NETOPIA INC, DEF 14A, 1998-01-12

NETOPIA INC
DEF 14A, 1998-01-12
COMPUTER INTEGRATED SYSTEMS DESIGN

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[LOGO OF NETOPIA APPEARS HERE]

January 16, 1998

Netopia, Inc.
2470 Mariner Square Loop
Alameda, CA 94501

NOTICE OF ANNUAL STOCKHOLDER MEETING

Notice is hereby given that the Annual Stockholder Meeting of Netopia,
Inc., formerly Farallon Communications, Inc. (the "Company") will be held on
February 18, 1998, at 10:00 a.m. local time, at 2470 Mariner Square Loop,
Alameda, California 94501 for the following purposes:

1. To elect five directors, the names of whom are set forth in the
accompanying proxy statement, to serve until the 1999 Annual
Stockholder Meeting;

2. To approve amendments to the Company's 1996 Stock Option Plan,
including a 500,000 share increase to the number of shares
available under the 1996 Stock Option Plan, as set forth in the
accompanying proxy;

3. To approve an amendment to the Company's Employee Stock Purchase
Plan to increase the number of shares of the Company's Common
Stock available for issuance by 100,000 shares to a total of
600,000 shares;

4. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company; and

5. To transact such other business as may properly be brought before
the meeting.

The forgoing items of business are more fully described in the attached
Proxy Statement.

Stockholders of record at the close of business on December 31, 1997 are
the only stockholders entitled to notice of and to vote at the Annual
Stockholder Meeting and at any adjournment or postponements thereof. A list of
such stockholders will be available for inspection at the Company's headquarters
located at 2470 Mariner Square Loop, Alameda, CA 94501, during ordinary business
hours for the ten-day period prior to the Annual Stockholder Meeting.

The Board of Directors,

/s/ Alan B. Lefkof

Alan B. Lefkof
President, Chief Executive Officer and Director

Alameda, California
January 16, 1998

IMPORTANT

WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE VOTE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ATTACHED SELF-ADDRESSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN
THOUGH YOU HAVE PREVIOUSLY SIGNED AND RETURNED YOUR PROXY.
<PAGE>

NETOPIA, INC.
PROXY STATEMENT FOR ANNUAL STOCKHOLDER MEETING
TO BE HELD ON FEBRUARY 18, 1998

<TABLE>
<S> <C>
GENERAL INFORMATION......................................................... 3

ELECTION OF DIRECTORS....................................................... 5
Executive Compensation..................................................... 7
Employment and Change of Control........................................... 9
Compensation of Directors.................................................. 9
Compensation Committee Interlocks and Insider Participation................ 9
Compliance with Section 16(a) of the Securities Exchange Act of 1934....... 10

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION............................................................... 10
Summary of Compensation Policies for Executive Officers.................... 10

COMPARISION OF SHAREHOLDER RETURNS.......................................... 12

APPROVAL OF AMENDMENT OF THE 1996 STOCK OPTION PLAN......................... 12
Summary of the Provisions of the 1996 Stock Option Plan.................... 13

APPROVAL OF AMENDMENT OF THE EMPLOYEE STOCK PURCHASE PLAN................... 19
Summary of the Provisions of the Employee Stock Purchase Plan.............. 20

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS......................... 23

STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING................ 23

TRANSACTION OF OTHER BUSINESS............................................... 24
</TABLE>

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[LOGO OF NETOPIA APPEARS HERE]

NETOPIA, INC.
2470 MARINER SQUARE LOOP
ALAMEDA, CA 94501
___________________

PROXY STATEMENT
FOR THE ANNUAL STOCKHOLDER MEETING
TO BE HELD ON FEBRUARY 18, 1998
________________________________________________________________________________

The accompanying proxy is solicited by the Board of Directors of Netopia,
Inc., formerly Farallon Communications, Inc., a Delaware corporation (the
"Company" or "Netopia"), for use at the Annual Stockholder Meeting to be held on
Wednesday, February 18, 1998, at 10:00 a.m. local time or any adjournment
thereof, for the purposes set forth in the accompanying Notice of Annual
Stockholder Meeting. The meeting will be held at the Company's facility at 2470
Mariner Square Loop, Alameda, California. The Company's telephone number is
(510) 814-5100. The date of this Proxy Statement is January 16, 1998, the
approximate date on which this Proxy Statement and the accompanying form of
proxy were first sent or given to stockholders.

GENERAL INFORMATION

ANNUAL REPORT. An annual report for the fiscal year ended September 30,
1997 is enclosed with this Proxy Statement.

VOTING SECURITIES. The Company's Common Stock is the only type of security
entitled to vote at the Annual Stockholder Meeting. On December 31, 1997, the
record date for the determination of stockholders entitled to vote at the Annual
Stockholder Meeting, there were 11,522,921 shares of the Company's Common Stock
issued and outstanding. Each stockholder of record on December 31, 1997 will be
entitled to one vote for each share of Common Stock held by such stockholder on
December 31, 1997 at the meeting and any adjournment thereof. Shares of Common
Stock may not be voted cumulatively. All votes will be tabulated by the
inspector of elections appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker non-votes.

Each holder of shares of the Company's Common Stock is entitled to one (1)
vote on the proposals presented in this Proxy Statement for each share of stock
held. Stockholders may vote in person or by proxy. The Company's By Laws
provide that a majority of all of the shares of the Common Stock entitled to
vote, whether present in person or represented by proxy, shall constitute a
quorum for the transaction of business at the Annual Stockholder Meeting.
Abstentions and broker non-votes will be counted as present for the purpose of
determining the presence of a quorum.

SOLICITATION OF PROXIES. The cost of soliciting proxies will be borne by
the Company. In addition to soliciting holders by mail through its regular
employees, the Company will request banks and brokers, and other custodians,
nominees and fiduciaries, to solicit their customers who have stock of the
Company registered in the names of such persons and will reimburse them for
their reasonable, out-of-pocket costs. The Company may use the services of its
officers, directors, and others to solicit proxies, personally or by telephone,
without additional compensation.

VOTING OF PROXIES. Whether or not you are able to attend the Annual
Stockholder Meeting, you are urged to complete and return the enclosed proxy,
which is solicited by the Company's Board of Directors and which will be voted
as you direct on your proxy when properly completed. In the event no directions
are specified, such proxies will be voted FOR the Nominees of the Board of
Directors (as set forth in Proposal No. 1), FOR Proposals No. 2, No. 3, No. 4
and in the discretion of the proxy holders, as to other matters that may
properly come before the Annual Stockholder Meeting. All valid proxies received
prior to the meeting will be voted. All shares represented by a proxy will be
voted, and where a holder specifies by means of the proxy a choice with respect
to any matter to be acted upon, the shares will be voted in accordance with the
specification so made. A holder giving a proxy has the power to revoke his or
her proxy, at any time prior to the time it is voted, by delivery to the
Secretary of the Company of a written

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instrument revoking the proxy or a duly executed proxy with a later date, or by
attending the meeting and voting in person.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of December 31,
1997, with respect to the beneficial ownership of the Company's Common Stock by
(i) the Chief Executive Officer and the four other most highly compensated
executive officers of the Company as of September 30, 1997, (ii) all directors
and nominees, (iii) all executive officers and directors of the Company as a
group, and (iv) owners of more than 5% of the Company's outstanding Common
Stock. Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended. Under this rule, certain
shares may be deemed to be beneficially owned by more than one person (if, for
example, persons share the power to vote or the power to dispose of the shares).
In addition, shares are deemed to be beneficially owned by a person if the
person has the right to acquire shares (for example, upon exercise of an option
or warrant) within sixty (60) days of the date as of which the information is
provided; in computing the percentage ownership of any person, the amount of
shares is deemed to include the amount of shares beneficially owned by such
person (and only such person) by reason of such acquisition rights. As a result,
the percentage of outstanding shares of any person as shown in the following
table does not necessarily reflect the person's actual voting power at any
particular date.

<TABLE>
<CAPTION>
Shares
Beneficially Owned (1)
------------------------------------------------

Name of Beneficial Currently Percent
Owner Owned of Class
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Alan B. Lefkof (2).................. 303,875 2.4%
James A. Clark (3).................. 57,001 *
Richard L. Maslana (4).............. 83,375 *
Didier Cop (5)...................... 39,051 *
Thomas A. Skoulis (6)............... 45,287 *
Reese M. Jones (7).................. 2,558,968 20.3%
Bandel L. Carano (8)................ 716,856 5.7%
David F. Marquardt (9).............. 1,228,916 9.8%
James R. Swartz (10)................ 1,051,525 8.4%
Oak Investment Partners V, L.P. (12) 691,856 5.5%
525 University Ave. Suite 1300
Palo Alto, CA 94301

Technology Venture Investors - IV, 1,201,414 9.6%
L.P. (13)..........................
2480 Sandhill Rd.
Menlo Park, CA 94025

Accell III, L.P. (14)............... 1,026,525 8.2%
One Embaradero Center
San Francisco, CA 94111

All Directors and Executive
Officers as a Group (13 6,125,947 48.7%
persons)(11).......................
</TABLE>

* Less than 1% of the outstanding shares of Common Stock.

1) The number of shares of Common Stock deemed outstanding includes shares
issuable pursuant to stock options that may be exercised within sixty (60)
days after December 31, 1997.

2) Includes options exercisable into 275,313 shares of Common Stock under the
1996 Stock Option Plan ("Option Plan").

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3) Includes options exercisable into 57,001 shares of Common Stock under the
Option Plan.

4) Includes options exercisable into 56,875 shares of Common Stock under the
Option Plan.

5) Includes options exercisable into 23,351 shares of Common Stock under the
Option Plan.

6) Includes options exercisable into 41,725 shares of Common Stock under the
Option Plan.

7) Includes options exercisable into 7,813 shares of Common Stock under the
Option Plan

8) Includes 691,856 shares beneficially owned by affiliated entities of Oak
Investment V, L.P., of which Mr. Carano disclaims beneficial ownership of
except as set forth below (see footnote 12). Includes options exercisable
into 25,000 shares of Common Stock under the Option Plan.

9) Includes 1,201,414 shares beneficially owned by affiliated entities of
Technology Venture Investors Management IV, L.P. of which Mr. Marquardt
disclaims beneficial ownership of except as set forth below (see footnote
13). Includes options exercisable into 25,000 shares of Common Stock under
the Option Plan.

10) Includes 1,026,525 shares beneficially owned by affiliated entities of
Accel, L.P. of which Mr. Swardt disclaims beneficial ownership of except as
set forth below (see footnote 14). Includes options exercisable into 25,000
shares of Common Stock under the Option Plan.

11) Includes options exercisable into 588,145 shares of Common Stock under the
Option Plan.

12) Mr. Carano, a director of the Company, is a managing member of Oak
Investment V, L.P. and Oak V Affiliates Fund, L.P. Includes 669,360 shares
held by Oak Investment Partners V, L.P., a limited partnership, and 22,496
shares held by Oak V Affiliates Fund, L.P., a limited partnership. Mr.
Carano disclaims beneficial ownership of the securities held by these
entities except to the extent of his pecuniary interest therein arising
from his partnership interests.

13) Mr. David F. Marquardt, a director of the Company, is a general partner of
Technology Venture Investors Management-IV, ("TVI-IV") a limited
partnership, which is the general partner of TVI-IV. Includes 1,201,414
shares held by entities affiliated with Technology Venture Investors-IV,
L.P., a limited partnership. Mr. Marquardt disclaims beneficial ownership
of the securities held by these entities except to the extent of his
pecuniary interest therein arising from his partnership interests.

14) Mr. James R. Swartz, director of the Company, is a managing partner or a
general partner of the respective general partnerships of Accel, Accel
Investors '92 L.P. and Accel Japan L.P. Includes 882,812 shares held by
Accel III L.P., a limited partnership; 61,591 shares held by Accel
Investors '92 L.P., a limited partnership; and 82,122 shares held by Accel
Japan L.P., a limited partnership. Mr. Swartz disclaims beneficial
ownership of the securities held by these entities except to the extent of
his pecuniary interest therein arising from his partnership interests.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

The directors who are being nominated for election to the Board of
Directors (the "Nominees"), their ages as of September 30, 1997, their positions
and offices held with the Company and certain biographical information are set
forth below. The proxy holders intend to vote all proxies received by them in
the accompanying form FOR the Nominees listed below unless otherwise instructed.
In the event any Nominee is unable or declines to serve as a director at the
time of the Annual Stockholder Meeting, the proxies will be voted for any
nominee who may be designated by the present Board of Directors to fill the
vacancy. As of the date of this Proxy Statement, the Board of Directors is not
aware of any Nominee who is unable or will decline to serve as a director. The
five Nominees receiving the highest number of affirmative votes of the shares
entitled to vote at the Annual Stockholder Meeting will be elected directors of
the Company to serve until the next Annual Stockholder Meeting or until their
successors have been duly elected and qualified.

<TABLE>
<CAPTION>
Name and Principal Occupation or Employment Age First Became a Director
- ------------------------------------------- --- -----------------------
<S> <C> <C>
Alan B. Lefkof, President, Chief Executive Officer and Director of the
Company............................................................... 44 1991

Reese M. Jones, Chairman of the Board of Directors of the Company...... 39 1987

Bandel L. Carano, Managing Member of Oak Investment Partners (1)....... 36 1992

David F. Marquardt, General Partner of August Capital and various
Technology Venture Investor entities (1)(2)........................... 48 1990

James R. Swartz, Managing Partner of Accel Partners (2)................ 54 1992
</TABLE>

(1) Member of the Audit Committee
(2) Member of the Compensation Committee

5
<PAGE>

Alan B. Lefkof joined the Company as President in August 1991 and has been
Chief Executive Officer since November 1994. Prior to joining the Company, Mr.
Lefkof spent over nine years at GRiD Systems, a manufacturer of laptop
computers, where he served as President from October 1989 to August 1991, Chief
Financial Officer from March 1987 to September 1989, and Vice President of
Marketing from August 1983 to February 1987. Before joining GRiD Systems, Mr.
Lefkof served as a Management Consultant at McKinsey and Company from July 1977
to January 1982. Mr. Lefkof received a B.S. in computer science from the
Massachusetts Institute of Technology in 1975 and an M.B.A. from Harvard
Business School in 1977.

Reese M. Jones, founder of the Company, has served as Chairman of the Board
of Directors of the Company since inception. Mr. Jones served as Chief Executive
Officer of the Company from the date of the Company's incorporation until Mr.
Lefkof was appointed Chief Executive Officer in November 1994. Mr. Jones
currently serves on the Board of Directors of a number of privately held
companies. Mr. Jones received a B.A. in biophysics from the University of
California at Berkeley in 1982.

Bandel L. Carano has been a director of the Company since 1992. Mr. Carano
joined Oak Investment Partners, a venture capital firm, in October 1985 as an
associate and was elected a General Partner of Oak Investment Partners III in
July 1987. Mr. Carano currently serves as a director of Digital Sound and
Polycom, Inc. Mr. Carano received a B.S. and an M.S. in electrical engineering
from Stanford University in 1983.

David F. Marquardt has been a director of the Company since 1990. Mr.
Marquardt is a founding general partner of August Capital, formed in 1995 and
has been a general partner of various Technology Venture Investors ("TVI")
entities since August 1980. August Capital and the TVI entities are all private
venture capital partnerships. Mr. Marquardt currently serves on the Board of
Directors of Auspex Systems, Microsoft Corporation, Visioneer, Inc. and a number
of privately held companies. Mr. Marquardt received a B.S. in mechanical
engineering from Columbia University in 1973 and an M.B.A. from Stanford
University in 1979.

James R. Swartz has been a director of the Company since 1992. Mr. Swartz
currently serves as a Managing Partner of Accel Partners, a venture capital
firm, which he founded in September 1983. Mr. Swartz currently serves on the
Board of Directors of Remedy Corporation, Polycom, Inc. and a number of
privately held companies Mr. Swartz is a graduate of Harvard University with a
concentration in Engineering Sciences and Applied Physics and received an M.S.
in Industrial Administration from Carnegie Mellon University.

During the fiscal year ended September 30, 1997, the Board held four
meetings. No director listed above who served on the Board in fiscal year 1997
attended fewer than 75% of the meetings of the Board and any committee on which
he served. The Board has an Audit Committee, Compensation Committee and Stock
Option Committee. The Board does not have a standing Nominating Committee.

During the fiscal year ended September 30, 1997, the Company's Audit
Committee met four times. Its current members are Bandel L. Carano and David F.
Marquardt. The Audit Committee makes recommendations to the Board regarding
engagement of the Company's independent auditors, approves services rendered by
such auditors, reviews the activities, reviews and evaluates the Company's
accounting systems, financial controls and financial personnel.

During the fiscal year ended September 30, 1997, the Compensation Committee
met four times and acted by written consent six times. Its current members are
David F. Marquardt and James R. Swartz. The Compensation Committee sets salaries
and other compensation arrangements for officers and other key employees of the
Company, administers the Company's stock option, stock purchase and stock bonus
plans, and advises the Board on general aspects of the Company's compensation
and benefit policies. For additional information concerning the Compensation
Committee, see "Report of the Compensation Committee on Executive Compensation,"
"Executive Compensation and other Matters," and "Compensation Committee
Interlocks and Insider Participation."

During the fiscal year ended September 30, 1997, the Stock Option Committee
acted by written consent twenty-four (24) times. Its current member is Alan B.
Lefkof.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION

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<PAGE>

approval of this proposal. Abstentions and broker non-votes will each be counted
as present for purposes of determining the presence of a quorum. Abstentions and
broker non-votes will not be counted towards a nominee's total. Stockholders may
not cumulate votes in the election of directors.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE DIRECTORS AS
NAMED ABOVE.

EXECUTIVE COMPENSATION AND OTHER MATTERS

The following Summary Compensation Table sets forth the compensation earned
by the Company's Chief Executive Officer and the four other most highly
compensated officers whose salary and bonus for fiscal 1997 were in excess of
$100,000 (collectively, the "Named Officers"), for services rendered in all
capacities to the Company and its subsidiary for the three fiscal years ended
September 30, 1997.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------
ANNUAL COMPENSATION SECURITIES
---------------------
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY (1) BONUS COMPENSATION OPTIONS (#) COMPENSATION(2)
--------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION
- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alan B. Lefkof........................................ 1997 $235,000 $ -- $ 1,125 (3) 160,000 $7,944
President and Chief Executive Officer 1996 235,000 36,600 -- 25,000 6,137
1995 235,945 38,155 -- 25,000 6,600

James A. Clark(4)..................................... 1997 151,000 -- -- 85,000 6,000
Vice President and Chief Financial Officer 1996 145,836 30,250 -- 5,000 6,000
1995 125,295 21,719 -- 60,000 6,000

Richard L. Maslana.................................... 1997 180,000 -- 1,330 (3) 60,000 6,000
Vice President of Operations and General Manager 1996 168,750 35,000 -- -- 6,000
of LAN Products 1995 152,579 36,415 -- 45,000 6,000

Thomas A. Skoulis (5)................................ 1997 118,750 50,919 -- 81,500 6,000
Senior Vice President of North American Sales 1996 90,000 69,539 -- 2,500 6,000
1995 90,000 46,054 -- 29,000 6,000

Didier Cop(8)........................................ 1997 130,373 36,996 69,070 (6) 63,500 6,179
Vice President of International 1996 129,790 58,277 40,306(7) -- 4,294
1995 112,650 56,721 -- 27,000 3,571
</TABLE>

(1) Salary includes amounts deferred under the Company's 401(k) Plan.
(2) Represents car allowances.
(3) Represents amounts paid in connection with tax services paid for by the
Company.
(4) James A. Clark's employment with the Company began in November 1994, during
the first quarter of fiscal 1995.
(5) Bonus includes commissions earned of $37,249, $45,539 and $50,919 during
fiscal 1995, 1996 and 1997, respectively.
(6) Represents amounts paid in connection with Didier Cop's relocation to the
United States, including $25,720 in tuition reimbursement and $24,900
temporary housing allowance.
(7) Represents amounts paid in connection with the relocation of Didier Cop to
the United States on July 23, 1996.
(8) Bonus includes commissions earned of $44,011, $48,518 and $36,996 during
fiscal 1995, 1996 and 1997, respectively.

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<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table contains information concerning the stock option grants
made to each of the Named Officers in the fiscal year ended September 30, 1997.
No stock appreciation rights were granted to these individuals during such year.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION OPTION TERM (4)
--------------------------
GRANTED(#) 1997 (2) SHARE (3) DATE 5% 10%
------------ ------------- ----------- ------------- ------------- ----------
NAME (1)
- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Lefkof...................... 70,000 3.93% $6.38 12/31/06 $280,644 $711,208
President and Chief Executive 90,000 5.06% 5.25 9/02/07 297,153 753,043
Officer

James A. Clark...................... 45,000 2.53% 6.38 12/31/06 180,414 457,205
Vice President and Chief 15,000 0.84% 4.00 4/22/07 37,734 95,625
Financial Officer 25,000 1.40% 5.25 9/02/07 82,542 209,179

Richard L. Maslana.................. 20,000 1.12% 6.38 12/31/06 80,184 203,202
Vice President of Operations 20,000 1.12% 4.00 4/22/07 50,312 127,499
and General Manager of LAN 20,000 1.12% 5.25 9/02/07 66,034 167,343
Products

Thomas A. Skoulis................... 39,000 2.19% 6.38 12/31/06 156,359 396,244
Vice President of North 2,500 0.14% 4.38 2/18/07 6,879 17,432
American Sales 40,000 2.25% 5.25 9/02/07 132,068 334,686

Didier Cop.......................... 38,500 2.16% 6.38 12/31/06 154,354 391,164
Vice President of International 25,000 1.40% 5.25 9/02/07 82,542 209,178

</TABLE>

(1) The options become exercisable in annual and quarterly installments over
four years beginning from the grant date. All outstanding options will
automatically accelerate in full and then terminate following an
acquisition of the Company by merger or asset sale unless the acquiring
company assumes the outstanding options or replaces the outstanding options
with a substitute option or with a cash incentive program. Any options
which are assumed or replaced shall automatically accelerate in the event
the optionee's service should subsequently terminate by reason of an
involuntary termination within twelve (12) months of such transaction and
remain exercisable for a one (1)-year period from the date of termination.

(2) Based on options for an aggregate of 1,779,865 shares granted in the 1997
fiscal year.

(3) The exercise price may be paid in cash or in shares of the Company's Common
Stock valued at fair market value on the exercise date. The Company may
also finance the option exercise by loaning the optionee sufficient funds
to pay the exercise price for the purchased shares, together with any
federal and state income tax liability incurred by the optionee in
connection with such exercise.

(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of
the Company's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Company's Common Stock
appreciates over the option term, no value will be realized from the option
grants made to the executive officers.

8
<PAGE>

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information concerning the shares acquired and
the value realized upon the exercise of stock options during the 1997 fiscal
year and the year-end number and value of unexercised options with respect to
each of the Named Officers. No stock appreciation rights were exercised by the
Named Officers in fiscal 1997.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT SEPTEMBER 30, 1997 (#) AT SEPTEMBER 30, 1997 (2)
-------------------------------- ----------------------------------
NAME EXERCISE (#) REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----- -------------- -------------- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Lefkof.......... -- -- 259,338 175,662 $1,420,796 $284,679
James A. Clark.......... -- -- 44,001 105,999 196,963 260,162
Richard L. Maslana...... 24,000 $102,325 43,125 92,125 219,578 303,466
Thomas A. Skoulis....... -- -- 33,026 88,474 143,187 156,775
Didier Cop.............. -- -- 16,032 71,768 51,748 139,729
</TABLE>

(1) Market price at exercise less exercise price.

(2) Based on the fair market value of the Company's Common Stock at September
30, 1997 ($6.875 per share), as determined by the closing price on the
Nasdaq National Market System, less the exercise price payable for such
shares.

EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS

The Compensation Committee, as Plan Administrator of the 1996 Stock Option
Plan, has the authority to provide for accelerated vesting of the shares of
Common Stock subject to outstanding options held by the Named Officers and any
other executive officer in connection with certain changes in control of the
Company or the subsequent termination of the officer's employment following the
change in control event.

None of the Named Officers have employment agreements with the Company, and
their employment may be terminated at any time. However, the Company has
entered into an agreement with Messrs. Lefkof, Clark, Maslana, Trupiano (Vice
President and General Manager of Netopia Systems), Ms. Crowe (Vice President of
Software Products), and Ms. Benesch (Vice President of LAN Products) which
provides for acceleration of vesting of option shares as if the officer remained
employed for 12 additional months in the event the officer's employment is
involuntarily terminated during the twelve month period following certain
acquisitions or changes in control of the Company. In addition, Messrs. Clark
and Maslana will receive severance pay equal to 12 months salary and Messrs.
Lefkof, Trupiano, Ms. Crowe and Ms. Benesch will receive severance pay equal to
six months salary upon any such termination.

COMPENSATION OF DIRECTORS

Members of the Company's Board of Directors do not receive compensation for
their services as directors. Nonemployee directors of the Company are eligible
for options under the Company's 1996 Stock Option Plan. The Automatic Option
Grant Program provides for the grant of an option to purchase 25,000 shares of
the Company's Common Stock upon a nonemployee director's initial election or
appointment to the Board. On June 12, 1996, each of Messrs. Carano, Marquardt,
and Swartz was granted a nonstatutory stock option to purchase 25,000 shares of
the Company's Common Stock under the Automatic Option Grant Program at an
exercise price of $16 per share. The terms applicable to the foregoing option
grants are summarized below in the description of the Automatic Option Grant
Program. Mr. Jones received an option to purchase 25,000 shares at an exercise
price of $9.50 per share on September 16, 1996 under the 1996 Stock Option Plan.
See "1996 Stock Option Plan."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Company's Board of Directors (the
"Compensation Committee"), as of September 30, 1997, consists of Messrs.
Marquardt and Swartz. Neither Mr. Marquardt nor Mr. Swartz was at any time
during the fiscal year ended September 30, 1997, or at any other time, an
officer or employee of the Company. No member of the Compensation Committee
serves as a member of the board of directors or compensation committee of

9
<PAGE>

any entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons. Based solely on the Company's
review of such forms furnished to the Company and written representations from
certain reporting persons, the Company believes that all filing requirements
applicable to the Company's executive officers, directors and more than 10%
Stockholders were complied with during fiscal 1997.

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Company's Board of Directors (the
"Compensation Committee") has the authority to establish the level of base
salary payable to the Chief Executive Officer ("CEO") and to administer the
Company's 1996 Stock Option Plan, Stock Bonus Plan and Employee Stock Purchase
Plan. In addition, the Committee has the responsibility for approving the
individual bonus program to be in effect for the CEO. The CEO has the authority
to establish the level of base salary payable to all other employees of the
Company, including all executive officers, subject to the approval of the
Committee. In addition, the CEO has the responsibility for approving the bonus
programs to be in effect for all other executive officers and other key
employees each fiscal year, subject to the approval of the Committee.

For fiscal 1997, the process utilized by the CEO in determining executive
officer compensation levels took into account both qualitative and quantitative
factors. Among the factors considered by the CEO were informal surveys
conducted by Company personnel among local companies. The Committee reviewed
but made no changes to the CEO's compensation proposals for the officers.

GENERAL COMPENSATION POLICY. The CEO's fundamental policy is to offer the
Company's executive officers competitive compensation opportunities based upon
overall Company performance, their individual contribution to the financial
success of the Company and their personal performance. It is the CEO's
objective to have a substantial portion of each officer's compensation
contingent upon the Company's performance, as well as upon his or her own level
of performance. Accordingly, each executive officer's compensation package
consists of: (i) base salary, (ii) cash bonus awards and (iii) long-term stock-
based incentive awards.

In preparing the stock performance graph for this Proxy Statement, the
Company has selected the Standard & Poor's 500 Index, the Nasdaq Stock Market-US
Index and the Hambrecht and Quist Technology Index. To the extent that the
Company compares its compensation practices against other companies, through
informal compensation surveys or otherwise, the constituent companies are not
necessarily those included in the Indices, because the latter may not be
competitive with the Company for executive talent or because compensation
information is not available to the Company.

BASE SALARY. The base salary for each executive officer is set at the time
of hire based on individual negotiation and any subsequent increases are awarded
on the basis of personal performance.

ANNUAL CASH BONUSES. Each executive officer has an established bonus
target each fiscal year. The annual pool of bonuses for executive officers is
determined on the basis of the Company's achievement of financial performance
targets established at the start of the fiscal year including operating profit,
gross margin performance and revenue, and then a range is established for each
executive on the basis of his/her expected contribution to the Company's
performance targets. Based on the compensation plan no bonuses were paid in
fiscal 1997.

LONG-TERM INCENTIVE COMPENSATION. Generally, a significant grant is made
in the year that an officer commences employment and grants typically of lesser
amounts are made periodically. Generally, the size of each grant is set at a
level that the Committee deems appropriate, to create a meaningful opportunity
for stock ownership

10
<PAGE>

based upon the individual's position with the Company the individual's potential
for future responsibility and promotion, the individual's performance in the
recent period and the number of unvested options held by the individual at the
time of the new grant. The relative weight given to each of these factors will
vary from individual to individual at the Committee's discretion based on the
recommendation made by the CEO to the Committee. In fiscal 1997, stock option
grants were awarded to each of the executive officers to provide an incentive
for the officers to improve the Company's performance.

Each grant allows the officer to acquire shares of the Company's Common
stock at a fixed price per share (the market price on the grant date) over a
specified period of time. The option vests in periodic installments over a
four-year period, contingent upon the executive officer's continued employment
with the Company. Accordingly, the option will provide a return to the
executive officer only if he/she remains in the Company's employ, and then only
if the market price of the Company's Common Stock appreciates over the option
term.

CEO COMPENSATION. Mr. Lefkof, the Company's President and CEO, received no
increase in annual base salary in fiscal 1997 and no bonus. The CEO bonus plan
for fiscal 1997 was based on the same incentive plan as for all other officers
who are eligible to receive bonuses and is subject to review by the Compensation
Committee. Along with the other executive officers, in fiscal 1997, stock option
grants were awarded to the CEO to provide an incentive for the CEO to improve
the Company's performance.

TAX LIMITATION. As a result of Federal tax legislation enacted in 1993, a
publicly held company such as the Company will not be allowed a Federal income
tax deduction for compensation paid to certain executive officers to the extent
that compensation exceeds $1 million per officer in any year. This limitation
will be in effect for all fiscal years of the Company ending after the Company's
initial public offering. The stockholders approved the Company's 1996 Stock
Option Plan, which includes a provision that limits the maximum number of shares
of Common Stock for which any one participant may be granted stock options over
a 3-year period. Accordingly, any compensation deemed paid to an executive
officer when he exercises an option under the 1996 Stock Option Plan with an
exercise price equal to the fair market value of the option shares on the grant
date will generally qualify as performance-based compensation that will not be
subject to the $1 million limitation. Since it is not expected that the cash
compensation to be paid to the Company's executive officers for the 1998 fiscal
year will exceed the $1 million limit per officer, the Committee will defer any
decision on whether to limit the dollar amount of the cash compensation payable
to the Company's executive officers to the $1 million cap.

Compensation Committee

David F. Marquardt
James R. Swartz

11
<PAGE>

COMPARISON OF STOCKHOLDER RETURN

Set forth below is a line graph comparing the annual percentage change in
the cumulative total return on the Company's Common Stock with the cumulative
total return of the Standard & Poor's 500 Index, the Nasdaq Stock Market-US
Index and the Hambrecht & Quist Technology Index for the period commencing on
JUNE 13, 1996 AND ENDING ON OCTOBER 31, 1997. THE COMPANY'S FISCAL YEAR ENDED
SEPTEMBER 30, 1997. THIS STOCK PERFORMANCE GRAPH INCLUDES DATA AS OF THE LATEST
PRACTICABLE DATE.

NTPA

<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------------
6/13/96 6/96 9/96 12/96 3/97 6/97 9/97 10/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NETOPIA INC NTPA 100 92 66 40 27 31 43 42

S & P 500 1500 100 100 104 112 115 135 145 141

NASDAQ STOCK MARKET (U.S.) INAS 100 97 100 105 99 118 138 130

H & Q TECHNOLOGY IHQT 100 96 102 109 104 125 152 136
</TABLE>

PROPOSAL NO. 2
AMENDMENT OF 1996 STOCK OPTION PLAN

The stockholders are being asked to vote on a proposal to approve an
amendment to the Netopia, Inc. 1996 Stock Option Plan (the "Option Plan") to
increase the number of shares of Company Common Stock available for issuance
under the Option Plan by 500,000 shares to a total of 4,243,141 shares of Common
Stock and to increase the limit on the number of shares issuable per person to
750,000 shares from 500,000 shares through June 30, 1999, and to limit the
number of shares issuable per person after June 30, 1999. The proxy holders
intend to vote all proxies received by them
12
<PAGE>

FOR the Amendment of the 1996 Stock Option Plan. The following is a description
of the Option Plan. The Company established the Option Plan as a successor to
the 1987 Restated Stock Option Plan ("1987 Plan") to provide a means whereby
employees, officers, directors, consultants, and independent advisers of the
Company or parent or subsidiary corporations may be given an opportunity to
purchase shares of the Company's Common Stock. The Option Plan was adopted by
the Board on April 16, 1996 and amended on February 14, 1997 and on October 29,
1997. The Board believes that option grants under the Option Plan play an
important role in the Company's efforts to attract, employ, and retain
employees, directors, and consultants of outstanding ability.

SUMMARY OF 1996 STOCK OPTION PLAN

The principal terms and provisions of the Option Plan are summarized below.
The summary, however, is not intended to be a complete description of all the
terms of the Option Plan. A copy of the Option Plan will be furnished by the
Company to any stockholder upon written request to the Chief Financial Officer
at the executive offices in Alameda, California.

STRUCTURE. The Option Plan contains two separate equity incentive
programs: (i) a Discretionary Option Grant Program under which eligible persons
may be granted stock options to purchase shares of the Company's Common Stock,
and (ii) an Automatic Option Grant Program under which option grants will be
made at specified intervals to the nonemployee Board members.

ADMINISTRATION. The Option Plan is currently administered by the
Compensation Committee of the Board of Directors. The Option Plan may also be
administered by the Board or a secondary committee comprised of one or more
Board members with respect to optionees who are not executive officers subject
to the short-swing profit rules of Federal securities laws. Currently, a
secondary committee, the Stock Option Committee, which has as its sole member
Alan B. Lefkof, the Company's Chief Executive Officer, has the authority to
grant options under the Option Plan to individuals who are not officers or
directors of the Company. Committee members serve for such period of time as
the Board may determine. The Committee (or Board or secondary committee to the
extent acting as plan administrator) has full authority (subject to the express
provisions of the Option Plan) to determine the eligible individuals who are to
receive grants under the Option Plan, the number of shares to be covered by each
granted option, the date or dates on which the option is to become exercisable,
the maximum term for which the option is to remain outstanding, whether the
granted option will be an incentive stock option ("Incentive Option") which
satisfies the requirements of section 422 of the Internal Revenue Code (the
"Code") or a nonstatutory option not intended to meet such requirements, and the
remaining provisions of the option grant.

Administration of the Automatic Option Grant Program is self-executing in
accordance with the terms of that program, however, the Plan Administrator may
exercise discretionary functions with respect to grants made thereunder.

ELIGIBILITY. Employees (including officers), consultants, independent
contractors and nonemployee members of the board of directors who render
services to the Company or its parent or subsidiary corporations (whether now
existing or subsequently established) are eligible to receive option grants
under the Discretionary Option Grant Program. A nonemployee member of the board
of directors of the Company is also eligible for option grants under the
Automatic Option Grant Program.

SECURITIES SUBJECT TO OPTION PLAN. The number of shares of the Company's
Common Stock which may be issued over the term of the Option Plan shall not
exceed 4,243,141 shares, including an increase of 500,000 shares, which is the
subject of this Proposal No. 2. Such share reserve will be subject to further
adjustment in the event of subsequent changes to the capital structure of the
Company. The shares may be made available either from the Company's authorized
but unissued Common Stock or from Common Stock reacquired by the Company,
including shares purchased on the open market. The share reserve shall increase
automatically on January 1, 1998 and January 1, 1999 by the number of shares of
Common Stock equal to 5% of the number of shares of Common Stock outstanding on
the last trading day of the preceding calendar year, up to a maximum annual
increase of 1,200,000 shares.

In no event, however, may any one participant in the Option Plan acquire
shares of the Company's Common Stock under the Option Plan in excess of 750,000
shares over the period beginning on the effective date of the Option Plan and
ending on June 30, 1999. Prior to the amendment of the option plan which is the
subject of this Proposal No. 2, no participant could be granted right to acquire
more than 500,000 shares of Common Stock and, in the period ending December 31,
1997, no participant had been granted rights to acquire more than 500,000 shares
of Common Stock. In addition, in no event may any one participant in the Option
Plan acquire shares of the Company's Common Stock under the Option Plan in
excess of 750,000 shares over the period beginning on July 1, 1999 and ending on
July 1, 2002.

13
<PAGE>

Should an option expire or terminate for any reason prior to exercise in
full, including options incorporated from the 1987 Plan, the shares subject to
the portion of the option not so exercised will be available for subsequent
option grants under the Option Plan.

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

DISCRETIONARY OPTION GRANT PROGRAM

PRICE AND EXERCISABILTY. The option exercise price per share may not be
less than eighty-five percent (85%) of the fair market value of the Company's
Common Stock on the grant date. Options granted under the Discretionary Option
Grant Program become exercisable at such time or times, and during such period,
as the Committee may determine and set forth in the instrument evidencing the
option grant. In any event, options granted under the Option Plan may not have
a term in excess of 10 years.

The exercise price for options granted under the Option Plan may be paid in
cash or in outstanding shares of the Company's Common Stock. Options may also
be exercised on a cashless basis through the same-day sale of the purchased
shares. The Compensation Committee may also permit the optionee to pay the
exercise price through a promissory note payable in installments over a period
of years. The amount financed may include any Federal or state income and
employment taxes incurred by reason of the option exercise.

No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option and paid the exercise price.
Options are not assignable or transferable other than by will or the laws of
descent and distribution, and during the optionee's lifetime, the option may be
exercised only by the optionee.

TERMINATION OF SERVICE. Any option held by the optionee at the time of
cessation of service will not remain exercisable beyond the designated post-
service exercise period. Under no circumstances may any option be exercised
after the specified expiration date of the option term. Each such option will
normally, during such limited period, be exercisable only to the extent of the
number of shares of the Company's Common Stock in which the optionee is vested
at the time of cessation of service. The optionee will be deemed to continue in
service for so long as such individual performs services for the Company (or any
parent or subsidiary corporation), whether as an employee, independent
contractor, consultant or Board member.

The Committee has complete discretion to extend the period following the
optionee's cessation of service during which his or her outstanding options may
be exercised and/or to accelerate the exercisability of such options in whole or
in part. Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.

The shares of the Company's Common Stock acquired upon the exercise of one
or more options may be subject to repurchase by the Company at the original
exercise price paid per share upon the optionee's cessation of service prior to
vesting in such shares. The Committee has complete discretion in establishing
the vesting schedule to be in effect for any such unvested shares and may cancel
the Company's outstanding repurchase rights with respect to those shares at any
time, thereby accelerating the vesting of the shares subject to the canceled
rights.

INCENTIVE OPTIONS. Incentive Options may only be granted to individuals
who are employees of the Company or its parent or subsidiary corporation. During
any calendar year, the aggregate fair market value (determined as of the grant
date(s)) of the Company's Common Stock for which one or more options granted to
any employee under the Option Plan (or any other option plan of the Company or
its parent or subsidiary corporations) may for the first time become exercisable
as incentive stock options under section 422 of the Code shall not exceed
$100,000.

If an employee to whom an Incentive Option is granted is the owner of stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any of its parent or subsidiary corporations,
then the option price per share will be at least one hundred and ten percent
(110%) of the fair market value per share on the grant date, and the option term
will not exceed five (5) years, measured from the grant date.

14
<PAGE>

TANDEM STOCK APPRECIATION RIGHTS. The Committee is authorized to issue
tandem stock appreciation rights in connection with option grants under the
Discretionary Option Grant Program. Tandem stock appreciation rights provide
the holders with the right, subject to the Committee's approval, to surrender
their options for a distribution from the Company equal in amount to the excess
of (a) the fair market value of the vested shares of Company Common Stock
subject to the surrendered option over (b) the aggregate exercise price payable
for such shares. Such distribution may, at the discretion of the Committee, be
made in cash or in shares of Company Common Stock or partly in shares of Company
Common Stock and partly in cash.

AUTOMATIC OPTION GRANT PROGRAM

Under the Automatic Option Grant Program, nonemployee Board members will
receive option grants at designated dates during their period of Board service.
These special grants may be summarized as follows:

Each individual who was serving as a nonemployee Board member on June 12,
1996 was automatically granted on that date a nonstatutory stock option to
purchase 25,000 shares of Common Stock. Each individual who first becomes a
nonemployee Board member after the date of the initial public offering, whether
through election by the stockholders or appointment by the Board, will
automatically be granted, at the time of such initial election or appointment, a
nonstatutory stock option to purchase 25,000 shares of Common Stock, provided
such individual has not previously been in the employ of the Company.

Each option grant under the Automatic Option Grant Program will be subject
to the following terms and conditions:

1. The option price per share will be equal to 100% of the fair market
value per share of the Company's Common Stock on the automatic grant date and
each option is to have a maximum term of ten years measured from the grant date.

2. Each automatic option granted before December 31, 1996 will be
immediately exercisable for all of the option shares, but the shares purchasable
under the option will be subject to repurchase at the original exercise price in
the event the optionee's Board service should cease prior to full vesting. With
respect to each initial grant, the repurchase right will lapse and the optionee
vest in a series of five (5) successive annual installments, measured from the
grant date, provided such optionee continues service as a Board member. Each
option granted after December 31, 1996 will become exercisable in a series of
five (5) successive annual installments over the optionee's Board service
measured from the grant date.

3. The option will remain exercisable for a twelve (12)-month period
following the optionee's termination of service as a Board member for any
reason. Should the optionee die while serving as a Board member or during the
twelve (12)-month period following his or her cessation of Board service, then
such options may be exercised during the twelve (12)-month period following such
optionee's cessation of service by the personal representatives of the
optionee's estate or the person to whom the grant is transferred by the
optionee's will or the laws of inheritance. In no event, however, may the option
be exercised after the expiration date of the option term. During the applicable
exercise period, the option may not be exercised for more than the number of
vested shares (if any) for which it is exercisable at the time of the optionee's
cessation of Board service.

4. The option shares will become fully exercisable and fully vested in the
event of a Corporate Transaction (as defined below) or a Change in Control (as
defined below). The option shares will become fully exercisable and fully vested
in the event of the optionee's cessation of Board service by reason of death or
permanent disability.

5. Upon the occurrence of a hostile tender offer, each option granted
before December 31, 1996 which has been in effect for at least six (6) months
(whether or not the optionee is vested in such option) shall be automatically
canceled and the optionee will in return be entitled to a cash distribution from
the Company in an amount per canceled option share equal to the excess of (i)
the highest reported price per share of the Company's Common Stock paid in the
tender offer or, if greater, the fair market value per share of the Company's
Common Stock over (ii) the option exercise price payable per share.

6. Option grants under the Automatic Option Grant Program will be made in
strict compliance with the express provisions of that program. The remaining
terms and conditions of the options will in general conform to the

15
<PAGE>

terms described above for option grants under the Discretionary Option Grant
Program and will be incorporated into the option agreement evidencing the
automatic grant.

GENERAL PROVISIONS

ACCELERATION OF OPTIONS/TERMINATION OF REPURCHASE RIGHTS. Upon the
occurrence of either of the following transactions (a "Corporate Transaction"):

(i) the sale, transfer, or other disposition of all, or substantially
all, of the Company's assets in complete liquidation or dissolution of the
Company, or

(ii) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction, each
outstanding option under the Option Plan will, immediately prior to the
effective date of the Corporate Transaction, become fully exercisable for all of
the shares at the time subject to such option. However, an outstanding option
shall not accelerate if and to the extent: (a) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent) or to be replaced with a comparable option to purchase
shares of the capital stock of the successor corporation (or parent), (b) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares at
the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option or (c) the
acceleration of such option is subject to other limitations imposed by the
Committee at the time of the option grant. Immediately following the
consummation of the Corporate Transaction, all outstanding options will
terminate and cease to be exercisable, except to the extent assumed by the
successor corporation.

Also upon a Corporate Transaction, the Company's outstanding repurchase
rights will terminate automatically and the shares of the Company's Common Stock
subject to those terminated rights shall vest in full unless assigned to the
successor corporation or accelerated vesting is precluded by other limitations
imposed by the Committee at the time the repurchase right is issued.

Any options which are assumed or replaced in the Corporate Transaction and
do not otherwise accelerate at that time shall automatically accelerate (and any
of the Company's outstanding repurchase rights which do not otherwise terminate
at the time of the Corporate Transaction shall automatically terminate and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full) in the event the optionee's service should subsequently terminate by
reason of an involuntary or constructive termination within twelve (12) months
following the effective date of such Corporate Transaction. Any options so
accelerated shall remain exercisable for fully vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one (1)-
year period measured from the effective date of the employment termination.

The Committee has the discretion to accelerate outstanding options and
terminate the Company's outstanding repurchase rights in its discretion,
including upon the occurrence of the following transactions ("Change in
Control"):

(i) any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) acquires beneficial ownership of more than
fifty percent (50%) of the Company's outstanding voting stock without the
Board's recommendation, or

(ii) there is a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of the Board
members ceases by reason of a proxy contest(s) to be comprised of individuals
who (a) have been Board members continuously since the beginning of such period
or (b) have been elected or nominated for selection as Board members by a
majority of the Board in clause (a) who were still in office at the time such
election or nomination was approved by the Board. The Committee also has the
discretion to accelerate outstanding options and terminate the Company's
outstanding repurchase rights upon the subsequent termination of the optionee's
service within a specified period following the Change in Control.

The acceleration of options in the event of a Corporate Transaction or
Change in Control may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt, or other efforts
to gain control of the Company.

16
<PAGE>

VALUATION. For purposes of establishing the option price and for all other
valuation purposes under the Option Plan, the fair market value of a share of
Company Common Stock on any relevant date will be the closing price per share of
Company Common Stock on that date, as such price is reported on the Nasdaq Stock
Market. The fair market value on December 31, 1997 as reported on the Nasdaq
Stock Market was $5.75 per share.

CHANGE IN CAPITALIZATION. In the event any change is made to the Company's
Common Stock issuable under the Option Plan by reason of any stock split, stock
dividend, combination of shares, exchange of shares, or other change effecting
the outstanding Company's Common Stock as a class without the Company's receipt
of consideration, appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the Option Plan, (ii) the maximum
number and/or class of securities for which any one person may be granted
options over the specified term, (iii) the number and/or class of securities for
which automatic option grants are to be subsequently made per director under the
Automatic Option Grant Program and (iv) the number and/or class of securities
and the exercise price per share in effect under each outstanding option
(including any option incorporated from the 1987 Plan) in order to prevent the
dilution or enlargement of benefits thereunder.

Each outstanding option which is assumed in connection with a Corporate
Transaction will be appropriately adjusted to apply and pertain to the number
and class of securities which would otherwise have been issued, in consummation
of such Corporate Transaction, to the option holder had the option been
exercised immediately prior to the Corporate Transaction. Appropriate
adjustments will also be made to the option price payable per share and to the
class and number of securities available for future issuance under the Option
Plan on both an aggregate and a per-participant basis.

OPTION PLAN AMENDMENTS. The Board may amend or modify the Option Plan in
any and all respects whatsoever. The Board may not, without the approval of the
Company's stockholders, (i) materially increase the maximum number of shares
issuable under the Option Plan (except in connection with certain changes in
capitalization) or (ii) materially modify the eligibility requirements for
option grants.

Unless sooner terminated by the Board, the Option Plan will in all events
terminate on April 15, 2006. Any options outstanding at the time of such
termination will remain in force in accordance with the provisions of the
instruments evidencing such grants.

NEW PLAN BENEFITS. As of January 1, 1998 options covering 2,722,099 shares
were outstanding under the Option Plan, 1,233,473 shares remained available for
future option grants, and 287,570 shares have been issued under the Option Plan.
the expiration dates for all such options range from April 2001 to December
2007.

Except as set forth above under the caption "Automatic Option Grant
Program," grants to be made under the Option Plan in the future are at the
discretion of the Committee and are not determinable at this time. The following
table shows all option grants made under the Option Plan during the fiscal year
ending September 30, 1997 and through December 31, 1997, to the indicated
individuals, all current executive officers as a group, all current directors
who are not executive officers as a group, and all employees (including all
current officers who are not executive officers) as a group, respectively:

17
<PAGE>

<TABLE>
<CAPTION>
Number of Option Shares
- --------------------------------------------------------------------------------
<S> <C>
Alan B. Lefkof............................... 160,000
James A. Clark............................... 85,000
Richard L. Maslana........................... 60,000
Didier Cop................................... 63,500
Thomas A. Skoulis............................ 81,500
Reese M. Jones............................... __
Bandel L. Carano............................. __
David F. Marquardt........................... __
James R. Swartz.............................. __

All Executive Officers as a Group (13 705,500
persons)....................................
All Directors who were not employees as a __
group (4 persons)...........................
All Employees (including officers who are
not executive officers)..................... 1,790,615
</TABLE>

FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS GRANTED UNDER THE OPTION PLAN

Options granted under the Option Plan may be either incentive stock options
that satisfy the requirements of Section 422 of the Internal Revenue Code or
nonstatutory options that are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:

INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee
at the time of the option grant, and no taxable income is generally recognized
at the time the option is exercised. However, the excess of the fair market
value of the purchased shares on the exercise date over the exercise price paid
for the shares generally is includable in alternative minimum taxable income.
The optionee will recognize taxable income in the year in which the purchased
shares are sold or otherwise made the subject of disposition.

For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two (2)
years after the grant date of the option and more than one (1) year after the
exercise date. If the optionee fails to satisfy either of these two holding
periods prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result.

Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of those
shares on the date the option was exercised over (ii) the exercise price paid
for the shares will be taxable as ordinary income. Any additional gain
recognized upon the disposition will be a capital gain.

If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction for the taxable
year in which such disposition occurs equal to the excess of (i) the fair market
value of such shares on the date the option was exercised over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
The Company anticipates that any compensation deemed paid by the Company upon
one or more disqualifying dispositions of incentive stock option shares by the
Company's executive officers will remain deductible by the Company and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company.

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NONSTATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a nonstatutory option.

The optionee will in general recognize ordinary income in the year in which
the option is exercised equal to the excess of the fair market value of the
purchased shares on the exercise date over the exercise price paid for the
shares, and the optionee will be required to satisfy the tax withholding
requirements applicable to such income.

Special provisions of the Internal Revenue Code apply to the acquisition of
the Company's Common Stock under a nonstatutory option if the purchased shares
are subject to repurchase by the Company. These special provisions may be
summarized as follows:

(i) If the shares acquired upon exercise of the nonstatutory option
are subject to repurchase by the Company at the original exercise price in the
event of the optionee's termination of service prior to vesting in such shares,
the optionee will not recognize any taxable income at the time of exercise but
will have to report as ordinary income, as and when the Company's repurchase
right lapses, an amount equal to the excess of (a) the fair market value of the
shares on the date such repurchase right lapses with respect to such shares over
(b) the exercise price paid for the shares.

(ii) The optionee may, however, elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of exercise of
the nonstatutory option an amount equal to the excess of (a) the fair market
value of the purchased shares on the exercise date (determined as if the shares
were not subject to the Company's repurchase right) over (b) the exercise price
paid for such shares. If the Section 83(b) election is made, the optionee will
not recognize any additional income as and when the repurchase right lapses.

The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised nonstatutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee. The Company anticipates that the compensation deemed paid by the
Company upon the exercise of nonstatutory options with exercise prices equal to
the fair market value of the option shares on the grant date will remain
deductible by the Company and will not have to be taken into account for
purposes of the $1 million limitation per covered individual on the
deductibility of the compensation paid to certain executive officers of the
Company.

STOCK APPRECIATION RIGHTS. An optionee who is granted a stock appreciation
right will recognize ordinary income in the year of exercise equal to the amount
of the appreciation distribution. The Company will be entitled to a business
expense deduction equal to the appreciation distribution for the taxable year of
the Company in which the ordinary income is recognized by the optionee.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION

In accordance with the Company's current By Laws, the affirmative vote of a
majority of the shares present or represented by proxy and entitled to vote at
the Annual Stockholder Meeting, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present, either in person
or by proxy, is required for approval of this proposal. Abstentions are not
affirmative votes and, therefore, will have the same effect as a vote against
the proposal. Broker non-votes will not be treated as entitled to vote on the
matter and thus, will not affect the outcome of the voting on the proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT OF
THE 1996 STOCK OPTION PLAN.

PROPOSAL NO. 3
AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN

The stockholders are being asked to vote on a proposal to approve an
amendment to the Netopia, Inc. Employee Stock Purchase Plan (the "Purchase
Plan") to increase the number of shares of the Company's Common Stock available
for issuance under the Option Plan by 100,000 shares to a total of 600,000
shares of Company Common Stock. The Purchase Plan was adopted by the Board on
April 16, 1996 and approved by the stockholders on May 15, 1996. The Purchase
Plan was amended on February 14, 1997 to increase the number of shares issuable
thereunder by 200,000

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shares. The Purchase Plan was amended on October 29, 1997 to increase the number
of shares issuable thereunder by 100,000 shares. The Purchase Plan, and the
right of participants to make purchases thereunder, is intended to meet the
requirements of an "employee stock purchase plan" as defined in Section 423 of
the Internal Revenue Code (the "Code"). The proxy holders intend to vote all
proxies received by them FOR the Amendment of the Purchase Plan.

The principal terms and provisions of the Purchase Plan are summarized
below. The summary, however, is not intended to be a complete description of all
the terms of the Purchase Plan. A copy of the Purchase Plan will be furnished
by the Company to any stockholder upon written request to the Chief Financial
Officer at the executive offices in Alameda, California.

PURPOSE. The purpose of the Purchase Plan is to provide employees of the
Company and designated parent or subsidiary corporations (collectively,
"Participating Companies") an opportunity to participate in the ownership of the
Company by purchasing Common Stock of the Company through payroll deductions.
The Company is the only Participating Company in the Purchase Plan.

The Purchase Plan is intended to benefit the Company as well as its
stockholders and employees. The Purchase Plan gives employees an opportunity to
purchase shares of Company Common Stock at a favorable price. The Company
believes that the stockholders will correspondingly benefit from the increased
interest on the part of participating employees in the appreciation of the
Company's share price. Finally, the Company will benefit from the periodic
investments of equity capital provided by participants in the Purchase Plan.

ADMINISTRATION. The Purchase Plan is currently administered by the
Compensation Committee of the Board (the "Committee"). All costs and expenses
incurred in plan administration are paid by the Company without charge to
participants. All cash proceeds received by the Company from payroll deductions
under the Purchase Plan are credited to a non-interest bearing book account.

SHARES AND TERMS. The stock issuable under the Purchase Plan is the
Company's authorized but unissued or reacquired Common Stock. The maximum number
of shares of Company Common Stock that may be issued under the Purchase Plan is
600,000 assuming approval of this Proposal No. 3. Company Common Stock subject
to a terminated purchase right shall be available for purchase pursuant to
purchase rights subsequently granted.

ADJUSTMENTS. If any change in the Company Common Stock occurs (through
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, or other change affecting the outstanding Common Stock as a class
without the Company's receipt of consideration), appropriate adjustments shall
be made by the Company to the class and maximum number of shares subject to the
Purchase Plan, to the class and maximum number of shares purchasable by each
participant on any one purchase date, and the class and number of shares and
purchase price per share subject to outstanding purchase rights in order to
prevent the dilution or enlargement of benefits thereunder.

ELIGIBILITY. Generally, any individual who is customarily employed by a
Participating Company more than 20 hours per week and for more than five months
per calendar year is eligible to participate in the Purchase Plan.
Approximately 244 employees (including 9 officers) were eligible to participate
in the Purchase Plan as of December 31, 1997.

OFFERING PERIODS. The Purchase Plan is implemented by offering periods
which generally have a duration of twenty-four months. Each offering period is
comprised of a series of one or more successive purchase periods, each of which
generally have a duration of six (6) months. The first offering period began on
the date of the Company's initial public offering. A new offering period will
commence on February 2, 1998 and will end on the last business day in January
2000, unless terminated earlier. The purchase periods within the first offering
period begin on the date of the IPO, February 1, 1997, August 1, 1997, and
February 2, 1998. The purchase dates are January 31, 1997, July 31, 1997,
January 30, 1998 and July 31, 1998. The Committee in its discretion may vary
the beginning date and ending date of the offering periods prior to their
commencement, provided no offering period (other than the initial offering
period) shall exceed twenty-four (24) months in length.

The participant will have a separate purchase right for each offering
period in which he or she participates. The purchase right will be granted on
the first day of the offering period and will be automatically exercised in
successive installments on the last day of each purchase period within the
offering period.

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<PAGE>

PURCHASE PRICE. The purchase price per share under the Purchase Plan will
be 85% of the lower of (i) the fair market value of a share of Company Common
Stock on the first day of the applicable offering period, or (ii) the fair
market value of a share of Company Common Stock on the purchase date.
Generally, the fair market value of the Company Common Stock on a given date is
the closing sale price of the Company Common Stock, as reported on the Nasdaq
Stock Market. The current fair market value of $4.63 for purposes of the
offering period began on July 31, 1997. The market value of the Company Common
Stock as reported on the Nasdaq Stock Market as of December 31, 1997, was $5.75
per share.

LIMITATIONS. The plan imposes certain limitations upon a participant's
rights to acquire Company Common Stock, including the following:

1. No purchase right shall be granted to any person who immediately thereafter
would own, directly or indirectly, stock or hold outstanding options or
rights to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or
any of its parent or subsidiary corporations.

2. In no event shall a participant be permitted to purchase more than 2,000
shares on any one purchase date.

3. The right to purchase Company Common Stock under the Purchase Plan (or any
other employee stock purchase plan that the Company or any of its
subsidiaries may establish) in an offering intended to qualify under
Section 423 of the Code may not accrue at a rate that exceeds $25,000 in
fair market value of such Company Common Stock (determined at the time such
purchase right is granted) for any calendar year in which such purchase
right is outstanding.

The purchase right shall be exercisable only by the Participant during the
Participant's lifetime and shall not be assignable or transferable by the
Participant.

PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS. Payment for shares by
participants shall be by accumulation of after-tax payroll deductions during the
purchase period. The deductions may not exceed 15% of a participant's cash
compensation paid during a purchase period. Compensation for this purpose will
include elective contributions that are not includable in income under Code
Sections 125 or 401(k) and all bonuses, overtime, commissions, and other amounts
to the extent paid in cash.

The participant will receive a purchase right for each offering period in
which he or she participates to purchase up to the number of shares of Company
Common Stock determined by dividing such participant's payroll deductions
accumulated prior to the purchase date by the applicable purchase price (subject
to the limitations described in the "Limitations" section). No fractional shares
shall be purchased. Any payroll deductions accumulated in a participant's
account that are not sufficient to purchase a full share will be retained in the
participant's account for the subsequent purchase period. No interest shall
accrue on the payroll deductions of a participant in the Purchase Plan.

TERMINATION AND CHANGE TO PAYROLL DEDUCTIONS. A purchase right shall
terminate at the end of the offering period or earlier if (i) the participant
terminates employment and then any payroll deductions which the participant may
have made with respect to a terminated purchase right will be refunded or (ii)
the participant elects to withdraw from the Purchase Plan. Any payroll
deductions which the participant may have made with respect to a terminated
purchase right under clause (ii) will be refunded unless the participant elects
to have the funds applied to the purchase of shares on the next purchase date.
Unless a participant has irrevocably elected otherwise, he or she may decrease
his or her deductions once during a purchase period.

AMENDMENT AND TERMINATION. The Purchase Plan shall continue in effect
until the earlier of (i) the last business day in July 2006, (ii) the date on
which all shares available for issuance under the Purchase Plan shall have been
issued or (iii) a Corporate Transaction, unless the Purchase Plan is earlier
terminated by the Board in its discretion.

The Board may at any time alter, amend, suspend or discontinue the Purchase
Plan, provided that, without the approval of the stockholders, no such action
may (i) alter the purchase price formula so as to reduce the purchase price
payable for shares under the Purchase Plan, (ii) materially increase the number
of shares issuable under the Purchase Plan or the maximum number of shares
purchasable per participant, or (iii) materially increase the benefits accruing
to participants under the Purchase Plan or materially modify the eligibility
requirements.

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<PAGE>

In addition, the Company has specifically reserved the right, exercisable
in the sole discretion of the Board, to terminate the Purchase Plan immediately
following any six-month purchase period. If such right is exercised by the
Board, then the Purchase Plan will terminate in its entirety and no further
purchase rights will be granted or exercised, and no further payroll deductions
shall thereafter be collected under the Purchase Plan.

CORPORATE TRANSACTION. In the event of (i) a merger or consolidation in
which securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately prior
to such transaction or (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company (a "Corporate Transaction"), each purchase right
under the Purchase Plan will automatically be exercised immediately before
consummation of the Corporate Transaction as if such date were the last purchase
date of the offering period. The purchase price per share shall be equal to
eighty-five percent (85%) of the lower of the fair market value per share of
Company Common Stock on the start date of the offering period or the fair market
value per share of Company Common Stock immediately prior to the effective date
of such Corporate Transaction. Any payroll deductions not applied to such
purchase shall be promptly refunded to the participant.

The grant of purchase rights under the Purchase Plan will in no way affect
the right of the Company to adjust, reclassify, reorganize, or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

PRORATION OF PURCHASE RIGHTS. If the total number of shares of Company
Common Stock for which purchase rights are to be granted on any date exceeds the
number of shares then remaining available under the Purchase Plan, the Committee
shall make a pro rata allocation of the shares remaining.

FEDERAL INCOME TAX CONSEQUENCES. The following is a general description of
certain federal income tax consequences of the Purchase Plan. This description
does not purport to be complete.

The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. Under a plan which so qualifies, no taxable
income will be reportable by a participant, and no deductions will be allowable
to the Company, by reason of the grant or exercise of the purchase rights issued
thereunder. A participant will, however, recognize taxable income in the year
in which the purchased shares are sold or otherwise made the subject of
disposition.

A sale or other disposition of the purchased shares will be a disqualifying
disposition if made before the later of two years after the start of the
offering period in which such shares were acquired or one year after the shares
are purchased. If the participant makes a disqualifying disposition of the
purchased shares, then the Company will be entitled to an income tax deduction,
for the taxable year in which such disposition occurs, equal to the amount by
which the fair market value of such shares on the date of purchase exceeded the
purchase price, and the participant will be required to satisfy the employment
and income tax withholding requirements applicable to such income. In no other
instance will the Company be allowed a deduction with respect to the
participant's disposition of the purchased shares.

Any additional gain or loss recognized upon the disposition of the shares
will be a capital gain, which will be long-term if the shares have been held for
more than one (1) year following the date of purchase under the Purchase Plan.

The foregoing is only a summary of the federal income taxation consequences
to the participant and the Company with respect to the shares purchased under
the Purchase Plan. In addition, the summary does not discuss the tax
consequences of a participant's death or the income tax laws of any city, state
or foreign country in which the participant may reside.

NEW PURCHASE PLAN BENEFITS. Since purchase rights are subject to
discretion, including an employee's decision not to participate in the Purchase
Plan, awards under the Purchase Plan for the current fiscal year are not
determinable. However, each of the Named Officers has the right to purchase a
maximum of 2,000 shares of Company Common Stock at a price that will not exceed
$3.93 per share on each of the January 31, 1998, July 31, 1998 and January 30,
1999, remaining purchase dates for the current offering period.

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<PAGE>

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE
COMPANY'S PURCHASE PLAN.

PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board has selected KPMG Peat Marwick LLP as the independent auditors of
the Company for the fiscal year ending September 30, 1998. KPMG Peat Marwick
LLP has acted in such capacity since its appointment for fiscal year 1987. The
proxy holders intend to vote all proxies received by them for the ratification
of appointment of independent auditors. A representative of KPMG Peat Marwick
LLP will be present at the Annual Stockholder Meeting, will be given the
opportunity to make a statement, if he or she so desires, and will be available
to respond to appropriate questions.

In the event ratification by the holders of the appointment of KPMG Peat
Marwick LLP as the Company's independent auditors is not obtained, the Board
will reconsider such appointment.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION

In accordance with the Company's current By Laws, the affirmative vote of a
majority of the shares present or represented by proxy and entitled to vote at
the Annual Stockholder Meeting, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present, either in person
or by proxy, is required for approval of this proposal. Abstentions and broker
non-votes will each be counted as present for purposes of determining the
presence of a quorum. Abstentions and broker non-votes will each have the same
effect as a negative vote.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1998.

FORM 10-K

THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S FORM 10-K REPORT FOR FISCAL 1997, INCLUDING THE CONSOLIDATED FINANCIAL
STATEMENTS, SCHEDULE AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO NETOPIA,
INC., 2470 MARINER SQUARE LOOP, ALAMEDA, CALIFORNIA 94501, ATTN: INVESTOR
RELATIONS.

STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL STOCKHOLDER MEETING

Proposals of Stockholders intended to be presented at the next Annual
Stockholder Meeting of the Company must be received by the Company at its
offices at 2470 Mariner Square Loop, Alameda, California 94501, not later than
October 20, 1998 and satisfy the conditions established by the Securities and
Exchange Commission for holder proposals to be included in the Company's proxy
statement for that meeting.

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<PAGE>

OTHER MATTERS

As of the date of this proxy statement, the Board of Directors is not
informed of any other matter, other than those stated above, that may be brought
before the meeting. The persons named in the enclosed form of proxy or their
substitutes will vote with respect to any such matters in accordance with their
best judgment.

By order of the Board of Directors,

/s/ Alan Lefkof

Alan Lefkof
President, Chief Executive Officer and Director
Dated January 16, 1998

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL STOCKHOLDER
MEETING. IF YOU DECIDE TO ATTEND THE ANNUAL STOCKHOLDER MEETING AND WISH TO
CHANGE YOUR VOTE, YOU MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE
MEETING.

THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE ANNUAL STOCKHOLDER MEETING.

24
<PAGE>

NETOPIA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS

The undersigned hereby appoints Alan B. Lefkof and James A. Clark, and
either of them, to vote all shares of stock which the undersigned is entitled to
vote at the Annual Stockholder Meeting, to be held at 2470 Mariner Square Loop,
Alameda, California 94501 on Wednesday, February 18, 1998 at 10:00 a.m., local
time, and at any continuation or adjournment thereof, with all the powers which
the undersigned might have if personally present at the meeting.

The undersigned hereby acknowledges receipt of the Notice of Annual
Stockholder Meeting and Proxy Statement, dated January 16, 1998, and a copy of
the Company's 1997 Annual Report to Stockholders. The undersigned hereby
expressly revokes any and all proxies heretofore given or executed by the
undersigned with respect to the shares of stock represented by this Proxy and,
by filing this Proxy with the Secretary of the Company, gives notice of such
revocation.

WHERE NO CONTRARY CHOICE IS INDICATED BY THE STOCKHOLDER, THIS PROXY, WHEN
RETURNED, WILL BE VOTED FOR SUCH PROPOSALS, FOR SUCH NOMINEES AND WITH
DISCRETIONARY AUTHORITY UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING. THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
<PAGE>

1. ELECTION OF DIRECTORS

For all nominees listed below [_] Withhold Authority to vote for
nominees listed below [_]

Reese M. Jones, Alan B. Lefkof, Bandel L. Carano, David F. Marquardt, and
James R. Swartz

2. PROPOSAL TO APPROVE AMENDMENTS TO THE 1996 STOCK OPTION PLAN, INCLUDING THE
500,000 SHARE INCREASE IN THE NUMBER OF SHARES AVAILABLE, AS SET FORTH IN
THE ACCOMPANYING PROXY.

For [_] Against [_] Abstain [_]

3. TO APPROVE AN AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN TO
INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK AVAILABLE FOR
ISSUANCE BY 100,000 SHARES TO A TOTAL OF 600,000 SHARES.

For [_] Against [_] Abstain [_]

4. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS OF THE COMPANY.

For [_] Against [_] Abstain [_]

5. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY BE BROUGHT BEFORE THE
MEETING.

This proxy when properly executed will be voted in the manner directed herein by
the undersigned Stockholder.

DATED: ___________________, 1998 _____________________________________
PLEASE VOTE, SIGN, DATE AND Signature
RETURN THE PROXY CARD
USING THE ENCLOSED ENVELOPE _____________________________________
Signature (if held jointly)