Offer To Exchange Outstanding Options To Purchase

EXHIBIT 99.(a)(1)


NETOPIA, INC.


OFFER TO EXCHANGE OUTSTANDING OPTIONS TO PURCHASE
COMMON STOCK UNDER NETOPIA, INC. 1996 STOCK OPTION PLAN


THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., PACIFIC DAYLIGHT TIME, ON JUNE 4, 2001 UNLESS THE OFFER IS
EXTENDED.


Netopia, Inc. ("Netopia", "we", or "us") is offering to our employees who
------- -- -- regularly work more than 30 hours per week, and to our directors, the opportunity to exchange all outstanding options to purchase shares of our common stock granted under the Netopia, Inc. 1996 Stock Option Plan (the "Plan") with
---- an exercise price above $10.00 per share for New Options (individually, a "New
--- Option" and collectively, the "New Options") that we will grant under the Plan. ------ ----------- We are making this offer upon the terms and subject to the conditions set forth in this offer to exchange and in the accompanying letter of transmittal (which together, as they may be amended from time to time, constitute the "offer"). The number of shares of common stock subject to New Option to be granted to each option holder who elects to receive the New Option will be equal to the number of shares subject to the eligible options elected to be exchanged by such option holder and accepted for exchange. The number of shares of common stock subject to the New Option will be subject to adjustments for any stock splits, stock dividends and similar events. We will grant the New Options on the date of the first meeting of the compensation committee of Netopia's board of directors held more than six months and one day after the date we cancel the options accepted for exchange (the "replacement grant date"). If you choose to participate by exchanging any of your Netopia stock options, you must also exchange all Netopia stock options granted on or after December 2, 2000.


This offer is not conditioned upon a minimum number of options being elected for exchange. This offer is subject to conditions, which we describe in Section 6 of this offer.


If you elect to exchange options as described in the offer and if your options are accepted for exchange, we will cancel your outstanding options that you have elected for exchange and grant you a New Option under the Plan pursuant to a new option agreement between Netopia and you. Some key features of the New Option will include:


. The number of shares subject to the New Option will equal the number
of shares subject to your cancelled options, subject to adjustments
for any stock splits, stock dividends and similar events.


. The exercise price of the New Option will equal the closing sale
price of our common stock as reported on the Nasdaq National Market
on the replacement grant date.


. The New Option will vest and become exercisable on the same dates
with respect to the same number of shares as the cancelled options.


. The New Option will be an incentive stock option to the extent
possible under applicable tax laws.


. The New Option will have other terms and conditions that are
substantially the same as those of the cancelled option.


After the replacement grant date, there may be some delay to your ability to exercise the vested portion, if any, of your New Option, while we handle administrative matters relating to the grant of the New Option.


Although our board of directors has approved this offer, neither we nor our board of directors make any recommendation as to whether you should elect to exchange or refrain from electing to exchange your options. You must make your own decision whether to elect to exchange your options.


Shares of our common stock are quoted on the Nasdaq National Market under the symbol "NTPA." On April 30, 2001, the last reported sale price of our common stock as reported on the Nasdaq National Market was $3.32 per share. We recommend that you obtain current market quotations for our common stock before deciding whether to elect to exchange your options.


You should direct questions about this offer or requests for assistance or for additional copies of the offer to exchange or the letter of transmittal to Janna Berry, our stock administrator, by email at janna@netopia.com, or by telephone
----------------- at (510) 814-5112.


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IMPORTANT


If you wish to elect to exchange your options, you must complete and sign the letter of transmittal in accordance with its instructions, and send it and any other required documents to us, to the attention of Janna Berry, by fax at (510) 814-5397 or by mail to Netopia, Inc., 2470 Mariner Square Loop, California 94501-1095.


We are not aware of any jurisdiction where the making of the offer violates applicable law. If we become aware of any jurisdiction where the making of the offer violates applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the offer will not be made to, nor will elections to exchange options be accepted from or on behalf of, the option holders residing in such jurisdiction.


WE CANNOT GUARANTEE THAT THE REPLACEMENT OPTIONS WILL HAVE A LOWER EXERCISE PRICE THAN THE ELIGIBLE OPTIONS. However, our board of directors believes that the offer may create a better chance for some participants to obtain value from their options. The board of directors recognizes that the decision to accept the offer is an individual one that should be based on a variety of factors, and you should consult your personal advisors if you have questions about your financial or tax situation. The information about this offer is limited to this document, the attached Summary of Terms and the Tender Offer Statement on Schedule TO.


We have not authorized any person to make any recommendation on our behalf as to whether you should elect to exchange or refrain from electing to exchange your options pursuant to the offer. You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to give you any information or to make any representation in connection with this offer other than the information and representations contained in this document or in the accompanying letter of transmittal. If anyone makes any recommendation or representation to you or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us.


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TABLE OF CONTENTS


Page
-------- SUMMARY TERM SHEET............................................................................. 5


General Questions About the Program.......................................................... 5


Specific Questions About the Cancelled Options............................................... 9


Specific Questions About the New Options..................................................... 10


INTRODUCTION................................................................................... 13


THE OFFER...................................................................................... 14


1. Number Of Options; Expiration Date....................................................... 14


2. Purpose Of The Offer..................................................................... 15


3. Procedures For Electing To Exchange Options.............................................. 16


4. Withdrawal Rights........................................................................ 16


5. Acceptance Of Options For Exchange And Issuance Of New Options........................... 17


6. Conditions of the Offer.................................................................. 18


7. Price Range Of Common Stock Underlying The Options....................................... 20


8. Source And Amount Of Consideration; Terms Of New Options................................. 20


9. Information Concerning Netopia........................................................... 22


10. Interests Of Directors And Officers; Transactions And Arrangements Concerning The
Options.................................................................................. 23


11. Status Of Options Acquired By Us In The Offer; Accounting Consequences Of The Offer...... 23


12. Legal Matters; Regulatory Approvals...................................................... 24


13. Material Federal Income Tax Consequences................................................. 24


14. Extension Of Offer; Termination; Amendment............................................... 25


15. Fees And Expenses........................................................................ 26


16. Additional Information................................................................... 26


17. Miscellaneous............................................................................ 27


ATTACHMENT: Letter of Transmittal


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SUMMARY TERM SHEET


The following section answers some of the questions that you may have about this offer. However, it is only a summary. You should carefully read the remainder of this offer to exchange and the accompanying letter of transmittal because the information in this summary is not complete and because there is additional important information in the remainder of this offer to exchange and the letter of transmittal. We have included page references to the remainder of this offer to exchange where you can find a more complete description of the topics in this summary.


GENERAL QUESTIONS ABOUT THE PROGRAM


1. What Securities Are We Offering To Exchange?


We are offering to exchange all stock options to purchase shares of Netopia common stock, that are outstanding under the Netopia, Inc. 1996 Stock Option Plan ("the Plan") with an exercise price above $10.00 per share for New Options
---- to be granted under the Plan. (Pages 13, 14)


2. Why Are We Making The Offer To Exchange?


We are making this offer to exchange because a considerable number of our employees and directors have stock options, whether or not they are currently exercisable, that have exercise prices significantly above our current and recent trading prices. We believe that these options are unlikely to be exercised in the foreseeable future. We are offering this program on a voluntary basis to allow our eligible employees and directors to choose whether to keep their current stock options at their current exercise price, or to cancel those options for New Options to purchase the same number of shares as the cancelled option. These New Options will be granted on the date of the first meeting of the compensation committee of the board of directors held at least six months and one day from the date we cancel the options accepted for exchange (the "replacement grant date"). The exercise price of these New Options will be equal to the closing sale price of our common stock on the replacement grant date. We are making this offer in order to provide our eligible employees and directors with the opportunity to hold options that over time may have a greater potential to increase in value, which we hope will create better performance incentives for our employees and directors and will maximize the value of our common stock for our current stockholders. (Pages 14-15)


3. Who Is Eligible?


Any current employee who regularly works more than 30 hours per week, or any director, of Netopia with a current stock option under the Plan with an exercise price above $10.00 per share is eligible. Our officers and directors are eligible to participate in this offer to exchange. (Pages 13, 14)


4. Does The Offer To Exchange Extend To All Of Netopia's Employee Option Plans?


The offer to exchange extends only to the options granted under the Plan, and
---- does not extend to option grants under the 2000 Stock Incentive Plan.


5. Will Overseas Employees Be Eligible To Participate?


As described above, any of our current employees who regularly work more than 30 hours per week, and our directors, with stock options granted under the Plan with an exercise price above $10.00 per share are eligible to participate. However, special considerations may apply to employees located abroad, depending on the laws of the jurisdiction in which these employees are located. Employees in the United Kingdom should particularly note the required tax election described in the answer to question 17 below, and employees in France should particularly note the additional considerations described in the answer to question 17 below concerning optionees in France. (Pages 14, 25)


6. How Does The Exchange Work?


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The offer to exchange requires that an eligible employee make a voluntary election that will become irrevocable by 5:00 p.m., Pacific Daylight Time, on June 4, 2001, to cancel his or her eligible outstanding stock options in exchange for a grant of a New Option to be issued on the replacement grant date. The number of shares subject to the New Option will be the same number as are subject to the cancelled options, subject to adjustments for any stock splits, stock dividends and similar events. The exercise price of the New Option will equal the closing market price of our common stock on that date. Except for the exercise price, the New Options will have terms and conditions that are substantially similar as those of the cancelled options. If you wish to participate by exchanging any of your options, you will be required to cancel all of your options granted on or after December 2, 2000, regardless whether the exercise price of those options is higher or lower than $10.00 per share. (Pages 13, 14)


7. What Do I Need To Do To Participate In The Offer To Exchange?


To participate, you must complete the letter of transmittal that is attached at the end of this offer to exchange, sign it, and ensure that Janna Berry, Netopia's Stock Administrator, receives it no later than 5:00 p.m., Pacific Daylight Time, on June 4, 2001. You can return your form either by fax to (510) 814-5397, or by mail to Janna Berry, Netopia, Inc., 2470 Mariner Square Loop, Alameda, California 94501-1095, USA. (Page 16)


8. Is This A Repricing?


This is not a traditional stock option repricing. In a repricing, the exercise price of an employee's current options would be adjusted immediately to be equal to the closing price of our common stock on the date of repricing. This results in variable accounting treatment of the option. For financial reporting purposes, we could be required to record additional compensation expense each quarter until the repriced options are exercised, cancelled or terminated. (Page 24)


9. Why Can't Netopia Just Reprice My Options, As I Have Seen Done At Other Companies?


In 1998, the Financial Accounting Standards Board adopted rules that have unfavorable accounting charge consequences for companies that reprice options. As described above, if we reprice options, we may need record a variable accounting charge against our earnings. The amount of this charge would be measured by the future appreciation of the common stock subject to the repriced options. As a result, a simple option "repricing" could seriously jeopardize our progress toward profitability, as we would be required to take a charge against earnings on any future appreciation of the repriced options. (Page 24)


10. Why Can't I Just Be Granted Additional New Options?


Because of the large number of options currently outstanding that have an exercise price significantly above our recent trading prices, a grant of additional options to replace these "underwater" options would have a negative impact on our dilution, outstanding shares and earnings per share. Additionally, we have a limited pool of options that we are allowed to grant without stockholder approval, and therefore we must conserve our currently available options for new employees and ongoing grants. (Page 15)


11. Wouldn't It Be Easier To Just Quit Working at Netopia And Then Get Rehired?


This alternative is not available. Options granted within six months after the date options are cancelled under this offer to exchange are treated the same as a traditional stock option repricing. As described above, this would require us to record a variable accounting charge against earnings. (Page 24)


12. If I Participate, What Will Happen To My Current Options?


Options exchanged under this program will be cancelled after 5:00 p.m., Pacific Daylight Time, on June 4, 2001. (Pages 14, 16)


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13. What Is The Deadline To Elect To Exchange And How Do I Do So?


The deadline to elect to exchange your options in this program is 5:00 p.m., Pacific Daylight Time, on June 4, 2001, unless we extend it. This means that Janna Berry at Netopia must have your election form in her hands before that time. We may, in our discretion, extend the offer at any time, but we cannot assure you that the offer will be extended or, if it is extended, for how long. If we extend the offer, we will make an announcement of the extension no later than 9:00 a.m. on the next business day following the previously scheduled expiration of the offer period. If we extend the offer beyond that time, you must deliver these documents before the extended expiration of the offer.


We reserve the right to reject any or all options elected for exchange that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept for exchange those stock options for which you have made a proper and timely election that is not withdrawn. Subject to our rights to extend, terminate, and amend the offer, we currently expect that we will accept all such options promptly after the expiration of the offer. (Pages 14, 16-17)


14. What Will Happen If I Do Not Turn In My Form By The Deadline?


If you do not turn in your election form by the deadline, then you will not participate in the option exchange. If you elect not to participate in this offer, we do not believe that this offer will change any of the terms of your eligible options if you do not accept the offer, and that the terms of those options will remain unchanged. However, if you choose not to accept this offer, it is possible that the Internal Revenue Service would decide that the right to exchange your incentive stock options under this offer is a "modification" of your incentive stock options. A successful assertion by the Internal Revenue Service that your incentive stock options are modified could extend the holding period of the incentive stock option to qualify for favorable tax treatment and cause a portion of your incentive stock options to be treated as nonqualified stock options. (Pages 14, 16, 24-25)


15. During What Period Of Time May I Withdraw A Previous Election To Exchange?


You may withdraw your election to exchange options at any time before 5:00 p.m., Pacific Daylight Time, on June 4, 2001. If we extend the offer beyond that time, you may withdraw your options elected for exchange at any time until the expiration of the extended offer. To withdraw an election to exchange options, you must deliver to Janna Berry at Netopia a written notice of withdrawal, or a facsimile of such notice, with the required information before 5:00 p.m., Pacific Daylight Time, on June 4, 2001. Once you have withdrawn options, you may re-elect to exchange options only by again following the election procedure described in the answer to Question 6. (Pages 16-17)


16. Am I Eligible To Receive Future Grants During The Following Six-Month Period If I Participate In This Exchange?


Because of the unfavorable accounting charge consequences, participants in this program are ineligible to receive any additional stock option grants until after the replacement grant date. (Page 24)


17. Is There Any Tax Consequence To My Participation In This Exchange?


If you exchange your current options for a New Option, you will not be required under current law to recognize income for federal income tax purposes at the time of the exchange. We believe that the exchange will be treated as a non-taxable exchange. Further, at the date of grant of the New Option, you will not be required under current law to recognize income for federal income tax purposes. The grant of options is not recognized as taxable income. In the case of incentive stock options, no taxable income is recognized at the time of exercise, and the excess of the fair market value of the purchase shares on the exercise date over the aggregate exercise price is includable in alternative minimum taxable income. To the extent that the exercise price of your new incentive stock option is lower than the exercise price of your cancelled option, your potential alternative minimal taxable income may be increased. Because this is a


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grant of a New Option, the applicable holding periods for incentive stock option tax treatment will start over beginning on the replacement grant date. In the case of nonstatutory stock options, taxable income is recognized upon exercise. Again, special considerations apply to employees located abroad. In some countries, the application of local taxation rules may have an impact upon the grant of the New Option.


For employees in the United Kingdom, which has adopted news law governing the exercise of stock options awarded after April 5, 1999, the grant of the New Option will be subject to the execution of a joint election between you and Netopia or any subsidiary of Netopia to provide for the shifting of any Secondary Class 1 National Insurance Contribution liability in connection with the exercise, assignment, release, or cancellation of the option from Netopia and/or any subsidiary to you. (This tax is currently set at 11.9% of the difference between the strike price and the fair market value of the stock at the time of exercise.) By accepting the New Option, to the extent allowable by applicable law, you will be consenting to and agreeing to satisfy any liability that Netopia and/or any subsidiary realizes with respect to Secondary Class 1 National Insurance Contribution payments required to be paid by Netopia and/or any subsidiary in connection with the exercise, assignment, release, or cancellation of the option. In addition, if you accept the New Option, you will be authorizing Netopia or the subsidiary to withhold any such Secondary Class 1 National Insurance Contributions from the payroll at any time or from the sale of a sufficient number of Shares upon exercise, assignment, release, or cancellation of the option. In the alternative, you agree to make payment on demand for such contributions to Netopia or any subsidiary that will remit such contributions to the Inland Revenue. If additional consents and/or any elections are required to accomplish the foregoing shifting of liability, you agree to provide them promptly upon request. If you do not enter into the joint election described above at the same time that you accept the New Option, or if the joint election is revoked at any time by the Inland Revenue, Netopia will have the right to cancel the New Option without further liability.


For employees in France, income tax will apply on most of the option spread at the date of exercise and capital gains will apply to any additional increase to the date of sale. Furthermore, extremely high social contributions can potentially apply to the spread at exercise (25% to you and 45% to Netopia). These taxes can be substantially reduced if the shares are not exercised until at least two years after the date of grant and are not sold until at least five years from the date of grant. In this case, the income tax on the option spread can be reduced from 54% to 40% and the social contributions at exercise can be substantially eliminated. While it is not certain, we believe it likely that the French authorities will treat the New Option available under this program to be a new grant. Accordingly, you will not be permitted to exercise your New Option until at least two years from the date of grant of the New Option and you will not be permitted to sell the shares under the New Option until at least five years from the date of grant of the New Option. Changes in the law currently being considered by France may alter the discussion set forth above.


We recommend that you consult with your own tax advisor to determine the tax consequences of electing to exchange options pursuant to the offer. (Pages 21, 24-25)


18. How Should I Decide Whether Or Not To Participate?


We understand that the decision whether or not to exchange options will be a challenging one for many employees. The program does carry considerable risk, and there are no guarantees of our future stock performance. So, the decision to participate must be each individual employee's personal decision, and it will depend largely on each employee's assumptions about the future overall economic environment, the performance of the overall market and companies in our industry, and our own business and stock price.


19. What Do We And Our Board Of Directors Think Of The Offer?


Although our board of directors has approved this offer, neither we nor our board of directors make any recommendation as to whether you should elect to exchange or refrain from exchanging your options. Employees who are officers of Netopia, as well as our directors, are eligible to participate in the offer. (Pages 13, 14-16)


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20. What If My Employment At Netopia Ends Between The Date My Options Are Cancelled And The Replacement Grant Date?


Your employment with Netopia is on an at-will basis and nothing in this offer to exchange modifies or changes that. The letter of transmittal will become irrevocable after 5:00 p.m., Pacific Daylight Time, on June 4, 2001. Therefore, if your employment with Netopia or one of its subsidiaries is terminated by you or Netopia voluntarily, involuntarily, or for any other reason, before your New Option is granted, you will not have a right to any stock options that were previously cancelled, and you will not have a right to the New Option that would have been issued on the replacement grant date. Therefore, if you are not an eligible employee of Netopia or one of our subsidiaries from the date you elect to exchange options through the replacement grant date, you will not receive any New Options in exchange for your options that have been accepted for exchange. You also will not receive any other consideration for the cancelled options if you are not an eligible employee from the date you elect to exchange options through the replacement grant date. (Pages 17-18)


21. What Are The Conditions To The Offer?


The offer is not conditioned upon a minimum number of options being elected for exchange. The offer is subject to a number of conditions, including the conditions described in Section 6. (Pages 18-20)


SPECIFIC QUESTIONS ABOUT THE CANCELLED OPTIONS


22. Which Options Can Be Cancelled?


If an eligible emplo ...