SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 14C INFORMATION
Proxy Statement Pursuant to Section 14(C) of the
Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary information statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14c-5(d)(2))
[X] Definitive information statement
NETOBJECTS, INC.
(Name of Registrant as Specified in its Charter)
-------------------------------------------------------
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provide by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
First mailed to stockholders on or about June 29, 2000.
<PAGE>
NETOBJECTS, INC.
301 Galveston Drive
Redwood City, CA 94063
To the Stockholders of NetObjects, Inc.:
Enclosed is an Information Statement that we are sending to you in
connection with the increase from 7,600,000 to 11,000,000 shares of NetObjects
Common Stock reserved for the exercise of outstanding options to purchase shares
of Common Stock granted or to be granted by the Board of Directors under the
Company's Amended and Restated 1997 Stock Option Plan (the "Plan"). Our Board of
Directors has already approved the increase of the number of shares of Common
Stock offered under the Plan. In addition, under the terms of the Plan and
certain rules of the NASDAQ National Market, we need to obtain stockholder
approval of this increase for certain purposes. Three of our stockholders, who
collectively hold a majority of the voting power of our Common Stock, have
already approved the amendment of the Plan by written consent, so this
Information Statement is being sent to you for informational purposes only. We
are not asking for your proxy or vote on any of the matters described in this
Information Statement.
We encourage you to read this Information Statement carefully.
Sincerely,
/s/ Samir Arora
---------------
Samir Arora
President
1
<PAGE>
NETOBJECTS, INC.
301 Galveston Drive
Redwood City, California 94063
-------------------------------------
INFORMATION STATEMENT
Dated June 29, 2000
-------------------------------------
We are furnishing this Information Statement to holders of our Common
Stock in connection with the previous approval by unanimous written consent of
our Board of Directors of the transaction described below and the subsequent
adoption by written consent of that transaction by a majority vote of our
stockholders. All corporate approvals in connection with the transaction
described below have been obtained and this Information Statement is furnished
solely for the purpose of informing stockholders, in the manner required by the
Securities Exchange Act of 1934, of this corporate action.
We Are Not Asking You for a Proxy and You Are Requested Not to Send Us
a Proxy.
The record date for determining stockholders entitled to receive this
Information Statement has been established as the close of business on June 22,
2000 (the "Record Date"). As of the Record Date, the Company had 31,057,229
shares of Common Stock issued and outstanding. Each share of our Common Stock
entitles its holder to one vote on all matters submitted to a vote of the
stockholders.
ACTIONS TAKEN
Amended and Restated Stock Option Plan
As of June 13, 2000, our Board of Directors executed and delivered to
the Company a unanimous written consent to increase from 7,600,000 to
11,000,000, subject to stockholder approval, the number of shares of Common
Stock offered for sale from time to time to employees, non-employee directors
and consultants (including those of our subsidiaries) upon exercise of
outstanding options to purchase shares of Common Stock granted or to be granted
by the Board of Directors under the Company's Amended and Restated 1997 Stock
Option Plan (the "Plan"). The terms and conditions of the options, including the
exercise prices for purchase of the shares of Common Stock, are governed by the
provisions of the Plan and the option agreements between the Company and the
participating employees, non-employee directors and consultants.
2
<PAGE>
As of June 13, 2000, the holders of 17,065,513 shares, or approximately
54 percent of the total number of shares of Common Stock outstanding, had
executed and delivered to the Company a written consent approving the amendment
of the Plan. Since the amendment of the Plan has been approved by the holders of
the required majority of Common Stock, no proxies are being solicited with this
Information Statement.
You are being provided with this Information Statement pursuant to
Section 14c of the Exchange Act and Rule 14c and Schedule 14C thereunder, and,
in accordance therewith, the Amendment will not become effective until at least
20 calendar days after the mailing of this Information Statement.
NO DISSENTERS RIGHTS
The corporate actions described in this Information Statement will not
afford our stockholders the opportunity to dissent from those actions or to
receive an agreed or judicially appraised value for their shares of our common
stock as a result of those actions.
DESCRIPTION OF THE PLAN
General
The Plan was adopted in April 1997 and was amended and restated upon
Board of Directors and stockholders' approval effective May 12, 1999 to provide
for 4,500,000 shares of Common Stock reserved for issuance upon the exercise of
options granted under the Plan. On November 22, 1999, the Board of Directors
approved, and on March 15, 2000 the stockholders ratified, an amendment to the
Plan to increase the maximum aggregate number of shares of Common Stock reserved
for issuance under the Plan from 4,500,000 shares to 7,600,000 shares. The Board
of Directors considered the most recent amendment of the Plan to increase by
3,400,000 the number of shares reserved for issuance thereunder to be in the
Company's best interest so that the Company may attract and retain high quality
employees necessary to build the Company and continue to provide ongoing
incentives to the Company's employees in the form of options to purchase the
Company's Common Stock.
At May 31, 2000, options covering an aggregate of 5,710,388 shares were
outstanding under the Plan and 494,086 shares remained available for future
grants. As of May 31, 2000, the options outstanding under the Plan had a
weighted average exercise price of $10.332 per share with expiration dates
between February 2005 and May 2010.
The Plan allows for the grant of stock options intended to qualify as
"incentive stock options" under Section 422 of the Code, as well as options that
are not so qualified, or nonstatutory stock options. See "Federal Income Tax
Consequences" below for information concerning the tax treatment of incentive
stock options and nonstatutory stock options. The Plan is not qualified under
Section 401(a) of the Code and is not subject to the Employee Retirement Income
Security Act of 1974, as amended.
3
<PAGE>
Purpose
The purpose of the Plan is to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentives to employees, directors and consultants of the Company and its
subsidiaries, and to promote the success of the Company's business.
Administration
The Plan may be administered by the Board of Directors, or by a
committee appointed by the Board of Directors and consisting of at least two
members of the Board of Directors. The Plan currently is administered by the
Compensation Committee of the Board of Directors (the "Committee"), which
currently consists of two outside directors. Option grants may be approved by
the Committee or the Board of Directors. The interpretation and construction of
any provision of the Plan by the Board of Directors or the Committee is final
and conclusive. All costs and expenses incurred in plan administration will be
paid by the Company without charge to participants.
Eligibility
The Plan provides that options may be granted to employees (including
officers and employee directors), non-employee directors and consultants of the
Company and its subsidiaries. The Committee approves the participants and the
number of shares to be subject to each option based upon management
recommendations. The Plan provides that the maximum number of shares of Common
Stock that may be granted in any one calendar year to an eligible participant is
1,000,000 shares. Directors who are not employees of the Company upon first
joining the Board of Directors are automatically granted an option to purchase
20,000 shares of Common Stock ("Directors Options"). Under the Plan, the
aggregate market value of shares subject to all incentive stock options granted
to an optionee that become exercisable for the first time during any calendar
year cannot exceed $100,000 (determined as of the date of grant). See "Federal
Income Tax Consequences."
Standard Option Terms
Each option is evidenced by a stock option agreement between the
Company and the optionee. The following terms and conditions generally apply to
all options, unless a participant's particular stock option agreement provides
otherwise:
(a) Exercise of the Option. Generally, the optionee must earn the right
to exercise the option by continuing to work for the Company. The Committee
determines when options granted under the Plan may be exercisable, but in no
event can any option be exercised more than ten years after the date of grant,
or six years in the case of Directors Options. Unless otherwise provided in the
stock option agreement, the purchase price of shares purchased upon exercise of
an option shall be paid by any of the following means, or by any combination
thereof: (1) cash; (2) check; (3) other shares of the Company's Common Stock.
(b) Exercise Price. The exercise price of options granted under the
Plan is determined by the Committee and must not be less than: (1) the fair
market value of the Common Stock on the date the option is granted in the case
of incentive stock options; or (2) 85% percent of such fair market value in the
case of nonstatutory stock options. If the participant owns stock representing
more than
4
<PAGE>
10% of the total combined voting power of the Company's outstanding
capital stock, the exercise price for an incentive stock option must not be less
than 110% of such fair market value. The Plan further provides that if the
optionee is an employee subject to the provisions of Section 162(m) of the Code,
which limit the Company's income tax deduction for certain excessive
compensation, the option price may not be less than fair market value at the
date of grant.
(c) Termination of Employment. If an optionee's employment or other
service with the Company terminates for any reason other than permanent and
total disability or death, options under the Plan may be exercised within 30
days (or such other period of time as is determined by the Committee) after such
termination, but may be exercised only to the extent the options were
exercisable on the date of termination, subject to the condition that no option
may be exercised after expiration of its term.
(d) Death or Disability. If an optionee should die or become
permanently and totally disabled while employed by or engaged in other service
for the Company, or within 90 days after termination of employment or other
service, and such employment or other service was not interrupted from the date
of the option grant through the date of death, disability or termination,
options may be exercised at any time within 180 days following the date of
disability, but only to the extent the options were exercisable on the date of
termination or disability, whichever occurs first, subject to the condition that
no option may be exercised after expiration of its term.
(e) Termination of Options. All options granted under the Plan expire
on the date specified in the stock option agreement, but in no event shall the
term of such options exceed ten years. However, all incentive stock options
granted under the Plan to any participant who owns stock possessing more than
10% of the total combined voting power of the Company's outstanding capital
stock must expire not later than five years from the date of grant.
(f) Nontransferability of Options. An option is nontransferable by the
optionee otherwise than by will or the laws of descent and distribution, and is
exercisable during the optionee's lifetime only by the optionee, or in the event
of the optionee's death, by a person who acquires the right to exercise the
option by bequest or inheritance or by reason of the death of the optionee. The
Plan permits the Committee to modify this limitation to permit transfers of
nonstatutory stock options to family members through gift or domestic relations
order.
(g) Other Provisions. The option agreement may contain such other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Committee or the Board of Directors.
Securities Subject to the Option Plan
Prior to the approval by the Board of Directors and the stockholders of
the amendment to the Plan, the maximum number of shares which could be sold to
participants under the Plan was 7,600,000 shares. Following the approval by the
Board of Directors and the stockholders of the amendment to the Plan, the
maximum number of shares which may be sold to participants under the Plan will
be 11,000,000 shares. The Common Stock issuable under the Plan may be either
shares of newly-issued Common Stock or shares of Common Stock reacquired by the
Company, provided that any shares of
5
<PAGE>
Common Stock delivered to the Company in payment for the exercise of options
shall not again become available for issuance under the Plan.
In the event of any change in the Company's capital structure (whether
by reason of any recapitalization, stock dividend, stock split, combination of
shares or other similar change in corporate structure), appropriate adjustments
shall be made by the Board of Directors in the number of shares subject to each
option and the per share exercise price therefor.
Unless otherwise determined by the Board of Directors, upon the
dissolution or liquidation of the Company, all outstanding options granted under
the Plan shall terminate. The Committee may, if it so determines in the exercise
of its sole discretion, make provision for proportionately adjusting the number
or class of securities covered by any option and the option price in the event
the Company effects a reorganization, recapitalization or rights offering, and
in the event the Company is consolidated with or merged into any other
corporation. In addition, upon any merger or consolidation, if the Company is
not the surviving corporation, or if the Company is the surviving corporation in
a "triangular merger" transaction with a subsidiary of a "parent corporation"
(as such term is defined and used in Section 175 and Section 1101 of the
California General Corporation Law), the options granted under the Plan shall
either be assumed by the new entity or the parent corporation, or shall
terminate pursuant to the preceding sentence.
Amendment and Termination of the Plan
The Board of Directors may amend the Plan at any time or from time to
time as it deems advisable, subject to compliance with all applicable laws and
stock exchange listing requirements. The listing requirements for the Nasdaq
National Market, on which the Company's stock is traded, generally require
stockholder approval of increases in the number of shares reserved under an
option plan. Such approval is not generally required with respect to shares for
an option grant to a new employee that is an essential inducement to the
individual's entering into an employment contract with the Company. Most of the
shares represented by the recent increase in shares reserved under the Plan will
meet this requirement, the Company believes, but the Company has obtained
stockholder approval of the increase to the extent future option grants do not
satisfy this exception to the Nasdaq rules.
Amendments with respect to incentive stock options granted or to be
granted under the Plan and options which the Company intends to exclude from the
application of section 162(m) are further subject to any approval by
stockholders required under the Code. However, no such action by the Board of
Directors or stockholders may alter or impair any option previously granted
under the Plan. In any event, the Plan terminates in April 2007.
No Additional Rights
Neither the establishment of, nor a participant's participation in, the
Plan shall be held or construed to confer upon any person any right to
employment by the Company or any subsidiary of the Company.
Federal Income Tax Consequences
Incentive Stock Options. An incentive stock option, or ISO, has
restrictions on the option terms and the disposition of shares acquired by
exercising the option. The option holder has the right to exercise the option
during the option term. As the value of the stock increases, the option holder
can benefit to the extent of the amount of such value in excess of the option
exercise price. If the option holder satisfies the holding period requirements
under the Code, the option holder does not recognize ordinary income at the time
of option grant or exercise (although the spread between the option price and
the option stock's fair market value constitutes an item of adjustment for
alternative minimum tax purposes under Section 56 of the Code), and the Company
cannot deduct the related compensation expense. The option holder is taxed only
upon disposition of the option stock. The gain is treated as a sale or exchange
of a capital asset for a qualifying disposition. If disposition
6
<PAGE>
occurs within two years of the option holder's receipt of the option or within
one year of receipt of the stock (i.e., a disqualifying disposition), the option
holder generally recognizes at the time of the disposition first, ordinary
income measured by the excess of the fair market value of the stock at the time
of option exercise over the option price (i.e., the "bargain purchase element"),
and second, capital gain measured by the excess of the disposition proceeds over
the fair market value of the stock on the date of exercise. In such cases, the
amount of ordinary income includible in the option holder's income is deductible
by the employer.
Nonstatutory Stock Options. The term nonstatutory stock option refers
to options to purchase employer stock which, for some reason, do not satisfy the
legal requirements to qualify as an ISO. A nonstatutory stock option is taxed to
the optionee at the time of grant only if it has a readily ascertainable fair
market value at that time (the Company's stock options do not have a readily
ascertainable fair market value). Otherwise, the optionee is taxed at the time
of exercise on ordinary income measured by the excess of the fair market value
of the underlying shares at the time of exercise over the exercise price of the
options. The employer has a corresponding compensation deduction at the time of
exercise.
[Remainder of page intentionally left blank.]
7
<PAGE>
COMPENSATION OF DIRECTORS AND OFFICERS
Executive Compensation
<TABLE>
The following table sets forth summary information concerning the
compensation received by our chief executive officer and by each of the other
four most highly compensated executive officers and their titles as of September
30, 1999 and September 30, 1998:
Summary Compensation Table
<CAPTION>
Annual Compensation
Name and Principal Position Salary Bonus
-------- ------------
<S> <C> <C> <C>
Samir Arora
Chairman of the Board, Chief Executive Officer, President.......... 1999 $ 183,129 $ 55,987
1998 175,338 47,434
Russell F. Surmanek
Executive Vice President, Finance and Operations, Chief Financial 1999 108,447 113,750
Officer............................................................ 1998 -- --
Morris Taradalsky(1)
Executive Vice President and General Manager, Enterprise........... 1999 176,073 24,343
1998 166,048 86,095(2)
Mark Patton
Executive Vice President Product and Services Group................ 1999 162,525 105,754
1998 150,000 35,555
Jack Rotolo (3)
Executive Vice President Sales..................................... 1999 119,923 53,774
1998 -- --
<FN>
-----------------
(1) Mr. Taradalsky resigned in April 2000.
(2) Includes $65,745 for relocation expenses.
(3) Mr. Rotolo became an executive officer in August 1999, and these figures
reflect his compensation for the entire fiscal year.
</FN>
</TABLE>
Option Grants in Last Fiscal Year
The following table provides information regarding the grant of stock
options during fiscal year 1999 to the named executive officers.
8
<PAGE>
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
----------------- at Assumed Annual Rate of
% of Total Stock Price Appreciation
Number of Options for Option
Shares Granted to Exercise Term (7)
Underlying Employees Price Expiration --------
Name Options (1) in Fiscal ($/share) Date 5% 10%
---- ----------- --------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Samir Arora -- --% $ -- -- $ -- $ --
Russell F. Surmanek 235,000(2) 13 7.50 24-Mar-09 1,108,427 2,808,971
Morris Taradalsky(8) 33,333(3) 2 7.50 09-Dec-08 157,223 398,432
30,000(5) 2 7.75 01-Jul-09 139,143 352,615
Mark Patton 41,666(3) 2 7.50 09-Dec-08 196,526 498,037
30,000(5) 2 7.75 01-Jul-09 139,143 352,615
Jack Rotolo 16,666(3) 1 7.50 12-Sep-08 78,609 199,210
10,000(4) 1 12.00 05-May-09 75,467 191,249
40,000(5) 2 8.06 30-Jun-09 202,755 513,823
100,000(6) 5 5.81 25-Aug-09 365,388 925,961
<FN>
--------------
(1) Options are incentive stock options to the extent qualified and
nonstatutory options otherwise. The options generally terminate 30 days
following the executive's employment with the company or the expiration
date, whichever occurs earlier. The exercise price of each option was
determined to be equal to or greater than the fair market value per share
of the Common Stock at the grant date.
(2) Options to purchase 35,000 shares fully vested three months following the
date of grant. Options to purchase 200,000 shares vest as follows: 25%
after six months, 2.5% per month for the next six months; 50% shall vest in
twenty-four equal monthly installments thereafter, and 10% shall vest in
equal monthly installments for the next twelve months.
(3) Options vest as to 25% after one year, and 1/36 monthly thereafter.
(4) Options vest in 12 equal monthly installments.
(5) Options vest in 24 equal monthly installments.
(6) Options vest as to 35,000 shares after three months, and as to the balance
of the shares over the next 24 months in equal installments, and vesting
will accelerate on a change of control so that 70% of the total number of
shares subject to options will be fully vested on the date of the change of
control.
(7) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise of the option or the sale of the underlying shares. The
actual gains, if any, on the exercise of stock options will depend on the
future performance of the Common Stock, the option holder's continued
employment throughout the option period and the date on which the options
are exercised.
(8) Mr. Taradalsky resigned in April 2000. On May 18, 2000, Mr. Taradalsky's
options to purchase 340,971 shares expired unexercised.
</FN>
</TABLE>
9
<PAGE>
Employment Contracts
We have entered into an employment agreement with Russell F. Surmanek,
Executive Vice President, Finance and Operations and Chief Financial Officer, as
of April 5, 1999. The employment agreement has a term of 24 months. Under the
agreement, Mr. Surmanek is entitled to receive an annual salary of $220,000 plus
a 15% sales target bonus payable semi-monthly, 20% of his annual salary as an
annual fiscal year bonus to executives and a starting bonus of $100,000. If Mr.
Surmanek's employment is terminated without cause before April 5, 2001, he is
entitled to be paid the remaining salary which would have been payable during
the term, including pro-rata bonus amounts. Additionally, under the agreement
the Company granted options to purchase 235,000 shares of Common Stock to Mr.
Surmanek. If Mr. Surmanek is terminated for any reason, other than for cause,
the vesting of his stock options will accelerate so that 65% of the shares
underlying the options will be vested as of the date of termination. If we are
acquired by another company, the vesting of Mr. Surmanek's stock options will
also accelerate by one calendar year or as necessary to provide for vesting of
at least 65% of the shares underlying the options as of the date of the
acquisition.
Unexercised Options in Last Fiscal Year and Fiscal Year-End Values
<TABLE>
The following table sets forth information regarding the number of
shares covered by both exercisable and unexercisable stock options as of
September 30, 1999, and the values of "in-the-money" options, which values
represent the positive spread between the exercise price of any such options and
the fiscal year-end value of our common stock. Additional option grants to our
chief executive officer and other executive officers since September 30, 1999
are discussed under "Benefit Plans."
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
September 30, at September 30,
1999 1999
---- ----
Exercisable/ Exercisable/
Name Unexercisable Unexercisable(1)
------------------------- ------------------------------ -----------------------
<S> <C> <C>
Samir Arora.............. 140,625 / 84,375 $558,984 / $335,390
Russell F. Surmanek...... 35,000 / 200,000 -- /--
Morris Taradalsky........ 83,055 / 113,611 332,289 / 217,709
Mark Patton.............. 16,051 / 107,255 64,188 / 177,335
Jack Rotolo.............. 13,421 / 180,627 19,747 / 85,104
<FN>
--------------------
(1) The value of unexercised in-the-money options at fiscal year end assumes a
fair market value for the common stock of $5.63, the closing market price
per share of the Company's Common Stock as reported on the Nasdaq National
Market on September 30, 1999.
</FN>
</TABLE>
Contractual Arrangements
We are party to a voting agreement with IBM that provides that IBM will
vote its shares of voting stock in a way that limits the number of IBM
representatives on a six-member board of directors to three, notwithstanding
IBM's right to elect a greater number of directors under the Delaware General
Corporation
10
<PAGE>
Law. The agreement defines an IBM representative as an officer, director or
other agent or employee of IBM, IBM's subsidiaries or any other entity
controlled by IBM, other than us. The voting agreement also obligates us and IBM
to maintain a board of directors consisting of six members unless the holders of
a majority of outstanding voting stock, excluding IBM's shares, approve an
amendment to our amended and restated bylaws or restated certificate of
incorporation to change the size of the board. The voting agreement remains in
effect until IBM holds less than 45% of our voting securities on a fully-diluted
basis (as defined in the IBM Voting Agreement) for a period of 180 consecutive
days. As of April 30, 2000, IBM held approximately 50% of our voting securities
as calculated on this fully-diluted basis, which takes into account outstanding
warrants and options to purchase shares of Common Stock. While the IBM voting
agreement remains effective, it may allow IBM's representatives on the Board of
Directors to control any determinations with respect to most material
transactions outside the ordinary course of our business, including mergers or
other business combinations, the acquisition or disposition of our assets,
future issuances of our equity or debt securities and the payment of dividends.
IBM's current representatives on our Board of Directors are Lee A. Dayton,
Robert G. Anderegg and Michael D. Zisman.
11
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
<TABLE>
The following table sets forth information regarding the beneficial
ownership of the common stock as of May 31, 2000 for (a) each person known to us
to own beneficially more than 5% of the common stock, (b) each of our directors,
(c) each of the named executive officers and (d) all executive officers and
directors as a group. Beneficial ownership is determined in accordance with
rules of the Securities and Exchange Commission, or the Commission, and includes
shares over which the beneficial owner exercises voting or investment power.
Shares of common stock subject to options or warrants currently exercisable or
exercisable within 60 days of May 31, 2000 are deemed outstanding for the
purpose of computing the percentage ownership of the person holding the options
or warrants, but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Except as otherwise indicated, and
subject to community property laws where applicable, we believe, based on
information provided by these persons, that the persons named in the table below
have sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them:
<CAPTION>
Shares Beneficially Owned(1)
-----------------------------
Name of Beneficial Owner Number Percent
------------------------------------------- --------------- ------------
<S> <C> <C>
International Business Machines Corporation (2) 15,552,010 49.57%
New Orchard Road
Armonk, NY 10504
Current Directors:
Samir Arora (3) 1,835,911 5.85
c/o NetObjects, Inc.
301 Galveston Drive
Redwood City, CA 94062
Robert G. Anderegg -- --
Lee A. Dayton -- --
Blake Modersitzki(6) 2,500 *
John Sculley (4) 35,581 *
Michael D. Zisman -- --
Named Executive Officers who are not Directors:
c/o NetObjects, Inc.
301 Galveston Drive
Redwood City, CA 94063
Russell F. Surmanek (5) 192,276 *
Mark Patton (7) 212,735 *
Jack Rotolo (8) 212,117 *
All directors and executive officers as a group
(11 persons) (9) 3,077,894 8.0%
<FN>
------------------
* Represents beneficial ownership of less than 1% of the Company's Common Stock.
12
<PAGE>
(1) The number of shares of Common Stock issued and outstanding on May 31, 2000
was 31,038,827. The calculation of percentages is based upon the number of
shares of Common Stock issued and outstanding on such date, plus shares of
Common Stock subject to options and/or warrants held by the respective
persons on May 31, 2000 and exercisable within 60 days thereafter. Such
shares are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Warrants are assumed to be
exercised in full notwithstanding the warrant holders' right to exercise
the warrant on a "net" basis by surrendering shares of Common Stock having
a value equal to the warrant exercise price upon exercise of the warrant.
The persons and entities named in the table have sole voting and
dispositive power with respect to all shares shown as beneficially owned by
them, except as described below.
(2) Includes warrants to purchase 253,194 shares at approximately $6.68 per
share that are exercisable on a net basis and expire on various dates in
2003 and 2004, and warrants to purchase 83,333 shares of Common Stock at
$10.80 per share that are exercisable on a net basis and expire in December
2000.
(3) Includes 354,167 shares subject to options to purchase Common Stock held by
Mr. Arora that are exercisable within 60 days of May 31, 2000. Also
includes 299,457 shares of Common Stock owned by Information Capital LLC,
wholly owned by Mr. Arora, and 362,129 shares of Common Stock held by Rae
Technology II LLC, of which he is President and owns a majority of the
equity interests. Mr. Arora exercises shared voting and dispositive power
over the shares held by Rae Technology II LLC, but disclaims beneficial
ownership of those shares except to the extent of his pecuniary interest
therein.
(4) Includes 24,791 shares subject to options to purchase Common Stock held by
Mr. Sculley that are exercisable within 60 days of May 31, 2000.
(5) Includes 190,418 shares subject to options to purchase Common Stock held by
Mr. Surmanek that are exercisable within 60 days of May 31, 2000.
(6) Includes 2,500 shares subject to options to purchase Common Stock held by
Mr. Modersitzki that are exercisable within 60 days of May 31, 2000.
(7) Includes 113,337 shares subject to options to purchase Common Stock held by
Mr. Patton that are exercisable within 60 days of May 31, 2000.
(8) All 201,824 shares are subject to options to purchase Common Stock held by
Mr. Rotolo that are exercisable within 60 days of May 31, 2000.
(9) Includes 1,167,338 shares subject to options to purchase Common Stock that
are exercisable within 60 days of May 31, 2000 and 362,129 shares of Common
Stock held by Rae Technology II LLC.
</FN>
</TABLE>
13
<PAGE>
INTERESTS OF CERTAIN PERSONS IN OR OPPOSITION TO
MATTERS TO BE ACTED UPON
Officers and directors of the Company are eligible under the Plan,
including Mr. Arora, who is a director, and have a substantial direct interest
in the approval of the amendment to the Plan. None of the additional shares
authorized to be granted under the Plan as described in this Information
Statement have been allocated to current executive officers or directors,
although they are eligible under the Plan.
RESTRICTIONS ON RESALE FOR CERTAIN PERSONS
Shares of stock issued upon exercise of outstanding options under the
Plan have been or will be registered on Form S-8 under the Securities Act. Thus,
generally, participants acquiring stock upon the exercise of options issued
under the Plan will be free to resell such stock without restriction, except for
those persons who are "affiliates" of the Company. In general, persons with the
power to manage and direct the policies of the Company, relatives of any of the
foregoing persons, and trusts, estates, corporations or other organizations
controlled by any of the foregoing persons may be deemed to be affiliates of the
Company. All executive officers and directors of an issuer may be considered
"affiliates". Resales of shares by affiliates are subject to certain
restrictions under SEC Rule 144. Rule 144 imposes certain additional limitations
upon resale, including the number of shares which may be sold in a three-month
period, a requirement that a notice of sale be filed in advance and a
requirement that sales may be made only in a certain manner.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents and other materials, which have been filed by
us with the Securities and Exchange Commission, are incorporated into and
specifically made a part of this Information Statement by this reference:
(a) The Registrant's annual report on Form 10-K for the fiscal
year ended September 30, 1999, filed with the Commission on
December 20, 1999, as amended on Form 10-K/A filed December
23, 1999.
(b) The Registrant's quarterly report on Form 10-Q for the
quarter ended March 31, 2000, filed with the Commission on May
15, 2000.
All documents filed by the Company with the Commission after the date
of this Information Statement pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act, shall also be deemed to be incorporated by reference in this
Information Statement and to be part hereof from the respective dates of filing
of such documents.
Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Information Statment to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Information Statement.
By Order of the Board of Directors:
/s/ Samir Arora
---------------
Samir Arora
Chairman
June 29, 2000
14
