NETSPEAK CORP
DEF 14A, 1999-04-20
COMPUTER INTEGRATED SYSTEMS DESIGN
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                                  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 MAY 20, 1999
                        -------------------------------

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 May 20, 1999 for the
following purposes:

   1. To elect nine directors of the Company for the ensuing year;

   2. 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, 1999; and

   3. 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 April 13, 1999
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,

                                        JOHN W. STATEN,
                                        Secretary

Boca Raton, Florida
April 20, 1999

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 MAY 20, 1999

                        -------------------------------
                                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
May 20, 1999, 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 April 13, 1999. Shareholders should
review the information provided herein in conjunction with the Company's 1998
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, its telephone number is (561) 998-8700
and its website is www.netspeak.com. Information contained on the Company's
website is not part of this Proxy Statement.

                         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 nine directors of the Company for the ensuing year;

   2. To ratify the appointment of Deloitte & Touche LLP as the Company's
      independent public accountants for the fiscal year ending December 31,
      1999; and

<PAGE>

   3. 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 April 13, 1999 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 12,798,866 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 proposal 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                     4.6
Robert Kennedy(4) .....................            281,551                     2.2
Michael R. Rich(5) ....................             25,000                      *
John W. Staten(6) .....................             75,000                      *
Harvey Kaufman(7) .....................            100,600                      *
Steven F. Mills(8) ....................             20,634                      *
Stephen P. Earhart(9) .................                -0-                    -0-
Michael B. Goldberg(10) ...............             10,000                      *
Dr. Steven D. Leeke(9) ................                -0-                    -0-
A. Jeffry Robinson(11) ................             85,000                      *
Martin Shum(10) .......................             10,000                      *
All directors and executive officers
  as a group (10 persons)(12) .........          1,187,151                     8.7
5% OR GREATER HOLDERS:
Bay Networks, Inc. ....................          1,334,171                    10.4
  4401 Great America Parkway
  Santa Clara, California 95054
Shane D. Mattaway(13) .................            748,000                     5.7
  826 Periwinkle Street
  Boca Raton, Florida 33486
Motorola, Inc. ........................          3,944,178                    30.8
  1303 E. Algonquin Road
  Schaumburg, Illinois 60196

<FN>
- ----------------
  *   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)  Includes 250,000 shares of Common Stock issuable upon the exercise of stock options and 30,000 shares of Common
      Stock issuable upon the exercise of stock options held by Mr. Kennedy's spouse.
 (5)  Represents 25,000 shares of Common Stock issuable upon the exercise of stock options. Does not include unvested
      options to acquire 225,000 shares of common stock.
 (6)  Represents 75,000 shares of Common Stock issuable upon the exercise of stock options. Does not include unvested
      options to acquire 60,000 shares of common stock.
 (7)  Includes 50,000 shares of Common Stock issuable upon the exercise of stock options.
 (8)  Represents 20,000 shares of Common Stock issuable upon exercise of stock options. Mr. Mills resigned from the
      Company in January 1999.
 (9)  Does not include the shares of Common Stock beneficially owned by Motorola, Inc. ("Motorola") in which shares
      Messrs. Leeke and Earhart disclaim beneficial ownership.
(10)  Represents 10,000 shares of Common Stock issuable upon exercise of stock options.
(11)  Represents 85,000 shares of Common Stock issuable upon the exercise of stock options.
(12)  Includes the shares of Common Stock described in notes (3) through (7) and (9) thorough (11).
(13)  Includes 250,000 shares of Common Stock issuable upon the exercise of stock options. Mr. Mattaway resigned from the
      Company in September 1998.
</FN>
</TABLE>

                                       3
<PAGE>

                             ELECTION OF DIRECTORS

     At the Annual Meeting, nine 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 nine 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 ................    56     Chairman of the Board and Chief Executive Officer
Robert Kennedy ..................    50     Vice Chairman of the Board
Michael R. Rich .................    41     President, Chief Operating Officer and Director
John W. Staten ..................    32     Chief Financial Officer, Secretary and Director
Stephen P. Earhart ..............    50     Director
Michael B. Goldberg(2) ..........    52     Director
Dr. Steven D. Leeke(1) ..........    37     Director
A. Jeffry Robinson (2) ..........    56     Director
Martin Shum(1) ..................    50     Director

<FN>
- ----------------
(1) Member of Audit Committee.
(2)  Member of Compensation Committee.
</FN>
</TABLE>

     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 Vice Chairman in November 1998. Mr. Kennedy also served as the
Company's President and Chief Operating Officer from March 1996 to November
1998. 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.

     MICHAEL R. RICH joined the Company as President, Chief Operating Officer
and a director in November 1998. From 1997 until joining the Company, Mr. Rich
served as Vice President and General Manager of AT&T's Business Internet
Services - Value-Added Services division where he was responsible for the daily
operations of the division which defined the strategy and work program for
launching international carrier and business services, including IP telephony,
clearinghouse, global

                                       4
<PAGE>

roaming and Internet transit services. From 1995 to 1997, Mr. Rich held the
position of General Manager and Founder of AT&T Web Site Services unit, where
he was responsible for strategic and tactical planning, service evolution and
attainment of revenue and profitability objectives on a global basis. From 1994
to 1995, Mr. Rich served as Director of New Business Development where he led
the product management team responsible for developing and bringing to market
next generation Call Center and Automatic Teller Machine products for the
services industry. From 1986 to 1994, Mr. Rich was part of AT&T Bell
Laboratories focusing on video and data networking applications, where he led
the systems engineering team to the development of real-time, interactive,
voice/video/data conferencing services.

     JOHN W. STATEN has served as Chief Financial Officer since February 1996
and became Secretary and a director of the Company in April 1998. Mr. Staten
also served as Assistant Secretary from February 1996 to 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.

     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 with Motorola. He joined Motorola in 1978 and has held numerous
progressive positions in Motorola's financial organization. Mr. Earhart also
serves as a director of Harris Bank Libertyville.

     MICHAEL B. GOLDBERG has served as a director of the Company since 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.

     DR. 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 Vice
President and Director of Business Development, Personal Networks Group,
Communications Enterprise 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 has served as a director of the Company since June 1997. In
1998, Mr. Shum co-founded Aprisa, Inc., a start-up focusing on the provision of
engineering services via the Internet, and serves as its President and Chief
Executive Officer. From May 1987 to July 1998, Mr. Shum served as Chairman of
the Board of Directors, President and Chief Executive Officer of ACT Networks,
Inc. ("ACT"), a company which he founded. Mr. Shum is currently on the Board of
a number of early stage companies including KnowledgeLINK, Inc. and Ampersand
Corporation.

     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. Motorola is
currently entitled to designate three nominees to the

                                       5
<PAGE>

Company's Board of Directors, two of whom are Stephen P. Earhart and Dr. Steven
D. Leeke. Motorola's third designee, Randall Battatt, resigned from the Board
of Directors in April 1999. Motorola has not as yet designated his replacement
and is not expected to do so prior to the Annual Meeting. At such time that
Motorola exercises this right, the Board of Directors will appoint the designee
to fill the vacancy caused by Mr. Battat's resignation. 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.

     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 the fiscal year ended December 31, 1998, the Board of Directors
held six formal meetings. During 1998, each current director attended all
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 Steven D. Leeke and Martin
Shum. 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 1998.

     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 the Company's Employee Stock
Purchase Plan. The Compensation Committee met four times during 1998.

COMPENSATION OF DIRECTORS

     The Company pays non-employee directors, except those directors designated
by Motorola, a fee of $1,000 per meeting of the Board of Directors or committee
thereof attended and provides non-employee directors, except those directors
designated by Motorola, 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 and 1998, 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 $8.125 and $10.00, respectively.

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,

                                       6
<PAGE>

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
1998, all filing requirements applicable to its executive officers, directors
and greater than ten percent beneficial owners were complied with.

                            EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The following compensation table sets forth, for the years ended December
31, 1996, 1997 and 1998, 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 1998 (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                   1998      275,000         --                  --                7,200
Chairman and CEO                   1997      190,776     90,000                  --                7,200
                                   1996       43,080         --             300,000                1,662

Robert Kennedy(3)                  1998      250,000         --                  --                8,200
Vice Chairman                      1997      165,507     70,000                  --                8,150
                                   1996       35,367         --             250,000                1,662

John W. Staten(4)                  1998      150,000         --              60,000                8,200
Chief Financial Officer            1997       99,246     50,000                  --                8,150
Secretary and director             1996       63,621         --             100,000                1,662

Harvey Kaufman                     1998      110,000         --                  --                7,200
Executive Vice President and       1997       90,385     25,000                  --                7,200
Assistance Secretary               1996       18,463         --              50,000                   --

Steven F. Mills(5)                 1998      192,308         --             150,000                1,000
Senior Vice President of           1997      124,664     32,500                  --                  950
Advanced Technology                1996       18,461         --             100,000                   --
Development

<FN>
- ----------------
(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. Staten joined the Company in February 1996.
(5) 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. Mr. Mills resigned from the Company in
    January 1999.
</FN>
</TABLE>

                                       7
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth information concerning individual grants of
stock options made during 1998 to any of the Named Executive Officers.
<TABLE>
<CAPTION>
                                                                                    POTENTIAL REALIZABLE
                               NUMBER OF                                              VALUE OF ASSUMED
                                SHARES      PERCENT OF                                 ANNUAL RATES OF
                              UNDERLYING   TOTAL OPTIONS                          STOCK PRICE APPRECIATION
                                OPTIONS     GRANTED TO    EXERCISE OR              FOR OPTION TERMS($)(1)
                                GRANTED    EMPLOYEES IN   BASE PRICE   EXPIRATION -------------------------
                                (#)(1)      FISCAL YEAR     ($/SH)        DATE        5%($)       10%($)
                             ------------ -------------- ------------ ----------- ------------ ------------
<S>                          <C>          <C>            <C>          <C>         <C>          <C>
John Staten ................     60,000          4.1          12.63      6/18/08     476,576    1,207,738
Steven F. Mills(2) .........     90,000          6.1          23.19      2/13/08   1,312,566    3,326,300
                                 60,000          4.1          12.63      6/18/08     476,576    1,207,738
<FN>
- ----------------
(1)   Based upon the exercise price, which was equal to the fair market on the
      date of grant, and annual appreciation at the rate stated on such price
      through the expiration date of the options. Amounts represented
      hypothetical gains that could be achieved for the options if exercised at
      the end of the term. The assumed 5% and 10% rates of stock price
      appreciation are provided in accordance with the rules of the Securities
      and Exchange Commission (the "Commission") and do not represent the
      Company's estimate or projection of the future stock price. Actual gains,
      if any, are contingent upon the continued employment of the Named
      Executive Officer through the expiration date, as well as being dependent
      upon the general performance of the Common Stock. The potential
      realizable values have not taken into account amounts required to be paid
      for federal income taxes.
(2)   Mr. Mills resigned from the Company in January 1999.
</FN>
</TABLE>

STOCK OPTIONS EXERCISED IN 1998 AND STOCK OPTIONS HELD AT THE END OF FISCAL
1998

     The following table indicates the total number and value of options
exercised during 1998 by each of the Named Executive Officers and the total
number and value of exercisable and unexercisable stock options held by each of
the Named Executive Officers as of December 31, 1998.
<TABLE>
<CAPTION>
                                                                   NUMBER OF SECURITIES
                                                                  UNDERLYING UNEXERCISED             VALUE OF UNEXERCISED
                                    SHARES                              OPTIONS AT                   IN-THE-MONEY OPTIONS
                                   ACQUIRED         VALUE           FISCAL YEAR-END(#)             AT FISCALYEAR-END($)(1)
                                  ON EXERCISE      REALIZED   -------------------------------   ------------------------------
NAME                                  (#)            ($)       EXERCISABLE     UNEXERCISABLE     EXERCISABLE     UNEXERCISABLE
- ----------------------------   ----------------   ---------   -------------   ---------------   -------------   --------------
<S>                            <C>                <C>         <C>             <C>               <C>             <C>
Stephen R. Cohen ...........               --           --       300,000               --         2,625,000              --
Robert Kennedy .............               --           --       250,000               --         2,187,550              --
John Staten ................           25,000(2)   687,500        75,000           60,000           656,250              --
Harvey Kaufman .............               --           --        50,000               --           437,500              --
Steven F. Mills(3) .........           66,000(2)   428,780        20,666          163,334             3,830         191,665
<FN>
- ----------------
(1) Based on the Nasdaq National Market closing price for the Company's Common
    Stock on December 31, 1998 of $11.25 per share.
(2) Upon exercise, 25,000 and 10,000 shares of Common Stock acquired by Messrs.
    Staten and Mills, respectively, were sold in April 1998 to Motorola in the
    tender offer described in "Certain Transactions - Transactions with
    Motorola".
(3) Mr. Mills resigned from the Company in January 1999.
</FN>
</TABLE>

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, John W. Staten and Harvey Kaufman. 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, $150,000, and
$110,000 for Messrs. Cohen, Kennedy, Staten and Kaufman, respectively.

                                       8
<PAGE>

     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.

     In November 1998, the Company entered into an employment agreement with
Michael Rich to serve as its President and Chief Operating Officer. The
employment agreement has a term of three years and provides for a minimum
annual salary of $200,000, a minimum bonus during the first year of $100,000
and an option under the 1995 Plan to purchase 250,000 shares of the Company's
Common Stock. In addition, the Company has lent Mr. Rich an aggregate $500,000
evidenced by interest-bearing promissory notes. The Company will forgive one
third of the principal amount of the loans, and accrued interest thereon, on
the first, second and third anniversary of the related agreements, provided
that Mr. Rich continues to be employed by the Company on such dates. In the
event Mr. Rich leaves the Company, any unforgiven principal amount of the
loans, together with accrued interest thereon, will be payable in full.

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 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 1999, 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

                                       9
<PAGE>

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 1998 compensation 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 1998 performance and development, including the fact
that strategic alliances had been entered into and expanded, expectations for
the fiscal year ending December 31, 1999 and other performance measures. There
was no specific relationship or formula, however, by which such compensation
was tied to Company performance.

  OTHER EXECUTIVE OFFICER COMPENSATION

     1998 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 1998,
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. During 1998, the
Company granted options to purchase 60,000 and 150,000 shares of Common Stock
to John Staten and Steve Mills, respectively. Upon joining the Company in
November 1998, the Company granted to Michael R. Rich, President and Chief
Operating Officer, options to purchase 250,000 shares of Common Stock.

                                                    /s/ Michael B. Goldberg

                                                    /s/ A. Jeffry Robinson

                                       10
<PAGE>

                               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, 1998.

             COMPARISON OF NINETEEN MONTH CUMULATIVE TOTAL RETURN*
               AMONG NETSPEAK CORPORATION, THE S&P 500 INDEX AND
                  THE NASDAQ COMPUTER & DATA PROCESSING INDEX

                               [GRAPHIC OMITTED]

<TABLE>
<CAPTION>
                                                    QUARTER ENDED 1997($)       QUARTER ENDED 1998($)
                                                    ----------------------   ----------------------------
                                     MAY 29, 1997    JUN     SEPT     DEC     MAR     JUN     SEP    DEC
                                    -------------   -----   ------   -----   -----   -----   -----   ----
<S>                                    <C>           <C>     <C>      <C>     <C>     <C>    <C>     <C>
 NetSpeak .......................        100         103      166     275     341     136      91    123
 S&P 500 ........................        100         111      119     123     140     144     130    158
 NASDAQ Computer and
  Data Processing Index .........        100         113      124     117     155     172     162    209

<FN>
- ----------------
* 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.
</FN>
</TABLE>

                                       11
<PAGE>

                             CERTAIN TRANSACTIONS

TRANSACTION WITH ACT

     In May 1997, the Company entered into a Technology Development and License
Agreement with ACT for technology development and product integration and
marketing. The Company also 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 Networks") to provide voice and fax-over-IP
solutions to Bay Networks and its customers. In conjunction with the
aforementioned agreement, the Company and Bay Networks entered into a stock
purchase agreement ("Purchase Agreement") pursuant to which Bay Networks
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
Networks 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 Networks
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.
Subsequent to the consummation of such agreement, Bay Networks was acquired by
Northern Telecom Limited ("Nortel") and, as a result of the change in
ownership, all joint development projects between the companies were suspended.
Nortel has advised the Company that it will pursue its own IP telephony
strategy, which at this time does not include the Company's technology.

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 issuable
on the exercise of stock options, 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

                                       12
<PAGE>

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 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 the Company, 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).

     Subsequently, a decision was made to terminate any further development
efforts for Stargate in favor of aggressively pursuing the development of the
Company's new software call processing technology. The Company and Motorola are
in discussions regarding replacing the acceptance of Stargate by Motorola with
another triggering event. Although the Company believes that it will be

                                       13
<PAGE>

successful in negotiating a new trigger for the minimum commitment, there can
be no assurances that the Company will be successful in this effort and, as a
result, there exists some uncertainty as to the receipt, amount and timing of
the remaining minimum commitment from Motorola.

  THE VOTING AGREEMENT

     The Voting Agreement grants Motorola the right to designate two additional
directors, resulting in a total of three designees 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 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, except
pursuant to the consent of the Company's Board of Directors, 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.

                                       14
<PAGE>

     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
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

                                       15
<PAGE>

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.

  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. 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, 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

                                       16
<PAGE>

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.

     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 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 its inception in
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, 1999. 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.

                                       17
<PAGE>

                 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 2000 Annual Meeting of Shareholders
must deliver a proposal in writing to the Company's principal executive offices
no later than December 22, 1999.

                                        By Order Of The Board of Directors

                                        JOHN W. STATEN,
                                        Secretary

Boca Raton, Florida
April 20, 1999

                                       18

<PAGE>

                              NETSPEAK CORPORATION

                  ANNUAL MEETING OF SHAREHOLDERS - MAY 20, 1999
         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 April 13, 1999 at the Annual
Meeting of Shareholders to be held on May 20, 1999 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

                                  MAY 20, 1999

                 PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED

[X]      PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE.

PROPOSAL 1.       Election of Directors

[ ] FOR ALL NOMINEES LISTED BELOW             [ ] WITHHOLD AUTHORITY TO VOTE
    (except as marked to the contrary below)      for all nominees listed below

            Stephen R. Cohen                            Robert Kennedy
            Michael R. Rich                             John W. Staten
            Stephen P. Earhart                          Michael B. Goldberg
            Dr. Steven D. Leeke                         A. Jeffry Robinson
            Martin Shum

PROPOSAL 2.       Ratification of selection of Deloitte & Touche LLP as
                  independent public accountants for the Company for the fiscal
                  year ending December 31, 1999.

                  FOR [  ]              AGAINST [  ]             ABSTAIN [  ]

         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 AND 2.

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:_______, 1999

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.



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