorized
shares of the Company's Common Stock from an aggregate of 25,000,000
shares to an aggregate of 75,000,000 shares;
5. To consider and vote upon a proposal to ratify the appointment of
Deloitte & Touche LLP as the Company's independent public accountants for
the fiscal year ending December 31, 1998; and
6. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponements thereof.
The Board of Directors has fixed the close of business on May 1, 1998 as
the record date for determining those shareholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof.
Whether or not you expect to be present, please sign, date and return the
enclosed proxy card in the pre-addressed envelope provided for that purpose as
promptly as possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
HARVEY KAUFMAN,
Secretary
Boca Raton, Florida
May 18, 1998
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. THOSE
SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY URGED TO EXECUTE AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO
EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE ANNUAL MEETING, REVOKE THEIR
PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE>
NETSPEAK CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 18, 1998
-------------------------------
PROXY STATEMENT
-------------------------------
TIME, DATE AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of NetSpeak Corporation, a Florida corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), for use at the Annual Meeting of
Shareholders (the "Annual Meeting") of the Company to be held at 9:00 A.M. on
June 18, 1998, at the Embassy Suites Hotel, 661 Northwest 53rd Street, Boca
Raton, Florida 33487, and at any adjournments or postponements thereof pursuant
to the enclosed Notice of Annual Meeting.
The approximate date this Proxy Statement and the enclosed form of proxy
are first being sent to shareholders is May 18, 1998. Shareholders should
review the information provided herein in conjunction with the Company's Annual
Report to Shareholders which accompanies this Proxy Statement. The Company's
principal executive offices are located at 902 Clint Moore Road, Suite 104,
Boca Raton, Florida 33487, and its telephone number is (561) 998-8700.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting and the enclosed proxy is to be borne by the Company.
In addition to the use of mail, employees of the Company may solicit proxies
personally and by telephone. The Company's employees will receive no
compensation for soliciting proxies other than their regular salaries. The
Company may request banks, brokers and other custodians, nominees and
fiduciaries to forward copies of the proxy material to their principals and to
request authority for the execution of proxies. The Company may reimburse such
persons for their expenses in so doing.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
1. To elect ten directors of the Company for the ensuing year;
2. To consider and vote upon a proposal to approve an amendment to the
Company's 1995 Stock Option Plan to increase the number of shares of the
Company's Common Stock reserved for issuance thereunder from an aggregate
of 2,700,000 shares to an aggregate of 5,500,000 shares;
<PAGE>
3. To consider and vote upon a proposal to approve the adoption of an
Employee Stock Purchase Plan;
4. To consider and vote upon a proposal to approve an amendment to the
Company's Articles of Incorporation to increase the number of authorized
shares of the Company's Common Stock from an aggregate of 25,000,000
shares to an aggregate of 75,000,000 shares;
5. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1998; and
6. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth herein)
will be voted (a) for the election of the respective nominees for director
named below and (b) in favor of all other proposals described in the Notice of
Annual Meeting. In the event a shareholder specifies a different choice by
means of the enclosed proxy, the shares will be voted in accordance with the
specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on May 1, 1998 as the
record date (the "Record Date") for determining shareholders of the Company
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were 12,332,997 shares of Common Stock issued and outstanding, all of
which are entitled to be voted at the Annual Meeting. Each share of Common
Stock is entitled to one vote on each matter submitted to shareholders for
approval at the Annual Meeting.
The attendance, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by plurality of the
votes cast by the shares of Common Stock represented in person or by proxy at
the Annual Meeting. The affirmative vote of the holders of a majority of the
shares of Common Stock represented in person or by proxy at the Annual Meeting
will be required for approval of the other proposals covered by this Proxy
Statement. If less than a majority of the outstanding shares of Common Stock
entitled to vote are represented at the Annual Meeting, a majority of the
shares of Common Stock so represented may adjourn the Annual Meeting to another
date, time or place, and notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before an
adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof. Abstentions will
be considered as shares of Common Stock present and entitled to vote at the
Annual Meeting and will be counted as votes cast at the Annual Meeting, but
will not be counted as votes cast for or against any given matter.
A broker or nominee holding shares of Common Stock registered in its name,
or in the name of its nominee, which are beneficially owned by another person
and for which it has not received instructions as to voting from the beneficial
owner, may have discretion to vote the beneficial owner's shares with respect
to the election of directors and other matters addressed at the Annual Meeting.
Any such shares which are not represented at the Annual Meeting either in
person or by proxy will not be considered to have cast votes on any matters
addressed at the Annual Meeting.
2
<PAGE>
BENEFICIAL SECURITY OWNERSHIP
The following table sets forth, as of the Record Date, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person who is known by the Company to beneficially own 5% or more of the
Company's outstanding Common Stock, (ii) the Company's Chief Executive Officer
and each of the other "Named Executive Officers" (as defined below in
"Executive Compensation--Summary Compensation Table"), (iii) each director of
the Company, and (iv) all directors and executive officers of the Company as a
group. The Company is not aware of any beneficial owner of more than 5% of the
outstanding Common Stock other than as set forth in the following table.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) % OF CLASS OUTSTANDING
- --------------------------------------- ----------------------- -----------------------
<S> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Stephen R. Cohen(3) ................... 600,000 4.7
Robert Kennedy(4) ..................... 270,000 2.1
Shane D. Mattaway(5) .................. 748,000 5.9
John W. Staten(6) ..................... 75,000 *
Steven F. Mills(7). ................... 23,334 *
Steven D. Leeke(8). ................... -0- -0-
A. Jeffry Robinson(9) ................. 80,000 *
Michael B. Goldberg(10) ............... 5,000 *
Martin Shum(10) ....................... 5,000 *
Randall Battat(8) ..................... -0- -0-
Stephen P. Earhart(8) ................. -0- -0-
All directors and executive officers
as a group (12 persons)(11) ......... 1,889,668 14.1
5% OR GREATER HOLDERS
Bay Networks, Inc ..................... 1,334,171 10.8
4401 Great America Parkway
Santa Clara, California 95054
Motorola, Inc ......................... 3,909,178 31.7
1303 E. Algonquin Road
Schaumburg, Illinois 60196
</TABLE>
- ----------------
* Less than 1%.
(1) Except as indicated, the address of each person named in the table is c/o
the Company, 902 Clint Moore Road, Suite 104, Boca Raton, Florida 33487.
(2) Except as otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
listed, which include shares of Common Stock that such persons have the
right to acquire a beneficial interest within 60 days from the Record
Date.
(3) Includes 300,000 shares of Common Stock issuable upon the exercise of
stock options.
(4) Represents 250,000 shares of Common Stock issuable upon the exercise of
stock options and 20,000 shares of Common Stock issuable upon the exercise
of stock options held by Mr. Kennedy's spouse.
(5) Includes 250,000 shares of Common Stock issuable upon the exercise of
stock options.
(6) Represents 75,000 shares of Common Stock issuable upon the exercise of
stock options.
(7) Represents 23,334 shares of Common Stock issuable upon the exercise of
stock options.
(8) Does not include the shares of Common Stock beneficially owned by
Motorola, Inc. ("Motorola") in which shares Messrs. Leeke, Earhart, and
Battat disclaim beneficial ownership.
(9) Represents 80,000 shares of Common Stock issuable upon the exercise of
stock options.
(10) Represents 5,000 shares of Common Stock issuable upon exercise of stock
options.
(11) Includes (i) the shares of Common Stock described in notes (3) through
(10) and (ii) 50,000 shares of Common Stock held by Harvey Kaufman and
33,334 shares of Common Stock issuable upon the exercise of stock options
held by Mr. Kaufman.
3
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting, ten directors will be elected by the shareholders
to serve until the next annual meeting of shareholders or until their
successors are elected and qualified. The accompanying form of proxy when
properly executed and returned to the Company, will be voted FOR the election
as directors of the ten persons named below, unless the proxy contains contrary
instructions. Proxies cannot be voted for a greater number of persons than the
number of nominees named in the Proxy Statement. Management has no reason to
believe that any of the nominees is unable or unwilling to serve if elected.
However, in the event that any of the nominees should become unable or
unwilling to serve as a director, the proxy will be voted for the election of
such person or persons as shall be designated by the Board of Directors.
The following table sets forth certain information concerning each
nominee.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------- ----- ----------------------------------------------------------
<S> <C> <C>
Stephen R. Cohen ................ 55 Chairman of the Board and Chief Executive Officer
Robert Kennedy .................. 49 President, Chief Operating Officer and Director
Shane D. Mattaway ............... 41 Chief Scientist and Director
John W. Staten .................. 31 Chief Financial Officer, Assistant Secretary and Director
Randall Battat .................. 38 Director
Stephen P. Earhart .............. 49 Director
Michael B. Goldberg(2) .......... 51 Director
Steven D. Leeke(1) .............. 36 Director
A. Jeffry Robinson(2) ........... 55 Director
Martin Shum(1) .................. 49 Director
</TABLE>
- ----------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
STEPHEN R. COHEN has served as Chairman of the Board and Chief Executive
Officer of the Company since December 1995. From 1975 until January 1995, Mr.
Cohen served as Chairman of the Board of TPI Enterprises, Inc., formerly
Telecom Plus International, Inc. ("TPI"). Under Mr. Cohen's stewardship, TPI
grew from a small, local telephone interconnect company with approximately
$1,000,000 in revenue in 1975 to become the largest independent supplier of
telecommunications equipment in the United States, with over $300 million in
revenue in 1987. Mr. Cohen also oversaw the expansion of TPI's operations into
other segments of the telecommunications industry, including cellular
operations, radio common carrier paging and telecommunications software
development. In 1987, TPI sold its core telecommunications business to Siemens
AG ("Siemens"), who had been TPI's joint venture partner since 1984. Following
the sale to Siemens, Mr. Cohen oversaw the redeployment of TPI's assets into
new businesses including restaurants and movie theaters. Mr. Cohen retired from
TPI in January 1995.
ROBERT KENNEDY has served as a director of the Company since December 1995
and became its President and Chief Operating Officer in March 1996. Mr. Kennedy
has over 20 years experience in the telecommunications industry. From 1976
until joining the Company, Mr. Kennedy served in a number of executive
positions at TPI, including Vice President of Sales and Marketing from 1976 to
1985 and as Executive Vice President since 1985. In the latter capacity, Mr.
Kennedy was responsible for sales, marketing, strategic planning, product
development and overall profit responsibility for a number of TPI's operating
subsidiaries. Mr. Kennedy also served as a member of TPI's Board of Directors
from 1984 to 1993 and as its Executive Vice President to March 1996.
SHANE D. MATTAWAY co-founded Internet Telephone Company ("ITC") in May
1995 and became the Company's Executive Vice President, Chief Technical Officer
and a director upon the Company's acquisition of ITC in December 1995. In
February 1998, Mr. Mattaway became the Company's Chief Scientist. For
approximately 10 years prior to founding ITC, Mr. Mattaway was the founder and
President of Boca Development, a computer consulting and software development
firm. Mr. Mattaway
4
<PAGE>
has also served as an Adjunct Professor in Computer Science at the University
of Miami, Florida International University and Florida Atlantic University.
JOHN W. STATEN has served as Chief Financial Officer and Assistant
Secretary since February 1996 and became a director of the Company in April
1998. From 1990 to January 1996, Mr. Staten was employed by Deloitte & Touche
LLP, a public accounting firm, most recently as a Manager focusing on the
retail and technology sectors.
RANDALL BATTAT was appointed to the Company's Board of Directors in April
1998 as the designee of Motorola. Mr. Battat is currently Senior Vice President
and General Manager of Motorola's Information Systems Group. He joined Motorola
in February 1994 as Corporate Vice President and General Manager of its
Wireless Data Group. From 1981 until joining Motorola, Mr. Battat was employed
in various positions at Apple Computer, Inc., including Vice President of that
company's Macintosh Desktop and Powerbook Division.
STEPHEN P. EARHART was appointed to the Company's Board of Directors in
April 1998 as the designee of Motorola. Mr. Earhart is currently a Senior Vice
President of Finance with Motorola. He joined Motorola in 1978 and has held
numerous progressive positions in Motorola's financial organization,
principally in the cellular, network operations and space infrastructure areas.
Mr. Earhart also serves as a director of Harris Bank Libertyville.
MICHAEL B. GOLDBERG became a director of the Company upon consummation of
the Company's initial public offering in June 1997. Since 1991, Mr. Goldberg
has been Managing Director at Kelso & Company, a private investment firm. From
1989 to 1991, Mr. Goldberg was a Managing Director and Co-head of the Mergers
and Acquisitions department at the First Boston Corporation. Prior thereto, he
was a partner in Skadden, Arps, Slate, Meagher & Flom. Mr. Goldberg is also a
director of Hosiery Corporation of America, Inc.
STEVEN D. LEEKE was appointed to the Company's Board of Directors in
November 1996 as the designee of Motorola. Mr. Leeke is currently the Director
and General Manager of Internet Content and Service Businesses within Motorola.
He joined Motorola in March 1995 as Director of Strategy for New Enterprises.
In 1988 he joined Texas Instruments: first as a member of their Corporate
Research Development & Engineering Department; then as Branch Manager,
Production Management Decision Systems; and finally as Manager of Strategic
Development, Semiconductor Group Research & Development, reporting to the Chief
Technical Officer.
A. JEFFRY ROBINSON has served as a director of the Company since December
1995. Since April 1996, Mr. Robinson has been a partner in the law firm of
Broad and Cassel, the Company's counsel, specializing in corporate and
securities matters. From March 1992 until April 1996, Mr. Robinson was a
shareholder in the Miami law firm of Greenberg, Traurig, Hoffman, Lipoff, Rosen
& Quentel, P.A.
MARTIN SHUM became a director of the Company upon consummation of the
Company's initial public offering in June 1997, as the designee of ACT
Networks, Inc. ("ACT"). Mr. Shum founded ACT in May 1987 and has served as
Chairman of the Board of Directors, President and Chief Executive Officer since
that time.
In March 1998, Stephen R. Cohen, Robert Kennedy, Shane D. Mattaway, Harvey
Kaufman, John W. Staten and Steven F. Mills (collectively, the "Management
Shareholders"), Motorola and the Company entered into a Voting Agreement (the
"Voting Agreement") pursuant to which Motorola has the right to designate
certain nominees to the Company's Board of Directors and, for as long as the
Voting Agreement is in effect, the Management Shareholders will vote in favor
of Motorola's designees, and Motorola will vote in favor of each Management
Shareholder nominated by the Company to the Board of Directors. See "Certain
Transactions--Transactions with Motorola."
See "Certain Transactions--Transactions with ACT" with respect to ACT's
right to designate a nominee to the Board of Directors.
5
<PAGE>
There are no family relationships among the Company's directors and
executive officers.
The Company's executive officers are elected annually by the Board of
Directors and serve at the discretion of the Board of Directors. The Company's
directors hold office until the next annual meeting of shareholders and until
their successors have been duly elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PERSONS NOMINATED
FOR ELECTION TO THE BOARD OF DIRECTORS.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During Fiscal 1997, the Board of Directors held four formal meetings and
acted by unanimous consent on two occasions. During Fiscal 1997, no director
attended fewer than 75% of the number of meetings of the Board of Directors and
each committee of the Board of Directors held during the period he served on
the Board of Directors.
The only committees of the Board of Directors are the Audit Committee and
the Compensation Committee. The Board of Directors does not have a nominating
or similar committee.
The Audit Committee is presently comprised of Martin Shum and Steven D.
Leeke. The duties and responsibilities of the Audit Committee include (a)
recommending to the Board of Directors the appointment of the Company's
independent public accountants and any termination of engagement, (b) reviewing
the plan and scope of independent audits, (c) reviewing the Company's
significant accounting policies and internal controls, (d) having general
responsibility for all related auditing matters, and (e) reporting its
recommendations and findings to the full Board of Directors. The Audit
Committee met once during Fiscal 1997.
The Compensation Committee is presently comprised of Michael B. Goldberg
and A. Jeffry Robinson. The Compensation Committee reviews and approves the
compensation of the Company's executive officers and administers the Company's
1995 Stock Option Plan (the "1995 Plan") and will administer the Company's
Employee Stock Purchase Plan if its adoption is approved. The Compensation
Committee met once during Fiscal 1997.
COMPENSATION OF DIRECTORS
The Company pays non-employee directors a fee of $1,000 per meeting of the
Board of Directors or committee thereof attended and provides non-employee
directors with annual grants of stock options under the 1995 Plan to purchase
5,000 shares of Common Stock. Directors are also reimbursed for travel and
lodging expenses in connection with their attendance at meetings. In August
1997, each of Michael B. Goldberg, A. Jeffry Robinson and Martin Shum were
granted ten-year options under the 1995 Plan to purchase 5,000 shares of Common
Stock at an exercise price of $8.125 per share.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and holders of more than ten
percent of the Company's Common Stock, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission. Such persons are
required to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
oral or written representations from certain reporting persons that no Forms 5
were required for those persons, the Company believes that, with respect to the
fiscal year ended December 31, 1997 ("Fiscal 1997"), all filing requirements
applicable to its executive officers, directors and greater than ten percent
beneficial owners were complied with.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for the fiscal years ended
December 31, 1995, 1996 and 1997, the cash and certain other compensation paid
by the Company to the Company's Chief Executive Officer ("CEO") and the four
most highly compensated other executive officers whose annual salary and bonus
exceed $100,000 during Fiscal 1997 (together with the CEO, collectively, the
"Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- SECURITIES UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTION/SARS(1) COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- ----------------------------- -------- --------- -------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C>
Stephen R. Cohen 1997 190,776 90,000 -- 7,200
Chairman and CEO 1996 43,080 -- 300,000 1,662
1995 -- -- -- --
Robert Kennedy(3) 1997 165,507 70,000 -- 8,150
President and 1996 35,367 -- 250,000 1,662
Chief Operating Officer
Shane D. Mattaway(4) 1997 129,670 50,000 -- 850
Chief Scientist 1996 109,171 -- 100,000 1,662
1995 101,462 -- 150,000 --
John W. Staten(5) 1997 99,246 50,000 -- 8,150
Chief Financial Officer 1996 63,261 -- 100,000 1,662
Steven F. Mills(6) 1997 124,664 32,500 -- 950
Senior Vice President of 1996 18,461 -- 100,000 --
Advanced Technology
Development
</TABLE>
- ----------------
(1) Represents options to purchase Common Stock granted to the Named Executive
Officer under the 1995 Plan.
(2) The dollar amount represents a car allowance and/or Company contributions
to the Company's 401(k) plan.
(3) Mr. Kennedy joined the Company in March 1996.
(4) Mr. Mattaway joined the Company as Executive Vice President and Chief
Technical Officer in December 1995 and became Chief Scientist in February
1998.
(5) Mr. Staten joined the Company in February 1996.
(6) Steven F. Mills joined the Company in October 1996 as Vice President of
Marketing and became Senior Vice President of Advanced Technology
Development in February 1998.
STOCK OPTIONS HELD AT END OF FISCAL 1997
The following table indicates the total number and value of exercisable
and unexercisable stock options held by each of the Named Executive Officers
listed as of December 31, 1997. No options to purchase stock were exercised by
any of the Named Executive Officers in Fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END
------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
- --------------------------- ------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C>
Stephen R. Cohen .......... 300,000 0 $6,787,500 0
Robert Kennedy ............ 250,000 0 5,656,250 0
Shane D. Mattaway ......... 250,000 0 5,881,250 0
John W. Staten ............ 80,000 20,000 1,810,000 452,500
Steven F. Mills ........... 33,334 66,666 654,880 1,308,320
</TABLE>
- ----------------
(1) Based on the Nasdaq National Market closing price for the Company's Common
Stock on December 31, 1997 of $25.125 per share.
7
<PAGE>
COMPENSATION COMMITTEE, INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is presently comprised of Michael B. Goldberg
and A. Jeffry Robinson. Mr. Robinson is a partner of the law firm of Broad and
Cassel, which serves as counsel to the Company. The Company has paid legal fees
to Broad and Cassel for services rendered.
EMPLOYMENT AGREEMENTS
Effective October 1996, the Company entered into employment agreements
with Stephen R. Cohen, Robert Kennedy, Shane D. Mattaway, John W. Staten and
Harvey Kaufman, the Company's Executive Vice President and Secretary. The
employment agreements have "rolling" two year terms, so that at all times the
remaining term of the agreement is two years. The employment agreements
currently provide for annual salaries set at $275,000, $250,000, $155,000,
$150,000, and $110,000 for Messrs. Cohen, Kennedy, Mattaway, Staten and
Kaufman, respectively.
Each employment agreement provides that the executive officer who is a
party thereto (the "Executive Officer") will continue to receive his salary for
a period of two years after termination of employment, if his employment is
terminated by the Company for any reason other than death, disability or Cause
(as defined in the employment agreement), or for a period of 12 months after
termination of the agreement as a result of the Executive Officer's disability,
and the Executive Officer's estate will receive a lump sum payment equal to one
year's salary plus a pro rata portion of any bonus to which the Executive
Officer is entitled upon termination of the employment agreement by reason of
the Executive Officer's death. Each employment agreement also prohibits the
Executive Officer from directly or indirectly competing with the Company for
one year after termination for any reason except a termination without Cause.
If a Change of Control (as defined in the employment agreement) occurs, the
employment agreement provides for the continued employment of the Executive
Officer for a period of two years following the Change of Control. In addition,
following the Change of Control, if the Executive Officer's employment is
terminated by the Company other than for Cause or by reason of the Executive
Officer's death or disability, or by the Executive Officer for certain
specified reasons (such as a reduction of compensation or a diminution of
duties), the Executive Officer will receive a lump sum cash payment equal to
200% of the cash compensation received by the Executive Officer during the 12
calendar months prior to such termination.
The Company is also party to a two-year employment agreement with Steven
F. Mills, the Company's Senior Vice President of Advanced Technology
Development, expiring in October 1998. The term of Mr. Mills' employment
agreement will automatically be extended for successive one-year terms unless
the Company or Mr. Mills gives written notice of its or his, respectively,
intent not to extend such agreement to the other party at least 60 days prior
to the then scheduled expiration date. Mr. Mills' employment agreement
currently provides for an annual salary set at $200,000 and contains
confidentiality and non-competition provisions.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant stock options during Fiscal 1997 to any of the
Named Executive Officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Commission, the Company is required to
provide a report explaining the rationale and considerations that led to
fundamental compensation decisions affecting the Company's executive officers
(including the Named Executive Officers) during the past fiscal year. The
report of the Company's Compensation Committee is set forth below.
COMPENSATION PHILOSOPHY
The three principal components of the Company's executive compensation are
salary, bonus and stock options. These components are designed to facilitate
fulfillment of the compensation objectives of
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the Company's Board of Directors and the Compensation Committee, which
objectives include (i) attracting and retaining competent management, (ii)
recognizing individual initiative and achievement, (iii) rewarding management
for short and long term accomplishments, and (iv) aligning management
compensation with the achievement of the Company's goals and performance.
The Compensation Committee strongly endorses the position that equity
ownership by management is beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value. This alignment
is amplified by the holdings by management of the Company's Common Stock and
stock options. Base salaries for new management employees are determined
initially by evaluating the responsibilities of the position held and the
experience of the individual, and by reference to the competitive marketplace
for managerial talent, including a comparison of base salaries for comparable
positions at similar companies. Annual salary adjustments and bonus and stock
option awards are determined by evaluating the competitive marketplace, the
performance of the Company, the performance of the executive, and the
responsibilities assumed by the executive.
During the current fiscal year, the Compensation Committee intends to
review the Company's existing management compensation programs and plans (i) to
meet with the chief executive officer to consider and set mutually agreeable
performance standards and goals for members of senior management and/or the
Company, as appropriate or as otherwise required pursuant to any such officer's
employment agreement and (ii) to consider and, as appropriate, approve
modifications to such programs to ensure a proper fit with the philosophy of
the Compensation Committee and the agreed-upon standards and goals.
Accordingly, the Compensation Committee has not yet considered or approved the
individual or corporate performance goals or standards for the present fiscal
year with respect to the Company's management incentive programs.
CHIEF EXECUTIVE OFFICER COMPENSATION
The principal factors considered by the Board of Directors in determining
Fiscal 1997 salary and bonus for Stephen R. Cohen, the Chairman of the Board
and Chief Executive Officer of the Company, included an analysis of the
compensation of chief executive officers of public companies within the
Company's industry, the Company's financial position, the length of Mr. Cohen's
service, the Company's Fiscal 1997 performance and development, including the
facts that many new products had been developed and that many strategic
alliances had been entered into, expectations for the fiscal year ending
December 31, 1998 and other performance measures. There was no specific
relationship or formula, however, by which such compensation was tied to
Company performance.
OTHER EXECUTIVE OFFICERS' COMPENSATION
Fiscal 1997 base salary and bonus for the Company's other executive
officers was determined by the Compensation Committee. This determination was
made after a review and consideration of a number of factors, including each
executive's level of responsibility and commitment, past and present
contribution to the Company's growth, the Company's performance and development
during Fiscal 1997, compensation levels at competitive publicly held companies
and other performance measures. Although Company performance was one of the
factors considered, the approval of the Compensation Committee was based upon
an overall review of the relevant factors, and there was no specific
relationship or formula by which compensation was tied to Company performance.
STOCK OPTIONS
The Company maintains the 1995 Plan which is designed to attract and
retain executive officers, directors and other employees of the Company and to
reward them for delivering long-term value to the Company. The Compensation
Committee did not grant any options to Named Executive Officers during Fiscal
1997.
/s/ Michael B. Goldberg
/s/ A. Jeffry Robinson
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PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Company's Common Stock with the cumulative total stockholder return on The
S&P 500 Index and the Nasdaq Stock Market-Computer and Data Processing
commencing on May 29, 1997 (the first day the Common Stock began trading on the
Nasdaq National Market) and ending December 31, 1997.
COMPARISON OF SEVEN MONTH CUMULATIVE TOTAL RETURN*
AMONG NETSPEAK CORPORATION, THE S&P 500 INDEX AND
THE NASDAQ COMPUTER & DATA PROCESSING INDEX
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
MAY 29, 1997 DECEMBER 31, 1997
-------------- ------------------
<S> <C> <C>
NetSpeak ........................................... $100 $275
S&P 500 ............................................ $100 $123
Nasdaq Computer and Data Processing Index .......... $100 $117
</TABLE>
- ----------------
* Assumes that $100 was invested on May 29, 1997 in the Company's Common Stock
in the Nasdaq Stock Market Computer and Data Processing Index or The S&P 500
Index, and that all dividends are reinvested.
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CERTAIN TRANSACTIONS
TRANSACTION WITH ACT
In May 1997, the Company entered into a Technology Development and License
Agreement with ACT pursuant to which the Company is adapting certain of its
software modules to execute on ACT's hardware products and granted ACT a
license to distribute a variety of the Company's products to ACT customers. ACT
and the Company are also seeking to integrate their respective technologies
into a bundled solution to be distributed and marketed by both of them. The
Company granted ACT the right to designate one member of the Company's Board of
Directors for a period of two years through June 1999. ACT also purchased
228,571 shares of Common Stock in the Company's initial public offering in June
1997 and in March 1998 sold all such shares of Common Stock in open market
transactions.
TRANSACTION WITH BAY NETWORKS, INC.
In January 1998, the Company signed an OEM and Joint Development Agreement
with Bay Networks, Inc. ("Bay") to provide voice and fax-over-IP solutions to
Bay and its customers. In conjunction with the aforementioned agreement, the
Company and Bay entered into a stock purchase agreement ("Purchase Agreement")
pursuant to which Bay purchased 1,334,171 shares of the Company's Common Stock
from the Company at $28.15 per share or approximately $37.6 million. Pursuant
to the Purchase Agreement, if the Company issues additional shares of Common
Stock, Bay will have the right, in certain circumstances, to purchase
additional shares of the Company's Common Stock so as to maintain its
percentage ownership in the Company (up to approximately 9% on a fully diluted
basis). Bay is also entitled to information and observer rights with respect to
meetings of the Company's Board of Directors and executive committee, if any,
and was also accorded registration rights under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the shares of Common Stock
purchased.
TRANSACTIONS WITH MOTOROLA
In August 1996, the Company established a strategic alliance with
Motorola, as part of which Motorola made a minority investment in the Company.
In connection with the investment by Motorola, the Company granted to Motorola
a right of first negotiation on licenses of the Company's technology as it
applies to the cellular, cable and wireless communications industries. The
Company also granted Motorola the right to designate one member of the
Company's Board of Directors and issued to Motorola a warrant to purchase
452,855 shares of the Common Stock at a price of $5.50 per share. The
aforementioned warrant was exercised contemporaneously with the Company's
initial public offering in June 1997.
In March 1998, the Company and Motorola agreed to expand their strategic
alliance and entered into a Joint Development and License Agreement (the
"License Agreement"). In order to increase its equity interest in the Company,
in March 1998, Motorola commenced a public tender offer (the "Offer") to
purchase up to 3,000,000 shares of Common Stock, at a purchase price of $30.00
per share, net to the seller in cash, and agreed to purchase from John W.
Staten and Steven F. Mills, 25,000 and 10,000 shares of Common Stock,
respectively. On April 22, 1998 the Offer was consummated resulting in the
purchase by Motorola of 2,686,470 shares of Common Stock from shareholders of
the Company, including 1,400,000, 500,000, 330,000, 200,000 and 100,000 shares
of Common Stock from Stephen R. Cohen, Robert Kennedy, Shane D. Mattaway,
Harvey Kaufman and A. Jeffry Robinson, respectively. On April 27, 1998,
Motorola consummated the purchase of 25,000 and 10,000 shares of Common Stock
from John W. Staten and Steven F. Mills, respectively.
Concurrently with the Offer, the Company, Motorola and the Management
Shareholders entered into the Voting Agreement, and the Company and Motorola
entered into a Standstill and Participation Rights Agreement (the "Standstill
and Participation Agreement") and an Amended and Restated NetSpeak Corporation
Investor's Rights Agreement (the "Investor's Rights Agreement"). The
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<PAGE>
following summarizes the terms of the License Agreement, the Voting Agreement,
the Standstill and Participation Agreement and the Investor's Rights Agreement.
THE LICENSE AGREEMENT
Pursuant to the License Agreement, the Company granted to Motorola a
non-transferable, perpetual, exclusive, royalty-bearing world-wide right and
license under the Company's intellectual property (i) to modify NetSpeak
Products (defined below) to create RF Products (defined below) and to use and
license in object code form, the RF Products, (ii) to manufacture RF Products
and use, sell or otherwise distribute RF Products, and (iii) to use the source
code of the NetSpeak Communication Protocol Module including future upgrades to
create RF Products to copy, perform, use, display, license and distribute in
object code form, such RF Products. The Company also granted Motorola non-
exclusive licenses with respect to NetSpeak Products.
The Company retains the right to directly license or otherwise deal with a
third party for joint development, development of derivative works, or the
integration of the Company's generally available products so long as the actual
or intended use of the results of such effort does not include RF wireless
links to end-users or RF coax links to end-users.
Subject to the terms and conditions of the License Agreement, Motorola
agreed to pay royalties (determined within 30 days of the execution of the
License Agreement), to the Company on fair, reasonable, most-favored customer
and competitive rates and terms for similar quantities and under similar
conditions. Under the License Agreement, Motorola will be obligated to pay the
Company a minimum amount of, subject to the Company complying with a minimum
revenue test as set forth in the License Agreement, $2,500,000 for NetSpeak
Products sold during the period from March 18, 1998 until Product Acceptance
(defined below), $2,500,000 during the first anniversary following Product
Acceptance, $10,000,000 during the second year anniversary following Product
Acceptance and $15,000,000 during the third year following the Product
Acceptance.
For purposes of the License Agreement the terms: EXCLUSIVE shall mean to
the exclusion of all other parties including the Company; NETSPEAK HARDWARE
shall mean the NetSpeak Stargate Product and any other hardware of the Company
and future hardware products (including any updates and upgrades) created by
the Company, and any technical know how therefor; NETSPEAK PRODUCTS shall mean
the NetSpeak Software, NetSpeak Hardware and future products; NETSPEAK SOFTWARE
shall mean any and all the Company's real-time communication software, Stargate
Product software, other Company's computer program products and future software
products (including any update and upgrades) created by NetSpeak, including
source code, and any technical know how therefor; PRODUCT ACCEPTANCE shall mean
the date of acceptance by Motorola of the Stargate product conforming to
jointly agreed upon product requirements; RF means the electromagnetic spectrum
between and including 10 kilohertz to 1 terahertz; RF PRODUCTS shall mean RF
Wireless Products and RF Wireline Products which constitute a Derivative Work,
alteration or modification of the NetSpeak Products; RF WIRELESS PRODUCT(S)
shall mean any software, firmware, hardware, or combination thereof for use in
RF wireless networks (including, without limitation, cellular/PCS, trunked
two-way conventional two-way, iDEN two-way, paging, satellite and future
wireless networks) and an infrastructure equipment and subscriber/ client
devices associated with any of the foregoing; and RF WIRELINE PRODUCT(S) shall
mean any software, firmware, or hardware, or combination thereof, for use with
a RF wireline infrastructure (including, without limitation, cable data
networks) and all subscriber devices associated therewith (including, without
limitation, cable data modems).
THE VOTING AGREEMENT
The Voting Agreement grants Motorola the right to designate two additional
directors to the Company's Board of Directors. Motorola's rights under the
Voting Agreement continue until Motorola owns less than 7% of the outstanding
shares of Common Stock; provided, however, at any time Motorola owns less than
26% but more than or equal to 7% of the shares of Common Stock, Motorola
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<PAGE>
has the right to designate two designees to the Company's Board of Directors.
If the Company's increases the size of its Board of Directors to more than ten
directors, Motorola has the right to designate a proportionate number of
designees in accordance with the foregoing formula.
Pursuant to the Voting Agreement, the Management Shareholders agreed for a
period of three years following the consummation of the Offer, to retain no
less than 30% of their beneficial ownership of the shares of Common Stock owned
by them, respectively, as of March 18, 1998. To the extent Motorola decreases
the percentage of the shares of Common Stock, the percentages set forth in the
preceding sentence will decrease proportionately. So long as the Voting
Agreement is in effect each of the Company and the Management Shareholders will
vote for Motorola's designees to the Company's Board of Directors and Motorola
will vote in favor of each of the Management Shareholders nominated by the
Company to its Board of Directors.
THE STANDSTILL AND PARTICIPATION AGREEMENT
STANDSTILL. Pursuant to the Standstill and Participation Agreement,
Motorola agreed for a period commencing on the Effective Date (as defined
below) and ending on the earlier of the third anniversary of the Effective Date
or the occurrence of a Purchase Designated Event (as defined below) not to
acquire shares of Common Stock; solicit proxies or become a participant in a
solicitation with respect to an election contest involving the Company's Board
of Directors or solicit any shareholder proposal to effect a change of control
of the Company; join or form any group for the purpose of acquiring Common
Stock; or make any public proposals to the Company regarding any Acquisition
Transaction (as defined below) relating to the Company with Motorola. The
preceding provisions shall not be effective upon the occurrence of a Purchase
Designated Event.
AGREEMENT NOT TO SELL VOTING SECURITIES. Except pursuant to the consent of
the Company's Board of Directors, Motorola agreed for a period commencing on
the Effective Date and ending on the earlier of the 18th month anniversary
thereof or the occurrence of a Sale Designated Event (as defined below) not to
sell any voting securities of the Company. Further, except pursuant to the
consent of the Company's Board of Directors and if a Sale Designated Event has
not occurred prior to the date which is 18 months following the Effective Date,
then for the period commencing on the date which is the 18th month anniversary
of the Effective Date and until the three year anniversary of the Effective
Date, Motorola shall not offer, sell, or transfer any voting securities of the
Company except (a) to an affiliate or subsidiary of Motorola (b) pursuant to a
bona fide public offering, registered under the Securities Act, of voting
securities of the Company, (c) pursuant to Rule 144 under the Securities Act,
(d) to a party or parties which are approved by the Company, or (e) without
restriction at any time in which Motorola beneficially owns less than 10% of
the voting securities of the Company. The preceding provisions shall not be
effective upon the occurrence of a Sale Designated Event.
PARTICIPATION RIGHTS. Subject to the terms and conditions of the
Standstill and Participation Agreement, the Company granted to Motorola a right
of participation with respect to future sales by the Company of its shares of
Common Stock.
Under the Standstill and Participation Agreement the term Sale Designated
Event means any of the following: (i) the Company reaches agreement with a
third party concerning an Acquisition Transaction with respect to the Company;
(ii) the Company reaches agreement with Motorola concerning an Acquisition
Transaction with respect to the Company; (iii) a material default by the
Company under the License Agreement shall have occurred and shall not have been
cured as provided in the License Agreement; (iv) any of the Company's officers
shall, at any time while employed by the Company or engaged by the Company in a
consulting or similar capacity, fail to beneficially own that percentage of
voting securities of the Company which exceeds 30% of the percentage of voting
securities of the Company beneficially owned by such individual as of March 18,
1998, it being understood that such 30% requirement shall decrease by one
percentage point for each percentage point decrease, if any, in the percentage
of outstanding voting securities of the Company beneficially owned by Motorola;
(v) either Stephen R. Cohen or Robert Kennedy shall cease to be employed by the
13
<PAGE>
Company in their current positions or in positions of greater authority (other
than due to death or permanent disability); (vi) Stephen R. Cohen and Robert
Kennedy shall each cease to be employed by the Company due to their death or
permanent disability; (vii) the number of members of the Board of Directors of
the Company designated by Motorola is less than 20% of the aggregate number of
members of the Board of Directors of the Company then serving at any time
during which Motorola's beneficial ownership of voting securities of the
Company exceeds 7% of the then outstanding voting securities of the Company and
is less than 26% of the then outstanding voting securities of the Company (it
being understood that this clause shall not take effect until the 10th day
following the Effective Date); (viii) the number of members of the Board of
Directors of the Company designated by Motorola is less than 30% of the
aggregate number of members of the Board of Directors of the Company then
serving at any time during which Motorola's beneficial ownership of voting
securities of the Company exceeds 26% of the then outstanding voting securities
of the Company; or (ix) a plan of liquidation or dissolution is adopted or a
receiver or trustee in bankruptcy is appointed with respect to the Company. The
term Acquisition Transaction shall mean any transaction not contemplated by the
Standstill and Participation Agreement involving: (i) any sale or other
disposition of all or substantially all of the assets of such party in any one
transaction or in a series of related transactions; or (ii) any merger,
consolidation or similar transaction or series of related transactions which
results in the shareholders of such party immediately before such transaction
holding less than 50% of the outstanding voting securities of such party
immediately after such transaction. The term Purchase Designated Event means
any of the following: (i) the Company reaches agreement with a third party
concerning an Acquisition Transaction with respect to the Company; (ii) a
tender or exchange offer is commenced by Motorola for 100% of the outstanding
voting securities of the Company not then owned by Motorola; (iii) the Company
reaches agreement with Motorola concerning an Acquisition Transaction with
respect to the Company; (iv) acquisitions by Motorola of voting securities of
the Company to the extent that any third party has beneficial ownership of
voting securities of the Company which exceeds the beneficial ownership of
voting securities of the Company then held by Motorola, provided that following
such acquisitions, the amount of voting securities of the Company beneficially
owned by Motorola shall not exceed the amount beneficially owned by the third
party; (v) acquisitions by Motorola pursuant to the Tender Agreement and the
purchases from Messrs. Staten and Mills; (vi) the purchase by Motorola of that
number of shares of voting securities, if any, of the Company equal to the
difference of the maximum number of voting securities pursuant to the Offer
which are offered to be purchased by Motorola minus the number of shares of
voting securities of the Company purchased under the Offer; (vii) a material
default by the Company under the License Agreement shall have occurred and
shall not have been cured as provided in the License Agreement; (viii) any of
the Company's officers shall, at any time while employed by the Company or
engaged by the Company in a consulting or similar capacity, fail to
beneficially own that percentage of voting securities of the Company which
exceeds 30% of the percentage of voting securities of the Company beneficially
owned by such individual as of March 18, 1998, it being understood that such
30% requirement shall decrease by one percentage point for each percentage
point decrease, if any, in the percentage of outstanding voting securities of
the Company beneficially owned by Motorola; (ix) either Stephen R. Cohen or
Robert Kennedy shall cease to be employed by the Company in their current
positions or in positions of greater authority; (x) Stephen R. Cohen and Robert
Kennedy shall each cease to be employed by the Company due to their death or
permanent disability; (xi) the number of members of the Board of Directors of
the Company designated by Motorola is less than 20% of the aggregate number of
members of the Board of Directors of the Company then serving at any time
during which Motorola's beneficial ownership of voting securities of the
Company exceeds 7% of the then outstanding voting securities of the Company and
is less than 26% of the then outstanding voting securities of the Company;
(xii) the number of members of the Board of Directors of the Company designated
by Motorola is less than 30% of the aggregate number of members of the Board of
Directors of the Company then serving at any time during which Motorola's
beneficial ownership of voting securities of the Company exceeds 26% of the
then outstanding voting securities of the Company; or (xiii) a plan of
liquidation or dissolution is adopted or a receiver or trustee in bankruptcy is
appointed with respect to the Company. The term Effective Date shall mean the
date upon which Motorola shall have consummated the Offer and shall own an
amount equal to or in excess of 19.9% of the voting securities the Company.
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<PAGE>
THE INVESTOR'S RIGHTS AGREEMENT
DEMAND REGISTRATION. The Investor's Rights Agreement provides that,
subject to certain restrictions, at any time the Company receives a written
request from Motorola, the Company will use its best efforts to effect the
registration under the Securities Act, as soon as practicable, and in any event
within 75 days of the receipt of such request under the Securities Act of all
Registrable Securities (as defined in the Investor's Rights Agreement) which
Motorola requests to be registered, subject to the limitations of the
Investor's Rights Agreement and the Investors' Rights Agreement between the
Company and Creative Technology Ltd. dated June 20, 1996 (the "Creative
Agreement"). Motorola may make up to five such requests for registration.
COMPANY REGISTRATION. If the Company proposes to register (including for
this purpose a registration effected by the Company for shareholders other than
Motorola or its assigns) any of its shares or other securities under the
Securities Act in connection with the public offering of such securities solely
for cash (other than a registration relating solely to the sale of securities
to participants in a Company stock plan or a registration in which the only
shares of Common Stock being registered is Common Stock issuable upon
conversion of debt securities which are also being registered), the Company
shall, at such time, promptly give Motorola written notice of such
registration. Upon the written request of Motorola given within 20 business
days after mailing of such notice by the Company in accordance with the
Investor's Rights Agreement, the Company shall, subject to the provisions of
the Investor's Rights Agreement and the Creative Agreement, cause to be
registered under the Securities Act all of the Registrable Securities that
Motorola has requested to be registered. If the underwriter determines in its
sole discretion that the total amount of securities, including Registrable
Securities, requested by shareholders to be included in such offering exceeds
the amount of securities sold other than by the Company is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder to the total
amount of securities entitled to be included therein by all selling
shareholders or in such other proportions as shall mutually be agreed to by
such selling shareholders) but in no event shall (i) the amount of securities
of Motorola included in the offering be reduced below 30% of the total amount
of securities included in such offering, or (ii) notwithstanding (i) above, any
shares being sold by a shareholder exercising a demand registration right
similar to that granted in the Investor's Rights Agreement be excluded from
such offering.
FORM S-3 REGISTRATION. If the Company receives from Motorola a written
request that the Company effect a registration on Form S-3 of the Securities
Act ("Form S-3") the Company will as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of Motorola's Registrable Securities as are specified in such request,
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, (1) if Form S-3 is not available for
such offering by Motorola; (2) if the Company shall furnish to Motorola a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not
more than 90 days; provided, however, that the Company shall not utilize this
right more than once in any 12-month period; (3) if the Company has already
effected five registrations in the aggregate for Motorola; (4) if Commission
rules and regulations require the Company to conduct a special audit (not
including an audit covering the end of the Company's fiscal year) in order to
effect such registration (unless resulting from a Company delay under clause
(2) above); or (5) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
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The rights of Motorola to cause the Company to register Registrable
Securities may not be assigned by Motorola except to an affiliate of Motorola
or to a transferee or assigned of such securities who, after such assignment or
transfer, holds at least 15% of the shares of Registrable Securities held by
Motorola prior to such transfer or assignment, subject to certain provisions in
the Investor's Rights Agreement.
OTHER TRANSACTIONS WITH AFFILIATES
A. Jeffry Robinson is a partner of the law firm of Broad and Cassel, which
serves as counsel to the Company. The Company has paid legal fees to Broad and
Cassel for services rendered.
The Company has adopted a policy that any transactions between the Company
and its executive officers, directors, principal shareholders or their
affiliates take place on an arms-length basis and require the approval of a
majority of the independent directors of the Company.
PROPOSAL TO AMEND 1995 STOCK OPTION PLAN
The Board of Directors of the Company has amended, subject to shareholder
approval, the 1995 Plan to increase the number of shares of Common Stock
authorized for issuance under the 1995 Plan by 2,800,000 shares from a total of
2,700,000 shares to 5,500,000 shares of Common Stock.
1995 PLAN DESCRIPTION
The statements in this Proxy Statement concerning the terms and provisions
of the 1995 Plan are summaries only and do not purport to be complete. All such
statements are qualified in their entirety by reference to the full text of the
1995 Plan, which is attached hereto as Exhibit A.
The purpose of the 1995 Plan is to advance the interests of the Company by
providing an additional incentive to attract and retain qualified and competent
persons as employees, upon whose efforts and judgment the success of the
Company is largely dependent, through the encouragement of stock ownership in
the Company by such persons.
The 1995 Plan was effective as of December 8, 1995, and, unless sooner
terminated by the Board of Directors of the Company in accordance with the
terms thereof, shall terminate on December 8, 2005. Certain employees, who are
selected by the stock option committee, or if there is no stock option
committee by the Board of Directors, may participate in the 1995 Plan; however,
no incentive stock option, as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code" or "Internal Revenue Code") shall be
granted to a consultant who is not also an employee of the Company.
The 1995 Plan provides for the issuance of incentive stock options
("Incentive Stock Options") and nonqualified stock options ("Nonqualified Stock
Options"). An Incentive Stock Option is an option to purchase Common Stock that
meets the definition of "incentive stock option" set forth in Section 422 of
the Code. A Nonqualified Stock Option is an option to purchase Common Stock
that meets certain requirements in the Plans but does not meet the definition
of an "incentive stock option" set forth in Section 422 of the Code.
Nonqualified Stock Options and Incentive Stock Options are sometimes referred
to herein as "Options."
The number of shares of Common Stock that may be issued pursuant to
Options granted under the 1995 Plan is presently 2,700,000, and if this
proposal is approved by the shareholders, will be increased to 5,500,000. If
any Option granted pursuant to the 1995 Plan terminates, expires, or is
canceled or surrendered, in whole or in part, shares subject to the unexercised
portion may again be issued pursuant to the exercise of Options granted under
the 1995 Plan. The shares acquired upon exercise of Options granted under the
1995 Plan will be authorized and unissued shares of Common Stock. The Company's
shareholders will not have any preemptive rights to purchase or subscribe for
the shares reserved for issuance under the 1995 Plan.
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<PAGE>
The 1995 Plan is administered by a stock option committee of two or more
directors (the "Committee") or, if a Committee is not designated by the Board
of Directors, by the Board of Directors as a whole. The Committee has the right
to determine, among other things, the persons to whom Options are granted, the
number of shares of Common Stock subject to Options, the exercise price of
Options and the term thereof.
All employees of the Company, including officers and directors and
consultants to the Company, are eligible to receive grants of Options under the
1995 Plan; however, no Incentive Stock Option may be granted to a consultant
who is not also an employee of the Company or any of its subsidiaries. Upon
receiving grants of Options, each holder of the Options (the "Optionee") shall
enter into an option agreement with the Company which contains the terms and
conditions deemed necessary by the Committee.
TERMS AND CONDITIONS OF OPTIONS
OPTION PRICE. For any Option granted under the 1995 Plan, the option price
per share of Common Stock may be any price not less than par value per share as
determined by the Committee; however, the option price per share of any
Incentive Stock Option may not be less than the Fair Market Value (defined
below) of the Common Stock on the date such Incentive Stock Option is granted.
On April 30, 1998, the closing price of the Company's Common Stock as reported
by the NASDAQ National Market was $24.313 per share.
Under the 1995 Plan, the "Fair Market Value" is the closing price of
shares on the business day immediately preceding the date of grant; however, if
the shares are not publicly traded, then the Fair Market Value will be as the
Committee shall in its sole and absolute discretion determine in a fair and
uniform manner. The closing price of the share on any business day under the
1995 Plan is (i) if the shares are listed or admitted for trading on any United
States national securities exchange, or if actual transactions are otherwise
reported on a consolidated transaction reporting system, the last reported sale
price of shares on such exchange or reporting system, as reported in any
newspaper of general circulation, (ii) if the shares are quoted on the National
Association of Securities Dealers Automated Quotations System, or any similar
system of automated dissemination of quotations of securities prices in common
use, the mean between the closing high bid and low asked quotations for such
day of shares on such system, or (iii) if neither clause (i) nor (ii) is
applicable, the mean between the high bid and low asked quotations for the
shares as reported by the National Quotation Bureau, Incorporated if at least
two securities dealers have inserted both bid and asked quotations for the
shares on at least five of the ten preceding days.
EXERCISE OF OPTIONS. Each Option is exercisable in such amounts, at such
intervals and upon such terms as the Committee may determine; however,
Incentive Stock Options must vest in three annual installments commencing one
year from the date of grant. In no event may an Option be exercisable after ten
years from the date of grant. Unless otherwise provided in an Option, each
outstanding Option may, in the sole discretion of the Committee, become
immediately fully exercisable (i) if there occurs any transaction (which shall
include a series of transactions occurring within 60 days or occurring pursuant
to a plan), that has the result that shareholders of the Company immediately
before such transaction cease to own at least 51 percent of the voting stock of
the Company or of any entity that results from the participation of the Company
in a reorganization, consolidation, merger, liquidation or any other form of
corporate transaction; (ii) if the shareholders of the Company shall approve a
plan of merger, consolidation, reorganization, liquidation or dissolution in
which the Company does not survive (unless such plan is subsequently
abandoned); or (iii) if the shareholders of the Company shall approve a plan
for the sale, lease, exchange or other disposition of all or substantially all
the property and assets of the Company (unless such plan is subsequently
abandoned). The Committee may in its sole discretion accelerate the date on
which any Option may be exercised and may accelerate the vesting of any shares
subject to any Option or previously acquired by the exercise of any Option.
Options granted to the officers and directors under the 1995 Plan may not be
exercised unless otherwise expressly provided in any Option, until six months
following the date of grant and if and only if the Optionee is in the employ of
the Company on such date.
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Unless further limited by the Committee in any Option, shares of Common
Stock purchased upon the exercise of Options must be paid for in cash, by
certified or official bank check, by money order, with already owned shares of
Common Stock, or a combination of the above. The Committee, in its sole
discretion, may accept a personal check in full or partial payment. If paid in
whole or in part with shares of already owned Common Stock, the value of the
shares surrendered is deemed to be their Fair Market Value on the date the
Option is exercised. Proceeds from the sale of Common Stock pursuant to the
exercise of Options will be added to the general funds of the Company to be
used for general corporate purposes. Under the 1995 Plan, the Company may also
lend money to an Optionee to exercise all or a portion of an Option granted
under the 1995 Plan. If the exercise price is paid in whole or in part with
Optionee's promissory note, such note shall (i) provide for full recourse to
the maker, (ii) be collateralized by the pledge of shares purchased by Optionee
upon exercise of such Option, (iii) bears interest at a rate of interest no
less than the rate of interest payable by the Company to its principal lender,
and (iv) contain such other terms as the Committee in its sole discretion shall
require.
NONTRANSFERABILITY. Options granted under the 1995 Plan are not
transferable by an Optionee other than by will or the laws of descent and
distribution, and Options are exercisable during an Optionee's lifetime only by
the Optionee.
TERMINATION OF OPTIONS. The expiration date of an Option is determined by
the Committee at the time of the grant and is set forth in the applicable stock
option agreement. In no event may an Option be exercisable after ten years from
the date it is granted.
The 1995 Plan provides that if an Optionee's employment is terminated for
any reason other than for cause, an improper termination, mental or physical
disability or death, then the unexercised portion of the Optionee's Options
shall terminate three months after such termination. If an Optionee's
employment is terminated for cause or if there is an improper termination of
Optionee's employment, the unexercised portion of the Optionee's Options shall
terminate immediately upon such termination. If an Optionee's employment is
terminated by reason of the Optionee's mental or physical disability, the
unexercised portion of the Optionee's Options shall terminate 12 months after
such termination. If an Optionee's employment is terminated by reason of the
Optionee's death, the unexercised portion of the Optionee's Options shall
terminate 12 months after the Optionee's death.
The Committee in its sole discretion may by giving written notice cancel,
effective upon the date of the consummation of certain corporate transactions
that would result in an Option becoming fully exercisable, cancel any Option
that remains unexercised on such date. Such notice shall be given a reasonable
period of time prior to the proposed date of such cancellation and may be given
either before or after shareholder approval of such corporate transaction.
OUTSTANDING OPTIONS
As of the Record Date, Options to purchase a total of 2,676,534 shares of
Common Stock had been granted pursuant to the 1995 Plan, 625,439 of which have
been exercised and 2,051,095 of which are outstanding (of which 1,330,836
Options are exercisable). Outstanding Options, which are held by approximately
122 persons, are exercisable at prices ranging from $1.00 per share to $31.81
per share and are exercisable through various expiration dates from January 24,
2003, to April 13, 2008.
FEDERAL INCOME TAX EFFECTS
The 1995 Plan is not qualified under the provisions of Section 401(a) of
the Code, nor is it subject to any of the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
INCENTIVE STOCK OPTIONS. Incentive Stock Options are "incentive stock
options" as defined in Section 422 of the Internal Revenue Code. Under the
Code, an Optionee generally is not subject to ordinary income tax upon the
grant or exercise of an Incentive Stock Option. However, an employee who
exercises an Incentive Stock Option by delivering shares of Common Stock
previously acquired
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pursuant to the exercise of an Incentive Stock Option is treated as making a
Disqualifying Disposition (defined below) of such shares if the employee
delivers such shares before the expiration of the holding period applicable to
such shares. The applicable holding period is the longer of two years from the
date of grant or one year from the date of exercise. The effect of this
provision is to prevent "pyramiding" the exercise of an Incentive Stock Option
(i.e., the exercise of the Incentive Stock Option for one share and the use of
that share to make successive exercise of the Incentive Stock Option until it
is completely exercised) without the imposition of current income tax.
The amount by which the fair market value of the shares acquired at the
time of exercise of an Incentive Stock Option exceeds the purchase price of the
shares under such Option will be treated as an item of adjustment included in
the Optionee's alternative minimum taxable income for purposes of the
alternative minimum tax. If, however, there is a Disqualifying Disposition in
the year in which the Option is exercised, the maximum amount of the item of
adjustment for such year is the gain on the disposition of the shares. If there
is Disqualifying Disposition in a year other than the year of exercise, the
dispositions will not result in an item of adjustment for such other year.
If, subsequent to the exercise of an Incentive Stock Option (whether paid
for in cash or in shares), the Optionee holds the shares received upon exercise
for a period that exceeds (a) two years from the date such Incentive Stock
Option was granted or, if later, (b) one year from the date of exercise (the
"Required Holding Period"), the difference (if any) between the amount realized
from the sale of such shares and their tax basis to the holder will be taxed as
long-term capital gain or loss. If the holder is subject to the alternative
minimum tax in the year of disposition, such holder's tax basis in his or her
shares will be increased for purposes of determining his alternative minimum
tax for such year, by the amount of the item of adjustment recognized with
respect to such shares in the year the Option was exercised.
In general, if, after exercising an Incentive Stock Option, an employee
disposes of the shares so acquired before the end of the Required Holding
Period (a "Disqualifying Disposition"), such Optionee would be deemed in
receipt of ordinary income in the year of the Disqualifying Disposition, in an
amount equal to the excess of the fair market value of the shares at the date
the Incentive Stock Option was exercised over the exercise price. If the
Disqualifying Disposition is a sale or exchange which would permit a loss to be
recognized under the Code (were a loss in fact to be sustained), and the sales
proceeds are less than the fair market value of the shares on the date of
exercise, the Optionee's ordinary income would be limited to the gain (if any)
from the sale. If the amount realized upon disposition exceeds the fair market
value of the shares on the date of exercise, the excess would be treated as
short-term or long-term capital gain, depending on whether the holding period
for such shares exceeded one year.
An income tax deduction is not allowed to the Company with respect to the
grant or exercise of an Incentive Stock Option or the disposition, after the
Required Holding Period, of shares acquired upon exercise. In the event of a
Disqualifying Disposition, a Federal income tax deduction will be allowed to
the Company in an amount equal to the ordinary income to be recognized by the
Optionee, provided that such amount constitutes an ordinary and necessary
business expense to the Company and is reasonable, and the Company satisfies
its withholding obligation with respect to such income.
NONQUALIFIED STOCK OPTIONS. An Optionee granted a Nonqualified Stock
Option under the 1995 Plan will generally recognize, at the date of exercise of
such Nonqualified Stock Option, ordinary income equal to the difference between
the exercise price and the fair market value of the shares of Common Stock
subject to the Nonqualified Stock Option. This taxable ordinary income will be
subject to Federal income tax withholding. A Federal income tax deduction will
be allowed to the Company in an amount equal to the ordinary income to be
recognized by the Optionee, provided that such amount constitutes an ordinary
and necessary business expense to the Company and is reasonable, and the
Company satisfies its withholding obligation with respect to such income.
If an Optionee exercises a Nonqualified Stock Option by delivering other
shares, the Optionee will not recognize gain or loss with respect to the
exchange of such shares, even if their then fair market
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value is different from the Optionee's tax basis. The Optionee, however, will
be taxed as described above with respect to the exercise of the Nonqualified
Stock Option as if he had paid the exercise price in cash, and the Company
likewise generally will be entitled to an equivalent tax deduction. Provided a
separate identifiable stock certificate is issued therefor, the Optionee's tax
basis in that number of shares received on such exercise which is equal to the
number of shares surrendered on such exercise will be equal to his tax basis in
the shares surrendered and his holding period for such number of shares
received will include his holding period for the shares surrendered. The
Optionee's tax basis and holding period for the additional shares received on
exercise of a Nonqualified Stock Option paid for, in whole or in part, with
shares will be the same as if the Optionee had exercised the Nonqualified Stock
Option solely for cash.
The discussion set forth above does not purport to be a complete analysis
of the potential tax consequences relevant to the Optionees or to the Company,
or to describe tax consequences based on particular circumstances. It is based
on Federal income tax law and interpretational authorities as of the date of
this Proxy Statement, which are subject to change at any time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
PROPOSAL TO ADOPT THE NETSPEAK CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has approved and is proposing for shareholder
approval the NetSpeak Corporation Employee Stock Purchase Plan (the "Employee
Purchase Plan"). The purpose of the Employee Purchase Plan is to enable
eligible employees of the Company or any of its subsidiaries, through payroll
deductions, to purchase shares of the Company's Common Stock and thus to
encourage shares ownership by employees of the Company and to encourage the
continued employment of employees of the Company. The statements in this Proxy
Statement concerning the terms and provisions of the Employee Purchase Plan are
summaries only and do not purport to be complete. All such statements are
qualified in their entirety by reference to the full text of the Employee
Purchase Plan, which is attached hereto as Exhibit B.
EMPLOYEE PURCHASE PLAN DESCRIPTION
Under the Employee Purchase Plan, 400,000 shares of Common Stock are
available for purchase by eligible employees of the Company or any of its
subsidiaries. The Employee Purchase Plan permits eligible employees to elect to
have a portion of their pay deducted by the Company to purchase shares of
Common Stock of the Company. In the event there is any increase or decrease in
the shares of Common Stock without receipt of consideration by the Company (for
instance, by a recapitalization or shares split), there may be a proportionate
adjustment to the number and kinds of shares of Common Stock that may be
purchased under the Employee Purchase Plan.
Rights to purchase shares of Common Stock will be deemed granted to
participating employees as of the first trading day of each Offering Period.
Offering Periods will be 24 months or such other period as is set by the
Company. Offering Periods are the periods during which shares of Common Stock
are purchased. Within an Offering Period there will be four or more Purchase
Periods. Generally, Purchase Periods will be six months. Payroll deductions and
other payments will be accumulated during a Purchase Period and purchases of
shares will occur at the end of each Purchase Period (from the amounts
accumulated during that Purchase Period).
The purchase price for each share (the "Purchase Price") will be set by
the Company's Board of Directors, or by the Compensation Committee; provided
that in no event shall the Purchase Price be less than the lesser of 85% of the
fair market value of the Common Stock (i) on the first trading day of such
Purchase Period or (ii) on the last day of the applicable Purchase Period,
whichever is lower.
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The Employee Purchase Plan will be administered by the Compensation
Committee. The Compensation Committee has the authority to interpret the
Employee Purchase Plan, to prescribe, amend and rescind rules relating to it,
and to make all other determinations necessary or advisable in administering
the Employee Purchase Plan, all of which determinations will be final and
binding.
Any employee of the Company or subsidiary may participate in the Employee
Purchase Plan, except the following, who are ineligible to participate: (a) an
employee who has been employed by the Company or subsidiary for less than three
months as of the beginning of the Offering Period; (b) an employee whose
customary employment is for less than nine months in any calendar year; (c) an
employee whose customary employment is 20 hours or less per week; and (d) an
employee who, after exercising his or her rights to purchase shares under the
Employee Purchase Plan, would own shares (including shares that may be acquired
under any outstanding options) representing five percent or more of the total
combined voting power of all classes of shares of the Company. An employee must
be employed on the last day of the Purchase Period in order to acquire shares
for that Purchase Period under the Employee Purchase Plan unless the employee
has retired, died, become disabled, been laid off or is on an approved leave of
absence.
An eligible employee may become a participant in the Employee Purchase
Plan by completing an election to participate in the Employee Purchase Plan
authorizing the Company to have deductions made from pay on each pay day
following enrollment in the Employee Purchase Plan. The deductions or
contributions will be credited to the employee's account under the Employee
Purchase Plan. An employee may not change his or her percentage of payroll
deduction or contribution for any Purchase Period during an Offering Period,
nor may an employee withdraw any contributed funds other than by terminating
participation in the Employee Purchase Plan (as described below). A
participating employee may terminate payroll deductions or contributions at any
time.
No employee may purchase Common Stock in any calendar year under the
Employee Purchase Plan and all other "employee shares purchase plans" of the
Company and any parent or subsidiary having an aggregate fair market value in
excess of $25,000, determined as of the first trading date of the Purchase
Period.
On the last trading day of each Purchase Period within an Offering Period,
a participating employee will be credited with the number of whole shares of
Common Stock purchased under the Employee Purchase Plan for such period. The
shares of Common Stock purchased under the Employee Purchase Plan will be held
in the custody of an agent designated by the Company (the "Agent"). The Agent
may hold the shares of Common Stock purchased under the Employee Purchase Plan
in shares certificates in nominee names and may commingle shares held in its
custody in a single account or shares certificate, without identification as to
individual employees. An employee may, however, instruct the Agent to have all
or part of such shares reissued in the employee's own name and have the shares
certificate delivered to the employee.
A participating employee will be refunded all monies in his or her
account, and his or her participation in the Employee Purchase Plan will be
terminated, if: (a) the employee elects to terminate participation by
delivering a written notice to that effect to the Company; (b) the employee
ceases to be employed by the Company or a participating affiliate except on
account of death, disability, retirement, lay-off or authorized leave of
absence; (c) the Board of Directors elects to terminate the Employee Purchase
Plan; or (d) the employee ceases to be eligible to participate in the Employee
Purchase Plan. If a participating employee terminates employment on account of
death, disability, retirement, lay-off or authorized leave of absence, the
participating employee will have the following alternatives: (a) refund of all
monies in his or her account or (b) purchase of shares of Common Stock on the
last day of the Purchase Period during which termination occurs with the
amounts then accumulated in his or her account.
No participating employee may assign his or her rights to purchase shares
of Common Stock under the Employee Purchase Plan, whether voluntarily, by
operation of law or otherwise.
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The Board of Directors may, at any time, amend the Employee Purchase Plan
in any respect; provided, however, that without approval of the Company's
shareholders no amendment shall be made (a) increasing the number of shares of
Common Stock that may be made available for purchase under the Employee
Purchase Plan, or (b) changing the eligibility requirements for participating
in the Employee Purchase Plan.
The Board of Directors may terminate the Employee Purchase Plan at any
time and for any reason or for no reason, provided that such termination shall
not impair any rights of participants that have vested at the time of
termination. In any event, the Employee Purchase Plan shall, without further
action of the Board of Directors, terminate at the earlier of (i) ten years
after adoption of the Employee Purchase Plan by the Board of Directors and (ii)
such time as all shares of Common Stock that may be made available for purchase
under the Employee Purchase Plan have been issued.
FEDERAL INCOME TAX EFFECTS
If a participant acquires shares of Common Stock under the Employee
Purchase Plan, no income will result to such participant, and the Company will
be allowed no deduction as a result of such purchase, if certain conditions are
met. The principal condition which must be satisfied is that the participant
does not dispose of the shares of Common Stock within two years after the first
day of the applicable Offering Period or one year after purchase of the shares
of Common Stock. If the employee disposes of the shares of Common Stock
acquired pursuant to the Employee Purchase Plan after the statutory holding
period has expired, gain on the sale is capital gain except to the extent of
ordinary (compensation) income determined as described below. If the employee
disposes of the shares of Common Stock before the expiration of the statutory
holding period, the employee must recognize as ordinary (compensation) income
the difference between the shares's fair market value and the purchase price.
An employee disposing of shares after expiration of the statutory holding
period (or who dies) must include in ordinary (compensation) income at the time
of sale or other taxable disposition of the shares acquired under the Employee
Purchase Plan, or upon the employee's death while still holding the shares, the
lesser of: (1) the Purchase Price discount from the fair market value of the
shares at the beginning of the Offering Period; or (2) the amount, if any, by
which the shares's fair market value at the time of such disposition or death
exceeds the purchase price paid.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
PROPOSAL TO AMEND ARTICLES OF INCORPORATION
The Board of Directors of the Company has approved and recommends that the
shareholders of the Company approve an amendment to the Company's Articles of
Incorporation for the purpose of increasing the number of its authorized shares
of Common Stock from 25,000,000 to 75,000,000. Such amendment will be
accomplished by amending the Company's Articles of Incorporation.
The Company's shareholders do not have preemptive rights to subscribe for
or purchase any of the additional shares of Common Stock to be authorized.
Additional shares of Common Stock could be used for any proper corporate
purpose, including acquisitions, raising of additional equity capital, stock
dividends or upon the exercise of stock options. The future issuance of
additional shares of Common Stock on other than a pro rata basis may dilute the
ownership of the current shareholders, as well as their proportionate voting
rights.
If the proposed amendment to the Company's Articles of Incorporation is
adopted, no further approval of the shareholders would be required for the
issuance of shares of Common Stock as authorized by the amendment and, absent
any legal or Nasdaq National Market requirements, it is not contemplated that
further approval of the holders of Common Stock would be sought for issuance of
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any shares authorized by the amendment. The Company has no present plans to
issue any shares of Common Stock which would be authorized hereby.
The approval of the proposed amendment could make it more difficult to
acquire control of the Company and thereby discourage attempts to do so, even
though the Company's shareholders may deem such an acquisition desirable.
Issuance of shares of Common Stock could dilute the ownership interest and
voting power of the Company's shareholders who may seek control of the Company.
Shares of Common Stock could be issued in a private placement to one or more
organizations sympathetic to the Company and opposed to any take-over bid, or
under other circumstances that could make it more difficult and thereby
discourage attempts to acquire control of the Company. To the extent that it
impedes any such attempts, the amendment may serve to perpetuate the Company's
management.
Although the Company has from time to time considered the issuance of
additional securities in connection with a strategic alliance or acquisition,
the Company has no present plans, agreements or arrangements for the issuance
of shares of Common Stock in excess of the number of such shares presently
authorized in connection with any particular transaction. The Company does not
anticipate soliciting the vote of its shareholders to authorize the issuance of
shares of the Common Stock unless otherwise required under the Florida Business
Corporation Act, the Company's Articles of Incorporation or its By Laws.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP, independent public accountants, has
served as the Company's independent public accountants since 1995. The Board of
Directors has directed that management submit the appointment of Deloitte &
Touche LLP for ratification by the shareholders at the Annual Meeting as the
Company's independent public accountants for the current fiscal year ending
December 31, 1998. One or more representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they desire to do so and are expected to be available to respond
to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before the
Annual Meeting. If, however, any other business should properly come before the
Annual Meeting, the persons named in the accompanying proxy will vote proxies
as in their discretion they may deem appropriate, unless they are directed by a
proxy to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be included in the
Company's proxy statement for the Company's 1998 Annual Meeting of Shareholders
must deliver a proposal in writing to the Company's principal executive offices
no later than January 18, 1999.
By Order Of The Board of Directors
HARVEY KAUFMAN,
Secretary
Boca Raton, Florida
May 18, 1998
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EXHIBIT A
-------------------------------
NETSPEAK CORPORATION
1995 STOCK OPTION PLAN
(AS AMENDED)
-------------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of
NETSPEAK CORPORATION, a Florida corporation (the "Company"), by providing an
additional incentive to attract, retain and motivate highly qualified and
competent persons who are key to the Company, including key employees,
consultants, Officers and Directors, and upon whose efforts and judgment the
success of the Company and its Subsidiaries is largely dependent, by
authorizing the grant of options to purchase Common Stock of the Company to
persons who are eligible to participate hereunder, thereby encouraging stock
ownership in the Company by such persons, all upon and subject to the terms and
conditions of this Plan.
2. DEFINITIONS. As used herein, the following terms shall have the
meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean any of the following:
(i) a determination by the Company that there has been a willful,
reckless or grossly negligent failure by the Optionee to perform his or her
duties as an employee of the Company;
(ii) a determination by the Company that there has been a willful
breach by the Optionee of any of the material terms or provisions of any
employment agreement between such Optionee and the Company;
(iii) any conduct by the Optionee that either results in his or her
conviction of a felony under the laws of the United States of America or any
state thereof, or of an equivalent crime under the laws of any other
jurisdiction;
(iv) a determination by the Company that the Optionee has committed an
act or acts involving fraud, embezzlement, misappropriation, theft, breach of
fiduciary duty or material dishonesty against the Company, its properties or
personnel;
(v) any act by the Optionee that the Company determines to be in
willful or wanton disregard of the Company's best interests, or which results,
or is intended to result, directly or indirectly, in improper gain or personal
enrichment of the Optionee at the expense of the Company;
(vi) a determination by the Company that there has been a willful,
reckless or grossly negligent failure by the Optionee to comply with any rules,
regulations, policies or procedures of the Company, or that the Optionee has
engaged in any act, behavior or conduct demonstrating a deliberate and material
violation or disregard of standards of behavior that the Company has a right to
expect of its employees; or
(vii) if the Optionee, while employed by the Company and for two years
thereafter, violates a confidentiality and/or noncompete agreement with the
Company, or fails to safeguard, divulges, communicates, uses to the detriment
of the Company or for the benefit of any person or persons, or misuses in any
way, any Confidential Information;
PROVIDED, HOWEVER, that, if the Optionee has entered into a written employment
agreement with the Company which remains effective and which expressly provides
for a termination of such Optionee's
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employment for "cause", the term "Cause" as used herein shall have the meaning
as set forth in the Optionee's employment agreement in lieu of the definition
of "Cause" set forth in this Section 2(b).
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean the stock option committee appointed by the
Board or, if not appointed, the Board.
(e) "Common Stock" shall mean the Company's Common Stock, par value $.01
per share.
(f) "Confidential Information" shall mean any and all information
pertaining to the Company's financial condition, clients, customers, prospects,
sources of prospects, customer lists, trademarks, trade names, service marks,
service names, "know-how," trade secrets, products, services, details of client
or consulting contracts, management agreements, pricing policies, operational
methods, site selection, results of operations, costs and methods of doing
business, owners and ownership structure, marketing practices, marketing plans
or strategies, product development techniques or plans, procurement and sales
activities, promotion and pricing techniques, credit and financial data
concerning customers and business acquisition plans, that is not generally
available to the public.
(g) "Director" shall mean a member of the Board.
(h) "Employee" shall mean any person, including officers, directors,
consultants and independent contractors employed by the Company or any parent
or Subsidiary of the Company.
(i) "Fair Market Value" of a Share on any date of reference shall be the
Closing Price of a share of Common Stock on the business day immediately
preceding such date, unless the Committee in its sole discretion shall
determine otherwise in a fair and uniform manner. For this purpose, the
"Closing Price" of the Common Stock on any business day shall be (i) if the
Common Stock is listed or admitted for trading on any United States national
securities exchange, or if actual transactions are otherwise reported on a
consolidated transaction reporting system, the last reported sale price of the
Common Stock on such exchange or reporting system, as reported in any newspaper
of general circulation, (ii) if the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ"), or
any similar system of automated dissemination of quotations of securities
prices in common use, the mean between the closing high bid and low asked
quotations for such day of the Common Stock on such system, or (iii) if neither
clause (i) nor (ii) is applicable, the mean between the high bid and low asked
quotations for the Common Stock as reported by the National Quotation Bureau,
Incorporated if at least two securities dealers have inserted both bid and
asked quotations for the Common Stock on at least five of the 10 preceding
days. If the information set forth in clauses (i) through (iii) above is
unavailable or inapplicable to the Company (E.G., if the Company's Common Stock
is not then publicly traded or quoted), then the "Fair Market Value" of a Share
shall be the fair market value (I.E., the price at which a willing seller would
sell a Share to a willing buyer when neither is acting under compulsion and
when both have reasonable knowledge of all relevant facts) of a share of the
Common Stock on the business day immediately preceding such date as the
Committee in its sole and absolute discretion shall determine in a fair and
uniform manner.
(j) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Code.
(k) "Non-Statutory Stock Option" or "Nonqualified Stock Option" shall
mean an Option which is not an Incentive Stock Option.
(l) "Officer" shall mean the Company's chairman, president, principal
financial officer, principal accounting officer (or, if there is no such
accounting officer, the controller), any vice-president of the Company in
charge of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs
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similar policy-making functions for the Company. Officers of Subsidiaries shall
be deemed Officers of the Company if they perform such policy-making functions
for the Company. As used in this paragraph, the phrase "policy-making function"
does not include policy-making functions that are not significant. Unless
specified otherwise in a resolution by the Board, an "executive officer"
pursuant to Item 401(b) of Regulation S-K (17 C.F.R. \s. 229.401(b)) shall be
only such person designated as an "Officer" pursuant to the foregoing
provisions of this paragraph.
(m) "Option" (when capitalized) shall mean any stock option granted
under this Plan.
(n) "Optionee" shall mean a person to whom an Option is granted under
this Plan or any person who succeeds to the rights of such person under this
Plan by reason of the death of such person.
(o) "Plan" shall mean this 1995 Stock Option Plan of the Company, which
Plan shall be effective on December 8, 1995, upon approval by the Board and
shareholders of the Company.
(p) "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(q) "Share" or "Shares" shall mean a share or shares, as the case may
be, of the Common Stock, as adjusted in accordance with Section 10 of this
Plan.
(r) "Subsidiary" shall mean any corporation (other than the Company) in
any unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AND OPTIONS. Subject to adjustment in accordance with Section 10
hereof, the Company may grant to Optionees from time to time Options to
purchase an aggregate of up to Five Million Five Hundred Thousand (5,500,000)
Shares from Shares held in the Company's treasury or from authorized and
unissued Shares. If any Option granted under this Plan shall terminate, expire,
or be canceled, forfeited or surrendered as to any Shares, the Shares relating
to such lapsed Option shall be available for issuance pursuant to new Options
subsequently granted under this Plan. Upon the grant of any Option hereunder,
the authorized and unissued Shares to which such Option relates shall be
reserved for issuance to permit exercise under this Plan. Subject to the
provisions of Section 14 hereof, an Option granted hereunder shall be either an
Incentive Stock Option or a Non-Statutory Stock Option as determined by the
Committee at the time of grant of such Option and shall clearly state whether
it is an Incentive Stock Option or Non-Statutory Stock Option. All Incentive
Stock Options shall be granted within 10 years from the effective date of this
Plan.
4. LIMITAITONS. Options otherwise qualifying as Incentive Stock Options
hereunder will not be treated as Incentive Stock Options to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Shares, with respect to which Options meeting the requirements of Code
Section 422(b) are exercisable for the first time by any individual during any
calendar year (under all stock option or similar plans of the Company and any
Subsidiary), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that may
contain any term deemed necessary or desirable by the Committee, provided such
terms are not inconsistent with this Plan or any applicable law. Optionees
shall be those persons selected by the Committee from the class of all regular
Employees of the Company or its Subsidiaries, including Employee Directors and
Officers who are regular or former regular employees of the Company, as well as
consultants to the Company. Any person who files with the Committee, in a form
satisfactory to the Committee, a written waiver of eligibility to receive any
Option under this Plan shall not be eligible to receive any Option under this
Plan for the duration of such waiver.
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(b) In granting Options, the Committee shall take into consideration the
contribution the person has made, or is expected to make, to the success of the
Company or its Subsidiaries and such other factors as the Committee shall
determine. The Committee shall also have the authority to consult with and
receive recommendations from Officers and other personnel of the Company and
its Subsidiaries with regard to these matters. The Committee may from time to
time in granting Options under this Plan prescribe such terms and conditions
concerning such Options as it deems appropriate, including, without limitation,
(i) the exercise price or prices of the Option or any installments thereof,
(ii) prescribing the date or dates on which the Option becomes and/or remains
exercisable, (iii) providing that the Option vests or becomes exercisable in
installments over a period of time, and/or upon the attainment of certain
stated standards, specifications or goals, (iv) relating an Option to the
continued employment of the Optionee for a specified period of time, or (v)
conditions or termination events with respect to the exercisability of any
Option, provided that such terms and conditions are not more favorable to an
Optionee than those expressly permitted herein; PROVIDED, HOWEVER, all
Incentive Stock Options shall vest and become exercisable in three equal
installments over a three year period following the date of grant, one-third
one year from the date of grant, an additional one-third (or two-thirds
cumulatively) two years from the date of grant and 100% after three years from
the date of grant.
(c) The Options granted to employees under this Plan shall be in
addition to regular salaries, pension, life insurance or other benefits related
to their employment with the Company or its Subsidiaries. Neither this Plan nor
any Option granted under this Plan shall confer upon any person any right to
employment or continuance of employment (or related salary and benefits) by the
Company or its Subsidiaries.
6. EXERCISE PRICE. The exercise price per Share of any Option shall be any
price determined by the Committee but shall not be less than the par value per
Share; PROVIDED, HOWEVER, that in no event shall the exercise price per Share
of any Incentive Stock Option be less than the Fair Market Value of the Shares
underlying such Option on the date such Option is granted. Re-granted Options,
or Options which are canceled and then re-granted covering such canceled
Options, will, for purposes of this Section 6, be deemed to have been granted
on the date of the re-granting.
7. EXERCISE OF OPTIONS.
(a) An Option shall be deemed exercised when (i) the Company has
received written notice of such exercise in accordance with the terms of the
Option, (ii) full payment of the aggregate option price of the Shares as to
which the Option is exercised has been made, (iii) the Optionee has agreed to
be bound by the terms, provisions and conditions of any applicable
shareholders' agreement, and (iv) arrangements that are satisfactory to the
Committee in its sole discretion have been made for the Optionee's payment to
the Company of the amount that is necessary for the Company or the Subsidiary
employing the Optionee to withhold in accordance with applicable Federal or
state tax withholding requirements. Unless further limited by the Committee in
any Option, the exercise price of any Shares purchased pursuant to the exercise
of such Option shall be paid in cash, by certified or official bank check, by
money order, with Shares or by a combination of the above; PROVIDED, HOWEVER,
that the Committee in its sole discretion may accept a personal check in full
or partial payment of any Shares. If the exercise price is paid in whole or in
part with Shares, the value of the Shares surrendered shall be their Fair
Market Value on the date the Option is exercised. The Company in its sole
discretion may, on an individual basis or pursuant to a general program
established by the Committee in connection with this Plan, lend money to an
Optionee to exercise all or a portion of the Option granted hereunder. If the
exercise price is paid in whole or part with the Optionee's promissory note,
such note shall (i) provide for full recourse to the maker, (ii) be
collateralized by the pledge of the Shares that the Optionee purchases upon
exercise of such Option, (iii) bear interest at a rate no less than the rate of
interest payable by the Company to its principal lender, and (iv) contain such
other terms as the Committee in its sole discretion shall require. No Optionee
shall be deemed to be a holder of any shares subject to an Option unless and
until a stock certificate or certificates for such shares are issued to the
person(s) under the terms of this Plan. No adjustments shall be made for
dividends (ordinary or
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extraordinary, whether in cash, securities or property) or distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as expressly provided in Section 10 hereof
(b) No Optionee shall be deemed to be a holder of any Shares subject to
an Option unless and until a stock certificate or certificates for such Shares
are issued to such person(s) under the terms of this Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights for which the record date
is prior to the date such stock certificate is issued, except as expressly
provided in Section 10 hereof
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in such
amounts, at such intervals, upon such events or occurrences and upon such other
terms and conditions as shall be provided in an individual Option agreement
evidencing such Option, except as otherwise provided in Section 5(b) or this
Section 8.
(a) The expiration date(s) of an Option shall be determined by the
Committee at the time of grant, but in no event shall an Option be exercisable
after the expiration of 10 years from the date of grant of the Option.
(b) Unless otherwise expressly provided in any Option as approved by the
Committee, notwithstanding the exercise schedule set forth in any Option, each
outstanding Option, may, in the sole discretion of the Committee, become fully
exercisable upon the date of the occurrence of any Change of Control, but,
unless otherwise expressly provided in any Option, no earlier than six months
after the date of grant, and if and only if Optionee is in the employ of the
Company on such date.
(c) The Committee may in its sole discretion accelerate the date on
which any Option may be exercised and may accelerate the vesting of any Shares
subject to any Option or previously acquired by the exercise of any Option.
9. TERMINATION OF OPTION PERIOD.
(a) Unless otherwise expressly provided in any Option, the unexercised
portion of any Option shall automatically and without notice immediately
terminate and become forfeited, null and void at the time of the earliest to
occur of the following:
(i) three months after the date on which the Optionee's employment is
terminated for any reason other than by reason of (A) Cause, (B) the
termination of the Optionee's employment with the Company by such Optionee
following less than ninety (90) days' prior written notice to the Company of
such termination (an "Improper Termination"), (C) a mental or physical
disability as determined by a medical doctor satisfactory to the Committee, or
(D) death;
(ii) immediately upon (A) the termination by the Company of the
Optionee's employment for Cause, or (B) an Improper Termination;
(iii) one year after the date on which the Optionee's employment is
terminated by reason of a mental or physical disability (within the meaning of
Code Section 22(e)) as determined by a medical doctor satisfactory to the
Committee; or
(iv) the later of (A) twelve months after the date of termination of
the Optionee's employment by reason of death of the employee, or (B) three
months after the date on which the Optionee shall die if such death shall occur
during the one year period specified in Subsection 9(a)(iii) hereof
(b) The Committee in its sole discretion may by giving written notice
("cancellation notice") cancel, effective upon the date of the consummation of
any corporate transaction described in
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Subsection 10(d) hereof, any Option that remains unexercised on such date. Such
cancellation notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
approval of such corporate transaction.
(c) Upon Optionee's termination of employment as described in this
Section 9, or otherwise, any Option (or portion thereof) not previously vested
or not yet exercisable pursuant to Section 8 of this Plan or the vesting
schedule set forth in such Option shall be immediately canceled.
10. ADJUSTMENT OF SHARES.
(a) If at any time while this Plan is in effect or unexercised Options
are outstanding, there shall be any increase or decrease in the number of
issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split, combination or
exchange of Shares (other than any such exchange or issuance of Shares through
which Shares are issued to effect an acquisition of another business or entity
or the Company's purchase of Shares to exercise a "call" purchase option), then
and in such event:
(i) appropriate adjustment shall be made in the maximum number of
Shares available for grant under this Plan, so that the same percentage of the
Company's issued and outstanding Shares shall continue to be subject to being
so optioned; and
(ii) appropriate adjustment shall be made in the number of Shares and
the exercise price per Share thereof then subject to any outstanding Option, so
that the same percentage of the Company's issued and outstanding Shares shall
remain subject to purchase at the same aggregate exercise price.
(iii) Such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.
(b) Subject to the specific terms of any Option, the Committee may
change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of a corporate transaction described in Subsection 10(d) hereof, or otherwise.
(c) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into or exchangeable for shares of its capital stock of any class, either in
connection with a direct or unwritten sale or upon the exercise of rights or
warrants to subscribe therefor or purchase such Shares, or upon conversion of
shares of obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to the number of or exercise price of Shares then subject to
outstanding Options granted under this Plan.
(d) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under this Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (i) any or all
adjustments, reclassifications, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business; (ii) any merger or
consolidation of the Company or to which the Company is a party; (iii) any
issuance by the Company of debt securities, or preferred or preference stock
that would rank senior to or above the Shares subject to outstanding Options;
(iv) any purchase or issuance by the Company of Shares or other classes of
common stock or common equity securities; (v) the dissolution or liquidation of
the Company; (vi) any sale, transfer, encumbrance, pledge or assignment of all
or any part of the assets or business of the Company; or (vii) any other
corporate act or proceeding, whether of a similar character or otherwise.
(e) The Optionee shall receive written notice within a reasonable time
prior to the consummation of such action advising the Optionee of any of the
foregoing. The Committee may, in the
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exercise of its sole discretion, in such instances declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the
right to exercise his or her Option.
11. TRANSFERABILITY OF OPTIONS. No Option granted hereunder shall be sold,
pledged, assigned, hypothecated, disposed or otherwise transferred by the
Optionee other than by will or the laws of descent and distribution, and no
Option shall be exercisable during the Optionee's lifetime by any person other
than the Optionee.
12. ISSUANCE OF SHARES. As a condition of any sale or issuance of Shares
upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to
assure compliance with any such law or regulation including, but not limited
to, the following:
(i) a representation and warranty by the Optionee to the Company, at
the time any Option is exercised, that he is acquiring the Shares to be issued
to him for investment and not with a view to, or for sale in connection with,
the distribution of any such Shares; and
(ii) (A) an agreement and undertaking to comply with all of the terms,
restrictions and provisions set forth in any then applicable shareholders'
agreement relating to the Shares, including, without limitation, any
restrictions on transferability, any rights of first refusal and any option of
the Company to "call" or purchase such Shares under then applicable agreements,
and
(B) any restrictive legend or legends, to be embossed or imprinted
on Share certificates, that are, in the discretion of the Committee, necessary
or appropriate to comply with the provisions of any securities law or other
restriction applicable to the issuance of the Shares.
13. ADMINISTRATION OF THIS PLAN.
(a) This Plan shall be administered by the Committee, which shall
consist of not less than two Directors. The Committee shall have all of the
powers of the Board with respect to this Plan. Any member of the Committee may
be removed at any time, with or without cause, by resolution of the Board and
any vacancy occurring in the membership of the Committee may be filled by
appointment by the Board.
(b) Subject to the provisions of this Plan, the Committee shall have the
authority, in its sole discretion, to: (i) grant Options, (ii) determine the
exercise price per Share at which Options may be exercised, (iii) determine the
Optionees to whom, and time or times at which, Options shall be granted, (iv)
determine the number of Shares to be represented by each Option, (v) determine
the terms, conditions and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, modify or amend each
Option, (vi) defer (with the consent of the Optionee) or accelerate the
exercise date of any Option, and (vii) make all other determinations deemed
necessary or advisable for the administration of this Plan, including
repricing, canceling and regranting Options.
(c) The Committee, from time to time, may adopt rules and regulations
for carrying out the purposes of this Plan. The Committee's determinations and
its interpretation and construction of any provision of this Plan shall be
final, conclusive and binding upon all Optionees and any holders of any Options
granted under this Plan.
(d) Any and all decisions or determinations of the Committee shall be
made either (i) by a majority vote of the members of the Committee at a meeting
of the Committee or (ii) without a meeting by the unanimous written approval of
the members of the Committee.
(e) No Member of the Committee, or any Officer or Director of the
Company or its Subsidiaries, shall be personally liable for any act or omission
made in good faith in connection with this Plan.
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14. INCENTIVE OPTIONS FOR 10% SHAREHOLDERS. Notwithstanding any other
provisions of this Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly or indirectly (through attribution under
Section 424(d) of the Code) at the date of grant, stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
(or of its Subsidiary) at the date of grant unless the exercise price of such
Option is at least 110% of the Fair Market Value of the Shares subject to such
Option on the date the Option is granted, and such Option by its terms is not
exercisable after the expiration of five years from the date such Option is
granted.
15. INTERPRETATION.
(a) This Plan shall be administered and interpreted so that all
Incentive Stock Options granted under this Plan will qualify as Incentive Stock
Options under Section 422 of the Code. If any provision of this Plan should be
held invalid for the granting of Incentive Stock Options or illegal for any
reason, such determination shall not affect the remaining provisions hereof,
and this Plan shall be construed and enforced as if such provision had never
been included in this Plan.
(b) This Plan shall be governed by the laws of the State of Florida.
(c) Headings contained in this Plan are for convenience only and shall
in no manner be construed as part of this Plan or affect the meaning or
interpretation of any part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall be
a reference to such other gender as is appropriate.
(e) Time shall be of the essence with respect to all time periods
specified for the giving of notices to the company hereunder, as well as all
time periods for the expiration and termination of Options in accordance with
Section 9 hereof (or as otherwise set forth in an option agreement).
16. AMENDMENT AND DISCONTINUATION OF THIS PLAN. Either the Board or the
Committee may from time to time amend this Plan or any Option without the
consent or approval of the shareholders of the Company; PROVIDED, HOWEVER,
that, except to the extent provided in Section 9, no amendment or suspension of
this Plan or any Option issued hereunder shall substantially impair any Option
previously granted to any Optionee without the consent of such Optionee.
17. TERMINATION DATE. This Plan shall terminate ten years after the date
of adoption by the Board of Directors.
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EXHIBIT B
-------------------------------
NETSPEAK CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
-------------------------------
The Board of Directors of Netspeak Corporation (the "Company") has adopted
this Employee Stock Purchase Plan (the "Plan") to enable eligible employees of
the Company and its participating Affiliates (as defined below), through
payroll deductions, to purchase shares of the Company's common stock, par value
$.01 per share (the "Common Stock"). The Plan is for the benefit of the
employees of Netspeak Corporation and any participating Affiliates. The Plan is
intended to benefit the Company by increasing the employees' interest in the
Company's growth and success and encouraging employees to remain in the employ
of the Company or its participating Affiliates. The provisions of the Plan are
set forth below:
1. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 26 below, the aggregate
number of shares of Common Stock that may be made available for purchase by
participating employees under the Plan is 400,000. The shares issuable under
the Plan may, in the discretion of the Board of Directors of the Company (the
"Board"), be authorized but unissued shares, treasury shares or issued and
outstanding shares that are purchased in the open market.
2. ADMINISTRATION.
The Plan shall be administered by the Board or by a Committee appointed by
the Board (the "Committee"). No member of the Board or the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan.
3. INTERPRETATION.
It is intended that the Plan will meet the requirements for an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code of 1986
(the "Code"), and it is to be so applied and interpreted. Subject to the
express provisions of the Plan, the Committee shall have authority to interpret
the Plan, to prescribe, amend and rescind rules relating to it, and to make all
other determinations necessary or advisable in administering the Plan, all of
which determinations will be final and binding upon all persons.
4. ELIGIBLE EMPLOYEES.
Any employee of the Company or any of its participating Affiliates may
participate in the Plan, except the following, who are ineligible to
participate: (a) an employee who has been employed by the Company or any of its
participating Affiliates for less than three months as of the beginning of an
Offering Period (as defined in Section 8 below); (b) an employee whose
customary employment is for less than nine months in any calendar year; (c) an
employee whose customary employment is 20 hours or less per week; and (d) an
employee who, after exercising his or her rights to purchase shares under the
Plan, would own shares of Common Stock (including shares that may be acquired
under any outstanding options) representing five percent or more of the total
combined voting power or value of all classes of stock of the Company (for
purposes of this Section 4, the rules of Section 424(d) of the Code shall apply
in determining the stock ownership of any employee). The term "participating
Affiliate" means any company or other trade or business that is a subsidiary of
the Company (determined in accordance with the principles of Sections 424(f) of
the Code and the regulations thereunder). The Board may at any time in its sole
discretion, if it deems it advisable to do so, terminate the participation of
the employees of a particular participating Affiliate.
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5. PARTICIPATION IN THE PLAN.
An eligible employee may become a participating employee in the Plan by
completing an election to participate in the Plan on a form provided by the
Company and submitting that form to the person designated on the form to
receive such form for the Company. The form will authorize payroll deductions
(as provided in Section 6 below) and authorize the purchase of shares of Common
Stock for the employee's account in accordance with the terms of the Plan.
Enrollment will become effective upon the first day of the first Offering
Period.
6. PAYROLL DEDUCTIONS.
At the time an eligible employee submits his or her election to
participate in the Plan (as provided in Section 5 above), the employee shall
elect to have deductions made from his or her pay, on each pay day following
his or her enrollment in the Plan, and for as long as he or she shall
participate in the Plan. The deductions will be credited to the participating
employee's account under the Plan in any whole percent amount, but in no event
less than one percent (1%) nor more than fifteen percent (15%) (or such lower
percentage as may be established by the Board or Committee), not to exceed
$25,000 per year. An employee may not during any Offering Period change his or
her percentage of payroll deduction for that Offering Period, nor may an
employee withdraw any contributed funds, other than in accordance with Sections
15 through 20 below.
7. INTEREST ON PAYROLL DEDUCTIONS.
The Company and participating Affiliates will cause to be maintained a
record of amounts credited to each participating employee authorizing a payroll
deduction pursuant to Section 6. The Company may, but is not required to,
credit interest on the balance of the employees' accounts during the Offering
Period. If interest is credited to such accounts, the rate may be a fixed or
variable rate determined by the Company.
8. OFFERING AND PURCAHSE PERIODS.
The periods during which the shares of Common Stock may be purchased (the
"Offering Period") will be 24 months or such other period as is determined by
the Committee. Within the Offering Period, there will be four or more "Purchase
Periods." Purchase Periods are the time periods determined by the Committee at
the end of which the shares of Common Stock may be purchased by the employees
based on the salary deductions of such periods. The initial Offering Period
shall commence on the date determined by the Committee and end on a date
determined by the Committee, and every Offering Period thereafter, shall
commence immediately after the prior Offering Period ends and shall be a
24-month period until changed by the Committee. The initial Purchase Period
shall commence on the first day of the Offering Period and end on at the end of
the sixth month from the commencement of the Purchase Period until changed by
the Committee, and every Purchase Period thereafter, shall commence immediately
after the prior Purchase Period ends and shall be a six month period until
changed by the Committee.
9. RIGHTS TO PURCHASE COMMON STOCK; PURCHASE PRICE.
Rights to purchase shares of Common Stock will be deemed granted to
participating employees as of the first trading day of each Offering Period.
The purchase price of each share of Common Stock (the "Purchase Price") shall
be the lesser of 85 percent of the fair market value of the Common Stock (i) on
the first trading day of the Purchase Period or (ii) on the last trading day of
the Purchase Period, unless the Purchase Price is otherwise established by the
Committee; provided that in no event shall the Purchase Price be less than the
amount determined pursuant to subparagraphs (i) and (ii) above or the par value
of the Common Stock. For purposes of the Plan, "fair market value" means the
value of each share of Common Stock subject to the Plan determined as follows:
if on the determination date the shares of Common Stock are listed on an
established national or regional stock exchange, are admitted
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to quotation on the National Association of Securities Dealers Automated
Quotation system, or are publicly traded on an established securities market,
the fair market value of the shares of Common Stock shall be the closing price
of the shares of Common Stock on such exchange or in such market (the highest
such closing price if there is more than one such exchange or market) on the
trading day immediately preceding the determination date (or if there is no
such reported closing price, the fair market value shall be the mean between
the highest bid and lowest asked prices or between the high and low sale prices
on such trading day) or, if no sale of the shares of Common Stock is reported
for such trading day, on the next preceding day on which any sale shall have
been reported. If the shares of Common Stock are not listed on such an
exchange, quoted on such system or traded on such a market, fair market value
shall be determined by the Board in good faith.
10. TIMING OF PURCHASE; PURCHASE LIMITATION.
Unless a participating employee has given prior written notice terminating
such employee's participation in the Plan, or the employee's participation in
the Plan has otherwise been terminated as provided in Sections 16 through 20
below, such employee will be deemed to have exercised automatically his or her
right to purchase Common Stock on the last trading day of the Purchase Period
(except as provided in Section 15 below) for the number of shares of Common
Stock which the accumulated funds in the employee's account at that time will
purchase at the Purchase Price, subject to the participation adjustment
provided for in Section 14 below and subject to adjustment under Section 26
below. Notwithstanding any other provision of the Plan, no employee may
purchase in any one calendar year under the Plan and all other "employee stock
purchase plans" of the Company and its participating Affiliates shares of
Common Stock having an aggregate fair market value in excess of $25,000,
determined as of the first trading date of the Purchase Period as to shares
purchased during such period. Effective upon the last trading day of the
Purchase Period, a participating employee will become a shareholder with
respect to the shares purchased during such period, and will thereupon have all
dividend, voting and other ownership rights incident thereto. Notwithstanding
the foregoing, no shares shall be sold pursuant to the Plan unless the Plan is
approved by the Company's shareholders in accordance with Section 25 below.
11. ISSUANCE OF STOCK CERTIFICATES.
As of the last trading day of the Purchase Period, a participating
employee will be credited with the number of shares of Common Stock purchased
for his or her account under the Plan during such Offering Period. Shares
purchased under the Plan will be held in the custody of an agent (the "Agent")
appointed by the Committee. The Agent may hold the shares purchased under the
Plan in stock certificates, in nominee names and may commingle shares held in
its custody in a single account or stock certificates without identification as
to individual participating employees. A participating employee may, at any
time following his or her purchase of shares under the Plan, by written notice,
instruct the Agent to have all or part of such shares reissued in the
participating employee's own name and have the stock certificate delivered to
the employee.
12. WITHHOLDING OF TAXES.
To the extent that a participating employee realizes ordinary income in
connection with a sale or other transfer of any shares of Common Stock
purchased under the Plan, the Company may withhold amounts needed to cover such
taxes from any payments otherwise due and owing to the participating employee
or from shares that would otherwise be issued to the participating employee
hereunder. Any participating employee who sells or otherwise transfers shares
purchased under the Plan within two years after the beginning of the Offering
Period in which the shares were purchased must within 30 days of such transfer
notify the payroll department of the Company in writing of such transfer.
13. ACCOUNT STATEMENTS.
The Company will cause the Agent to deliver to each participating employee
a statement for each Purchase Period during which the employee purchases shares
of Common Stock under the Plan, but no
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more frequently than quarterly, reflecting the amount of payroll deductions
during the Purchase Period, the number of shares purchased for the employee's
account, the price per share of the shares purchased for the employee's account
and the number of shares held for the employee's account at the end of the
Purchase Period.
14. PARTICIPATION ADJUSTMETNT.
If in any Purchase Period the number of unsold shares that may be made
available for purchase under the Plan pursuant to Section 1 above is
insufficient to permit exercise of all rights deemed exercised by all
participating employees pursuant to Section 10 above, a participation
adjustment will be made, and the number of shares purchasable by all
participating employees will be reduced proportionately. Any funds then
remaining in a participating employee's account after such exercise will be
refunded to the employee.
15. CHANGES IN ELECTIONS TO PURCHASE.
(a) A participating employee may, at any time prior to the last day of the
Purchase Period, by written notice to the Company, direct the Company to cease
payroll deductions (or, if the payment for shares is being made through
periodic cash payments, notify the Company that such payments will be
terminated), in accordance with the following alternatives:
(i) The employee's option to purchase shall be reduced to the number of
shares which may be purchased, as of the last day of the Purchase Period, with
the amount then credited to the employee's account; or
(ii) Withdraw the amount in such employee's account and terminate such
employee's option to purchase.
(b) Any participating employee may increase or decrease his or her payroll
deduction or periodic cash payments, to take effect on the first day of the
next Offering Period, by delivering to the Company a new form regarding
election to participate in the Plan under Section 5 above.
16. TERMINATION OF EMPLOYMENT.
In the event a participating employee voluntarily leaves the employ of the
Company or a participating Affiliate, otherwise than by death or retirement
(under Section 17 below) prior to the last day of the Purchase Period, the
amount in the employee's account will be distributed and the employee's option
to purchase will terminate.
17. RETIREMENT.
In the event a participating employee who has an option to purchase shares
leaves the employ of the Company or a participating Affiliate because of
retirement under a plan of the Company or a participating Affiliate, the
participating employee may elect, within 30 days after the date of such
retirement, one of the following alternatives:
(a) To make up any deficiency in the employee's account resulting from the
termination of payroll deductions by an immediate cash payment;
(b) The employee's option to purchase shall be reduced to the number of
shares which may be purchased, as of the last day of the Purchase Period, with
the amount then credited to the employee's account; or
(c) Withdraw the amount in such employee's account and terminate such
employee's option to purchase.
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In the event the participating employee does not make an election within
the aforesaid 30-day period, he or she will be deemed to have elected
subsection 17(c) above.
18. LAY-OFF, AUTHORIZED LEAVE OF ABSENCE OR DISABLITY.
Payroll deductions for shares for which a participating employee has an
option to purchase may be suspended during any period of absence of the
employee from work due to lay-off, authorized leave of absence or disability
or, if the employee so elects, periodic payments for such shares may continue
to be made in cash.
If such employee returns to active service prior to the last day of the
Purchase Period, the employee's payroll deductions will be resumed and if said
employee did not make periodic cash payments during the employee's period of
absence, the employee shall, by written notice to the Company's payroll
department within 10 days after the employee's return to active service, but
not later than the last day of the Purchase Period, elect:
(a) To make up any deficiency in the employee's account resulting from a
suspension of payroll deductions by an immediate cash payment;
(b) To not make up such deficiency, in which event the number of shares to
be purchased by the employee shall be reduced to the number of whole shares
which may be purchased with the amount, if any, then credited to the employee's
account plus the aggregate amount, if any, of all payroll deductions to be made
thereafter; or
(c) To withdraw the amount in the employee's account and terminate the
employee's option to purchase.
A participating employee on lay-off, authorized leave of absence or
disability on the last day of the Purchase Period shall deliver written notice
to his or her employer on or before the last day of the Purchase Period,
electing one of the alternatives provided in the foregoing clauses (a), (b) and
(c) of this Section 18.
If any employee fails to deliver the required written notice within 10
business days after the employee's return to active service or by the last day
of the Purchase Period, whichever is earlier, the employee shall be deemed to
have elected subsection 18(c) above.
If the period of a participating employee's lay-off, authorized leave of
absence or disability shall terminate on or before the last day of the Purchase
Period, and the employee shall not resume active employment with the Company or
a participating Affiliate, the employee shall receive a distribution in
accordance with the provisions of Section 16 of this Plan.
19. DEATH.
In the event of the death of a participating employee while the employee's
option to purchase shares is in effect, the legal representatives of such
employee may, within three months after the employee's death (but no later than
the last day of the Purchase Period) by written notice to the Company or
participating Affiliate, elect one of the following alternatives:
(a) To make up any deficiency in the employee's account resulting from a
suspension of payroll deductions by an immediate cash payment;
(b) The employee's option to purchase shall be reduced to the number of
shares which may be purchased, as of the last day of the Purchase Period, with
the amount then credited to the employee's account; or
(c) To withdraw the amount in such employee's account and terminate such
employee's option to purchase.
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In the event the legal representatives of such employee fail to deliver
such written notice to the Company or participating Affiliate within the
prescribed period, the election to purchase shares shall terminate and the
amount, then credited to the employee's account shall be paid to such legal
representatives.
20. TERMINATION OF PARTICIPATION.
A participating employee will be refunded all moneys in his or her
account, and his or her participation in the Plan will be terminated if either
(a) the Board elects to terminate the Plan as provided in Section 25 below, or
(b) the employee ceases to be eligible to participate in the Plan under Section
4 above. As soon as practicable following termination of an employee's
participation in the Plan, the Company will deliver to the employee a check
representing the amount in the employee's account and a stock certificate
representing the number of whole shares held in the employee's account. Once
terminated, participation may not be reinstated for the then current Offering
Period, but, if otherwise eligible, the employee may elect to participate in
any subsequent Offering Period.
21. ASSIGMENT.
No participating employee may assign his or her rights to purchase shares
of Common Stock under the Plan, whether voluntarily, by operation of law or
otherwise. Any payment of cash or issuance of shares of Common Stock under the
Plan may be made only to the participating employee (or, in the event of the
employee's death, to the employee's designated beneficiary (pursuant to such
procedures as the Committee establishes) or absent such designation to the
employee's estate). Once a stock certificate has been issued to the employee or
for his or her account, such certificate may be assigned the same as any other
stock certificate.
22. APPLICATION OF FUNDS.
All funds received or held by the Company under the Plan shall be
deposited with the Agent for the account of the participating employees.
Participating employees' accounts will not be segregated.
23. NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the Plan nor any right to purchase Common Stock under the Plan
confers upon any employee any right to continued employment with the Company or
any of its participating Affiliates, nor will an employee's participation in
the Plan restrict or interfere in any way with the right of the Company or any
of its participating Affiliates to terminate the employee's employment at any
time.
24. AMENDMENT OF PLAN.
The Board may, at any time, amend the Plan in any respect (including an
increase in the percentage specified in Section 9 above used in calculating the
Purchase Price); provided, however, that without approval of the shareholders
of the Company no amendment shall be made (a) increasing the number of shares
specified in Section 1 above that may be made available for purchase under the
Plan (except as provided in Section 26 below) or (b) changing the eligibility
requirements for participating in the Plan.
25. EFFECTIVE DATE; TERM AND TERMINATION OF THE PLAN.
The Plan shall be effective as of the date of adoption by the Board, which
date is set forth below, subject to approval of the Plan by a majority of the
votes present and entitled to vote at a duly held meeting of the shareholders
of the Company at which a quorum representing a majority of all outstanding
voting stock is present, either in person or by proxy; provided, however, that
upon approval of the Plan by the shareholders of the Company as set forth
above, all rights to purchase shares granted under the Plan on or after the
effective date shall be fully effective as if the shareholders of the
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<PAGE>
Company had approved the Plan on the effective date. If the shareholders fail
to approve the Plan on or before one year after the effective date, the Plan
shall terminate, any rights to purchase shares granted hereunder shall be null
and void and of no effect and all contributed funds shall be refunded to
participating employees. The Board may terminate the Plan at any time and for
any reason or for no reason, provided that such termination shall not impair
any rights of participating employees that have vested at the time of
termination. In any event, the Plan shall, without further action of the Board,
terminate ten years after the date of adoption of the Plan by the Board or, if
earlier, at such time as all shares of Common Stock that may be made available
for purchase under the Plan pursuant to Section 1 above have been issued.
26. EFFECT OF CHANGES IN CAPITALIZATION.
(a) CHANGES IN COMMON STOCK.
If the number of outstanding shares of Common Stock is increased or
decreased or the shares of Common Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend, or other
distribution payable in capital stock, or other increase or decrease in such
shares effected without receipt of consideration by the Company occurring after
the effective date of the Plan, the number and kinds of shares that may be
purchased under the Plan shall be adjusted proportionately and accordingly by
the Company. In addition, the number and kind of shares for which rights are
outstanding shall be similarly adjusted so that the proportionate interest of a
participating employee immediately following such event shall, to the extent
practicable, be the same as immediately prior to such event. Any such
adjustment in outstanding rights shall not change the aggregate Purchase Price
payable by a participating employee with respect to shares subject to such
rights, but shall include a corresponding proportionate adjustment in the
Purchase Price per share.
(b) REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING CORPORATION.
Subject to Subsection (c) of this Section 26, if the Company shall be the
surviving corporation in any reorganization, merger or consolidation of the
Company with one or more other corporations, all outstanding rights under the
Plan shall pertain to and apply to the securities to which a holder of the
number of shares of Common Stock subject to such rights would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Purchase Price per share
so that the aggregate Purchase Price thereafter shall be the same as the
aggregate Purchase Price of the shares subject to such rights immediately prior
to such reorganization, merger or consolidation.
(c) REORGANIZATION IN WHICH THE COMPANY IS NOT THE SURVIVING CORPORATION OR
SALE OF ASSETS OR STOCK.
Upon any dissolution or liquidation of the Company, or upon a merger,
consolidation or reorganization of the Company with one or more other
corporations in which the Company is not the surviving corporation, or upon a
sale of all or substantially all of the assets of the Company to another
corporation, or upon any transaction (including, without limitation, a merger
or reorganization in which the Company is the surviving corporation) approved
by the Board that results in any person or entity owning more than 80 percent
of the combined voting power of all classes of stock of the Company, the Plan
and all rights outstanding hereunder shall terminate, except to the extent
provision is made in writing in connection with such transaction for the
continuation of the Plan and/or the assumption of the rights theretofore
granted, or for the substitution for such rights of new rights covering the
stock of a successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and exercise
prices, in which event the Plan and rights theretofore granted shall continue
in the manner and under the terms so provided. In the event of any such
termination of the Plan, all current Purchase Periods and Offering Periods
shall be deemed to have ended on the last
7
<PAGE>
trading day prior to such termination, and in accordance with Section 10 above
the rights of each participating employee then outstanding shall be deemed to
be automatically exercised on such last trading day. The Board shall send
written notice of an event that will result in such a termination to all
participating employees not later than the time at which the Company gives
notice thereof to its shareholders.
(d) ADJUSTMENTS.
Adjustments under this Section 26 related to stock or securities of the
Company shall be made by the Committee, whose determination in that respect
shall be final, binding, and conclusive.
(e) NO LIMITATIONS ON COMPANY.
The grant of a right pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve or liquidate, or to sell or transfer all or any part of
its business or assets.
27. GOVERNMENTAL REGULATION.
The Company's obligation to issue, sell and deliver shares of Common Stock
pursuant to the Plan is subject to such approval of any governmental authority
and any national securities exchange or other market quotation system as may be
required in connection with the authorization, issuance or sale of such shares.
28. SHAREHOLDER RIGHTS.
Any dividends paid on shares held by the Company for a participating
employee's account will be transmitted to the employee. The Company will
deliver to each participating employee who purchases shares of Common Stock
under the Plan, as promptly as practicable by mail or otherwise, all notices of
meetings, proxy statements, proxies and other materials distributed by the
Company to its shareholders. Any shares of Common Stock held by the Agent for
an employee's account will be voted in accordance with the employee's duly
delivered and signed proxy instructions. There will be no charge to
participating employees in connection with such notices, proxies and other
materials.
29. RULE 16B-3.
Transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or any successor provision under the Securities
Exchange Act of 1934, as amended. If any provision of the Plan or action by the
Board fails to so comply, it shall be deemed null and void to the extent
permitted by law and deemed advisable by the Board. Moreover, in the event the
Plan does not include a provision required by Rule 16b-3 to be stated herein,
such provision (other than one relating to eligibility requirements, or the
price and amount of awards) shall be deemed automatically to be incorporated by
reference into the Plan.
30. PAYMENT OF PLAN EXPENSES.
The Company will bear all costs of administering and carrying out the
Plan; provided however, participating employees shall bear all costs incurred
subsequent to the issuance of stock certificates pursuant to Section 11.
* * *
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<PAGE>
NETSPEAK CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - JUNE 18, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NETSPEAK CORPORATION
The undersigned hereby appoints Stephen R. Cohen and Robert Kennedy as
Proxies, each with full power to appoint a substitute, to represent and to vote,
with all the powers the undersigned would have if personally present, all the
shares of Common Stock $.01 par value per share of NetSpeak Corporation (the
"Company") held of record by the undersigned on May 1, 1998 at the Annual
Meeting of Shareholders to be held on June 18, 1998 or any adjournment or
adjournments thereof.
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
NETSPEAK CORPORATION
JUNE 18, 1998
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
[X] PLEASE MARK YOUR
VOTES AS INDICATED
IN THIS EXAMPLE.
<TABLE>
<S> <C> <C> <C> <C>
FOR ALL NOMINEES WITHHOLD
LISTED AT RIGHT AUTHORITY
(except as marked to to vote for all nominees
the contrary below) listed at right
Proposal 1. NOMINEES:
Election of [ ] [ ] Stephen R. Cohen Robert Kennedy
Directors Shane D. Mattaway John W. Staten
Randall Battat Stephen P. Earhart
FOR, except vote withheld from the following Michael B. Goldberg Steven D. Leeke
nominee(s): A. Jeffry Robinson Martin Shum
____________________________________________
</TABLE>
Proposal 2. Approval of proposal to amend the FOR AGAINST ABSTAIN
Company's 1995 Stock Option Plan. [ ] [ ] [ ]
Proposal 3. Approval of proposal to adopt the FOR AGAINST ABSTAIN
Employee Stock Purchase Plan. [ ] [ ] [ ]
Proposal 4. Approval of proposal to amend the FOR AGAINST ABSTAIN
Company's Articles of Incorporation. [ ] [ ] [ ]
Proposal 5. Ratification of selection of FOR AGAINST ABSTAIN
Deloitte & Touche LLP as [ ] [ ] [ ]
independent public accountants for
the Company for the fiscal year
ending January 31, 1998.
In their discretion, the Proxies are authorized to vote upon other
business as may come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5.
PLEASE DATE, SIGN, AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
(Signature)________________(Signature)______________________Dated:_______, 1998
NOTE: PLEASE SIGN HERE. Please date this proxy and sign your name exactly as it
appears hereon. Where there is more than one owner, each should sign. When
signing as an agent, attorney, administrator, executor, guardian, or
trustee, please add your title as such. If executed by a corporation, the
proxy should be signed by a duly authorized officer who should indicate
his office.
