[LOGO OF NETOPIA APPEARS HERE]
January 18, 1999
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., (the "Company") will be held on February 18, 1999, at 10:00 a.m. local
time, at 2470 Mariner Square Loop, Alameda, California 94501 for the following
purposes:
1. To elect four directors, the names of whom are set forth in the
accompanying proxy statement, to serve until the 2000 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 150,000 shares, as set forth in the
accompanying proxy;
4. To ratify the appointment of KPMG 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, 1998 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 18, 1999
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.
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NETOPIA, INC.
PROXY STATEMENT FOR ANNUAL STOCKHOLDER MEETING
TO BE HELD ON FEBRUARY 18, 1999
GENERAL INFORMATION...........................................................3
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................4
ELECTION OF DIRECTORS.........................................................5
EXECUTIVE COMPENSATION AND OTHER MATTERS......................................7
Employment and Change of Control Arrangements..............................9
Certain Relationships and Related Transactions............................10
Compensation of Directors.................................................10
Compensation Committee Interlocks and Insider Participation...............10
Section 16(A) Beneficial Ownership Reporting Compliance...................10
EXECUTIVE OFFICERS...........................................................11
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION...............................................................12
COMPARISON OF STOCKHOLDER RETURNS............................................14
APPROVAL OF AMENDMENT OF THE 1996 STOCK OPTION PLAN..........................15
Summary of the Provisions of the 1996 Stock Option Plan..................15
APPROVAL OF AMENDMENT OF THE EMPLOYMENT STOCK PURCHASE PLAN..................22
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.........................25
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL STOCKHOLDER MEETING...26
OTHER MATTERS................................................................26
2
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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, 1999
================================================================================
The accompanying proxy is solicited by the Board of Directors of Netopia,
Inc., a Delaware corporation (the "Company" or "Netopia"), for use at the Annual
Stockholder Meeting to be held on Thursday, February 18, 1999, 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 18, 1999, 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,
1998 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, 1998, the
record date for the determination of stockholders entitled to vote at the Annual
Stockholder Meeting, there were 12,461,748 shares of the Company's Common Stock
issued and outstanding. Each stockholder of record on December 31, 1998 will be
entitled to one (1) vote for each share of Common Stock held by such stockholder
on December 31, 1998 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 bylaws 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 and No. 4
and in the discretion of the proxy holders as to other matters that may properly
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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 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,
1998, with respect to the beneficial ownership of the Company's Common Stock by
(i) the Chief Executive Officer and the five other executive officers of the
Company named in the "Executive Compensation and Other Matters - Summary
Compensation Table," (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)............................. 378,259 2.7%
James A. Clark (3)............................. 104,877 *
Richard L. Maslana (4)......................... 145,589 1.0%
Didier Cop (5)................................. 76,188 *
Thomas A. Skoulis (6).......................... 87,550 *
Michael P. Trupiano (7) ....................... 104,557 *
Reese M. Jones (8)............................. 2,365,218 16.9%
David F. Marquardt (9)......................... 1,228,916 8.8%
James R. Swartz (10)........................... 1,051,525 7.5%
Technology Venture Investors - IV, L.P. (11)... 1,201,414 8.6%
2480 Sandhill Rd.
Menlo Park, CA 94025
Accel III, L.P. (12) .......................... 1,026,525 7.3%
One Embaradero Center
San Francisco, CA 94111
All Current Directors and Executive Officers as
a Group (9 persons)(13)........................ 5,431,528 38.7%
</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, 1998.
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2) Includes options exercisable into 337,063 shares of Common Stock under the
1996 Stock Option Plan ("Option Plan") and 41,196 shares held by the Lefkof
Family Trust over which Alan B. Lefkof has shared voting and investment
authority.
3) Includes options exercisable into 104,877 shares of Common Stock under
the Option Plan.
4) Includes options exercisable into 104,876 shares of Common Stock under the
Option Plan.
5) Includes options exercisable into 55,263 shares of Common Stock under
the Option Plan.
6) Includes options exercisable into 79,988 shares of Common Stock under the
Option Plan.
7) Includes options exercisable into 104,557 shares of Common Stock under
the Option Plan.
8) Includes options exercisable into 14,063 shares of Common Stock under the
Option Plan.
9) Includes 1,201,414 shares beneficially owned by affiliated entities of
Technology Venture Investors IV, L.P., as limited partnership ("TVI-IV"),
of which Mr. Marquardt disclaims beneficial ownership except as set forth
below (see footnote 10). 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. ("Accel"), of which Mr. Swartz disclaims beneficial ownership
except as set forth below (see footnote 11). Includes options exercisable
into 25,000 shares of Common Stock under the Option Plan.
11) Mr. David F. Marquardt, a director of the Company, is a general partner of
Technology Venture Investors Management-IV, a limited partnership, which is
the general partner of TVI-IV. Includes 1,201,414 shares held by entities
affiliated with TVI-IV. 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.
12) Mr. James R. Swartz, a 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.
13) Includes options exercisable into 765,312 shares of Common Stock under the
Option Plan.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The bylaws of the Company provide that the authorized number of directors
of the Company shall be set by resolution of the Board of Directors. Following
the October 27, 1998 resignation of Bandel L. Carano, the Board of Directors has
adopted a resolution, effective October 27, 1998, that reduces the authorized
number of directors of the Company to four (4). The directors who are being
nominated for election to the Board of Directors (the "Nominees"), their ages as
of September 30, 1998, 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 four 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.
5
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<TABLE>
<CAPTION>
Name and Positions Held with the Company Age First Became a Director
- ---------------------------------------- --- -----------------------
<S> <C> <C>
Alan B. Lefkof, President, Chief Executive Officer and Director (1)...... 45 1991
Reese M. Jones, Chairman of the Board of Directors....................... 40 1987
David F. Marquardt, Director (2)(3)...................................... 49 1990
James R. Swartz, Director (3)............................................ 56 1992
</TABLE>
- ----------
(1) Member of the Stock Option Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
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 & 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.
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 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
is Founding General Partner of Accel Partners, a venture capital firm, which he
co-founded in September 1983. Mr. Swartz currently serves on the Board of
Directors of Remedy Corporation, Polycom, Inc., FVC.COM, 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.
Information regarding the Company's executive officers may be found in
"Executive Officers" below.
During the fiscal year ended September 30, 1998, the Board held six (6)
meetings. No director listed above who served on the Board in fiscal year 1998
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, 1998, the Company's Audit
Committee met four (4) times. 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 of such auditors,
reviews and evaluates the Company's accounting systems, financial controls and
financial personnel. The members of the Audit Committee during the 1998 fiscal
year were David F. Marquardt and Bandel L. Carano.
During the fiscal year ended September 30, 1998, the Compensation Committee
met four (4) times and acted by written consent seven (7) times. Its current
members are David F. Marquardt and James R. Swartz. The Compensation Committee
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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, 1998, the Stock Option Committee
acted by written consent nineteen (19) times. The Stock Option Committee grants
stock options to employees and other eligible individuals. Its current member is
Alan B. Lefkof.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Directors are elected by a plurality of the affirmative votes cast by those
shares of Common Stock present in person or represented by proxy and entitled to
vote at the Annual Stockholder Meeting. The four (4) nominees for director
receiving the highest number of affirmative votes will be elected. 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 and one individual who ceased to be an officer, each of
whom earned salary and bonus for fiscal 1998 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,
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation (1) -------------
----------------------- Securities
Other Annual Underlying All Other
Name and Principal Position Salary Bonus Compensation Options (#) Compensation(2)
- --------------------------- ------------ ---------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Lefkof.........................................1998 $253,750 $13,500 $ 643 (3) 120,000 $7,272
President and Chief Executive Officer 1997 235,000 -- 1,125 (3) 160,000 7,944
1996 235,000 36,600 -- 25,000 6,137
James A. Clark.........................................1998 157,750 32,200 125 (3) 75,000 6,000
Vice President and Chief Financial Officer 1997 151,000 -- -- 85,000 6,000
1996 145,836 30,250 -- 5,000 6,000
Thomas A. Skoulis (5)..................................1998 128,750 56,451 -- 65,000 6,000
Vice President of Software Sales 1997 118,750 50,919 -- 81,500 6,000
1996 90,000 69,539 -- 2,500 6,000
Didier Cop (8).........................................1998 137,023 60,447 33,942 (9) 76,500 6,579
Vice President of International and 1997 130,373 36,996 69,070 (6) 63,500 6,179
Marketing, Internet Connectivity Solutions 1996 129,790 58,277 40,306 (7) -- 4,294
Michael P. Trupiano....................................1998 151,250 6,750 -- 92,000 6,000
Senior Vice President and General Manager, 1997 140,326 -- -- 93,000 6,000
Internet Connectivity Solutions 1996 129,603 24,000 -- 10,000 6,000
Richard L. Maslana (4).................................1998 173,167 -- 364 (3) 40,000 5,500
Former Vice President of Operations and 1997 180,000 -- 1,330 (3) 60,000 6,000
General Manager of LAN Products 1996 168,750 35,000 -- -- 6,000
</TABLE>
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(1) 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 Richard L. Maslana ceased his position as an officer of Netopia, Inc.
on August 5, 1998, but remains as a part-time employee of Netopia.
(5) Bonus includes commissions earned of $45,539, $50,919 and $52,701
during fiscal 1996, 1997 and 1998, 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.
(8) Bonus includes commissions earned of $48,518, $36,996 and $56,247
during fiscal 1996, 1997 and 1998, respectively.
(9) Represents
amounts paid in connection with Didier Cop's relocation to the United
States, including $31,109 in tuition reimbursement and amounts paid in
connection with tax services paid for by the Company.
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, 1998.
No stock appreciation rights were granted to these individuals during such year.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------- Potential Realizable
% of Total Value at Assumed
Options Annual Rates
Number of Granted of Stock Price
Securities to Appreciation for
Underlying Employees Exercise Option Term (4)
Options in Fiscal Price per Expiration ------------------------------
Name Granted(1) 1998 (2) Share (3) Date 5% 10%
---- ------------ ---------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Lefkof...................... 120,000 8.51% $5.69 4/10/08 $ 429,409 $1,088,207
President and Chief Executive
Officer
James A. Clark...................... 60,000 4.26% 5.69 4/10/08 214,705 544,104
Vice President and Chief
Financial Officer 15,000 1.06% 4.75 9/01/08 44,809 113,554
Thomas A. Skoulis................... 45,000 3.19% 5.69 4/10/08 161,028 408,078
Vice President of Software
Sales 20,000 1.42% 4.75 9/01/08 59,745 151,406
Didier Cop.......................... 60,000 4.26% 5.69 4/10/08 214,705 544,104
Vice President of International
and Marketing, Internet 16,500 1.17% 4.75 9/01/08 49,290 124,910
Connectivity Solutions
Michael P. Trupiano................. 60,000 4.26% 5.69 4/10/08 214,705 544,104
Senior Vice President and
General Manager of Internet 32,000 2.27% 4.75 9/01/08 95,592 242,249
Connectivity Solutions
Richard L. Maslana.................. 40,000 2.84% 5.69 4/10/08 143,136 362,736
Former Vice President of
Operations and General
Manager of LAN Products
</TABLE>
- ----------
(1) The options become exercisable in 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
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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 1,409,425 shares granted in the 1998
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.
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 1998 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 1998.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options in-the-Money Options
Acquired at September 30, 1998 at September 30, 1998 (2)
on Value -------------------------- -----------------------------
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- ---------- ----------- ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Lefkof............ 12,000 $51,000 306,438 236,562 $1,094,235 $64,490
James A. Clark............ 0 -- 82,502 142,498 212,665 103,835
Thomas A. Skoulis......... 0 -- 63,364 123,136 141,128 56,834
Didier Cop................ 10,975 33,968 40,333 112,992 19,419 59,307
Michael P. Trupiano....... 2,000 6,850 82,381 165,619 203,859 91,341
Richard L. Maslana........ 19,500 84,725 88,625 67,125 204,197 78,497
</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, 1998 ($5.625 per share), as determined by the closing price on the
Nasdaq Stock Market, 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 and Trupiano and Ms. Crowe, 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
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acquisitions or changes in control of the Company. In addition, Mr. Clark will
receive severance pay equal to 12 months salary and Messrs. Lefkof and Trupiano
and Ms. Crowe will receive severance pay equal to six months salary upon any
such termination.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 5, 1998, the Company sold its Farallon LAN Division (the "LAN
Division"), including the LAN Division's products, accounts receivable,
inventory, property and equipment, intellectual property and other related
assets to Farallon Communications, Inc. (f/k/a Farallon Networking Corporation),
a Delaware corporation ("Farallon") and an affiliate of Gores Technology Group,
for cash, a warrant, and certain receivables aggregating $4.9 million in
consideration. In connection with the sale of the LAN Division, Richard L.
Maslana, who served as the Company's Vice President of Operations and General
Manager of LAN Products prior to such transaction, became Farallon's President.
Mr. Maslana received accelerated vesting of certain stock options in connection
with this transaction. In addition, Mr. Maslana has agreed to continue to serve
as a part-time employee of the Company for a period of eighteen (18) months from
the transaction date.
The Company entered into a loan agreement with Didier Cop, Vice President
of International and Marketing, Internet Connectivity Solutions, to assist in
his relocation to the United States. During the fiscal year ended September 30,
1998, the largest aggregate amount of indebtedness outstanding was $158,310,
including interest which accrues at a rate of 6.1% per annum. As of December 31,
1998, the remaining obligation on the loan was $120,937.
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. 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, 1998, consists of Messrs.
Marquardt and Swartz. Neither Mr. Marquardt nor Mr. Swartz was at any time
during the fiscal year ended September 30, 1998, 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 any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
Further information may be found in "Certain Relationships and Related
Transactions" above.
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 1998 except that Mary Felice Crowe
filed one report late reporting one transaction.
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EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
First Became an
Name and Positions Held with the Company Age Executive Officer
- ---------------------------------------- --- -----------------
<S> <C> <C>
Alan B. Lefkof, President, Chief Executive Officer and Director.......... 45 1991
James A. Clark, Vice President and Chief Financial Officer............... 42 1994
Didier Cop, Vice President of International and Marketing, Internet 44 1995
Connectivity Solutions
Mary Felice Crowe, Vice President of Software Development 51 1997
Thomas A. Skoulis, Vice President of Software Sales 42 1994
Michael Trupiano, Senior Vice President and General Manager of Internet 42 1995
Connectivity Solutions
</TABLE>
Alan B. Lefkof - See "Proposal No. 1 - Election of Directors"
James A. Clark, Vice President and Chief Financial Officer, joined the
Company in November 1994. Prior to joining the Company, Mr. Clark was Vice
President and Chief Financial Officer at Integral, a developer of large scale,
client/server business application software, from November 1985 to November
1994. Before joining Integral, Mr. Clark was Manager of Reporting and
International Accounting at MicroPro from April 1984 to November 1985. Mr. Clark
received a B.A. in business administration/accounting from California State
University at Chico in 1978 and is a Certified Public Accountant.
Didier Cop, Vice President of International and Marketing, Internet
Connectivity Solutions, joined the Company in June 1991. Prior to joining the
Company, Mr. Cop was Sales and Marketing Manager for Mood Media, a multimedia
and advertising system company, from August 1990 to May 1991. Before joining
Mood Media, Mr. Cop was General Manager for Southern Europe Sales with General
Parametrics. Mr. Cop received a degree in business administration from
E.S.S.E.C. in France, in 1976.
Mary Felice Crowe, Vice President of Software Development, joined the
Company in July 1994. Prior to joining the Company, Ms. Crowe spent six years
from 1988 to 1994 at Orion Network Systems as a Software Engineering Manager for
SNA connectivity products. Before joining Orion Ms. Crowe was a software
engineer at DCA, SoftSwitch, and Intel. Ms. Crowe received a B.S. in mathematics
from Mississippi University for Women in 1969 and an M.A. in mathematics from
Vanderbilt University in 1971.
Thomas A. Skoulis, Vice President of Software Sales, joined the Company
in September 1991. Prior to joining the Company, Mr. Skoulis held various sales
management positions with 3Com from March 1988 to September 1991. Before joining
3Com, Mr. Skoulis also held the position of Senior Sales Representative at
Digital Equipment from June 1980 to March 1988. Mr. Skoulis received a B.A.
in business administration from Miami University in Oxford, Ohio, in 1980.
Michael P. Trupiano, Senior Vice President and General Manager of
Internet Connectivity Solutions, joined the Company in May 1992. Prior to
joining the Company, Mr. Trupiano was Director of R&D/Product Marketing at
Verifone, a transaction processing products company, from January 1989 to May
1992. Before joining Verifone, Mr. Trupiano was Vice President of Engineering at
Isix from June 1987 to December 1989, and was Director of Engineering at Amtel
Systems from January 1984 to June 1987. Mr. Trupiano received a B.S. in
electrical engineering and computer science from Santa Clara University in 1978.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "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 1998, 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 results,
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. Actual bonuses paid reflect both achievement of corporate
objectives and an individual's accomplishment of functional objectives, with
greater weight being given to achievement of corporate rather than functional
objectives.
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 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 1998, 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.
12
<PAGE>
CEO COMPENSATION. Mr. Lefkof, the Company's President and CEO, received
an increase in annual base salary on January 1, 1998. The remaining components
of the CEO's fiscal 1998 incentive compensation were entirely dependent upon the
Company's financial performance and provided no dollar guarantees. The bonus
paid to the CEO for fiscal 1998 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
1998, stock option grants were awarded to the CEO to provide an incentive for
the CEO to improve the Company's performance.
TAX LIMITATION. 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 1999 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
13
<PAGE>
COMPARISON OF STOCKHOLDER RETURNS
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, 1998. The Company's fiscal year ended
September 30, 1998. This stock performance graph includes data as of the latest
practicable date.
COMPARISON OF 28 MONTH CUMULATIVE TOTAL RETURN*
AMONG NETOPIA, INC., THE S & P 500 INDEX,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------------------------------------------------------------
6/13/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97 3/98 6/98 9/98 10/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NETOPIA, INC. 100 92 66 40 27 31 43 36 38 49 35 37
S & P 500 100 100 104 112 115 135 145 150 171 176 159 172
NASDAQ STOCK MARKET (U.S.) 100 97 100 105 99 118 138 129 151 155 141 146
HAMBRECHT & QUIST TECHNOLOGY 100 96 102 109 104 125 152 128 155 159 141 146
</TABLE>
14
<PAGE>
PROPOSAL NO. 2
AMENDMENT OF THE 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 5,366,228 shares of Common
Stock and to provide for automatic annual increases in the share reserve in 2000
and 2001 calendar years. The proxy holders intend to vote all proxies received
by them 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,
October 29, 1997 and on October 27, 1998, and each of the foregoing amendments
was approved by the stockholders. 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 5,366,228 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
15
<PAGE>
but unissued Common Stock or from Common Stock reacquired by the Company,
including shares purchased on the open market. Assuming approval of this
Proposal No. 2, the share reserve shall increase automatically on January 1,
2000 and January 1, 2001 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.
The share reserve was increased on January 1, 1999 by 623,087 shares pursuant to
a provision of the Option Plan providing for an automatic increase in that year.
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. 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.
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 underlying 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
16
<PAGE>
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.
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
17
<PAGE>
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 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.
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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.
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, 1998 as reported on the Nasdaq
Stock Market was $6.8125 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, 1999 options covering 3,534,527 shares
were outstanding under the Option Plan, 1,163,946 shares remained available for
future option grants, and 667,755 shares have been issued under the Option Plan.
The expiration dates for all such options range from April 2001 to December
2008.
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
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table shows all option grants made under the Option Plan during the fiscal year
ending September 30, 1998 and through December 31, 1998, 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:
<TABLE>
<CAPTION>
Number of Option Shares
- ----------------------------------------------------------- -----------------------
<S> <C>
Alan B. Lefkof ......................................... 120,000
James A. Clark.......................................... 75,000
Richard L. Maslana...................................... 40,000
Didier Cop.............................................. 76,500
Thomas A. Skoulis....................................... 65,000
Michael P. Trupiano..................................... 92,000
Reese M. Jones.......................................... 0
David F. Marquardt...................................... 0
James R. Swartz......................................... 0
All Current Executive Officers as a Group (6 persons)... 487,750
All Directors who were not employees as a group (4
persons).............................................. 0
All Employees (including officers who are not executive
officers)............................................. 1,534,800
</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
20
<PAGE>
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.
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
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.
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<PAGE>
PROPOSAL NO. 3
AMENDMENT OF THE 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 150,000 shares to a total of 750,000
shares of Company Common Stock. The Company has been advised by its counsel that
it should reserve a sufficient number of shares under its Purchase Plan to last
through the end of each twenty-four month offering period beginning prior to the
2000 Annual Stockholder Meeting. In accordance with recently issued accounting
guidance, an insufficient number of shares reserved at the beginning of an
offering period may result in future compensation charges for financial
reporting purposes. Accordingly, the Board is recommending an increase to the
number of shares available under the Purchase Plan.
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 shares,
on October 29, 1997 to increase the number of shares issuable thereunder by
100,000 shares, and on October 27, 1998 to increase the number of shares
issuable thereunder by 150,000 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
750,000 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.
22
<PAGE>
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
188 employees (including 6 officers) were eligible to participate in the
Purchase Plan as of December 31, 1998.
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. Offering periods are concurrent and
successive and, accordingly, a new offering period commences every six months
and runs concurrently with each prior offering period. Generally, purchase
periods start on the first business day in each of February and August and end,
respectively, on the last business day of July of the same year and January of
the following year. A new offering period will begin on February 1, 1999 and
will end on January 31, 2001. 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, and may terminate an
offering period following any purchase period.
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.
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 market value of the Company's Common Stock as reported on the Nasdaq Stock
Market as of December 31, 1998 was $6.8125 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
23
<PAGE>
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.
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.
24
<PAGE>
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, in the fiscal year ended September 30, 1998, each of the
Named Officers purchased the following number of shares of Common Stock at a
price of $3.93 per share: Mr. Clark 4,000; Mr. Cop 1,331; Mr. Lefkof 634; and
Mr. Skoulis 4,000. In addition, Mr. Trupiano purchased 996 shares at a price of
$4.04 per share. All executive officers as a group (6 persons) purchased 13,229
shares during the fiscal year ended September 30, 1998. Each of the Named
Officers, other than Mr. Trupiano, has the right to purchase a maximum of 2,000
shares of Common Stock at a price that will not exceed $3.93 per share on each
of the January 29, 1999 and July 30, 1999 purchase dates. Mr. Trupiano has the
right to purchase a maximum of 2,000 shares of Common Stock at a price that will
not exceed $4.04 per share on each of the January 29, 1999, July 30, 1999 and
January 31, 2000 purchase dates.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
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
COMPANY'S EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has selected KPMG LLP as the independent auditors of the Company
for the fiscal year ending September 30, 1999. KPMG LLP has acted in such
capacity since its appointment for fiscal year 1987. A representative of KPMG
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 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 bylaws, 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
25
<PAGE>
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 LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 1999.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF
THE COMPANY'S FORM 10-K REPORT FOR FISCAL 1998, 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
September 20, 1999 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. Pursuant to new amendments to Rule 14a-4(c) of the
Securities Exchange Act of 1934, as amended, a stockholder proposal 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 December 4, 1999 in order for proxy holders to
be allowed to use their discretionary voting authority to vote on such proposal
when the proposal is raised at the next Annual Stockholder Meeting, even through
there is no discussion of such proposal in the Company's proxy statement for
that meeting.
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 B. Lefkof
Alan B. Lefkof
President, Chief Executive Officer and Director
Dated January 18, 1999
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.
<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 Thursday, February 18, 1999 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 18, 1999, and a copy of
the Company's 1998 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.
1. ELECTION OF DIRECTORS
For all nominees listed below [_] Withhold Authority to vote
for nominees listed below [_]
Reese M. Jones, Alan B. Lefkof, 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 150,000 SHARES, AS SET FORTH IN THE
ACCOMPANYING PROXY.
For [_] Against [_] Abstain [_]
4. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG 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: ___________________, 1999 _________________________________
PLEASE VOTE, SIGN, DATE AND Signature
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