<PAGE>
SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NETLIVE COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------
<PAGE>
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by Registration
Statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------
(3) Filing Party:
--------------------------------------------
(4) Date Filed:
----------------------------------------------
<PAGE>
PRELIMINARY COPIES
NETLIVE COMMUNICATIONS, INC.
One World Trade Center, 87th Floor
New York, New York 11215 10048
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _________________, 1999
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders
("Meeting") of NetLive Communications, Inc., a Delaware corporation ("Company"),
will be held at ___________________________ on ____________________ 1999, at
10:00 a.m., for the following purposes, all as more fully described in the
attached Proxy Statement:
1. To approve (a) the issuance of 8,000,000 shares of common stock, par
value $.0001 per share (the "Common Stock") (on a post-Reverse Split
basis), and 1,000,000 shares of non-voting, convertible Series A
preferred stock (the "Preferred Stock") (on a post-Reverse Split
basis) to several Australian purchasers (the "Purchasers") for Ten
Million Australian Dollars (AUD $10,000,000), (b) the purchase of
1,666,667 ordinary shares of Linda Industries Pty Limited, an
Australian corporation ("Linda") and a wholly owned subsidiary of the
Company, for AUD $1,666,667, (c) making an unsecured loan to Linda in
the amount of AUD $3,333,333, (d) making an unsecured loan to Modara
Oaks Pty Limited, an Australian corporation ("Modara") and a wholly
owned subsidiary of the Company, in the amount of AUD $5,000,000, (e)
the acquisition by Linda of the operating assets (the "Operating
Assets") of Newton Grace Pty Limited, an Australian corporation
("Newton Grace") and one of the Purchasers, used in the manufacture
and distribution of electric blankets, electric kettles, and other
small electric appliances, for AUD $16,923,060, subject to adjustment,
(f) the purchase by Modara of Newton Grace's registered trade marks
(the "Brand Names") for AUD $5,000,000 and (g) the license of the
Brand Names by Modara to Linda, all pursuant to an Amended and
Restated Stock Purchase and Reorganization Agreement (the "Agreement")
dated as of December 10, 1998 by and among the Company, Linda, Modara,
Budbox Pty Limited, an Australian corporation ("Budbox"), Playbyrne
Investments Pty Limited, an Australian corporation ("Playbyrne"),
Newton Grace, Intercorp Group Pty Limited, an Australian corporation
("Intercorp"), Hallendon Pty Limited, an Australian corporation
("Hallendon"), Geoffrey Russell Player ("Mr. Player"), and Vicki Gaye
Player ("Mrs. Player");
i
<PAGE>
2. To authorize an amendment to the Company's Certificate of
Incorporation, as amended to date, to (a) amend Article I to change
the name of the Company from NetLive Communications, Inc. to Linda
Corporation and (b) amend Article IV to (i) change the number of
authorized shares of Common Stock from 19,000,000 shares to 37,000,000
shares, and (ii) change the number of authorized shares of Preferred
Stock from 1,000,000 shares to 4,000,000 shares;
3. To approve a 3.4 to 1 reverse stock split (the "Reverse Split") of
each issued and outstanding share of Common Stock and Preferred Stock
and each share of Common Stock reserved for issuance upon exercise of
outstanding options and warrants, so that immediately thereafter each
pre-Reverse Split share shall equal 0.294 post-Reverse Split shares;
4. To approve an amendment to the Company's 1996 Stock Option Plan (the
"Option Plan") to increase from 800,000 (on a pre-Reverse Split basis)
to 1,000,000 (on a post-Reverse Split basis) the number of shares of
Common Stock reserved for issuance upon exercise of options granted
under the Option Plan;
5. To ratify and approve Founder Settlement Agreements between the
Company and each of Michael Kharitonov, Andrew Schwartz, and Jeffrey
Wolf, former officers and directors of the Company; and
6. To transact such other business as may properly come before the
Meeting and any and all adjournments thereof.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF THE COMPANY VOTE "FOR" THE AGREEMENT AND THE TRANSACTIONS
THEREUNDER, AMENDMENTS TO THE CERTIFICATE OF INCORPORATION, THE REVERSE SPLIT,
AMENDMENT OF THE OPTION PLAN, AND RATIFICATION OF THE FOUNDER SETTLEMENT
AGREEMENTS. Certain stockholders, including several former officers and
directors of the Company, who own approximately 52.6% of the outstanding voting
securities of the Company, have agreed to vote all Common Stock over which they
have voting control in favor of such proposals.
The Board of Directors has fixed the close of business on
__________________, 1999 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meeting or any
adjournment thereof.
YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT, WHICH CONTAINS
INFORMATION RELEVANT TO THE ACTIONS TO BE TAKEN AT THE MEETING. YOU ARE EARNEST
REQUESTED TO DATE, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENVELOPE ENCLOSED FOR THAT PURPOSE (TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES) WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN
PERSON. THE PROXY IS REVOCABLE BY YOU AT ANY TIME PRIOR TO ITS
ii
<PAGE>
EXERCISE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU
ATTEND THE MEETING OR ANY ADJOURNMENT THEREOF. THE PROMPT RETURN OF THE PROXY
WILL BE OF ASSISTANCE IN PREPARING FOR THE MEETING AND YOUR COOPERATION IN THIS
RESPECT WILL BE APPRECIATED.
By Order of the Board of Directors
Adam Goldberg, Secretary
New York, New York
__________________, 1999
iii
<PAGE>
PRELIMINARY COPIES
NETLIVE COMMUNICATIONS, INC.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON
______________________ 1999
This Proxy Statement and the accompanying form of proxy is furnished to
stockholders of NetLive Communications, Inc., a Delaware corporation ("Company")
in connection with the solicitation of proxies, in the accompanying form, by the
Board of Directors of the Company for use in voting at the Special Meeting of
Stockholders ("Meeting") to be held at ________________________, on
______________ 1999, at 10:00 a.m., and at any and all adjournments thereof.
Accompanying this Proxy Statement is a Notice of Special Meeting of
Stockholders, a form of proxy, a copy of the Company's amended Annual Report on
Form 10-KSB/A-1 for the year ended March 31, 1998, the Company's Current Report
on Form 8-K dated December 10, 1998, describing the transactions which are the
subject of the Meeting, the Company's amended Current Report on Form 8-K/A-1
dated December 10, 1998, containing audited financial statements at June 30,
1998 and 1997 and for the years ended June 30, 1998, 1997 and 1996 and unaudited
financial statements at December 31, 1998 and for the six months ended December
31, 1998, and the Company's quarterly report on Form 10-QSB for the quarter
ended December 31, 1998, which contains unaudited financial statements at
December 31, 1998 and for the six months and three months ended December 31,
1998.
At the Meeting, the stockholders of the Company will be asked:
1. To consider and vote upon a proposal (the "Agreement Proposal") to
approve (a) the issuance of 8,000,000 shares of common stock, par value $.0001
per share (the "Common Stock") (on a post-Reverse Split basis), and 1,000,000
shares of non-voting, convertible Series A preferred stock (the "Preferred
Stock") (on a post-Reverse Split basis) to several Australian purchasers (the
"Purchasers") for Ten Million Australian Dollars (AUD $10,000,000), (b) the
purchase of 1,666,667
i
<PAGE>
ordinary shares of Linda Industries Pty Limited, an Australian corporation
("Linda") and a wholly-owned subsidiary of the Company, for AUD $1,666,667, (c)
making an unsecured loan to Linda in the amount of AUD $3,333,333, (d) making an
unsecured loan to Modara Oaks Pty Limited, an Australian corporation ("Modara")
and a wholly-owned subsidiary of the Company, in the amount of AUD $5,000,000,
(e) the acquisition by Linda of the operating assets (the "Operating Assets") of
Newton Grace Pty Limited, an Australian corporation ("Newton Grace") and one of
the Purchasers, used in the manufacture and distribution of electric blankets,
electric kettles, and other small electric appliance, for AUD $16,923,060,
subject to adjustment, (f) the purchase of Modara of Newton Grace's registered
trademarks (the "Brand Names") for AUD $5,000,000, and (g) the license of the
Brand Names by Modara to Linda, all pursuant to an Amended and Restated Stock
Purchase and Reorganization Agreement (the "Agreement") dated as of December 10,
1998 by and among the Company, Linda, Modara, Budbox Pty Limited, an Australian
corporation ("Budbox"), Playbyrne Investments Pty Limited, an Australian
corporation ("Playbyrne"), Newton Grace, Intercorp Group Pty Limited, an
Australian corporation ("Intercorp"), Hallendon Pty Limited, an Australian
corporation ("Hallendon"), Geoffrey Russell Player ("Mr. Player"), and Vicki
Gaye Player ("Mrs. Player");
2. To consider and vote upon a proposal (the "Charter Proposal") to
authorize an amendment to the Company's Certificate of Incorporation, as amended
to date, to (a) amend Article I to change the name of the Company from NetLive
Communications, Inc. to Linda Corporation and (b) amend Article IV to (i) change
the number of authorized shares of Common Stock from 19,000,000 shares to
37,000,000 shares, and (ii) change the number of authorized shares of Preferred
Stock from 1,000,000 shares to 4,000,000 shares;
3. To consider and vote upon a proposal (the "Reverse Split Proposal")
to approve a 3.4 to 1 reverse stock split (the "Reverse Split") of each issued
and outstanding share of Common Stock and Preferred Stock and each share of
Common Stock reserved for issuance upon exercise of outstanding options and
warrants, so that immediately thereafter each pre-Reverse Split share shall
equal 0.294 post-Reverse Split shares;
4. To consider and vote upon a proposal (the "Option Proposal") to
approve an amendment to the Company's 1996 Stock Option Plan (the "Option Plan")
to increase from 800,000 (on a pre-Reverse Split basis) to 1,000,000 (on a
post-Reverse Split basis) the number of shares of Common Stock reserved for
issuance upon exercise of options granted under the Option Plan;
5. To consider and vote upon a proposal (the "Settlement Proposal") to
ratify and approve Founder Settlement Agreements (the "Settlement Agreements")
between the Company and each of Michael Kharitonov, Andrew Schwartz, and Jeffrey
Wolf, former officers and directors of the Company; and
6. To transact such other business as may properly come before the
Meeting and any and all adjournments thereof.
ii
<PAGE>
On or about ____________________ 1999, this Proxy Statement and the
accompanying form of proxy are being mailed to each stockholder of record at the
close of business on _____________________ 1999.
The affirmative vote by the holders of the outstanding Common Stock
constituting a majority of the voting power of the Company's outstanding voting
securities present in person or represented by proxy at the Meeting and voting
is required to approve the Agreement Proposal, Reverse Split Proposal, Option
Proposal, and Settlement Proposal. Approval of the Charter Proposal requires the
affirmative vote of the holders of a majority of the voting power of the
Company's outstanding voting securities.
The Board of Directors of the Company unanimously recommends that the
stockholders of the Company vote "FOR" the Agreement proposal, the Charter
Proposal, the Reverse Split Proposal, the Option Proposal, and the Settlement
Proposal. Certain stockholders, including several former executive officers and
directors of the Company, who own in the aggregate approximately 52.6% of the
voting power of the Company's outstanding voting securities, have agreed to vote
in favor of these proposals.
Holders of the Company's voting securities will not be entitled to any
dissenters or appraisal rights in connection with any of the proposals.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it by giving notice to the Secretary of the Company in person, or
by written notification actually received by the Secretary, at any time prior to
its being exercised. Unless otherwise specified in the proxy, voting securities
represented by proxies will be voted for the Agreement Proposal, the Charter
Proposal, the Reverse Split Proposal, the Option proposal, and the Settlement
Proposal.
The Company's executive offices are located at One World Trade Center,
87th Floor, New York, New York 10048.
iii
<PAGE>
TABLE OF CONTENTS
SUMMARY ................................................................. 1
Meeting ................................................................. 1
The Agreement ........................................................... 2
Lock-Up Agreements ...................................................... 3
Reasons for the Agreement Proposal ...................................... 4
Recommendation of the Board of Directors ................................ 4
No Appraisal Rights for Dissenters ...................................... 4
Accounting Treatment .................................................... 4
Market Price Data ....................................................... 4
Summary Condensed Consolidated Financial Information .................... 5
Currencies of Presentation, Exchange Rates and Certain Definitions ...... 6
THE MEETING ............................................................. 7
Meeting and Record Date ................................................. 7
Quorum; Proxies and Voting Instructions ................................. 7
Votes Required .......................................................... 7
Solicitation of Proxies ................................................. 8
PROPOSAL I: AGREEMENT PROPOSAL .......................................... 9
The Agreement Proposal Generally ........................................ 9
Reasons for the Agreement ............................................... 9
Recommendation of the Board of Directors ................................ 9
iv
<PAGE>
Regulatory Approval .................................................... 10
Material Contracts Between the Company and Newton Grace ................ 10
Accounting Treatment ................................................... 10
Certain Federal Income Tax Consequences ................................ 10
No Appraisal Rights for Dissenters ..................................... 10
The Agreement .......................................................... 11
Description of the Acquisition Securities .............................. 12
Principal Stockholders of the Company .................................. 14
Market Price Data ...................................................... 16
The Loan and Other Facilities .......................................... 16
Management After the NetLive Purchase .................................. 18
Executive Compensation ................................................. 20
Company Properties ..................................................... 21
BUSINESS OF NEWTON GRACE ............................................... 21
General ................................................................ 21
The 1997 Purchase ...................................................... 22
Background ............................................................. 22
Products ............................................................... 23
Proprietary Rights ..................................................... 25
Patents ................................................................ 25
Manufacturing and Raw Materials ........................................ 25
Sales and Marketing .................................................... 26
v
<PAGE>
Advertising .............................................................. 27
Product Development and Engineering ...................................... 27
Competition .............................................................. 27
Seasonality .............................................................. 28
Properties ............................................................... 28
Employees ................................................................ 29
Litigation ............................................................... 29
Linda Management ......................................................... 29
Executive Compensation ................................................... 31
Employment Agreements .................................................... 32
Compensation of Directors ................................................ 32
Other Compensation ....................................................... 32
Certain Relationships and Related Transactions ........................... 32
SELECTED FINANCIAL DATA .................................................. 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION OF NEWTON GRACE ..................... 34
General .................................................................. 34
Results of Operations .................................................... 35
Liquidity and Capital Resources .......................................... 36
"Year 2000" Problem ...................................................... 36
Reasons Why the Board of Directors Recommends Approval of Agreement
Proposal................................................................. 37
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............................... 37
vi
<PAGE>
PROPOSAL II: CHARTER PROPOSAL .......................................... 37
PROPOSAL III: THE REVERSE SPLIT PROPOSAL................................ 39
PROPOSAL IV: THE OPTION PROPOSAL ....................................... 41
PROPOSAL V: THE SETTLEMENT PROPOSAL .................................... 42
FISCAL 1999 STOCKHOLDER PROPOSALS ...................................... 43
DOCUMENTS INCORPORATED BY REFERENCE .................................... 43
vii
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement and the Appendices hereto. This summary does not contain
a complete statement of all material features of the proposals to be voted on
and is qualified in its entirety by reference to the full text of this Proxy
Statement and the Appendices. Stockholders are urged to read this Proxy
Statement and the Appendices in their entirety.
When used in this Proxy Statement the words or phrases "will likely
result," "the Company expects," "will continue," "is anticipated," "estimated,"
"project," or "outlook" or similar expressions are intended to identify
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, each of which
speaks only as of the date made. Such statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Factors that
could affect the Company's results of operations and cause its results to differ
from these statements include the demand for the Company's products; the level
and volatility of interest rates and currency exchange rates; the availability
of credit; legislation affecting the business and financial communities; and the
economy in general. The Company has no obligation to publicly release the result
of any revisions that may be made to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.
MEETING
There will be a Meeting of the Company's stockholders at _______
_____________________ on _______________, 1999 at 10:00 a.m. At the Meeting,
stockholders of the Company will be asked to consider and vote upon the
Agreement Proposal, the Charter Proposal, the Reverse Split Proposal, the Option
Proposal, and the Settlement Proposal and to consider and act upon any other
matters which may properly come before the Meeting or any adjournment thereof.
The close of business on __________, 1999 was the record date ("Record
Date") for determining which holders of the Company's outstanding voting
securities are entitled to vote at the Company's Meeting.
The Delaware General Corporation Law ("GCL") does not require that the
stockholders of the Company approve the Agreement Proposal, the Reverse Split
Proposal, or the Option Proposal. Under the rules of The Nasdaq Stock Market
("Nasdaq"), stockholder approval is required for transactions which result in a
change of control. Issuance of the Common Stock and the Preferred Stock to the
Purchasers results in a change of control of the Company. Although the Company's
securities are not presently listed on Nasdaq, the Company is soliciting
stockholder approval of these Proposals.
1
<PAGE>
The affirmative vote by the holders of the outstanding Common Stock
constituting a majority of the voting power of the Company's outstanding voting
securities present in person or represented by proxy at the Meeting and voting
is required to approve the Agreement Proposal, Reverse Split Proposal, Option
Proposal, and Settlement Proposal. Approval of the Charter Proposal requires the
affirmative vote of the holders of a majority of the voting power of the
Company's outstanding voting securities.
THE AGREEMENT
Structure
Pursuant to the Agreement, the Company sold shares of its Common Stock
and Preferred Stock which in the aggregate would equal, when fully issued and
converted (as to the Preferred Stock), approximately ninety percent (90%) of the
Common Stock to the Purchasers. Simultaneously with such purchase, the Player
Group sold all of the operating assets of a consumer electric goods business to
the Company. The Company previously had ceased its historic internet call center
business, and will continue this consumer electric goods business, featuring
electric blankets, foot warmers, fans, kettles, jugs, stainless steel urns,
steam and dry irons, toasters, hair care products, and mixers.
Parties to the Agreement
The Company operates this consumer electric goods business through its
Australian subsidiaries, Linda (which acquired the Operating Assets) and Modara
(which acquired the Brand Names and licensed them to Linda). The principal
executive offices of the Company are located at One World Trade Center, 87th
Floor, New York, New York 10048 and its telephone number is (212) 321-9531.
Newton Grace sold the Operating Assets to Linda and the Brand Names to
Modara. Newton Grace is an indirect wholly-owned subsidiary of Budbox. Mr.
Player and Mrs. Player own all of the capital stock of Budbox and Playbyrne. All
of such individuals and entities are investors. The principal executive offices
of all of such entities and individuals is 90 Hanna Street, Noble Park, Victoria
3174, Australia and their telephone number is 011-613-9798-7888.
Agreement Transactions
On December 10, 1998, pursuant to the Agreement, the Company sold (the
"NetLive Purchase") to the Purchasers, for AUD $10,000,000, an aggregate of (i)
27,200,000 shares of Common Stock and (ii) 3,400,000 shares of Preferred Stock
(the Preferred Stock and the Common Stock are collectively referred to as the
"Acquisition Securities"). Because the Company does not currently have a
sufficient number of authorized shares of Common Stock or Preferred Stock to
issue all of the Acquisition Securities, the Company only was able to issue to
the Purchasers 13,499,359 shares of Common Stock. The Agreement provides,
however, that the balance of the Acquisition
2
<PAGE>
Securities will be issued immediately following the proposed 3.4 for 1 Reverse
Split. As a result, immediately following the Reverse Split the Company then
will have issued and outstanding 9,000,000 shares of Common Stock, of which the
Purchasers and their assignees will own 8,000,000 shares (approximately 89%),
and 1,000,000 shares of Preferred Stock, which will be owned by the Player
Group. The Preferred Stock is convertible into up to 1,000,000 shares of Common
Stock, so that upon conversion the Company would have up to 10,000,000 shares of
Common Stock then issued and outstanding, of which the Purchasers and their
assignees would own up to 9,000,000 shares (90%).
Simultaneously with the NetLive Purchase, Linda and Modara (the
Registrant's wholly-owned subsidiaries) purchased (the "Asset Purchase") the
Operating Assets and the Brand Names (collectively, the "Assets") of Newton
Grace (one of the Purchasers) for AUD $21,923,060, subject to adjustment.
Management After the NetLive Purchase
Upon closing of the NetLive Purchase, all of the Company's officers and
directors, except for Adam Goldberg (who is remaining as Director of the
Company), resigned. The following individuals have been elected officers and
directors, to serve in such capacities until the next annual meeting of the
stockholders and Board of Directors: Geoffrey Russell Player, as Chairman and
Director; Adrian D. Wischer, as Chief Executive Officer, President and Director;
Francis D. Spencer, as Director; Drew Ilsley, as Director; and Adam Goldberg, as
Secretary. Mr. Player is empowered to fill the two remaining vacancies in the
Board of Directors.
The Company's resigning directors entered into a settlement agreement
with the former Chief Executive Officer, President, and Director of the Company
to resolve an action brought in the Supreme Court of the State of New York
captioned "Laurence Rosen, on behalf of the shareholders of NetLive
Communications, Inc. v. Kharitonov, et al" (Index No. 98-602056). At the closing
of the NetLive Purchase, the parties to this action executed a Stipulation of
Dismissal, mutual releases, and covenants not to sue. In connection with this
settlement, the Company and three of its resigning executive officers and
directors executed the Settlement Agreements pursuant to which the individuals
resigned from the Company, forfeited all options granted to them, extended
lock-up agreements as to Common Stock owned by them for a period of one year,
and executed mutual releases with the Company.
LOCK-UP AGREEMENTS
Concurrently with the execution of the Agreement, the Player Group
executed lock-up agreements with the Company whereby they each agreed that,
without the prior written consent of the Company or its underwriter, for a
period of 24 months, they will not offer, sell, pledge or otherwise dispose of
any shares of Common Stock or Preferred Stock. Furthermore, Intercorp,
Hallendon, and certain assignees of the Player Group executed similar lock-up
agreements with the Company for periods ranging from 12 to 24 months.
3
<PAGE>
REASONS FOR THE AGREEMENT PROPOSAL
The Company's new management recommends the NetLive Purchase and the
Asset Purchase for two primary reasons. First, to operate a consumer electric
goods business while gaining access to capital markets. This capital would be
used to expand Linda's existing business, to fund new product development and
technological advances in the Company's products, and to enable the Company to
acquire compatible businesses. Second, to develop a United States presence with
a view to selling the Company's products in the United States and potentially
developing local manufacturing and/or distribution. Based on its consolidated
balance sheet (unaudited) at December 31, 1998, the consolidated statement of
income (audited) for the year ended June 30, 1998, and the consolidated
statement of operations (unaudited) for the six months ended December 31, 1998,
the Company had approximately $2,424,000 of stockholders' equity, $11,774,000 of
annual net sales and $2,234,000 of net sales for the interim six month period.
Sales for the interim six month period are seasonally low, typically
representing only approximately 20% of annual sales.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company unanimously recommends that
stockholders approve the Agreement Proposal and the related Charter Proposal,
Reverse Split Proposal, Option Proposal, and Settlement Proposal. See "Agreement
Proposal-Recommendation of the Board of Directors."
NO APPRAISAL RIGHTS FOR DISSENTERS
Under Delaware law, holders of the Company's Common Stock and Preferred
Stock will not be entitled to appraisal rights in connection with any of these
Proposals.
ACCOUNTING TREATMENT
For accounting purposes, the NetLive Purchase and the Asset Purchase
are treated as a reverse merger in which Newton Grace becomes the accounting
acquirer and the historical financial statements of Newton Grace replace those
of the Company. Accordingly, the Company will now be reporting on a June 30 year
end. The Newton Grace financial statements have been adjusted to reflect the
Common Stock and Preferred Stock of the Company as if the NetLive Purchase and
the Asset Purchase were consummated and completed on December 31, 1998.
MARKET PRICE DATA
The Company's Common Stock is traded on the NASD Electronic Bulletin
Board under the symbol NETL. On December 9, 1998, the day preceding the closing
date of the NetLive Purchase and the Asset Purchase, the high and low sales
prices of the Common Stock were $0.875 and $0.875, respectively. On March 23,
1999, the most recent date for which it was
4
<PAGE>
practicable to obtain market price information prior to the printing of this
Proxy Statement, the high and low sales prices were $0.4688 and $0.4688,
respectively.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain condensed consolidated financial
data for the Company, presenting the historical financial statements of Newton
Grace to replace those of the Company, as described above in "Accounting
Treatment." The following data gives effect to the NetLive Purchase and the
Asset Purchase as if those events had occurred as of December 31, 1998, with
respect to the operating and balance sheet data. The following data should be
read in conjunction with the consolidated financial statements of the Company
which are incorporated by reference into this Proxy Statement. See "Condensed
Consolidated Financial Statements."
Condensed Consolidated Financial
Information for the Company
<TABLE>
<CAPTION>
(ACQUISITION JULY 1 TO
DATE) (ACQUISITION
FISCAL YEAR ENDED NOV. 21, 1997 DATE) SIX MONTHS ENDED
JUNE 30, 1998 TO JUNE 30, 1998 NOV. 21, 1997 DECEMBER 31, 1998
------------------ ----------------- -------------- ------------------
(audited) (audited) (audited) (unaudited)
<S> <C> <C> <C> <C>
Statement of Operations
Total revenues $11,774,468 $ 8,929,617 $ 2,540,258 $ 2,233,923
Gross Profit $ 4,136,570 $ 3,235,765 $ 782,600 $ 280,886
Operating Expenses/
(income) $ 2,482,965 $ 1,998,235 $ 418,428 $ 968,013
Income/loss before
income taxes $ 1,653,605 $ 1,237,530 $ 364,172 $ (687,127)
Net income/loss $ 926,640 $ 663,097 $ 233,070 $ (499,145)
Net income/loss per share $ 0.12 $ 0.08 $ 0.03 $ (0.06)
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, 1998 DECEMBER 31, 1998
------------- -----------------
(audited) (unaudited)
<S> <C> <C>
Balance Sheet Data
Total assets $ 21,624,516 $12,385,160
Total liabilities $ 2,392,939 $ 9,960,728
Stockholders' equity $ 19,231,577 $ 2,424,432
</TABLE>
Per share data is based on 8,000,000 shares of Common Stock (on a post-Reverse
Split basis) which will be issued in connection with the NetLive Purchase, as if
issued at the beginning of the period.
CURRENCIES OF PRESENTATION, EXCHANGE RATES AND CERTAIN DEFINITIONS
Newton Grace publishes its consolidated financial statements in
Australian dollars. Unless otherwise stated or the context otherwise requires,
references in this Proxy Statement to "US$," "$," "USD," or "U.S. dollars" are
to United States dollars and references to "AUD" or "A$" are to Australian
dollars. Solely for the convenience of the reader, this Proxy Statement presents
translations of certain Australian dollar amounts into U.S. dollars at specified
rates. Unless otherwise indicated, translations of Australian dollar amounts to
U.S. dollar amounts have been made at the rate of AUD $1.00 = U.S. $0.6382 the
Noon Buying Rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate") on March 23, 1999. These translations should not be
construed as representations that the Australian dollar amounts actually
represent such U.S. dollar amounts or could be converted into U.S. dollars at
the rate indicated.
The following table sets forth certain information with respect to the
Noon Buying Rates for Australian dollars for the periods and dates indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended June 30 Average* High Low Period-End
- ------------------------- -------- ---- --- ----------
<S> <C> <C> <C> <C>
1994 0.69 0.74 0.73 0.73
1995 0.74 0.78 0.71 0.71
1996 0.76 0.80 0.71 0.79
1997 0.78 0.82 0.74 0.75
1998 0.68 0.75 0.59 0.62
- ------------
</TABLE>
* The average of the Noon Buying Rates on the last day of each month during the
period.
6
<PAGE>
THE MEETING
MEETING AND RECORD DATE
The Meeting is scheduled to be held at __________________ ___________,
on ____________, 1999, at 10:00 a.m. __________, 1999 has been fixed as the
Record Date. Only holders of shares of Common Stock as of the Record Date are
entitled to vote at the Meeting.
QUORUM; PROXIES AND VOTING INSTRUCTIONS
The presence at the Meeting in person or by proxy of the holders of
Common Stock possessing a majority of the voting power of all of the outstanding
voting securities of the Company constitutes a quorum at the Meeting. Proxies
relating to "street name" shares that are returned to the Company but marked by
brokers as "not voted," will be treated as shares present for purposes of
determining the presence of a quorum on all matters but will not be treated as
shares entitled to vote on the matter as to which authority to vote is withheld
by the broker ("broker non-votes").
All proxies that are properly executed and returned, unless revoked
prior to the Meeting, will be voted at the Meeting and any postponements or
adjournments thereof in accordance with the instructions indicated thereon or,
except for broker non-votes, if no direction is indicated, in accordance with
the recommendations of the Board. Management knows of no matters to be submitted
at the Meeting other than as specified in the Notice of Meeting included with
this Proxy Statement. However, if any other business properly comes before the
Meeting, it is the intention of the persons named in the proxy to vote in
respect thereof in accordance with their best judgment. The execution of a proxy
will not affect a stockholder's right to attend the Meeting and vote in person.
A stockholder who has given a proxy may revoke it at any time before it is
exercised at the Meeting by filing with the Secretary of the Company a written
notice of revocation. Attendance at the Meeting will not, by itself, revoke a
proxy.
VOTES REQUIRED
The GCL does not require that the stockholders of the Company approve
the Agreement Proposal, the Reverse Split Proposal, or the Option Proposal.
Under the rules of Nasdaq, stockholder approval is required for transactions
which result in a change of control. Issuance of the Common Stock and the
Preferred Stock to the Purchasers results in a change of control of the Company.
Although the Company's securities are not presently listed on Nasdaq, the
Company is soliciting stockholder approval of these Proposals.
At the close of business on the Record Date, the Company had issued and
outstanding 3,400,000 shares of Common Stock (exclusive of 13,499,359 shares
issued to the Purchasers pursuant to the Agreement), the Company's only class of
voting securities outstanding. Each holder
7
<PAGE>
of Common Stock will be entitled to one vote for each share of Common Stock
registered in his or her name on the Record Date.
The affirmative vote by the holders of the outstanding Common Stock and
Preferred Stock constituting a majority of the voting power of the Company's
outstanding voting securities present in person or represented by proxy at the
Meeting and voting is required to approve the Agreement Proposal, Reverse Split
Proposal, Option Proposal, and Settlement Proposal. Abstentions regarding these
proposals are considered present and entitled to vote on the matter and,
therefore, will have the same effect as a vote against these proposals but
because shares held by brokers will not be considered entitled to vote on
matters as to which brokers withhold authority, a broker non-vote on these
proposals will have no effect on the vote.
Approval of the Charter Proposal requires the affirmative vote of the
holders of a majority of the voting power of the Company's outstanding voting
securities. Accordingly, abstentions and broker non-votes regarding this
proposal, since they are not counted in favor of the proposal, will have the
same effect as a vote against this proposal.
All other matters that may be voted on will be decided by the
affirmative vote of the voting securities, present or represented at the meeting
and entitled to vote. On any such matter, an abstention will have the same
effect as a negative vote, but broker non-votes will have no effect on the vote
regarding such matter. Unless otherwise specified in the proxy, voting
securities represented by proxies will be voted "FOR" the Agreement Proposal,
the Charter Proposal, the Reverse Split Proposal, the Option Proposal, and the
Settlement Proposal.
Certain stockholders, including several former executive officers and
directors of the Company, have agreed in writing to vote all outstanding voting
securities of the Company owned by them (approximately 52.6% of the voting power
of the Company's outstanding voting securities) in favor of the Agreement
Proposal, the Charter Proposal, the Reverse Split Proposal, the Option Proposal
and the Settlement Proposal.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation of proxies from
its stockholders as well as the cost of preparing, assembling, printing and
mailing this Proxy Statement, the proxy card and any additional information
furnished to stockholders. Copies of solicitation material will be furnished to
brokerage houses, fiduciaries and custodians holding in their names shares of
Common Stock beneficially owned by others to forward to such beneficial owners.
The Company may reimburse persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such beneficial owners.
Solicitation of proxies by mail may be supplemented by telephone or other
electronic or personal solicitation by directors, officers or other regular
employees of the Company who will not receive additional compensation for such
services.
8
<PAGE>
PROPOSAL I: AGREEMENT PROPOSAL
The following is a brief summary of certain aspects of the Agreement
Proposal, the Agreement and the transactions contemplated thereby. This summary
does not purport to be complete and is qualified in its entirely by reference to
the Agreement, annexed as Exhibit 2(a) to the Company's Current Report on Form
8-K dated December 10, 1998, which accompanies this Proxy Statement and is
incorporated herein by reference. Stockholders of the Company are urged to read
the Agreement in its entirety.
THE AGREEMENT PROPOSAL GENERALLY
On December 10, 1998, the Company sold, pursuant to the Agreement,
shares of its Common Stock and Preferred Stock which in the aggregate would
equal, when fully issued and converted (as to the Preferred Stock),
approximately ninety (90%) percent of the Common Stock to the Purchasers.
Simultaneously with such purchase, Newton Grace sold all of the operating assets
of its consumer electric goods business to the Company. The Company previously
had ceased its historic internet call center business, and will continue this
consumer electric goods business, featuring electric blankets, foot warmers,
fans, kettles, jugs, stainless steel urns, steam and dry irons, toasters, hair
care products, and mixers.
REASONS FOR THE AGREEMENT
The Company's new management recommends the NetLive Purchase and the
Asset Purchase for two primary reasons. First, to operate a consumer electric
goods business while gaining access to capital markets. This capital would be
used to expand Linda's existing business, to fund new product development and
technological advances in the Company's products, and to enable the Company to
acquire compatible businesses. Second, to develop a United States presence with
a view to selling the Company's products in the United States and potentially
developing local manufacturing and/or distribution. The Company has
approximately $2,424,000 in stockholders' equity, $11,774,000 in annual net
sales, and $2,234,000 of net sales for six months, based on the consolidated
balance sheet (unaudited) at December 31, 1998, the consolidated statement of
income (audited) for the year ended June 30, 1998, and the consolidated
statement of operations (unaudited) for the six months ended December 31, 1998,
respectively. Sales for the interim six month period are seasonally low,
typically representing only approximately 20% of annual sales.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company unanimously approved the
Agreement Proposal and related matters and believes it is fair to and in the
best interests of the Company's stockholders. The Board of Directors unanimously
recommends that stockholders approve the Agreement Proposal, the Charter
Proposal, the Reverse Split Proposal, the Option Proposal, and the Settlement
Proposal.
9
<PAGE>
REGULATORY APPROVAL
The Company and the Player Group must comply with applicable Federal
and state securities laws regarding the issuance of Common Stock and Preferred
Stock. In addition, the Company obtained a letter of no objections from the
International and Investment Division of the Treasury of Australia regarding the
Asset Purchase.
MATERIAL CONTRACTS BETWEEN THE COMPANY AND NEWTON GRACE
Other than the Agreement and related documents, the Company is not
aware of any past, present, or proposed material contracts, arrangements,
understandings, relationships, negotiations or transactions between Newton Grace
or the Player Group and the Company or any of its affiliates, except for an
arrangement between Linda and Dandenong Custom Moulders Pty Ltd. ("DCM"), an
Australian corporation that is wholly-owned indirectly by the Player Group. DCM
operates a plastic injection molding business and may be engaged by Linda to
subcontract out that work for the Company's range of kettle products. Linda has
adopted an informal policy requiring at least two independent bids from third
parties prior to subcontracting any work to DCM. Linda also presently maintains
machinery and employees at DCM's plant, for use in producing Linda's goods, and
Linda reimburses DCM for the overhead expenses associated with such use.
ACCOUNTING TREATMENT
For accounting purposes, the NetLive Purchase and the Asset Purchase
are treated as a reverse merger in which Newton Grace becomes the accounting
acquirer and the historical financial statements of Newton Grace replace those
of the Company. Accordingly, the Company will now be reporting on a June 30 year
end. The Newton Grace financial statements have been adjusted to reflect the
Common Stock and Preferred Stock of the Company as if the NetLive Purchase and
the Asset Purchase were consummated and completed on December 31, 1998.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Neither the Company nor the stockholders of the Company will recognize
any gain or loss in the NetLive Purchase or the Asset Purchase.
NO APPRAISAL RIGHTS FOR DISSENTERS
Under Delaware law, the Company's stockholders will not be entitled to
appraisal rights in connection with any of the Proposals discussed in this Proxy
Statement.
10
<PAGE>
THE AGREEMENT
The description of the Agreement set forth below does not purport to be
complete and is qualified in its entirety by reference to the Agreement,
included in the Company's Current Report on Form 8-K dated December 10, 1998,
which Report accompanies this Proxy Statement and is incorporated herein by
reference. Stockholders are urged to read the Agreement in its entirety.
General
- -------
On December 10, 1998 (the "Closing Date"), the Company and the
Purchasers entered into the Agreement pursuant to which the NetLive Purchase,
the Asset Purchase and related matters were consummated.
Agreement Transactions
- ----------------------
Pursuant to the Agreement, the Company sold to the Purchasers, for AUD
$10,000,000, an aggregate of (i) 27,200,000 shares of Common Stock (pre-Reverse
Split) and (ii) 3,400,000 shares of Preferred Stock (pre-Reverse Split). Because
the Company does not have a sufficient number of authorized shares of Common
Stock or Preferred Stock to issue all of the Acquisition Securities, the Company
only was able to issue to the Purchases 13,499,359 shares of Common Stock
(pre-Reverse Split). Upon approval of the proposals discussed in this Proxy
Statement and after taking into account the Reverse Split, the Company will
issue the balance of the Acquisition Securities to the Purchasers so that there
will be issued and outstanding 9,000,000 shares of Common Stock (of which
8,000,000 will be owned by the Purchasers and their assignees) and 1,000,000
shares of Preferred Stock (owned by the Player Group).
On the Closing Date, Linda sold (the "Linda Share Acquisition") to the
Company, for AUD $1,666,667, 1,666,667 ordinary shares of Linda. Immediately
thereafter, the Company made a loan to Linda (the "Linda Loan") in the amount of
AUD $3,333,333. Linda used the proceeds of the Linda Share Acquisition and the
Linda Loan, plus a loan (the "Loan") from National Australia Bank Limited in the
amount of AUD $10,000,000 to fund the cash portion (AUD $15,000,000) of the
purchase price for the Operating Assets of Newton Grace. The balance of the
purchase (approximately AUD $1,923,060, subject to adjustment) was paid by
delivery of a promissory note. Subsequent to the Closing Date, the Player Group
made loans (in the form of cash and payment to third party creditors of Linda
and the Company) aggregating approximately A$739,157. In partial payment of this
indebtedness, Linda made payments to third party creditors of Newton Grace
aggregating approximately A$1,456,000, so that Linda remains indebted to Newton
Grace and the other Player Group members in the approximate amount of
A$1,206,217, subject to adjustment.
On the Closing Date, the Company also made a loan (the "Modara Loan")
to its other Australian subsidiary, Modara, in the amount of AUD $5,000,000.
Modara utilizes the proceeds of the Modara Loan to fund its purchase of the
Brand Names from Newton Grace. Modara then licensed the Brand Names to Linda.
11
<PAGE>
In connection with the NetLive Purchase, the Player Group executed
lock-up agreements pursuant to which they agreed that, without the prior written
consent of the Company or its underwriter, for a period of 24 months, they will
not offer, sell, pledge, or otherwise dispose of any shares of Common Stock or
Preferred Stock. In addition, Intercorp, Hallendon, and certain assignees of the
Player Group executed similar lock-up agreements with the Company for periods
ranging from 12 to 24 months.
In connection with the Agreement, the Company's resigning directors
entered into a settlement agreement with the former Chief Executive Officer,
President, and Director of the Company to resolve an action brought in the
Supreme Court of the State of New York captioned "Laurence Rosen, on behalf of
the shareholders of NetLive Communications, Inc. v. Kharitonov, et al" (Index
No. 98-602056). At the closing of the NetLive Purchase, the parties to this
action executed a Stipulation of Dismissal, mutual releases, and covenants not
to sue. In connection with this settlement, the Company and three of its
resigning executive officers and directors executed the Settlement Agreements
pursuant to which the individuals resigned from the Company, forfeited all
options granted to them, extended lock-up agreements as to Common Stock owned by
them for a period of one year, and executed mutual releases with the Company.
Pursuant to the Agreement, all outstanding options, warrants, and
similar rights were cancelled except for options to purchase an aggregate of
33,644 shares of Common Stock (on a pre-Reverse Split basis) and warrants to
purchase a total of 2,007,500 shares of Common Stock (on a pre-Reverse Split
basis).
In connection with the Agreement, the Company also sold 450,000 shares
of Common Stock (on a pre-Reverse Split basis) to an individual investor for a
total consideration of $150,000.
DESCRIPTION OF THE ACQUISITION SECURITIES
Pursuant to the Agreement, in connection with the NetLive Purchase, the
Company has agreed to issue (i) to the Purchasers an aggregate of 27,200,000
shares of Common Stock (on a pre-Reverse Split basis); and (ii) to the Player
Group 3,400,000 shares of Preferred Stock (on a pre-Reverse Split basis).
The authorized capital stock of the Company consists of 19,000,000
shares of Common Stock, par value $.0001 per share, and 1,000,000 shares of
Preferred Stock, par value $.0001 per share.
Common Stock
- ------------
There are currently 3,400,000 shares of Common Stock issued and
outstanding (excluding 13,499,359 shares issued to the Purchasers pursuant to
the Agreement) held of record by 753 stockholders.
12
<PAGE>
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Stockholders do not
have cumulative voting rights. Subject to preferences that may be applicable to
any then outstanding Preferred Stock, holders of Common stock are entitled to
receive ratably such dividends as may be declared from time to time by the Board
of Directors out of funds legally available therefor. In the event of a
dissolution, liquidation or winding-up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding Preferred
Stock. Holders of Common Stock have no right to convert their Common Stock into
any other securities. The Common Stock has no pre-emptive or other subscription
rights. There are no redemption or sinking funds provisions applicable to the
Common Stock. All outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and non-assessable.
Preferred Stock
- ---------------
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 1,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of Preferred Stock could
adversely affect the voting power of holders of Common Stock and could have the
effect of delaying, deferring or preventing a change in control of the Company.
The Series A Convertible Preferred Stock
- ----------------------------------------
The Series A Convertible Preferred Stock to be issued to the Player
Group will rank prior to all other capital stock of the Company as to dividends,
repurchases, or distribution of assets upon liquidation. Holders of the Series A
Convertible Preferred Stock will receive a liquidation preference equal to
$.0001 per share before any liquidation distribution is made to the holders of
Common Stock. Prior to conversion, the holders of Preferred Stock will have no
voting rights except regarding (i) amending the terms of the Preferred Stock or
(ii) any proposed authorization or issuance of any class of securities which
have a liquidation preference or rights to dividends or other distributions
which are superior to or pari passu with the Series A Convertible Preferred
Stock. Holders of shares of Series A Convertible Preferred Stock have the right
to convert such shares into shares of Common Stock at a conversion rate
(initially one share of Common Stock for each one share of Preferred Stock), but
only if the Company's audited consolidated net after tax income ("Net Income")
exceeds the equivalent in U.S. Dollars of AUD $3,571,429 ("Target Income") for
any of the fiscal years ending June 30, 1999, 2000, and 2001. If Net Income
exceeds Target Income in any of such years, for each U.S. $200,000 increment
that Net Income exceeds Target Income, 200,000 shares of Preferred Stock will be
convertible into shares of Common Stock.
13
<PAGE>
FOR A COMPLETE DESCRIPTION OF THE SERIES A CONVERTIBLE PREFERRED STOCK
SEE THE CERTIFICATE OF DESIGNATION FOR THE SERIES A CONVERTIBLE PREFERRED STOCK
ANNEXED HERETO AS EXHIBIT 4.1.
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth, as of the Record Date, the number of
shares of Common Stock owned beneficially to the knowledge of the Company by
each director and by all officers and directors of the Company as a group and
all persons, to the best of the Company's knowledge, that beneficially own five
(5%) percent or more of the issued and outstanding Common Stock. The percentages
have been calculated on the basis of treating as outstanding for purposes of
computing the percentage ownership of a particular individual, all shares of
Common Stock outstanding as of such date and all shares of Common Stock issuable
to such individual in the event of exercise of outstanding options owned by such
holder at such date which are exercisable within sixty (60) days of such date.
Shares of Common Stock issuable to the Purchasers upon approval of the Agreement
Proposal, Charter Proposal, and the Reverse Split Proposal discussed in this
Proxy Statement are deemed outstanding for these purposes. All amounts are
expressed in post-Reverse Split shares.
14
<PAGE>
<TABLE>
<CAPTION>
Name and Address* Number of Shares
of Beneficial Owner(1) Beneficially Owned Percent of Class
- ---------------------- ------------------ ----------------
<S> <C> <C> <C>
Geoffrey R. Player(2) 6,685,000 72.3%
Adrian D. Wischer(3) -0- 0%
Francis D. Spencer(4) -0- 0%
Drew Ilsley(4) -0- 0%
Adam L. Goldberg(5) 1,941 **
Playbyrne Investments Pty Limited(6) 3,000,000 32.4%
Budbox Pty Limited(7) 1,800,000 19.5%
Newton Grace Pty Limited(8) 1,385,000 15.0%
Intercorp Group Holdings Pty Limited(9) 700,000 7.6%
All Executive Officers and Directors
(Five Persons) 6,936,941 75.0%
</TABLE>
- --------
* The address of Mr. Goldberg is c/o the Company, 330 16th Street, Brooklyn,
New York 11215. The address of Intercorp Group Holdings Pty Limited is 23
Welwyn Avenue, East Brighton, Victoria 3187, Australia. The address of the
other owners is 90 Hanna Street, Noble Park, Victoria 3174, Australia.
** Owns less than one (1%) percent.
1 The shares owned by Mr. Player, Playbyrne, Budbox, and Newton Grace have
been pledged as collateral for the NAB Facilities and the NAB has the power to
vote such shares. See "Proposal I: Agreement Proposal - The Loan and Other
Facilities."Unless otherwise noted, all other persons named in the table have
sole voting and dispositive power with respect to all shares of Common Stock
beneficially owned by them.
2 Mr. Player is the Chairman and a Director of the Company. Does not include
250,000 shares owned by Mr. Player's wife, Vicki Gaye Player, as to which Mr.
Player disclaims beneficial ownership. Includes 3,000,000 shares owned by
Playbyrne, 1,800,000 shares owned by Budbox, and 1,385,000 shares owned by
Newton Grace, all of which are controlled by Mr. Player.
3 Mr. Wischer is the Chief Executive Officer, President, and a Director of
the Company. Does not include 500,000 shares issuable upon exercise of options.
Does not include 300,000 shares which may be purchased for nominal
consideration from Playbyrne upon satisfaction of certain conditions. See
"Proposal I: Agreement Proposal - Executive Compensation."
4 Messrs. Spencer and Ilsley are Directors of the Company. Does not include
25,000 shares issuable upon exercise of options granted to each of them. See
"Proposal I: Agreement Proposal - Executive Compensation."
5 Mr. Goldberg is the Secretary and a Director of the Company. Does not
include 25,000 shares issuable upon exercise of options granted to Mr.
Goldberg. See "Proposal I: Agreement Proposal - Executive Compensation."
6 Playbyrne is controlled by Mr. Player. Includes 300,000 shares which may
be sold for nominal consideration to Mr. Wischer, as described above.
7 Budbox is controlled by Mr. Player. Does not include 1,385,000 shares
owned by its subsidiary, Newton Grace, as to which Budbox disclaims beneficial
ownership.
8 Newton Grace is controlled by Mr. Player.
9 Intercorp Group Holdings Pty Limited, an affiliate of two of the
Purchasers, Intercorp and Hallendon, received its shares by assignment from
Intercorp and Budbox. Does not include 65,000 shares owned by Hallendon, as to
which Intercorp Group Holdings Pty Limited disclaims beneficial ownership.
15
<PAGE>
MARKET PRICE DATA
The Company's Common Stock is traded on the NASD Electronic Bulletin
Board under the symbol "NETL." On December 9, 1998, the day preceding the
closing date of the NetLive Purchase and the Asset Purchase the high and low
sales prices of the Common Stock were $0.875 and $0.875, respectively. On March
23, 1999, the most recent date for which it was practicable to obtain market
price information prior to the printing of this Proxy Statement, the high and
low sales prices of the Common Stock were $0.4688 and $0.4688, respectively.
THE LOAN AND OTHER FACILITIES
Pursuant to the terms of Overdraft and Multi-Option facilities (the
"Overdraft and Multi-Option Facilities"), dated February 9, 1999 between
National Australia Bank Limited (the "NAB") and Linda, as detailed in the letter
of offer of the NAB to Linda, dated February 9, 1999, Linda may borrow up to AUD
$1,200,000 under the Overdraft Facility in the form of a revolving credit line
at NAB's base variable rate (currently 8.50% per annum), plus a margin of 1.0%
per annum on balances up to AUD $500,000 and 3.5% per annum on balances over
such amount, calculated daily and payable monthly in arrears. The Overdraft
Facility also requires payment of a line fee equal to 0.8% per annum, payable
semi-annually. In addition, AUD $400,000 may be utilized by Linda under the
Multi-Option Facility in any combination of a documentary letter of credit
facility, a leasing facility or an encasement negotiation advice facility.
Certain negotiation fees were payable and ongoing annual fees are payable by
Linda to the NAB under the Overdraft and Multi-Option Facilities. The purpose of
the Overdraft and Multi-Option Facilities are to provide for day-to-day working
capital requirements of Linda's business, enable the importing and exporting of
goods and enable the leasing of equipment used for "business purposes" and the
assignment of exiting leases from Newton Grace. The Overdraft and Multi-Option
Facilities expire on June 30, 1999. As of March 19, 1999, AUD $1,262,767 was
outstanding under the Overdraft and Multi-Option Facilities.
In order to assist Linda with the purchase of the Assets of Newton
Grace, the NAB and Linda have also entered into a Bills Accepted/Discounted
(Floating) facility (the "Bill Facility" or the "Loan"), pursuant to which Linda
borrowed AUD $10 million. The interest rate payable by Linda under the Bill
Facility floats at NAB's rate for Bank Accepted Bills, which rate currently is
approximately 5.0% per annum. The Bill Facility also requires Linda to pay a
facility fee of 1.25% per annum to the NAB, payable quarterly in advance.
Amounts outstanding under the Bill Facility mature on June 30, 1999. The Company
paid an extension fee of AUD $10,000 to the NAB to extend the maturity date of
the Loan and the Overdraft and Multi-Option Facilities from January 31, 1999 to
June 30, 1999.
The Overdraft and Multi-Option Facilities and the Bill Facility
(collectively, the "NAB Facilities") are secured by (i) liens over all of the
assets of Linda (in the form of registered charges over all assets in
Australia), (ii) a guarantee and indemnity to the NAB for AUD $11.6 million from
16
<PAGE>
NetLive supported by liens over all of its assets and (iii) guarantees and
indemnities to the NAB for AUD $11.6 million from Newton Grace, Budbox, Noble
Heights Pty. Ltd, Oxford Banner Pty Ltd, Modara, Playbyrne, Geoffrey Player and
Vicki Player, certain of which are supported by liens over all of their
respective assets, including over the shares of common stock of NetLive held by
each of the foregoing guarantors. In addition, (i) Newton Grace has agreed with
the NAB and Linda to subordinate its promissory note from Linda of approximately
AUD $1,923,060, subject to adjustment, to the NAB Facilities, (ii) NetLive has
agreed with the NAB and Modara to subordinate its loan of AUD $5.0 million to
Modara to the NAB Facilities and (iii) NetLive has agreed with the NAB and Linda
to subordinate its loan of AUD $3,333,333 to Linda to the NAB Facilities.
The NAB Facilities contain certain restrictive covenants of Linda for
so long as any amounts are outstanding thereunder, including restrictions
against the following without the consent of the NAB: (i) granting of additional
liens; (ii) disposition of any of its assets (other than in its usual and
ordinary course of business); (iii) engaging in any business other than that in
which it is presently operating; (iv) mergers or acquisitions; (v) disposition
or a change in ownership of any of its subsidiaries; (vi) repayment of any
related party, inter-company or shareholder's loans provided to Linda prior to
repayment in full of amounts outstanding under the NAB Facilities; (vii) payment
of any dividends by Linda or any of its subsidiaries; (viii) the transfer of any
funds, the repayment of any loans or the creation of any loan obligation or
commitment or (ix) the entry into any speculative foreign currency options or
other transactions. In addition to the foregoing restrictive covenants, Linda
has agreed with the NAB to (i) ensure that all risks insurance is held over all
of its physical assets, (ii) comply with all applicable laws and pay all
obligations that if unpaid might result in a lien or claim against Linda's
assets, (iii) maintain its plant and machinery in a state of good repair, (iv)
obtain the NAB's consent for undertaking capital expenditures in excess of an
aggregate of AUD $150,000 (such consent to not be unreasonably withheld) and (v)
ensure that all proceeds from any issuance of equity or debt by NetLive be
invested in Linda through the purchase of equity or the making of loans which
Linda must apply to repay amounts outstanding under the Bill Facility.
The occurrence of any of the following events entitles the NAB to
terminate the NAB Facilities, will result in all amounts outstanding thereunder
becoming immediately due and payable by Linda and entitles the NAB to enforce
its security for the NAB Facilities (as described above): (i) any default in the
performance and observance of any of the terms and conditions in the NAB
Facilities; (ii) failure to repay the Bill Facility in full by June 30, 1999,
(iii) failure by Linda to pay any amounts from time to time due and payable to
the NAB pursuant to any facility or arrangement; (iv) default by Linda in the
due performance or observance of any covenant, undertaking, obligation or
condition applying under any of the NAB Facilities which could have a material
adverse affect on the ability of Linda to perform any of its obligations to the
NAB and which is not remedied within seven (7) days thereafter; (v) any order
for payment is made or judgment entered against Linda which is not satisfied
within seven (7) days thereafter; (vi) appointment of a receiver, manager,
receiver and manager, liquidator or provisional liquidator in respect of Linda
or the whole or any part of its property or assets; (vii) a ground for the
winding up of Linda shall arise; (viii) Linda stops payment generally or ceases
or threatens to cease carrying on its business or the majority part thereof;
(ix) Linda convenes a meeting of its creditors or proposes or enters into any
arrangement or composition
17
<PAGE>
for the benefit of its creditors; (x) a resolution is passed for the winding up
of Linda (other than for the purpose of a reconstruction or amalgamation
previously approved in writing by the NAB); (xi) any present or future monetary
obligation (of whatever nature) of Linda is not paid when due or becomes due
and payable before its normal maturity by reason of a default or event of
default; and (xii) Linda (a) fails to pay any indebtedness (including interest)
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) or (b) fails to perform or observe any term, covenant or
condition, actual or implied, on its part to be performed or observed under any
agreement, instrument or arrangement relating to any indebtedness if the effect
of which is to accelerate or to permit the acceleration of the maturity of such
indebtedness or to make demand therefor, or such indebtedness shall be declared
due and payable, or required to be prepaid prior to the stated maturity
thereof.
MANAGEMENT AFTER THE NETLIVE PURCHASE
Upon closing of the NetLive Purchase, all of the Company's officers and
directors, except for Adam Goldberg (who is remaining as Director of the
Company), resigned. The following individuals have been elected officers and
directors, to serve in such capacities until the next annual meeting of the
stockholders and Board of Directors: Geoffrey Russell Player, as Chairman and
Director; Adrian D. Wischer, as Chief Executive Officer, President, and
Director; Francis D. Spencer, as Director; Drew A. Ilsley, as Director; and Adam
Goldberg, as Secretary. Mr. Player is empowered to fill the two remaining
vacancies in the Board of Directors.
The directors and executive officers of the Company are as follows:
Name Age Company Positions
---- --- -----------------
Geoffrey R. Player 53 Chairman and Director
Adrian D. Wischer 42 Chief Executive Officer, President
and Director
Francis D. Spencer 58 Director
Drew A. Ilsley 39 Director
Adam L. Goldberg 39 Secretary and Director
Geoffrey R. Player has been Executive Chairman and Managing Director of
Newton Grace since he acquired the company in November 1997 from its founder.
From November 1994 to November 1997 he was a private investor, directly and
through family-owned companies such as Playbyrne and Budbox. Prior thereto, from
1974 to 1994, Mr. Player founded Players Biscuits Pty Limited and oversaw its
development to an Australian Stock Exchange listed company with annual sales
reaching AUD $40 million. He also is a Director of Linda, Budbox, Playbyrne,
Playbyrne Pty Ltd, Roxholme Grove Pty
18
<PAGE>
Ltd, P. F. Management Services Pty Ltd, Noble Heights Pty Ltd, and Oxford
Banner Pty Ltd. Mr. Player graduated from The Scots College, Sydney, Australia
in 1963.
Adrian D. Wischer was elected President and CEO of the Company on
February 23, 1999. He also was appointed a Managing Director of Linda and a
Director of Modara, each on February 24, 1999. From November 1995 to February
1999 he was the CEO and a principal of Nepean Capital Partners, a private equity
fund management business focusing on medium sized Australian companies. Prior to
November 1995, Mr. Wischer was the CEO and a major shareholder in Toby
Industries Ltd., a specialty chemicals manufacturing business listed on the
Australian Stock Exchange. He also is Chairman and a controlling shareholder of
Pool Systems Pty Ltd., a manufacturer and distributor of swimming pool
accessories, and a Director of two non-traded public Australian companies,
Osprey Gold NL and Reedy Lagoon Corporation NL, engaged in exploration for gold
and diamonds, respectively. Mr. Wischer is a Director of the Bays Hospital Group
Inc., a community hospital. Mr. Wischer has an Economics Degree from Monash
University and has completed the Australian Institute of Company Directors -
Company Directors Course. He is a Fellow of the Australian Institute of Company
Directors and an Associate Fellow of the Australian Institute of Management.
Francis D. Spencer accepted election as a Director of the Company on
February 22, 1999. Since June 1994, he has been Managing Partner of Spencer &
Co., providing auditing services to public and private companies and
institutions, and Managing Director of Spencers Corporate Pty Ltd., licensed by
the Australia Securities and Investment Commission to issue independent expert
reports with respect to takeovers and mergers by public companies. For the 23
years prior thereto (the last 14 as a partner), Mr. Spencer was employed by
Deloitte Touche Tohmatsu, certified public accountants, for which he was partner
in charge of corporate advisory activities in the Melbourne, Australia office.
He earned a Bachelor of Commerce degree in 1964 from Melbourne University and is
a Fellow of the Institute of Chartered Accountants in Australia and an Associate
Member of the Institute of Arbitrators Australia.
Drew A. Ilsley was elected a Director of the Company on February 23,
1999. For more than the past five years, Mr. Ilsley has been a principal of Drew
Ilsley & Associates, an investment banking and business consultant specializing
in capital raising and mergers and acquisitions. He is a Director of Secure
Network Solutions Ltd, which has securities listed on the Australian Stock
Exchange. Mr. Ilsley earned a Bachelor of Commerce degree from University of
Melbourne in 1981.
Adam L. Goldberg has been Secretary of the Company since October 1998
and a Director since September 1997. He also is a Director of Linda and Modara,
the Company's Australian subsidiaries, and Apollo International of Delaware,
Inc., a public company which produces relays and fuses, and Euro Tech Holdings
Corp., Ltd. a public company which produces water purification systems. For more
than the past five years, Mr. Goldberg has been self-employed as an attorney.
Mr. Goldberg earned a B.A. degree from State University of New York at Buffalo
(1983) and a J.D. degree from Brooklyn Law School (1986).
19
<PAGE>
EXECUTIVE COMPENSATION
- ----------------------
The Company entered into a Consultancy Agreement effective March 1,
1999 with Wischer Corporation Pty Ltd. ("WCPL"), an Australian corporation
controlled by Mr. Wischer. Pursuant to that agreement, Mr. Wischer will act as
President and Chief Executive Officer of the Company and Managing Director of
Linda for an initial three year term. The agreement provides for an annual
consultancy fee of A$250,000, subject to annual increase in accordance with any
increases in the Consumer Price Index (All Groups - Melbourne). WCPL also will
receive options to purchase up to 500,000 shares of Common Stock (post-Reverse
Split) pursuant to the Company's 1996 Stock Option Plan, which options are
exercisable at a price of $1.25 per share (post-Reverse Split) and expire in 10
years. Such options will vest in three years or sooner upon the occurrence of
the following events: on the effectiveness of the Reverse Split and issuance of
the balance of the Acquisition Securities, as to 250,000 shares; and at the
discretion of the Board of Directors, following a review of the performance of
the Company and Linda, as to the balance of 250,000 shares. The Consultancy
Agreement contains a non-compete provision, expiring one year after termination
of the agreement, which prohibits WCPL and Mr. Wischer from competing with the
Company and Linda.
WCPL also has entered into a Share Sale Agreement with Mr. Player,
Budbox, Playbyrne, and Newton Grace, pursuant to which WCPL may purchase from
Playbyrne 500,000 shares of the Preferred Stock (on a post-Reverse Split basis)
and 300,000 shares of the Common Stock (on a post-Reverse Split basis). The
Preferred Stock is to be sold to WCPL on the date such shares are issued by the
Company, for a nominal consideration of A$1.00. The Common Stock will be sold to
WCPL for a nominal consideration of A$1.00 if, on or before December 31, 1999,
either (i) the Company raises new equity capital in an amount not less than
A$5,000,000 or (ii) the combined holding of Mr. Player, Budbox, Playbyrne, and
Newton Grace in the Company's Common Stock is reduced to less than 40% of the
issued and outstanding Common Stock. Sales of Preferred Stock and Common Stock
by Playbyrne to WCPL pursuant to the Share Sale Agreement are conditioned upon
the consent of the NAB.
The Company and Linda entered into a Management Agreement dated
December 11, 1998 with Geoffrey R. Player and Budbox (which is controlled by Mr.
Player). Pursuant to that agreement, Mr. Player was to act as Chief Executive
Officer of Linda for an initial three year term. The agreement provides for an
annual Management Fee of A$150,000 and a monthly retainer of A$12,500. In an
agreement dated March 26, 1999, the Management Agreement was rescinded effective
March 31, 1999. In that rescission agreement, the Company and Linda acknowledged
that Budbox is due A$91,666.67 for services provided plus reimbursement of any
expenses incurred by Budbox and Mr. Player in connection with such services.
Commencing April 1, 1999, Mr. Player will be paid a fee of A$60,000 per annum as
Chairman, plus reimbursement of expenses.
The Company has not entered into any employment agreements with any
others of its current management team. However, the Company has granted options
to purchase 25,000 shares of Common Stock (post-Reverse Split) to each of
Messrs. Spencer, Ilsley, and Goldberg. These options
20
<PAGE>
are exercisable at a price of $1.25 per share (post-Reverse Split), expire in
10 years, and vest in 12 months. In addition, the Company has approved annual
payments to each Director who is not an Executive Officer (Messrs. Spencer and
Ilsley) in the amount of A$25,000. The Company also has approved payments in
the amount of US$2,500 per month to Mr. Goldberg for his services as the
Company's Secretary.
COMPANY PROPERTIES
In October 1998, the Company surrendered its lease to its former
offices at 584 Broadway, New York, New York upon payment of the sum of $5,000
plus forfeiture of its security deposit. The Company has sublet new offices at
One World Trade Center, New York, New York from May Davis Group, Inc. ("MDG") on
a month-to-month basis at a cost of $2,000 per month. MDG, the underwriter for
the Company's public offering, and its affiliates and associates (i) are
receiving by assignment from Playbyrne, in connection with the NetLive Purchase,
an aggregate of 250,000 shares of Common Stock (on a post-Reverse Split basis)
and (ii) hold warrants to purchase an aggregate of 49,412 shares of Common Stock
(on a post- Reverse Split basis).
BUSINESS OF NEWTON GRACE
GENERAL
Newton Grace, doing business as "Linda Electric Industries," was one of
the leading manufacturers and marketers of electrical household products in
Australia. Newton Grace's primary business was the manufacture, marketing and
sale of durable electric blankets, electric kettles, and other small electrical
household products, primarily through major retailers in Australia.
Newton Grace's product categories included products manufactured by
Newton Grace and products manufactured by outside suppliers and sold under
Newton Grace's brand names. Among the products manufactured by Newton Grace are
the following:
Electric blankets
Electric footwarmers
Electric heating pads
Electric kettles and urns
Among the products manufactured by third parties and sold under Newton
Grace's brand names are the following:
Electric irons
Electric hair driers and other hair care products
Electric toasters Electric sandwich makers
21
<PAGE>
Electric blenders and grinders
Electric stick mixers
Electric fans
Newton Grace products were sold predominantly under the brand name
"Linda." Products sold under the Linda brand name enjoy a long-standing
reputation for quality and reliability in Australia.
THE 1997 PURCHASE
In November, 1997, pursuant to a Share Sale Agreement dated September
19, 1997 by and among Pamdale Investments Pty Limited, an Australian corporation
("Pamdale"), Vincent Smart, Susan Smart, and Budbox (as amended, the "1997
Agreement"), Budbox acquired all of the outstanding shares of capital stock of
Oxford Banner Pty Limited, an Australian corporation ("Oxford"). Oxford, through
a subsidiary, and Budbox own 100% of the outstanding shares of capital stock of
Newton Grace. The purchase price under the 1997 Agreement was AUD $30,676,290.
The 1997 Agreement contained certain provisions prohibiting Pamdale, Vincent
Smart and Susan Smart, for a period of five (5) years, from (i) competing with
Newton Grace's business, (ii) soliciting business from Newton Grace customers,
(iii) soliciting Newton Grace employees, and (iv) disclosing confidential
information regarding Newton Grace's business.
BACKGROUND
Newton Grace was formed in 1982 by Vincent Smart to acquire the
business of its predecessor, V Smart Industries. Mr. Smart commenced the
manufacture and sale of electric blankets in 1967 under the name of V Smart
Industries, and from 1975 under the name of Linda Electric Industries.
From 1967 to 1980 electric blankets were the only products manufactured
or marketed. In 1975 the Linda brand name became the marketing focus and
developed over time into a well recognized brand name in Australia.
Newton Grace developed significant brand awareness with its "Sleep
Wonderfully Warm With Linda" campaign. This advertising slogan is specific to
the electric blanket market, but in recent years Newton Grace played off of
consumer awareness and acceptance of its Linda brand name to extend the
franchise to the Company's other products with its "Wonderfully Linda" slogan.
The Company believes the Linda brand name in Australia has come to be
associated with the characteristics of reliability, security and performance. As
the value of the Linda brand name in Australia grew, Newton Grace sought to
extend the franchise and diversify its business using the Linda name.
PRODUCTS
22
<PAGE>
Beginning in 1980 Newton Grace and/or its predecessor introduced the
following products:
1980
Electric Kettles. 21 models and two models of electric urns are now
produced.
1985 Electric Toasters. Eight models of toasters and two models of sandwich
toasters are manufactured by third parties and imported to Australia
and sold under the Linda brand.
1989 Electric Steam Irons. Six models are manufactured by third parties,
imported to Australia and sold under the Linda brand.
1990 Electric Hair Dryers and Hair Care Products. 20 models are
manufactured by third parties and imported to Australia and sold under
the Linda brand.
1994 Electric Blenders and Grinders. Two models are manufactured by third
parties and imported to Australia and sold under the Linda brand.
Despite such diversification of its product line, the Newton
Grace/Linda business still derives in excess of ninety (90%) percent of its
revenues and profits from the manufacture and sale of electric blankets and
electric kettles.
23
<PAGE>
The revenue from each of the Newton Grace/Linda respective product
categories for the 1996/97 and 1997/98 fiscal years were as follows:
<TABLE>
<CAPTION>
================================================================================================================================
1996/97 1997/98
================================================================================================================================
Revenues (AUD) % Revenues (AUD) %
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electric Blankets $13,118,314 64.8 $11,294,041 65.2
- --------------------------------------------------------------------------------------------------------------------------------
Kettles and Urns $ 5,265,168 26.0 $ 4,229,070 24.4
- --------------------------------------------------------------------------------------------------------------------------------
Steam Irons $ 70,825 0.3 $ 416,476 2.4
- --------------------------------------------------------------------------------------------------------------------------------
Hair Care $ 892,083 4.4 $ 407,065 2.4
- --------------------------------------------------------------------------------------------------------------------------------
Mixers $ 156,251 0.8 $ 124,351 0.7
- --------------------------------------------------------------------------------------------------------------------------------
Toasters and
Sandwich Makers $ 725,164 3.6 $ 841,466 4.9
- --------------------------------------------------------------------------------------------------------------------------------
Fans $ 15,130 0.1 $ 379 0.0
- --------------------------------------------------------------------------------------------------------------------------------
Totals $20,242,935 100.0 $17,312,848 100.0
================================================================================================================================
</TABLE>
The Company believes that the total Australian market, and the market
share for each of the Newton Grace/Linda respective product categories for the
1997/98 fiscal years were as follows:
<TABLE>
<CAPTION>
Total Market Newton Grace Sales Market Share
(A$1000's) (A$1000's) (%)
<S> <C> <C> <C>
Blankets......... 17,000 11,493 67.6
Kettles and Urns. 26,000 4,354 16.7
Irons............ 21,000 454 2.2
Hair Dryers...... 12,000 412 3.4
Blenders
and Grinders..... 12,000 129 1.1
Toasters and
Sandwich Makers.. 26,000 878 3.4
</TABLE>
The total market estimate is based on sources the Company believes to
be reliable; however, there can be no assurance as to the accuracy of such
information. Accordingly, the respective market
24
<PAGE>
shares of Newton Grace/Linda products are also believed to be accurate, but no
assurances can be given with respect thereto.
PROPRIETARY RIGHTS
The Company will rely on a combination of Australian patent, trade
secret and trademark laws, nondisclosure and other contractual agreements and
technical measures to protect its proprietary rights in its products and
processes. The Company believes that its technologies and intellectual property
rights do not infringe upon the proprietary rights of third parties. There can
be no assurance, however, that third parties will not assert infringement claims
against the Company in the future or that such claims will not require the
Company to enter into royalty arrangements or result in costly litigation, any
of which could materially and adversely affect the Company's business, operating
results and financial condition. The following table sets forth the Australian
patents and patent applications owned by the Company and its subsidiaries.
PATENTS
Name Patent or Application Number
---- ----------------------------
"Electric Blanket" Patent # 537659
"A method of manufacturing
electric blankets and
electric blankets made hereby" Patent # 571256
"Improved electric plug
construction and methods of
production" Application # 75453/96
The Company also will protect its intellectual property with the
following trademarks: Linda, Sundreamer, Free Style, Island Breeze, Belinda,
Sleepy Sue, Slumber Pal, Whispair, Karessa, Supa Slumber, Radiant Gold,
Seabreeze, Karessa Sleepsafe, Wendy, Peter Pan, and Impress. The Linda mark is
also registered in New Zealand.
MANUFACTURING AND RAW MATERIALS
Linda manufactures electric blankets, electric kettles, electric
footwarmers, and electric heating pads at its manufacturing facility from raw
materials it purchases. These products, in the aggregate, have constituted more
than ninety (90%) percent of Newton Grace's annual sales. Based on the equipment
currently at its manufacturing facility, the Company believes that it has
sufficient capacity to expand its production approximately one hundred and forty
(140%) percent by increasing the number of shifts per day and the number of
working days per week.
25
<PAGE>
Linda contracts with independent contractors to manufacture all other
products sold by it, including electric irons, electric hair dryers and other
hair care products, electric toasters, electric sandwich makers, electric
blenders and grinders, electric stick mixers and electric fans. In the aggregate
these products have comprised less than ten (10%) percent of Newton
Grace/Linda's annual sales. Independent manufacturers of Linda products are
primarily located outside of Australia and are chosen on the basis of quality,
timeliness in delivery and price. Linda's independent manufacturers typically
manufacture and deliver products within 90 days after it places an order for the
products. Linda is not party to any contractual obligation requiring it to
negotiate with or utilize any specific manufacturer for any of its products.
Molds and product designs are generally owned by Linda. Linda's
products are safety tested by both Linda and by independent testing agencies.
Raw materials for Linda products are obtained from several independent
sources, generally located in Australia, New Zealand, Hong Kong, and China. The
primary raw material used in Linda's products is wool for electric blankets.
Linda currently uses two suppliers for wool - Creswick Woolen Mills and Smith
Family Industries, both located in Australia.
Other raw materials used by Linda in the manufacture of its products
include electric switches, heating elements, wire, and polyvinyl chloride. These
materials are obtained from several sources in Australia, the United Kingdom and
Hong Kong. The Company believes that all of such materials are readily available
from alternative suppliers on comparable terms.
SALES AND MARKETING
Linda markets its products through the following channels: (i) general
merchandise retailers including department stores, discount department stores,
electrical chain stores, independent electric stores, and hardware stores; (ii)
hotel industry sales; (iii) exports; and (iv) Amway direct marketing sales.
Linda employs an internal sales and marketing staff of three, and engages third
party sales agents and distributors to support its sales and marketing efforts.
This network of sales agents includes two in Victoria, four agents and three
distributors in New South Wales, six in Queensland, two in Tasmania, two in
South Australia, and two in Western Australia. Linda also has limited sales in
the United Kingdom (urns) and New Zealand (a limited range of electric kettles),
which in the aggregate comprise less than one (1%) percent of total sales. For
fiscal years 1995/96, 1996/97, and 1997/98, Newton Grace/Linda had customers
numbering 362, 366, and 370, respectively. Sales to its three largest customers
were approximately as follows (in AUD):
1995-1996 1996-1997 1997-1998
--------- --------- ---------
KMART A$5,800,000 A$5,600,000 A$5,100,000
TARGET $2,900,000 $3,900,000 $3,200,000
RETRAVISION $1,500,000 $1,400,000 $1,100,000
26
<PAGE>
Linda negotiates and submits prices to all of its major accounts in
Australia, on a direct basis. Sales then are handled either directly through the
head office or through the distributor network in the Australian states outside
Victoria. Distributors hold a stock of blankets and appliances on a consignment
basis, except for one buy/sell distributor in New South Wales.
ADVERTISING
The Company believes that one of the most important factors in the
success of its products is the value built in its brand names. In order to build
brand awareness and acceptance, Newton Grace/Linda spent an average of
approximately $950,000 per year on advertising over the last five years, and the
Company expects to continue to devote substantial resources to advertising in
the future.
The advertising mix varies from year to year using a combination of
television, radio, print - magazine, print - newspapers, trade journals, point
of sale, product fliers and direct mailings, consumer competitions, and
cooperative (shared) advertising and major retailers. George Patterson Bates
Advertising Agency was used exclusively until 1996 to develop all advertising
and communications, after which time Newton Grace/Linda worked with integrated
marketing agencies, public relations companies, graphic design studios and
directly with media creative teams. This change has allowed a more focused
approach to each campaign.
PRODUCT DEVELOPMENT AND ENGINEERING
The Company believes that its success depends in some measure on its
continuing research and development efforts with respect to its products.
Competitive products are continually improving due to technological advances,
and the Company believes its products, in order to remain successful, must be
kept current with technological advances. Consequently, the Company intends to
continue to devote sufficient resources to its product development efforts to
enable it to remain current with technological advances in the industry.
Newton Grace/Linda's product development has included, and is projected
to include, expenditures to design and develop a new electronic temperature
regulatory system (approximately AUD $70,000), to update existing kettle models
to extend product life and increase distribution (approximately AUD $140,000),
and to design a new range of electric kettles (approximately AUD $230,000).
Additional project include development of a new detachable cord system for
electric blankets, a new bonded electric blanket, a new "hot pot"
multi-cooker/kettle, and a "phase 2" electronic temperature regulatory system
for electric blankets.
COMPETITION
The Australian household appliance market is substantially mature.
Barriers to entry are high and competition is intense. The establishment of and
continual investment in brand names is
27
<PAGE>
essential for success in the industry. It also is necessary to continually
invest in research and development with respect to the products in order not to
fall behind evolving industry standards.
All products are subject to intense competition from such companies as
Sunbeam, Black and Decker, Kambrook and Breville. In the electric blanket
market, Linda is the dominant player, with approximately 67% market share, with
Sunbeam being the only other major player in the Australian electric blanket
market. The only other Linda product which has developed a substantial market
share is electric kettles, at approximately 17% of the market.
Major competitors of Linda in Australia include the following
companies:
Sunbeam Victa, a subsidiary of GUD Holdings Ltd. ("Sunbeam"). Sunbeam
is the dominant player in the Australian market with respect to many of the
products manufactured and/or sold by Linda (other than electric blankets);
Kambrook, a major manufacturer of irons, kettles, heaters and heating
trays;
Black and Decker, a marketer of irons, kettles, food processors and
frying pans; and
Breville, a manufacturer of small household appliances, including
toasters, kettles, hair care products, frying pans and bread makers.
SEASONALITY
Linda's business is subject to substantial seasonal variations.
Approximately ninety (90%) percent of Linda's main product, electric blankets,
which account for more than sixty (60%) percent of the Company's total sales,
are sold primarily in the period between February and June. As a result, the
operating results of Linda are traditionally substantially stronger in its third
and fourth fiscal quarters, and correspondingly weaker during the remainder of
the year. The seasonable nature of blanket sales requires a build-up of
inventory in the post-July "off season" and a corresponding need for working
capital.
PROPERTIES
The Company subleases approximately 55,000 square feet of space at
premises located at 48 to 78 Hanna Street, Noble Park, Victoria, Australia for
its manufacturing operations pursuant to the terms of a sublease agreement dated
as of November 22, 1997 among Vincent David Smart and VS Access Pty Ltd. and
Newton Grace (the "First Hanna Street Lease"). The First Hanna Street Lease
provides for an initial three year term, with two renewal options of three years
each, no rental payments during the first two years, an annual rental payment of
$306,000 in the third year, and annual increases thereafter based upon a
Consumer Price Index factor. The Company also subleases approximately 50,000
square feet of space at premises located at 90 Hanna Street, Noble Park,
Victoria, Australia for its administrative and management operations and for
warehousing pursuant
28
<PAGE>
to the terms of a sublease agreement dated as of June 30, 1998 among Pamdale
Investments Pty Ltd. and Playbyrne Pty Ltd (an affiliate of the Player Group)
and Newton Grace (the "Second Hanna Street Lease" and, together with the First
Hanna Street Lease, the "Hanna Street Leases"). The Second Hanna Street Lease
provides for an initial three year term, with a renewal option for an
additional four years, an annual rental payment of $220,000 in the first year,
and annual increases thereafter equal to the greater of a Consumer Price Index
factor or three (3%) percent.
EMPLOYEES
As of March 22, 1999, the Company employed a total of 157 employees. Of
such employees, 131 were engaged in manufacturing, 11 in product development and
engineering, 3 in sales and marketing, and 12 in administration and finance. The
Company is and will be highly dependent upon the continued service of its key
senior management personnel and its continuing ability to attract and retain
highly qualified managerial personnel. Competition for such personnel is intense
and there can be no assurance that the Company can retain its key managerial
employees or that it can attract, assimilate or retain other highly qualified
managerial personnel in the future. None of the Company's employees are
represented by a labor union. The Company has not experienced any work stoppages
and considers its relations with its employees to be good.
LITIGATION
Linda is not a party to any other material litigation, and the Company
is currently not aware of any other pending or threatened litigation that could
have a material adverse effect on Linda's business.
LINDA MANAGEMENT
The directors and executive officers of Linda are as follows:
Name Age Company Positions
---- --- -----------------
Geoffrey R. Player 53 Chairman
Adrian D. Wischer 42 Managing Director
Francis D. Spencer 58 Director
Adam L. Goldberg 39 Director
Garry John Watkins 48 General Manager
Set forth below is a brief background of the Executive Officers and
Directors of Linda, based upon information supplied by them.
29
<PAGE>
Biographical information for Geoffrey R. Player, Adrian D. Wischer,
Francis D. Spencer, and Adam L. Goldberg is set forth above. See "Proposal I:
Agreement Proposal - Management After the NetLive Purchase."
Garry John Watkins has been General Manager of Newton Grace/Linda since
November 1997. He has also been Secretary and a Director of Roxholme Grove Pty
Ltd since July 1995. Prior thereto, Mr. Watkins was Secretary of Woodpecker
Productions, a furniture manufacturer, from November 1994 until its acquisition
by Roxholme Grove Pty Ltd in June 1995. From 1984 to 1994, he was Commercial
Manager and then Secretary of Players Biscuits Pty Ltd. Mr. Watkins also was a
group accountant at Toy Traders Pty Ltd, a toy importer (1983-1984), and a state
accountant and assistant manager at Patra Sales Pty Ltd, a juice manufacturer
(1973-1983). Mr. Watkins earned an Accountancy Certificate from Bankstown
Technical College and is a Certified Practicing Accountant.
Linda has the following significant employees:
Name Age Company Position
---- --- ----------------
Bryce W. Russell 39 Marketing Manager
Richard W. Morrison 53 National Account Manager
Stephen C. Townsend 41 Logistics Manager
Kenneth J. MacDonald 38 Factory Manager
Bryce W. Russell has been Marketing Manager of Newton Grace/Linda since
March 1996. In that capacity, his responsibilities include developing a
marketing plan for electric blankets, kettles, toasters, iron, and hair care
products, manage the advertising budget, develop sales strategies and manage
implementation of sales promotions, make recommendations for new products,
implement and launch new products, and appraise and enhance sales performance.
Prior thereto, he was employed by Philips Electronics, as National Marketing
Manager from May 1995 to March 1996 and as National Business Manager from
November 1994 to May 1995. From 1986 to 1994, he was employed by Kraft Foods
Limited, as Trade Marketing and Sales Operations Manager (January 1994 to
November 1994), National Account Manager (April 1993 to January 1994), Category
Development Manager (August 1991 to April 1993), National Field Sales Manager
(August 1990 to August 1991), Sales System Manager (August 1988 to August 1990),
and Key Account Representative (July 1986 to August 1988). Mr. Russell has also
been an Agent for Zurich Australian Life Insurance (1985 to 1986) and was
employed in various capacities by BP Australia Limited from 1981 to 1985. He
earned a Bachelor of Economics degree from University of Adelaide in 1980.
Richard W. Morrison has been employed by Newton Grace/Linda since 1983,
first as a Sales Manager and currently as National Account Manager. He is
responsible for achieving sales targets throughout Queensland, Western
Australia, South Australia, and Victoria (Australian states), managing major
national accounts, and directing and monitoring sales agents. Prior thereto, Mr.
Morrison was Sales Manager for Goldberg Sportswear (1982 to 1983), National
Sales Manager for
30
<PAGE>
a sportswear division of Beacham & Rattray (1972 to 1982), and a Sales
Representative and Department Manager for Melbourne Sports Depot (1962 to
1972). He completed Middle Park High School in 1962.
Stephen C. Townsend joined Linda in March 1999 as Logistics Manager.
His responsibilities include managing purchasing and logistics for raw
materials, supervising outsourced manufacturers, managing the warehouse,
automating and computerizing operations, and preparing Linda for electronic
commerce with its major customers. Mr. Townsend was Logistics Manager of Music
Link Australia Pty from September 1997 to December 1998, Logistics Manager - Car
Systems of Philips Electronics Australia Limited from November 1995 to September
1997, and Logistics/Purchasing Manager of Esselte Meto Australia Pty Ltd. from
March 1994 to November 1995. He was employed by Adidas Australia Pty Ltd from
March 1989 to March 1994, as a Shipping Manager and then as a Logistics Manager.
Mr. Townsend completed high school in 1976.
Kenneth J. MacDonald has been Factory Manager of Newton Grace/Linda for
the past year. He has been employed by the company since 1977, as a Production
Supervisor (May 1995 to present), Technical Officer (1994 to May 1995), Research
and Development Officer (1986 to 1995), Moulding Production Supervisor (1985 to
1995), Maintenance Supervisor (1983 to 1995), Apprentice Supervisor (1983 to
1992), Maintenance Fitter (1981 to 1983), and Apprentice Fitter and Turner (1977
to 1981). Mr. MacDonald graduated from Huntingdale Technical School (1976) and
has earned a Certificate of Proficiency, Fitting and Turning (1981) and a
Certificate of Technology, Mechanical Design Drafting (1983).
EXECUTIVE COMPENSATION
The following table sets forth certain summary information with respect
to the compensation paid by Newton Grace for services rendered in all capacities
to each of the persons during the last fiscal year by those persons indicated.
Newton Grace had no other executive officer whose total annual salary and bonus
exceeded $100,000 for its last fiscal year:
31
<PAGE>
SUMMARY COMPENSATION TABLE
FISCAL YEAR ENDED
JUNE 30, 1998
<TABLE>
<CAPTION>
NAME POSITION SALARY BONUS
- ---- -------- ------ -----
<S> <C> <C> <C>
Geoffrey R. Player Executive Chairman A$543,244 1 A$350,000
Managing Director
Garry J. Watkins General Manager A$180,977 2
</TABLE>
EMPLOYMENT AGREEMENTS
None of Linda's officers or other employees are subject to any written
employment agreements. All of Linda's officers and employees are employees at
will.
COMPENSATION OF DIRECTORS
The Board of Directors of Linda may authorize the payment of
compensation to directors for their attendance at regular and special meetings
of the Board and for attendance at meetings of committees of the Board as is
customary for similar companies. Directors will be reimbursed for their
reasonable out-of-pocket expenses incurred in connection with their duties to
Linda.
OTHER COMPENSATION
Linda provides statutory superannuation (retirement benefits similar to
American 401(k) plans) for its employees, including its executive officers. No
other retirement or similar program has been adopted by Linda. Other benefits
may be adopted by Linda for its employees in the future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Geoffrey Player and his wife Vicki, personally, and Oxford Banner Pty
Limited, Noble Heights Pty Limited, Newton Grace, Modara, Playbyrne, and Budbox
have entered into agreements with National Australia Bank guaranteeing the
payment of any amounts owing by Linda to the NAB under the NAB Facilities. See
"Proposal I: Agreement Proposal - The Loan and Other Facilities."
- --------
1 Consists of A$200,000 in fiscal year 1998 management fees, A$300,000
in prepaid 1999 management fees and A$43,244 in business related travel
expenses.
2 Consists of A$130,000 in consulting fees and A$50,977 in business
related travel expenses.
32
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data for the three years in the period ended
June 30, 1998 are derived from the financial statements of Newton Grace,
included in the Company's Current Report on Form 8-K/A-1 dated December 31,
1998, which Report accompanies this Proxy Statement, which have been audited by
PricewaterhouseCoopers, independent auditors, as stated in their report
appearing therein. All amounts for the fiscal years ended June 30, 1996, 1997
and 1998 are presented in US$ thousands. The selected financial data for each of
the fiscal years ended June 30, 1994 and 1995 are derived from unaudited
financial statements of Newton Grace not included herein and are presented in A$
thousands. The financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements, including the notes thereto,
accompanying this Proxy Statement.
<TABLE>
<CAPTION>
Year Ended June 30
------------------
1994 1995 1996 1997 1998
(A$000) (A$000) (US$000) (US$000) (US$000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales .............................. $ 19,755 $ 19,999 $ 13,700 $ 15,502 $ 11,774
Cost of goods sold ..................... 13,167 12,050 8,783 9,362 7,638
Gross profit ........................... 6,588 7,949 4,917 6,140 4,137
Operating income ....................... 3,272 5,768 2,088 3,246 1,271
Interest income (expense), net ......... (777) (1,174) 1,015 842 552
Income taxes ........................... 1,365 2,308 1,123 1,477 727
Net income ............................. 2,685 4,635 1,979 2,610 927
Net income per share ................... 0.34 0.58 0.25 0.33 0.12
BALANCE SHEET DATA (AT END OF PERIODS):
Current Assets ........................... 18,320 22,660 18,453 19,887 16,786
Current Liabilities ...................... 7,842 6,184 2,962 3,337 2,327
Total assets ............................. 23,683 26,656 20,555 20,460 21,625
Total liabilities ........................ 9,730 8,068 4,447 3,337 2,393
Shareholders' equity ..................... 13,953 18,588 16,108 17,123 19,232
Dividends per share ...................... 0.00 0.00 0.23 0.08 0.00
</TABLE>
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION OF NEWTON GRACE
The following discussion and analysis should be read in conjunction
with the Financial Statements and notes thereto included elsewhere herein.
GENERAL
Newton Grace, doing business as "Linda Electric Industries," was one of
the leading manufacturers and marketers of electrical household products in
Australia. Newton Grace's primary business was the manufacture, marketing and
sale of durable electric blankets, electric kettles, and other small electrical
household products, primarily through major retailers in Australia.
Newton Grace's product categories included products manufactured by
Newton Grace and products manufactured by outside suppliers and sold under
Newton Grace's brand names. Among the products manufactured by Newton Grace are
the following:
Electric blankets
Electric footwarmers
Electric heating pads
Electric kettles and urns
Among the products manufactured by third parties and sold under Newton
Grace's brand names are the following:
Electric irons
Electric hair driers and other hair care products
Electric toasters
Electric sandwich makers
Electric blenders and grinders
Electric stick mixers
Electric fans
Newton Grace products were sold predominantly under the brand name
"Linda." Products sold under the Linda brand name enjoy a long-standing
reputation for quality and reliability in Australia.
The Linda business has been seasonal, with its highest revenue levels
occurring in the fourth fiscal quarter. This period, which includes the
Australian winter selling season, accounts for a significant portion of total
revenues and profitability.
34
<PAGE>
RESULTS OF OPERATIONS
Year Ended June 30, 1998 Compared to Year Ended June 30, 1997
Net sales decreased by 24.0% to $11,774,468 in the year ended June 30,
1998 from $15,502,040 in the year ended June 30, 1997. The sales decrease is
attributable to two major factors. Firstly, the A$ fell from US$0.77 to US$0.68,
a fall of 12%. This translates directly to a proportional reduction in US$
sales. Secondly, a relatively warm winter reduced the demand for electric
blankets, which comprise about two thirds of the Company's sales. Gross profit
for the year ended June 30, 1998 was $4,136,570 compared to $6,140,455 for the
year ended June 30, 1997, a 32.6% decrease. Again, 12% of this fall is directly
attributable to the fall in the A$. The Gross Profit fall, of 21% in A$, is
attributed to inefficiencies in production caused by the lower sales and a
general increase in manufacturing costs. Gross margin was 35.1% and 39.6% of
sales for the years ended June 30, 1998 and 1997, respectively. The decrease in
gross margins was due to the manufacturing cost increases that were unable to be
passed on to customers.
Operating expenses decreased by 1.0% in US$ terms, to $2,865,434 for
the year ended June 30, 1998 compared to $2,894,542 in 1997. In fact expenses
rose 11% in A$ terms. 1998 saw an increase in selling, general and
administrative expenses. This increase was offset to some degree by a reduction
in provisions for stock, warranties and redundancy pay compared to the prior
year. Operating expenses were 24.3% and 18.7% of sales for the years ended June
30, 1998 and 1997, respectively.
Net income decreased 64.5% to $926,640 in the year ended June 30, 1998
as compared to net income of $2,610,349 in the year ended June 30, 1997. This
decrease was attributable to the 12% decline in the A$ and to the Gross Profit
decline and expense increase outlined above.
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Net sales increased by 13.2% to $15,502,040 for the year ended June 30,
1997 compared to $13,700,067 for the year ended June 30, 1996. The sales
increase is attributable to new products introduced into the market and a large
promotion of hair care products. Gross profit for the year ended June 30, 1997
was $6,140,455 compared to $4,917,377 for the year ended June 30, 1996, an
increase of 24.9%. The increase in 1997 was due to increased sales volume. Gross
margin was 39.6% and 35.9% of sales for the years ended June 30, 1997 and 1996,
respectively. The increase in gross margin was attributable to increased sales
volume.
Operating expenses were $2,894,542 for the year ended June 30, 1997
compared to $2,829,558 in the comparable 1996 period, an increase of 2.3%. The
increase in operating expenses is primarily attributable to provisions for
warranties, redundancy pay, and doubtful debts in 1997, which more than offset
decreases in selling, general, and administrative expenses.
35
<PAGE>
Net income increased 31.9% to $2,610,349, in the year ended June 30,
1997 compared to $1,979,302 in the year ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash provided by operating activities was $2,213,396,
$1,499,817 and $376,505 in the years ended June 30, 1998, 1997 and 1996,
respectively. The increase in cash provided by operating activities in fiscal
1998 compared to 1997 was primarily attributable to more favorable trading terms
negotiated with a major supplier, from cash collections 90 days net to 14 days
4% settlement discount. The increase in cash provided by operating activities in
1997 compared to 1996 was primarily attributable to a decrease of approximately
$1,015,000 in income taxes paid.
Cash provided by (used in) investing activities was $(10,369,710),
$3,645,202 and $1,765,469 in the years ended June 30, 1998, 1997 and 1996,
respectively. The decrease in cash provided by investing activities in 1998
compared to 1997 is primarily attributable to (i) the payment of a $8,775,000
term deposit of which the National Australia Bank has an offset against Budbox
Pty Ltd, Newton Grace's corporate parent, and (ii) amounts paid to related
parties of $1,700,557 in fiscal 1998. The increase in cash provided by investing
activities in 1997 compared to 1996 is primarily attributable to cash bank bills
of three months and under three months duration.
Cash provided by (used in) financing activities were $144,456,
$(672,860) and $(1,870,960) for the years ended June 30, 1998, 1997 and 1996,
respectively. Cash provided by financing activities during the year ended June
30, 1998 consists of an increase in a bank overdraft. Cash used in financing
activities in 1997 and 1996 were attributable to dividends paid to Newton
Grace's shareholders.
The Company anticipates that it will be able to meet its cash
requirements for fiscal 1999 with a combination of cash flow from operations,
current cash balances, and/or borrowings under the NAB Facilities. See
"Proposal I: Agreement Proposal - The Loan and Other Facilities."
"YEAR 2000" PROBLEM. The Company is aware of the issues associated with the
programming code in existing computer systems being acquired from Newton Grace
by Linda as the millennium (Year 2000) approaches. The "Year 2000" problem is
pervasive and complex as virtually every computer operation will be affected in
some way by the rollover of the latter two digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail. The Company
has upgraded its computers and believes that they are Year 2000 compliant and
that the "Year 2000" problem will not have a material adverse effect upon the
Company.
REASONS WHY THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF AGREEMENT PROPOSAL
36
<PAGE>
The Board of Directors of the Company recommends the NetLive Purchase
and the Asset Purchase for two primary reasons. First, to operate a consumer
electric goods business while gaining access to capital markets. This capital
would be used to expand Linda's existing business, to fund new product
development and technological advances in the Company's products, and to enable
the Company to acquire compatible businesses. Second, to develop a United States
presence with a view to selling the Company's products in the United States and
potentially developing local manufacturing and/or distribution.
AS A RESULT, THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE AGREEMENT AND THE ISSUANCE OF THE ACQUISITION SECURITIES.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Because the NetLive Purchase and the Asset Purchase are treated, for
accounting purposes, as a reverse merger in which Newton Grace becomes the
accounting acquirer, the historical financial statements of Newton Grace replace
those of the Company. Audited financial statements at June 30, 1998 and 1997 and
for the years ended June 30, 1998, 1997 and 1996 are included in the Company's
amended Current Report on Form 8-K/A-1 dated December 10, 1998, a copy of which
accompanies this Proxy Statement, and such financial statements are hereby
incorporated by reference in this Proxy Statement. Unaudited financial
statements at December 31, 1998 and for the six months and three months ended
December 31, 1998 are included in the Company's quarterly report on Form 10-QSB
for the quarter ended December 31, 1998, a copy of which accompanies this Proxy
Statement, and such financial statements are hereby incorporated by reference
herein. All of these financial statements have been adjusted to reflect the
Common Stock and Preferred Stock of the Company as if the NetLive Purchase and
the Asset Purchase were consummated and completed on December 31, 1998. Pro
forma financial information is not required to be presented because of the
reverse merger treatment for accounting purposes.
PROPOSAL II: CHARTER PROPOSAL
The following is a brief summary of the Charter Proposal. This summary
does not purport to be complete and is qualified in its entirety by reference to
the Amended and Restated Certificate of Incorporation (the "Certificate"),
annexed as Exhibit 4.2 and incorporated by reference. Stockholders of the
Company are urged to read the Certificate in its entirety.
The Company previously ceased its historic internet call center
business and will continue the consumer electric goods business acquired from
Newton Grace. The Company's new business has developed significant brand name
recognition under the name "Linda." To reflect the Company's new business, the
Board of Directors proposes that Article I of the Company's Certificate of
Incorporation be amended to change the name of the Company from NetLive
Communications, Inc. to Linda Corporation.
37
<PAGE>
The Company was unable to issue all of the Acquisition Securities to
the Purchasers because the Company does not have a sufficient number of
authorized shares of Common Stock or Preferred Stock. Presently, there are only
19,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock
authorized. The NetLive Purchase requires the issuance of 27,200,000 shares of
Common Stock and 3,400,000 shares of Preferred Stock (on a pre-Reverse Split
basis). To permit the issuance of all such Acquisition Securities, the Board of
Directors proposes that Article IV of the Company's Certificate of Incorporation
be amended to (i) change the number of authorized shares of Common Stock from
19,000,000 shares to 37,000,000 shares (on a post-Reverse Split basis) and (ii)
change the number of authorized shares of Preferred Stock from 1,000,000 shares
to 4,000,000 (on a post-Reverse Split basis) shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENTS TO THE CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE
COMPANY AND TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND
PREFERRED STOCK.
38
<PAGE>
PROPOSAL III: THE REVERSE SPLIT PROPOSAL
Subject to approval by the stockholders, the Board has authorized the
issuance to stockholders of record on ______________, 1999 of 0.294 shares of
Common Stock in exchange for each issued and outstanding share of Common Stock.
The Board of Directors believes that the Reverse Split is in the best interest
of the stockholders because it helps facilitate the transactions contemplated by
the Agreement.
The effect of the Reverse Split encompasses shares of Common Stock
reserved for issuance upon the conversion of the Series A Convertible Preferred
Stock, options granted or to be granted under stock option plans, and
outstanding warrants. As of March 23, 1999, the Company had 3,996,144 shares of
Common Stock issuable upon outstanding options, warrants, rights, calls, or
other commitments or agreements ("Derivative Rights"). As a result of the
Reverse Split, the Company's capital structure will be as follows:
<TABLE>
<CAPTION>
==========================================================================================================================
Common Stock Common Stock Pro
Prior to Reverse Forma After Reverse
Split/Effectiveness of Split/Effectiveness
Restated Certificate of Restated Certificate
of Incorporation of Incorporation
---------------- ----------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Authorized 19,000,000 37,000,000
- --------------------------------------------------------------------------------------------------------------------------
Issued and Outstanding 3,400,000 9,000,000
- --------------------------------------------------------------------------------------------------------------------------
Reserved for Issuance:
- --------------------------------------------------------------------------------------------------------------------------
Series A Preferred Stock -- 1,000,000
- --------------------------------------------------------------------------------------------------------------------------
Stock Options 800,000 1,000,000
- --------------------------------------------------------------------------------------------------------------------------
Warrants 2,007,500 590,441
==========================================================================================================================
</TABLE>
In connection with the Reverse Split, a transfer of $789.94 will be
deducted from the Company's common stock account and transferred to the
additional paid-in capital account as of ________________, 1999, the date on
which stockholders of record will be entitled to the issuance of shares, because
of the surplus paid-in capital that will arise as a result of the Reverse Split.
Following the decrease of capital in the common stock account becoming
effective, certificates representing the Reverse Split shares will be
distributed by American Stock Transfer & Trust Company, the Company's transfer
agent, to stockholders upon their tender of their shares of Common Stock held of
record as of _______________, 1999.
39
<PAGE>
Upon effectiveness of the Reverse Split, each share of Common Stock
will automatically be combined and changed into 0.294 shares of Common Stock. No
additional action on the part of the Company or any stockholder will be required
in order to effect the Reverse Split. Stockholders will be requested to exchange
their certificates representing shares of Common Stock held prior to the Reverse
Split for new certificates representing shares of Common Stock issued as a
result of the Reverse Split. Stockholders will be furnished the necessary
materials and instructions to effect such exchange. Certificates representing
shares of Common Stock subsequently presented for transfer will not be
transferred on the books and records of the Company but will be returned to the
tendering person for exchange. Stockholders should not submit any certificate
until requested to do so. In the event any certificate representing shares of
Common Stock is not presented for exchange upon request by the Company, any
dividends that may be declared after the Reverse Split with respect to the
Common Stock represented by such certificate will be withheld by the Company
until such certificate has been properly presented for exchange, at which time
all such withheld dividends which have not yet been paid to a public official
pursuant to relevant abandoned property laws will be paid to the holder thereof
or his designee, without interest.
No fractional shares of Common Stock will be issued to any stockholder
as a result of the Reverse Split. Accordingly, stockholders of record who would
otherwise be entitled to receive fractional shares of Common Stock, will, upon
surrender of their certificates representing shares of Common Stock, receive a
cash payment in lieu thereof equal to the fair value of such fractional share.
The fair value of the Common Stock will be based on the average of the high and
low sales prices on the effective date of the Reverse Split.
The issuance of the shares in connection with the Reverse Split will
result in no gain or loss or any other form of taxable income for United States
federal income tax purposes, and the holding period and tax basis of the shares
of Common Stock held prior to the Reverse Split will be transferred to the
shares of Common Stock received as a result of the Reverse Split.
Generally, cash received in lieu of fractional shares will be treated
as a sale of the fractional shares and stockholders will recognize gain or loss
based upon the difference between the amount of cash received and the basis in
the surrendered fractional share.
This discussion should not be considered as tax or investment advice,
and the tax consequences of the Reverse Split may not be the same for all
stockholders. Stockholders should consult their own tax advisors to know their
individual federal, state, local and foreign tax consequences.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
REVERSE SPLIT.
40
<PAGE>
PROPOSAL IV: THE OPTION PROPOSAL
Subject to the approval of the stockholders, the Board has authorized
an amendment to the terms of the Company's 1996 Stock Option Plan to increase
the number of shares of Common Stock reserved for issuance under the Option Plan
from 800,000 (on a pre-Reverse Split basis) to 1,000,000 (on a post-Reverse
Split basis). The purpose of this amendment to the Option Plan is to expand the
Company's ability to incentivize its key employees, officers and directors and
to attract, retain and motivate individuals upon whom the Company's sustained
growth and financial success depends.
As of March 23, 1999, there are options outstanding to purchase an
aggregate of 584,895 shares of Common Stock (on a post-Reverse Split basis)
pursuant to the Option Plan.
All other terms of the Option Plan will remain unchanged by this
proposed amendment. Stockholders are urged to read the description of the Option
Plan included in the amendment to the Company's Annual Report on Form 10-KSB/A-1
for the year ended March 31, 1998, a copy of which accompanies this Proxy
Statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
AMENDMENT TO THE OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE UNDER THE OPTION PLAN.
41
<PAGE>
PROPOSAL V: THE SETTLEMENT PROPOSAL
The Board seeks approval and ratification by the stockholders of the
Settlement Agreements between the Company and each of Michael Kharitonov, Andrew
Schwartz, and Jeffrey Wolf, former officers and directors of the Company. The
Board of Directors believes that the Settlement Agreements are in the best
interests of the stockholders because they helped facilitate the transactions
contemplated by the Agreement. Specifically, the Settlement Agreements provide
for resignations of the now former officers and directors, forfeiture of all of
their stock options, extended lock-up agreements as to shares of Common Stock
owned by them, and mutual releases with the Company. These actions permitted a
change in control of the Company, whereby the Player Group is able to assume
management of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
AND RATIFICATION OF THE SETTLEMENT AGREEMENTS WITH THE COMPANY'S FORMER OFFICERS
AND DIRECTORS.
42
<PAGE>
FISCAL 1999 STOCKHOLDER PROPOSALS
The Company intends to hold an Annual Meeting in 1999 and stockholder
proposals in order to be included in the Company's proxy statement must be
received by the Company at a reasonable time before the 1999 Annual Meeting of
Stockholders.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents accompany this Proxy Statement and are
incorporated by reference in this Proxy Statement: the Company's amended Annual
Report on Form 10-KSB/A-1 for the year ended March 31, 1998; the Company's
Current Report on Form 8-K dated December 10, 1998, describing the NetLive
Purchase and the Asset Purchase; the Company's amended Current Report on Form
8-K/A-1 dated December 10, 1998, containing audited financial statements at June
30, 1998 and 1997 and for the years ended June 30, 1998, 1997 and 1996 and
unaudited financial statements at December 31, 1998 and for the six months ended
December 31, 1998; and the Company's quarterly report on Form 10-QSB for the
quarter ended December 31, 1998, which contains unaudited financial statements
at December 31, 1998 and for the six months and three months ended December 31,
1998.
43
<PAGE>
PROXY CARD FRONT
NETLIVE COMMUNICATIONS, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints _____________________
and __________________, and each of them, with full power of substitution, as
proxies to represent the undersigned and vote all the shares of Common Stock of
NetLive Communications, Inc., which the undersigned is entitled to vote at the
Special Meeting of Shareholders to be held on _____________, 1999, at 10:00 a.m.
local time at the ________________________________, ___________________, New
York, and at any adjournments thereof, in the following manner:
Management recommends that you vote FOR each of Proposals 1, 2, 3, 4,
and 5.
1. Proposal to approve the issuance of 27,200,000 shares of Common
Stock and 3,400,000 of Series A Preferred Stock in connection with the
acquisition of substantially all the assets of Newton Grace Pty Limited by Linda
Industries Pty Limited, a wholly-owned Australian subsidiary of the Company, and
all related transactions pursuant to an Amended and Restated Stock Purchase and
Reorganization Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to authorize an amendment to the Company's Certificate of
Incorporation to change the name of the Company to Linda Corporation and to
increase the number of authorized shares of Common Stock (to 37,000,000) and
Preferred Stock (to 4,000,000).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve a 3.4 to 1 reverse stock split of each issued
and outstanding share of Common Stock and Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to approve an amendment to the Company's 1996 Stock Option
Plan to increase the number of shares of Common Stock reserved for issuance to
1,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Proposal to ratify and approve Settlement Agreements with the
Company's former officers and directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
44
<PAGE>
IN ACCORDANCE WITH THEIR BEST JUDGMENT, the Proxy is authorized to vote
upon any other matter which may properly come before the Meeting.
THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN.
UNLESS OTHERWISE DIRECTED, OR IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, 3, 4, AND 5.
Date: _____________, 1999
________________________________________
Signature
________________________________________
Signature if jointly held
Please date and sign exactly as your
name appears hereon. If shares are
jointly held, all joint owners should
sign. Trustees and others signing in a
representative capacity shall sign as
such. If the owner is a corporation or
partnership, a duly authorized officer
or partner shall sign the full
corporate or partnership name.
45
<PAGE>
EXHIBITS
4.1 Certificate of Designation for Series A Convertible Preferred Stock
4.2 Amended and Restated Certificate of Incorporation of the Company
46
<PAGE>
CERTIFICATE OF DESIGNATION
OF
NETLIVE COMMUNICATIONS, INC.
(PURSUANT TO SECTION 151(G) OF THE DELAWARE
GENERAL CORPORATE LAW)
The undersigned, Adrian D. Wischer, being the President of NetLive
Communications, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that the following resolution, duly adopted by the Board of Directors
of the Corporation, establishes and sets forth the rights, preferences, powers,
designations, limitations and restrictions of the Corporation's Series A
Convertible Preferred Stock:
"RESOLVED, that pursuant to the authority granted to this Board of
Directors in the Amended and Restated Certificate of Incorporation of the
Corporation, there is hereby established out of the 4,000,000 authorized shares
of Preferred Stock, par value $.0001 per share, a series consisting of
1,000,000 shares, designated as Series A Convertible Preferred Stock.
The following are the powers, rights, qualifications and
restrictions regarding the Series A Convertible Preferred Stock
(the "Series A Preferred Stock"):
A. Definitions.
------------
1. "Common Stock" shall mean the Corporation's common
stock, par value $.0001 per share.
2. "Conversion Date" shall mean the date on which certificates for
shares of the Series A Preferred Stock have been surrendered for conversion in
accordance with this Certificate of Designation.
3. "Control," "controlling" and "in control" shall mean or refer
to possession of the ability to vote no less than 50.1% of the issued and
outstanding voting stock of the Corporation.
<PAGE>
4. "Conversion Rate" shall mean the number of shares of Common
Stock into which each share of Series A Preferred Stock is convertible.
Initially, the Conversion Rate shall be one share of Common Stock for each
share of Series A Preferred Stock subject to conversion. The Conversion Rate
shall be subject to adjustment as provided in Section E.4. hereof.
5. "Liquidation Preference" shall mean $.0001 per share of Series
A Preferred Stock, subject to adjustment.
6. "Market Price" shall mean, as of any given date, the fair
market value per share of Common Stock as of the close of business on such
date, or, if such date is not a business day, on the business day immediately
preceding such date, as determined in good faith by the Corporation's board of
directors; provided that, if the Common Stock is listed for trading on a
national securities exchange, or on the NASDAQ National Market System, or on
the NASDAQ Small Cap Market, or on the Over-the-Counter market, the fair market
value per share of Common Stock shall be the closing bid price of the Common
Stock on such national securities exchange, NASDAQ National Market System,
NASDAQ Small Cap Market, or Over- the-Counter market, as reported by the
National Quotation Bureau, Incorporated, as the case may be, on such date, or,
if such date is not a business day, or there is no closing bid price on such
date, on the first business day preceding such date on which there is a closing
bid price.
7. "Person" shall mean any individual, partnership, corporation,
limited liability company, association, trust, joint venture, unincorporated
organization, and any government, governmental department of agency or
political subdivision thereof.
8. "Pro Rata" shall mean, with respect to any sums to be
distributed to the holders of the Series A Preferred Stock, a pro rata
allocation based on the full preferential amounts to which such holders are
entitled.
B. Priority as to Payments.
------------------------
The Series A Preferred Stock shall rank prior to all other capital
stock of the Corporation as to dividends, repurchase, or the distribution of
assets upon liquidation.
C. Liquidation Rights.
-------------------
1. Distributions. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, before any
distribution of the assets of the Corporation shall be made to or set apart for
the holders of any Common Stock, the holders of the Series A Preferred Stock
shall be entitled to a cash payment, equal to the then applicable Liquidation
Preference, for each share of Series A Preferred Stock held
2
<PAGE>
by them. Upon payment of such sum, the holders of Series A Preferred Stock
shall not be entitled to any further payment or distribution in connection with
any such liquidation, dissolution or winding up of the Corporation.
2. Partial Distribution. If, upon any such liquidation,
dissolution or winding up, the assets of the Corporation distributable among
the holders of the Series A Preferred Stock shall be insufficient to pay to
them in full the Liquidation Preference, then all such assets, or the proceeds
thereof, shall be distributed only among the holders of the Series A Preferred
Stock, Pro Rata.
3. Merger, Consolidation, Etc. In the event of (i) a merger or
consolidation of the Corporation with or into another entity, other than a
wholly-owned subsidiary of the Corporation (except if (A) the then-current
controlling shareholders of the Corporation after any such transaction remain
in control of the Corporation or any combined or new corporation, or (B) such
merger or consolidation does not result in the transfer of more than 50% of the
voting securities of the Corporation), or (ii) except in the case of a
reorganization of the Corporation in which the then-current controlling
shareholders of the Corporation remain in control of the Corporation, any sale,
conveyance, exchange or transfer of all or substantially all of (A) the assets
or (B) the capital stock of the Corporation (in either case, for cash, shares
of capital stock, other securities or other consideration) (collectively, an
"Acquisition"), then, subject to the holder's right to make the election
specified in Section E.4(d), if eligible, if the aggregate value of securities
or other assets received by the Corporation or its stockholders in such
Acquisition, after giving effect to the distribution of such consideration to
all holders of outstanding capital stock of the Corporation, would result in
the holders of Preferred Stock receiving consideration equal to, or in excess
of, the then applicable Liquidation Preference (assuming conversion of all of
the outstanding shares of Series A Preferred Stock), such securities or other
assets received in the Acquisition will be distributed among the holders of
Series A Preferred Stock and other classes of capital stock pro rata on an as
converted basis. If such Acquisition would not result in the holders of Series
A Preferred Stock receiving consideration in excess of the then applicable
Liquidation Preference, such total amount will be distributed among the holders
of Series A Preferred Stock until all such holders have received consideration
equal to the then-applicable Liquidation Preference, with any excess
consideration thereafter to be distributed to the holders of other classes of
capital stock.
D. Voting Rights.
1. General. Other than as set forth in Section D.2. below, the
holders of Series A Preferred Stock shall not be
3
<PAGE>
entitled to vote as Common Stock holders on any matters on which a vote of
security holders of the Corporation is taken or written consent is given.
2. Certain Transactions Requiring Vote of all Holders as a Class.
So long as any share of Series A Preferred Stock is outstanding, the
Corporation shall not, without the affirmative vote of the holders of a
majority of the shares of the outstanding Series A Preferred Stock:
(a) authorize or issue any class of securities which have a
liquidation preference or rights to dividends or other
distributions superior to or pari passu with the Series A
Preferred Stock; or
(b) amend this Certificate of Designation.
E. Conversion.
1. General. The holders of shares of Series A Preferred Stock
shall have the right to convert shares of Series A Preferred Stock into shares
of Common Stock in the following manner.
2. Optional Conversion.
(a) Subject to (i) the restrictions on conversion set forth in
Section E.2(b) below, and (ii) the provisions for
adjustment hereinafter set forth in Section E.4., during
the period during which any share of Series A Preferred
Stock is outstanding (the "Conversion Period"), each share
of Series A Preferred Stock shall be convertible, at the
option of the holder thereof, upon surrender of the
certificate(s) so to be converted, into fully paid and
non-assessable shares of Common Stock, at the Conversion
Rate, as adjusted.
(b) The Series A Preferred Stock will be convertible into
shares of Common Stock if and only if the Corporation's
audited consolidated net after tax income, as computed by
a major accounting firm regularly retained by the
Corporation, in accordance with generally accepted
accounting principles, consistently applied, and in
accordance with Regulation S-X promulgated under the
Securities Act of 1933, as amended ("Net Income") exceeds
a sum in U.S. Dollars equivalent to $3,571,429 Australian
Dollars (the "Target Income") for any of the fiscal years
ending June 30, 1999, 2000 and 2001 (each a "Target Year"
and collectively the "Target Years"). In the event the
4
<PAGE>
Corporation's Net Income exceeds the Target Income
in any Target Year, for each $200,000 increment in U.S.
Dollars that the Corporation's Net Income exceeds the
Target Income, 200,000 shares of Series A Preferred Stock
(as such number may be adjusted for stock splits, stock
dividends and similar events) will become convertible into
shares of Common Stock at the then prevailing Conversion
Rate.
3. Conversion Procedure. Any shares so surrendered for conversion
shall be duly endorsed, or accompanied by proper instruments of transfer, to
the Corporation or in blank, together with a written notice to the Corporation
of the election to make such conversion and of the name or names in which the
certificate or certificates for shares of the Common Stock shall be issued. Any
accrued and unpaid dividends upon the Series A Preferred Stock shall, upon
conversion, in the Company's sole discretion, be paid in either cash or
additional shares of Common Stock, such shares to be valued in the same manner
as dividends payable in Common Stock. The Corporation shall pay all taxes and
other charges in respect of the issue of shares of the Common Stock upon any
such conversion; provided, however, that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of the Common Stock in a name other than that in
which the shares of the Series A Preferred Stock so converted were registered.
4. Adjustments. The Conversion Rate shall be subject to adjustment
from time to time as follows:
(a) whenever the Corporation shall (i) declare a dividend
payable in shares of Common Stock, or any securities
convertible or exercisable into shares of Common Stock;
(ii) subdivide the outstanding shares of Common Stock;
(iii) combine the outstanding shares of Common Stock into
a smaller number of shares; or (iv) issue by
reclassification of the Common Stock any shares of stock
of the Corporation, the Conversion Rate shall be adjusted
so that the holder of each share of the Series A Preferred
Stock shall thereafter be entitled to receive upon the
conversion of such share the number of shares of Common
Stock of the Corporation which such holder would have
owned or be entitled to receive after the happening of any
of the events described above had such shares been
converted immediately prior to the happening of such
event;
(b) whenever the Corporation shall make any distribution of
evidences of its indebtedness or assets, other than any
distribution of cash, or
5
<PAGE>
rights to subscribe for or purchase any evidences of the
Corporation's indebtedness or assets, the Conversion Rate
shall be adjusted so that the number of shares of Common
Stock into which each share of Series A Preferred Stock
shall thereafter be convertible shall be determined by
multiplying the number of shares of Common Stock into
which such share of Series A Preferred Stock was
theretofore convertible by a fraction of which the
numerator shall be the Market Price as of the date of such
distribution and of which the denominator shall be the
Market Price as of such date less the book value per share
of Common Stock (as determined in good faith in accordance
with generally accepted accounting principles,
consistently applied, by the Board of Directors of the
Corporation) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription or
purchase rights (unless the denominator as so calculated
would be less than or equal to zero, in which case the
denominator shall be deemed to equal one percent (1%) of
the Market Price as of the date of such distribution);
(c) for the purpose of any adjustment of the Conversion Rate
pursuant to this Section E.4, the following provisions
shall be applicable:
(1) in the case of the issuance hereafter of options or
warrants to purchase or rights to subscribe for Common
Stock (collectively, such "Rights"), the aggregate
maximum number of shares of Common Stock deliverable
upon exercise of such Rights shall be deemed to have
been issued at the time such Rights were issued;
(2) in the case of the issuance of securities by their
terms convertible into or exchangeable for Common
Stock (collectively, such "Convertible Securities"),
or options or warrants to purchase or rights to
subscribe for securities by their terms convertible or
exchangeable for Common Stock (collectively, such
"Related Rights") the aggregate maximum number of
shares of Common Stock deliverable upon conversion,
exchange or exercise of any such Convertible
Securities or such Related Rights shall be deemed to
have been issued at the time such Convertible
Securities or such Related Rights were issued;
6
<PAGE>
(3) on any change in the number of shares of Common Stock
deliverable upon the exercise of such Rights or
Related Rights or upon the conversion, exchange or
exercise of such Convertible Securities other than any
change resulting from the anti-dilution provisions of
such Rights, or Related Rights or Convertible
Securities, the Conversion Rate shall forthwith be
readjusted to such Conversion Rate, in accordance with
the formula in Section E.4(b) above, as would have
been in effect had such Rights, Related Rights or
Convertible Securities not been converted, exchanged
or exercised prior to such change, and had provided
for such change in the number of shares deliverable
upon a conversion, exchange or exercise at the time
initially granted, issued or sold;
(4) on the expiration and/or cancellation of any such
Rights, Related Rights or Convertible Securities, the
Conversion Rate shall forthwith be readjusted to such
Conversion Rate, in accordance with the formula in
Section E.4(b) above, as would have been obtained had
the adjustment made upon the issuance of such Rights
or Related Rights or the issuance of any such
Convertible Securities been made upon the basis of the
issuance of only the number of shares of Common Stock
actually issued upon the exercise of such Rights or
Related Rights or the conversion, exchange or exercise
of any such Convertible Securities;
(d) in case the Corporation shall effect a reorganization,
shall merge with or consolidate into another corporation,
or shall sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business and,
pursuant to the terms of such reorganization, merger,
consolidation or disposition of assets, shares of stock or
other securities, property or assets of the Corporation,
successor or transferee or an affiliate thereof are to be
received by or distributed to the holders of Common Stock,
then each holder of Series A Preferred Stock shall be
provided with written notice from the Corporation
informing each holder of Series A Preferred Stock of the
terms of such reorganization, merger, consolidation or
disposition of assets and of the record date thereof for
any distribution pursuant
7
<PAGE>
thereto, at least 10 days in advance of such record date,
and each holder of Series A Preferred Stock shall have, in
addition to the rights provided for herein, the right to
receive, at the holder's election, either (i) upon
conversion of such Series A Preferred Stock, the number of
shares of stock or other securities, property or assets of
the Corporation, successor or transferee or affiliate
thereof or cash receivable upon or as a result of such
reorganization, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock
into which such holder's shares of Series A Preferred
Stock are then convertible immediately prior to such event
or (ii) the securities into which the shares of Series A
Preferred Stock are converted into, upon, or as a result
of such reorganization, merger, consolidation or
disposition of assets. Nothing herein shall derogate from
the rights of the holders of Series A Preferred Stock to
the liquidation preference specified in Section C.3. The
provisions of this Section E.4(d) shall similarly apply to
successive reorganizations, mergers, consolidations or
dispositions of assets;
(e) if any other event or circumstance not specifically
contemplated in Section E.4. shall occur, such occurrence
from which the conversion rights of the holders of Series
A Preferred Stock shall not be protected to the extent
that such conversion rights are otherwise protected by the
provisions and intent of and general principles underlying
this Section E.4., the Board of Directors of the
Corporation shall make an adjustment in the application
and interpretation of Section E.4. so that such conversion
rights are protected upon occurrence of such other event
or circumstance, in accordance with the intent and general
principles of such Section E.4.
The certificate of any independent firm of public accountants of
recognized standing selected by the Board of Directors of the Corporation shall
be presumptive evidence of the correctness of any computation made under this
Section E.4.
5. Notice of Adjustment. Whenever any adjustment is required in
respect of the Conversion Rate, the Corporation shall forthwith (a) prepare a
statement describing in reasonable detail the adjustment and the method of
calculation used, and certified by an independent firm of public accountants or
recognized standing selected by the Board of Directors of the Corporation, and
(b) cause a copy of such statement to be mailed to the holders of
8
<PAGE>
record of the Series A Preferred Stock at the close of business on the day
preceding the effective date of such adjustment.
6. Fractions. No fractions of shares of stock of any class of the
Corporation at any time authorized shall be issuable upon any conversion of the
Series A Preferred Stock. In lieu of any such fraction of a share, the person
entitled to an interest in respect of such fraction shall be entitled, as
determined from time to time by the Board of Directors of the Corporation, to
the cash equivalent of such fraction based upon the market value thereof on the
date of such conversion, which for the purpose of this Section E.6. shall be as
determined in good faith by the Board of Directors of the Corporation.
7. Reserves. The Corporation shall at all times reserve and keep
available out of its authorized but unissued Common Stock the full number of
shares of Common Stock into which all shares of Series A Preferred Stock from
time to time outstanding are convertible.
8. Status of Converted Shares. Shares of Series A Preferred Stock
surrendered for conversion may be reissued as shares of such series or as
shares of such other series of Preferred Stock as shall be determined by the
Board of Directors of the Corporation."
IN WITNESS WHEREOF, said NetLive Communications, Inc. has caused
this Certificate to be signed by Adrian D. Wischer, its President, this ______
day of ___________, 1999.
By:__________________________________
Adrian D. Wischer, President
9
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NETLIVE COMMUNICATIONS, INC.
NetLive Communications, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is NetLive Communications, Inc. The
name under which the corporation was originally incorporated was Netvisions
Incorporated. The date of filing of its original Certificate of Incorporation
with the Secretary of State was August 23, 1995. The dates of filing of the
three Certificates of Amendment to the Certificate of Incorporation were
January 3, 1996, March 4, 1996 and October 17, 1997.
2. This Restated Certificate of Incorporation restates and integrates
and further amends the Certificate of Incorporation of the corporation by: (1)
changing the name of the corporation to "Linda Corporation"; (2) increasing the
authorized capitalization of the corporation from 20,000,000 shares, of which
19,000,000 are Common Stock and 1,000,000 are Preferred Stock, to 37,000,000
shares, of which 33,000,000 are Common Stock and 4,000,000 are Preferred Stock;
and (3) renumbering certain remaining paragraphs of the Restated Certificate of
Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or
changes to read as herein set forth in full:
ARTICLE I: The name of the corporation shall be: LINDA CORPORATION
(hereinafter the "corporation").
ARTICLE II: The registered office of this corporation in the State of
Delaware is Two Greenville Crossing, Suite 300A, 4001 Kennett Pike, P.O. Box
4477, Wilmington, New Castle County, Delaware 19807-0477 and its registered
agent at that address is Corporations & Companies, Inc., Two Greenville
Crossing, Suite 300A, 4001 Kennett Pike, P.O. Box 4477, Wilmington, New Castle
County, Delaware 19807-0477.
ARTICLE III: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware; and shall have perpetual existence.
ARTICLE IV: 1. The total number of shares which the corporation shall
have authority to issue is 37,000,000, all of which have a par value of
$0.0001; 33,000,000 of said shares are Common Stock and 4,000,000 of said
shares are Preferred Stock.
2. The powers, preferences and rights, and the qualifications,
limitations and restrictions
<PAGE>
of the corporation's Common Stock and Preferred Stock are as follows:
(a) holders of the corporation's Common Stock as a class have equal
ratable rights to receive dividends when, as and if declared by the
Board of Directors, out of funds legally available therefor and are
entitled upon liquidation of the corporation to share ratably in the
net assets available for distribution, are not redeemable and have no
pre-emptive or similar rights; and holders of the corporation's Common
Stock have one non-cumulative vote for each share held of record on
all matters to be voted on by the corporation's stockholders; and
(b) the shares of Preferred Stock may be issued in series, and shall
have such voting powers, full or limited, or no voting powers, and
such designations, preferences and relative participating, optional or
other special rights, and qualifications, limitations or restrictions
thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issuance of such stock adopted from time
to time by the Board of Directors. The Board of Directors is hereby
expressly vested with the authority to determine and fix in the
resolution or resolutions providing for the issuances of Preferred
Stock the voting powers, designations, preferences and rights, and the
qualifications, limitations or restrictions thereof, of each such
series to the full extent now or hereafter permitted by the laws of
the State of Delaware.
ARTICLE V: A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any
amendment, modification or repeal of the foregoing sentence by the stockholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation in respect of any act or omission occurring prior
to the time of such amendment, modification or repeal.
ARTICLE VI: The stockholders and directors shall have the power to
hold their meetings, to have an office or offices, to keep the books, documents
and papers of the corporation outside of the State of Delaware at such places
as might from time to time be designated by the by-laws or resolutions of the
directors or stockholders, except as otherwise required by the laws of
Delaware.
ARTICLE VII: Number of Directors: The number of directors of the
corporation shall be seven.
ARTICLE VIII: Classified Board of Directors: The directors, other than
those who may be elected by the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation pursuant
to the terms of this Certificate of Incorporation of any resolution or
resolutions providing for the issuance of any such series of stock adopted by
the Board of Directors, shall be classified with respect to the time for which
they severally hold office into three classes, as nearly equal in number as
possible. The initial Class I
2
<PAGE>
Directors shall serve for a term expiring at the first annual meeting of
stockholders of the corporation following the filing of this Amended and
Restated Certificate of Incorporation; the initial Class II Directors shall
serve for a term expiring at the first annual meeting of stockholders following
the filing of this Amended and Restated Certificate of Incorporation; and the
initial Class III Directors shall serve for a term expiring at the second
annual meeting of stockholders following the filing of this Amended and
Restated Certificate of Incorporation. Each director in each such class shall
hold office until his or her successor is duly elected and qualified or until
his earlier death, disability, resignation or removal. At the first annual
meeting of stockholders following the filing of this Amended and Restated
Certificate of Incorporation, the successors of the initial Class I Directors
and the initial Class II Directors shall be elected to hold office for a term
expiring at the annual meeting of stockholders to be held in the second year
and third year, respectively, following the year of their election, with each
director in each such class to hold office until his or her successor is duly
elected and qualified or until his earlier death, disability, resignation or
removal. At each annual meeting of stockholders beginning with the second
annual meeting of stockholders following the filing of this Amended and
Restated Certificate of Incorporation, the successors of the class of directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders to be held in the third year
following the year of their election, with each director in each such class to
hold office until his or her successor is duly elected and qualified or until
his earlier death, disability, resignation or removal.
ARTICLE IX: Vacancies: If any seat on the Board becomes vacant during
its initial term following the 1997 annual meeting of the stockholders, such
vacancy shall be filled as follows: (i) in the case of Class III Directors, or
their successors, by the vote of a majority of the remaining Class III
Directors, (ii) in the case of the Class II Directors or Designee "A" of the
Class I Directors, or their successors (all such Directors being referred to as
the "Independent Directors"), by the vote of a majority of the remaining
Independent Directors, and (iii) in the case of Designee "B" of the Class I
Directors, or his successors, by May Davis Group, Inc., Owen May, Dibo Attar,
Dennis E. Sal, Davstar II Mdg. Investments Corp. N.V., Jasminville Corp., N.V.,
Celestial Dreams Corp. N.V., Eaglehurst Corp. N.V., Signal Hill N.V.,
Wellington Corp. N.V. and Ganaterra Corp. N.V., so long as such person is not
an officer or employee of May Davis Group, Inc. and is reasonably acceptable to
the Board."
4. This Amended and Restated Certificate of Incorporation was duly
adopted by written consent of the stockholders in accordance with the
applicable provisions of Sections 242 and 245 of the General Corporation Law of
the State of Delaware and written notice of the adoption of this Restated
Certificate of Incorporation has been given as provided by Section 228 of the
General Corporation Law of the State of Delaware to every stockholder entitled
to such notice.
3
<PAGE>
IN WITNESS WHEREOF, said NetLive Communications, Inc. has caused this
Certificate to be signed by Adrian D. Wischer, its President, this ___ day of
__________, 1999.
NETLIVE COMMUNICATIONS, INC.
By: _______________________________
Adrian D. Wischer, President
4
