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Netobjects Inc – ‘PRE 14C’ for 1/8/01

On: Thursday, 1/11/01, at 5:25pm ET · For: 1/8/01 · Accession #: 950005-1-14 · File #: 0-25427

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 1/11/01  Netobjects Inc                    PRE 14C     1/08/01    1:44K                                    Dr EDGAR & Consulting/FA

Preliminary Proxy Information Statement — Schedule 14C
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PRE 14C     Preliminary 14C                                       20     69K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Information Statement Terms of the License Agreement
1	1st Page - Filing Submission
3	Information Statement
14	Terms of the License Agreement

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------------

SCHEDULE 14C INFORMATION

Proxy Statement Pursuant to Section 14(C) of the
 Securities Exchange Act of 1934

Check the appropriate box:                                                      

[X] Preliminary information statement                                           

[ ] Confidential, for use of the Commission only                                
(as permitted by Rule 14c-5(d)(2))                                      

[ ] Definitive information statement                                            

NETOBJECTS, INC.
(Name of Registrant as Specified in its Charter)

------------------------------------

Payment of filing fee (Check the appropriate box):                              

[ ] No fee required                                                             

[X] Fee  computed on table below per  Exchange  Act Rules  14c-5(g) and 0-11 (1)

(1) Title of each class of securities to which transaction applies:     
N/A                                         
--------------------------------------------                    

(2) Aggregate number of securities to which transaction applies:        
N/A                                         
--------------------------------------------                    

    (3) Per unit  price  or  other  underlying  value  of  transaction  computed
pursuant to Exchange Act Rule 0-11:                             
N/A                                         
--------------------------------------------                    

(4) Proposed maximum aggregate value of transaction:                    
$18,000,000                                 
--------------------------------------------                    

(5) Total fee paid:                                                     
$3,600                                      
--------------------------------------------                    

[ ] Fee paid previously with preliminary materials                              

[ ] Check box if any part of  the fee  is offset as provide by Exchange Act Rule
    0-11(a)(2)  and  identify the filing for which the  offsetting  fee was paid
    previously.  Identify the previous filing by registration  statement number,
or the Form or Schedule and the date of its filing.                     

(1) Amount Previously Paid:                                             

----------------------------                                    

(2) Form, Schedule or Registration Statement No.:                       

----------------------------                                    

(3) Filing Party:                                                       

----------------------------                                    

(4) Date Filed:                                                         

----------------------------                                    

First mailed to stockholders on or about January __, 2001.

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NETOBJECTS, INC.
 301 Galveston Drive
Redwood City, CA 94063

To the Stockholders of NetObjects, Inc.:                                        

         Enclosed  is an  Information  Statement  that we are  sending to you in
connection  with  the  sale  of our  Enterprise  division  to  Merant,  Inc.,  a
California  corporation,  for $18 million  under the terms of the Asset Sale and
Purchase Agreement between NetObjects, Inc. and Merant dated January 8, 2001.   

         Our board of  directors  has  already  approved  the  transaction.  The
Enterprise  division  represents a significant  portion of the Company's present
operations  and assets,  so the board of directors  decided to seek  stockholder
approval as well. Two of our  stockholders,  who collectively hold a majority of
the voting power of our common stock,  have already  approved the transaction by
written consent.  Therefore, this Information Statement is being sent to you for
informational purposes only. We are not asking for a proxy or vote on any of the
matters described in this Information Statement.                                

         We are mailing with the  Information  Statement  the  Company's  Annual
Report on Form 10K, which we filed with the  Securities and Exchange  Commission
on December 29, 2000. The annual report contains  financial  information for our
most recent fiscal year ended September 30, 2000, a description of our business,
a discussion of relevant risk factors and other material information helpful for
an  understanding  of our  company.  We encourage  you to read this  Information
Statement and the annual report carefully.                                      

                        Sincerely,

                         Samir Arora
                       President

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NETOBJECTS, INC.
 301 Galveston Drive
Redwood City, California 94063

 -------------------------------------

 INFORMATION STATEMENT
 AND
NOTICE OF ACTION TAKEN WITHOUT A MEETING

Dated January __, 2001

 -------------------------------------

         This Information Statement and Notice of Action Taken Without a Meeting
(collectively,  the "Information Statement") is furnished to the stockholders of
NetObjects, Inc., a Delaware corporation, to provide information with respect to
an  action  taken  by  written  consent  of the  holders  of a  majority  of the
outstanding  shares of the Company's  common stock that were entitled to vote on
such action. This Information  Statement also constitutes notice of action taken
without a  meeting  as  required  by  Section  228(d)  of the  Delaware  General
Corporation Law.                                                                

         The  written  consent  approved  the sale of the  Company's  Enterprise
division to Merant,  Inc. for a total  purchase  price of $18 million  under the
terms of an Asset Sale and  Purchase  Agreement,  or the  definitive  agreement,
dated  January 8, 2001.  This  transaction  involves  the sale of a  significant
portion  of  our  assets,  business  and  operations  and,  conceivably,   could
constitute a sale of substantially  all of the property and assets of NetObjects
within the meaning of Section 271(a) of the Delaware  General  Corporation  Law.
Because a transaction  subject to Section 271(a) requires approval of a majority
of the corporation's  outstanding voting shares under Delaware law, the board of
directors sought the approval by our stockholders for the sale of the Enterprise
division to Merant Two of our  stockholders,  IBM and Samir  Arora,  represent a
majority  of the  outstanding  shares of our  common  stock and have  signed the
written consent.  Therefore, all required corporate approvals of the transaction
have been  obtained.  This  Information  Statement is  furnished  solely for the
purpose  of  informing  stockholders  of this  corporate  action  in the  manner
required by the Securities Exchange Act of 1934.                                

 ---------------------------

We Are Not Asking You for a Proxy and You Are Requested Not to Send Us a Proxy. 

 ---------------------------

         The record date for determining  stockholders  entitled to receive this
Information  Statement has been  established as the close of business on January
2, 2001. As of the record date, we had 31,687,043  shares of common stock issued
and outstanding.  Each share of our common stock entitles its holder to one vote
on all matters submitted to a vote of the stockholders.                         

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SUMMARY TERM SHEET

         Our Enterprise division provides software and professional  services to
large-scale  corporate  enterprises  and  departments  requiring  an  integrated
solution  that enables  them to manage the entire Web  production  process.  The
principal  product  of  our  Enterprise   division  is  NetObjects  Collage,  an
integrated  platform for the  management of  enterprise  Web  applications.  The
NetObjects  Collage  platform  combines  collaboration  with content  management
enterprise integration and dynamic application services. Our Enterprise division
also provides  professional  services to help our customers  install  NetObjects
Collage and to train their personnel in the use and maintenance of corporate web
sites with this product.                                                        

         As of December  19,  2000,  we and Merant  signed an option and license
agreement  under  which  Merant paid us $4 million  for an  exclusive  option to
purchase the Enterprise division. We signed the definitive agreement,  which was
contemplated  under the  option  and  license  agreement,  on  January  8, 2001.
Merant's option expired when we signed the definitive agreement.                

         The  following  is a summary of the  material  terms of the  definitive
agreement:                                                                      

         o  We will sell to Merant  the  products  of our  Enterprise  division,
            including  NetObjects  Collage,   NetObjects  Authoring  Server  and
            NetObjects TeamFusion,  the goodwill of the business and most of the
related intellectual property.                          

         o  We expect most of the current  employees of the Enterprise  division
to accept offers of employment to be extended by Merant.

         o  We will  license  to  Merant   two  software  programs  and  related
            intellectual  property  rights  that we will  continue to use in our
Small Business operations.                              

         o  We will  receive a total of $18 million in cash from the sale of the
            Enterprise  division,  of which $4  million  has been paid under the
option agreement.                                       

         o  We will not sell to  Merant,  and will  retain,  all of our cash and
            accounts   receivable   and  the  fixed   assets,   leaseholds   and
       intellectual property related to our Small Business operations.

         o  We have agreed  that,  for a period of 2 years,  we will not compete
            with  Merant in the  business  that we have  conducted  through  the
Enterprise division.                                    

         o  The  closing  of the  transactions  contemplated  in the  definitive
            agreement is projected to occur in February 2001,  approximately  20
days after the date of this Information Statement.      

         The terms of the definitive  agreement are more specifically  described
below.                                                                          

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 ACTIONS TAKEN

         Our board of directors  authorized the sale of the Enterprise  division
and  approved  the material  terms of the  definitive  agreement at a telephonic
meeting on January 3, 2001.                                                     

         As of January  2,  2001,  the  record  date for this  transaction,  the
holders of 16,693,423 shares, or approximately 53% of the total number of shares
of common stock  outstanding,  approved the sale of the Enterprise  division and
the definitive  agreement.  As the transaction and the definitive agreement have
been  approved  by holders of a majority of the shares of our common  stock,  no
proxies are being solicited with this Information Statement.                    

         You are being  provided  with this  Information  Statement  pursuant to
Section 14(c) of the Securities Exchange Act of 1934, as amended, and Regulation
14C and Schedule 14C  thereunder.  The sale of the Enterprise  division will not
become  effective  until at least 20 days after the mailing of this  Information
Statement.  This Information Statement is being mailed to the stockholders on or
about January ___, 2001.                                                        

FORWARD-LOOKING STATEMENTS

         This  Information  Statement  may  contain  forward-looking  statements
within the  meaning of the  federal  securities  laws.  Such  statements  can be
identified  by the words  "believes",  "anticipates",  "plans",  "expects",  and
similar  expressions.   These   forward-looking   statements  include,   without
limitation, statements about the planned sale of our Enterprise division, market
opportunities  for web site  building  software  and  services  and our business
strategy.   These  forward-looking   statements  do  not  constitute  assurances
regarding  our future  operating  results,  including  the  planned  sale of the
Enterprise division, the operations of our online services business, cash flows,
and financial condition. The market for online web-based small business services
is new  and  extremely  competitive.  We  cannot  be  assured  of  generating  a
significant  amount of revenue  or earning a profit  from the sale or license of
these services.  Our actual results could differ materially from those expressed
or implied by these forward-looking statements due to various factors, including
the risk that the planned sale of the Enterprise  division may not be completed,
and the risk factors  described  in our annual  report on Form 10-K for the year
ended September 30, 2000 and other periodic  reports filed with the SEC pursuant
to the  Securities  Exchange Act of 1934.  We undertake no  obligation to update
publicly any forward-looking  statements as new information becomes available or
relevant events occur in the future.                                            

NO DISSENTERS' RIGHTS OF APPRAISAL

         The corporate actions described in this Information  Statement will not
afford our  stockholders  the  opportunity  to dissent from those  actions or to
receive an agreed or judicially  appraised  value for their shares of our common
stock as a result of those actions.                                             

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BACKGROUND OF AND REASONS FOR THE SALE

         From our inception through the fiscal year ended September 30, 2000, we
focused our  business on being a leading  provider of  software,  solutions  and
services that enable small  businesses to build,  deploy and maintain web sites,
conduct online e-business and enable large enterprises to effectively create and
manage corporate intranets.                                                     

         Our  objective is to become a leading  provider of online  services for
small businesses.  We intend to partner with service  providers--from telcos and
financial  institutions  to ISPs and hardware  manufacturers--to  deliver  these
services to their small business customers. We offer our partners the technology
solutions  and services  they need to enable their small  business  customers to
successfully  leverage  the  power of the web.  Our  applications  and  services
empower small businesses by helping them create web sites,  engage in e-commerce
and grow and manage their businesses.  In deploying these services, our partners
benefit  from  potential  new  sources of revenue,  faster time to market,  less
administrative overhead and an improved customer experience.                    

         In 1996, we introduced  NetObjects  Fusion, the first web site building
software application. Since then, NetObjects Fusion has been instrumental in the
development  of  millions  of  websites  and has become  well known in the site-
building industry, winning over 75 awards.                                      

Enterprise Division History                                   

         We introduced NetObjects  TeamFusion,  our first client-server web site
building  application,  in December  1997.  In  September  1998,  we  introduced
NetObjects  Authoring  Server Suite 3.0 as a  client-server  application for the
corporate  intranet market.  This product replaced  NetObjects  TeamFusion,  but
retained the TeamFusion  Client as one of the product's four modules.  We formed
our Professional Services Group in October 1998 to provide training,  consulting
and installation  services to our customers  deploying the NetObjects  Authoring
Server.  In the fourth quarter of fiscal year 1999, we began  administering  the
NetObjects  Authoring Server product family and our professional  services group
as our Enterprise division.                                                     

         In March 2000, the Enterprise  division launched NetObjects Collage, an
integrated   platform  for  the  management  of  enterprise  Web   applications.
NetObjects Collage provides an integrated  platform that combines  collaboration
with  content  management,   enterprise  integration,  and  dynamic  application
services.  We also  expanded  our  professional  services to help our  customers
install  NetObjects  Collage  and  to  train  their  personnel  in the  use  and
maintenance of corporate web sites with this product.                           

Evolving Small Business Strategy                              

         Building  on the  success  of  NetObjects  Fusion and the growth of the
Internet,  during fiscal year 2000 we adopted a strategy of expanding our market
position from serving as a provider of traditional  desktop software to becoming
an online services  provider.  We had previously built popular online resources,
including  NetObjects.com,  and eFuse.com,  that target  communities of business
users and provide sources of information, products and services for building web
sites.  This  strategic  shift  began in October  1999 with the  acquisition  of
Sitematic, Corp., and the                                                       

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formation of a Small Business division. In December 1999, we combined our online
resources and launched GoBizGo.com,  a web application services site where small
businesses can find the solutions and services  needed to build a successful Web
presence.                                                                       

         In July 2000, we acquired  privately-held  Rocktide Inc., a provider of
the next generation  application  service provider (ASP) technology and wireless
e-services that help Web-enable  businesses  worldwide.  This product technology
was  incorporated  in our newly branded  Matrix  Platform,  which we launched on
October 30, 2000.                                                               

         NetObjects  Matrix  is an  integrated  suite of  online  services  that
enables small businesses to take advantage of the Internet to expand and improve
their  business.  It  is  the  first  set  of  online  services  designed  to be
distributed by service providers,  companies whose reach into the small business
marketplace  through their business  relationships makes them the most effective
distributors of NetObjects products and services.                               

Focusing Our Business                                         

         As usage of the  Internet by  businesses  and  related  markets for our
products and services have evolved, we have decided to narrow our focus in order
to become a leading  provider of essential  online services for small businesses
worldwide by partnering with service providers who can provide mass distribution
to their small business customers. To date, we have made significant progress in
building and  partnering  to create  best-of-class  Web site builders and online
services for services providers and their subscribers.                          

         We believe that the  ubiquity of Web browsers and the  evolution of ASP
technology  to enable the online  delivery of technology  solutions  provide key
benefits to small businesses.  These benefits include ease of use,  installation
and upgradeability,  potential revenues from e-commerce, convenience and reduced
costs--lower monthly subscription fees versus large, up-front payments.         

         We also believe that small businesses will look to a single supplier to
provide an integrated  suite of applications  and services they need rather than
shopping for individual services from multiple vendors. We anticipate that small
businesses   will  purchase   these   services   from  their   current   service
providers--companies  with whom they  already do business and whom they trust to
help them achieve online  success.  We have targeted these service  providers as
the primary customer base for our online web site services.                     

Selling the Enterprise Division                               

         In June 2000, our board of directors retained  Broadview  International
LLC, or Broadview, to explore a range of strategic  alternatives,  including the
possible sale of the Enterprise  division.  At  approximately  the same time, we
also engaged an investment  banking firm to assist us in raising capital through
a private  placement of our  securities.  Our  engagement  letter with Broadview
provides that for its services Broadview is entitled to a fee of $1 million upon
the closing of the sale of the Enterprise division to Merant.                   

         Merant  was  among  a  number  of  companies   initially  contacted  by
Broadview. Direct discussions between Merant and us commenced in September 2000.
Negotiations  for the sale of the  Enterprise  division to Merant  continued for
more than two months.  Although  Broadview  and                                 

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we held discussions with other interested parties,  Merant sustained the highest
level of interest in acquiring this business.                                   

         In the meantime,  we were unable to conclude a private placement of our
securities,  and our lack of  working  capital  for future  operations  became a
paramount concern for the board of directors.  The Enterprise division, which we
are selling to Merant,  generated  approximately  $10  million of  revenues  and
contributed  $7.6  million  to our  operating  loss for the  fiscal  year  ended
September  30,  2000.  Our  ability to  finance  both our  Enterprise  and Small
Business divisions declined substantially. In addition, our independent auditors
advised us that,  without  substantial  additional  capital,  or a commitment to
provide such  capital,  our  financial  statements  would be subject to a "going
concern" qualification.                                                         

         In mid-December 2000, we resolved the principal terms for a sale of the
Enterprise  division to Merant.  Taking into  account  our  liquidity  and other
business  factors,  the board of directors  authorized  us to sign an option and
license agreement with Merant as of December 19, 2000. Under that agreement,  we
received $4 million in cash for granting Merant an exclusive  option to purchase
the  Enterprise  division for $18 million  (including the option  payment).  The
terms of the agreement  provided that Merant's  option to acquire the Enterprise
division  would  expire on January 5, 2001,  if a definitive  agreement  for the
purchase of the  Enterprise  division had not been signed by that date,  or by a
later date agreed upon by both companies.                                       

         The  definitive  agreement  and  the  sale of the  Enterprise  division
described  in  this  Information  Statement  are a  consequence  of  the  option
agreement. The option agreement also provides,  however, that if the acquisition
is not completed, Merant will have a three-year license to distribute NetObjects
Collage,  and the $4 million  option  payment  will be credited  against  future
royalty payment obligations under the license agreement.                        

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DESCRIPTION OF THE SALE OF THE ENTERPRISE DIVISION

Terms of the Definitive Agreement                                               

Assets to be Sold                                             

         The assets being sold or licensed or otherwise transferred to Merant as
part of the sale of our  Enterprise  division  are  located at our  facility  in
Redwood City, California. The assets being sold consist primarily of:           

         o  All intellectual property rights related to the software products of
            the Enterprise division, including NetObjects Collage and NetObjects
            Authoring  Server,  and the  results of any  in-process  development
            efforts  of  the  Enterprise   division   regarding  those  software
products;                                               

         o  All trademarks used in the Enterprise  division,  excluding the name
      "NetObjects," and the goodwill associated with the trademarks;

         o  Our rights  under  most of our  third-party  contracts,  agreements,
            leases,  purchase orders, sales orders and other such instruments to
         which we are a party and which relate to the Enterprise division;

         o  All licenses,  agreements and other arrangements under which we have
            the right to use any third-party intellectual property rights in the
conduct of the business of the Enterprise division; and 

         o  Computers  and  peripherals  that we have  leased  for use  with the
Enterprise division.                                    

Consideration                                                 

         In exchange for the sale and license of the assets  described above, we
will  receive a total of $18  million  in cash.  We  received  $4 million of the
purchase  price from  Merant on  December  21, 2000 under the option and license
agreement.  Merant will deliver $14 million by wire transfer within 7 days after
the closing of the transactions contemplated in the definitive agreement.       

Retained Assets                                               

         We will continue to conduct  business  operations in our Small Business
division.  Therefore, the intellectual property, fixed assets, personal property
and leaseholds used in our Small Business  operations are excluded from the sale
to Merant.  All of our cash holdings and accounts  receivable  also are excluded
from the sale.  We will license  Merant to use,  copy and modify the source code
and  the  object  code  of the  NetObjects  TeamFusion  client,  which  includes
NetObjects Fusion software,  in the purchased business on a non-exclusive  basis
in  perpetuity.  The terms of the  license  prohibit  Merant  from  creating  or
distributing single user versions of this licensed software.                    

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Covenant not to Compete                                       

         We agreed that between January 8, 2001 and the closing date or the date
of  termination of the definitive  agreement,  we will not compete,  directly or
indirectly, with Merant in owning, managing,  operating,  controlling or being a
consultant to any company in the business of providing software services similar
to those of the  Enterprise  division  for a period of two years  following  the
closing of the transaction.                                                     

Covenant not to Hire                                          

         We agreed not to offer  employment  to any  employee of the  Enterprise
division for one year following the closing of the transaction.                 

Representations and Warranties                                

         We made  representations  and warranties in favor of Merant that relate
to a number of matters, including:                                              

o  our due organization and good standing;                    

         o  the  authorization,  execution,  delivery and  enforceability of the
definitive agreement;                                   

o  the absence of litigation and our compliance with laws;    

         o  the accuracy of financial  statements of the Enterprise division and
        the absence of undisclosed liabilities since September 30, 2000;

         o  our  title  to the  assets  to be sold and our  ability  to sell the
assets without any third-party consents;                

         o  our  ownership of or right to use, and the  non-infringement  of the
rights of third parties to, intellectual property;      

o  the performance of the software products being sold;       

         o  the  absence of  infringement  of the  intellectual  property of the
Enterprise division by third parties;                   

         o  the  absence  of  breaches  of  license  agreements  related  to the
Enterprise division;                                    

         o  the absence of conflict  with or violation  of any law,  judgment or
 contract and our certificate of incorporation and bylaws;

o  the filing of tax returns and the payment of taxes;        

         o  the disclosure of employee  benefit plans and their  compliance with
ERISA and other applicable laws;                        

o  our compliance with environmental laws and permits; and    

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o  our labor relations.                                       

         The definitive  agreement also includes  representations and warranties
made by Merant in favor of us that relate to a number of matters, including:    

o  Merant's due organization and good standing;               

         o  the  authorization,  execution,  delivery and  enforceability of the
definitive agreement; and                               

         o  the  absence of conflict  with or  violation  of any law,  judgment,
   contract and Merant's articles of incorporation and bylaws.

Covenant not to Solicit; Covenant not to Merge                

         We agreed that between January 8, 2001 and the closing date or the date
of termination of the definitive agreement,  we will not authorize or permit the
sale,  disposition or  encumbrance  of the assets of the Enterprise  division or
consider or solicit any offers,  engage in  negotiations  or make any  agreement
with respect to any such transaction.  We also agreed not to enter into a merger
or consolidation with any other entity during this same period.                 

Conditions to Closing                                         

         The obligation of Merant to purchase the Enterprise division is subject
to the satisfaction of the following conditions:                                

         o  our  representations  and  warranties  contained  in the  definitive
            agreement are materially  true and correct on the closing date as if
made on that date;                                      

         o  we  perform  or  comply  with all of our  covenants  and  agreements
       required by the definitive agreement prior to the closing date;

         o  we execute and  deliver to Merant  specified  documents  required to
 transfer the assets of the Enterprise division to Merant;

o  we deliver to Merant an opinion of our counsel;            

         o  no action or proceeding by or before any  governmental  authority is
         instituted or threatened which prohibits or invalidates the sale;

         o  Merant enters into employment  agreements with designated  employees
of the Enterprise division; and                         

         o  neither the  Enterprise  division  nor its assets  suffer a material
            adverse change between the date of the definitive  agreement and the
            closing date. For this purpose,  a material  adverse change will not
            include  confirmed  operating  losses  for the  Enterprise  division
            consistent with our historical operations through December 31, 2000.

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         Our  obligation  to sell the  Enterprise  division  is  subject  to the
satisfaction of the following conditions:                                       

         o  Merant's  representations and warranties contained in the definitive
            agreement are materially  true and correct on the closing date as if
made on such date;                                      

         o  Merant performs or complies with all of its covenants and agreements
            required by the  definitive  agreement to be performed  prior to the
closing date; and                                       

         o  no action or proceeding by or before any  governmental  authority is
         instituted or threatened which prohibits or invalidates the sale.

Termination                                                   

         The  definitive  agreement  may be  terminated at any time prior to the
closing date:                                                                   

o  by written consent of Merant and us;                       

         o  by Merant or us if it is  reasonably  concluded  that a condition to
closing cannot be satisfied prior to March 1, 2001; or  

         o  by us if Merant breaches,  or by Merant if we breach, our respective
            representations and warranties set forth in the definitive agreement
            if the breach is not cured within 20 business days following receipt
            by the  breaching  party of written  notice of the  breach  from the
non-breaching party.                                    

         Neither  party  may  terminate  the  definitive  agreement  if it is in
material breach of its obligations or  representations  and warranties under the
definitive  agreement.  The  termination  of the  definitive  agreement will not
relieve any party of liability for any breach of the definitive agreement.      

Indemnification                                               

We agreed to indemnify Merant for --                          

         o  any liability relating to our business that is not expressly assumed
by Merant;                                              

         o  any liability  related to the Enterprise  division  arising prior to
the closing date;                                       

         o  any  breach  by us of  our  representations  and  warranties  in the
definitive agreement or the license agreement; and      

         o  our noncompliance with our covenants or agreements in the definitive
agreement or the license agreement.                     

         For most  matters,  our  indemnification  obligation  will  survive the
closing of the  transaction  for 16 months,  and we will have no  liability  for
indemnity under any  representation or warranty for any claim not brought within
that  period.  Additionally,  for most  matters,  we will                       

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not be liable for any claims  under  $10,000  or until the  aggregate  amount of
liability  exceeds  $70,000,  and our  potential  liability  will not exceed $10
million.   Our   liability  for  breaches  of  our   representations   regarding
intellectual  property  and our title to the assets to be sold to Merant and for
any claim arising out of any of our assets or  businesses  not sold to Merant is
not subject to these limitations on liability.                                  

In addition, Merant agreed to indemnify us for --             

o  any liability that is expressly assumed by Merant;         

         o  any liability  related to the Enterprise  division arising after the
closing date;                                           

         o  any breach by Merant of its  representations  and  warranties in the
definitive agreement; and                               

         o  Merant's  noncompliance  with its  covenants  or  agreements  in the
definitive agreement;                                   

         Merant's  indemnification  obligation  will  survive the closing of the
transaction for 16 months.                                                      

Limitation of Remedies                                        

         In the event of any claim arising out of the definitive agreement,  the
exclusive  remedy of either party will be the right to terminate  the  agreement
and/or the right of indemnification.                                            

Expenses                                                      

         If the closing of the sale of the Enterprise division does not occur by
January 31, 2001 for a reason other than our fault,  then Merant will  reimburse
us for the portion of the  reasonable  net expenses of the  Enterprise  division
incurred by us between January 31, 2001 and March 1, 2001.                      

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Terms of the License Agreement                                                  

         The  license  agreement  that we will enter into with Merant as part of
the sale of the Enterprise division includes the following terms:               

License Grant                                                 

We will grant to Merant the following licenses:               

         o  A  perpetual  license to use,  copy,  modify  and create  derivative
            versions  of  the  NetObjects   TeamFusion  client,  which  includes
            NetObjects  Fusion software,  including the source code,  solely for
            the purpose of  licensing  to end users or  distributors  NetObjects
            TeamFusion  together with any version of  NetObjects  Collage in the
field of enterprise web content management.             

         o  A perpetual license to copy NetObjects ScriptBuilder, solely for the
            purpose  of  licensing  to  end  users  or  distributors  NetObjects
            ScriptBuilder  bundled  with any  version of  NetObjects  Collage or
            NetObjects  Authoring  Server.  Merant will have the right to bundle
            NetObjects  ScriptBuilder with other products so long as the parties
mutually agree on a reasonable royalty for the bundling.

         o  A  perpetual  license,  with  the  right to  grant  sublicenses,  to
            practice and make improvements to any inventions claimed in specific
            patents and to make,  use and sell products  containing the patents,
            solely for the purpose of modifying and creating derivative versions
            of NetObjects  TeamFusion and licensing  NetObjects  TeamFusion with
            any version of NetObjects  Collage to end users and  distributors in
            the  field  of  enterprise  web  content  management  and  providing
maintenance and support services.                       

o  A perpetual license to use specific trademarks.            

Ownership of Derivative Works                                 

         Merant will own all derivative works, modifications and improvements to
the  intellectual  property  licensed  as  described  above,  but we will retain
ownership of the underlying, unmodified intellectual property contained in those
works.                                                                          

Source Code Escrow                                            

         We will agree to deposit the source code for  NetObjects  ScriptBuilder
and the  related  documentation  and  programmers'  notes with an escrow  agent.
Merant will be entitled to obtain the source code and other information if we   

         o  fail  to  perform  our  maintenance  and  support   obligations  for
            NetObjects  ScriptBuilder  and do not cure the failure within 3 days
of Merant's demand;                                     

         o  file or are the subject of a petition  for relief  under  bankruptcy
laws, or                                                

o  cease business operations generally.                       

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         If the source code and materials are released from escrow,  then Merant
will have a license to use,  copy,  modify and prepare  derivative or collective
works  from the  source  code  and the  related  materials  for the  purpose  of
providing  support and maintenance of NetObjects  ScriptBuilder  and customizing
and integrating NetObjects ScriptBuilder with its own products.                 

Representations and Warranties                                

         We will make  representations  and  warranties  in favor of Merant that
relate to the following:                                                        

o  our title to the licensed trademarks;                      

         o  the  non-infringement of the rights of third parties by the licensed
intellectual property, to our knowledge;                

         o  the  absence  of any  breach  of any  license,  sublicense  or other
            agreement  relating to the licensed  intellectual  property,  to our
knowledge;                                              

         o  the absence of any  unauthorized use or infringement of the licensed
intellectual property, to our knowledge; and            

         o  our right to bring an action for infringement or misappropriation of
licensed intellectual property.                         

Indemnification                                               

         We will agree to indemnify Merant for any  misrepresentation  or breach
of  our  representations  and  warranties  in  the  license  agreement  and  our
noncompliance with any covenants or agreements made in the license agreement.   

Third-Party Infringers                                        

         We will retain the right to  initiate  any  proceeding  relating to the
protection of the licensed  intellectual  property, at our expense. If, however,
we elect not to initiate any  proceeding,  then Merant will have the right to do
so, at its expense.                                                             

Termination                                                   

         We can terminate the license agreement and the licenses described above
on 60 days notice if Merant is in default of any  material  agreement  under the
license agreement and does not cure such default within 60 days of notice of the
default from us.                                                                

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Assignability                                                 

         Merant does not have the right to assign  either the license  agreement
or the  licenses  granted to it under the  license  agreement  without our prior
written consent, except to a subsidiary or affiliate of Merant or an acquiror of
all or substantially all of the assets of the Enterprise division sold to Merant
under the definitive agreement.                                                 

Taxation                                                                        

         We will  recognize  taxable income from the sale of assets set forth in
the definitive  agreement.  We currently are losing money and have net operating
loss  carryforwards  available.  We have  not yet  determined  what  income  tax
consequences will arise from the transaction.                                   

Terms of the Software License Agreement                                         

         The terms of the option and license  agreement  provide  that  Merant's
option to acquire the Enterprise  division would expire on January 5, 2001, if a
definitive  agreement for the purchase of the  Enterprise  division had not been
signed by that  date,  or by a later  date  agreed  upon by both  companies.  In
connection with the option agreement, we agreed to enter into a software license
agreement on the following  terms if Merant does not complete the acquisition of
the Enterprise division:                                                        

License Grant                                                 

We granted to Merant the following licenses:                                    

         o  A license to use, copy, market,  promote,  distribute and sublicense
            NetObjects  Collage  and  any  upgrades  and  new  versions,  or the
            software  products,  in  object  code  format  only to end users and
distributors.                                           

         o  A license to use a reasonable number of copies of NetObjects Collage
            in object code format only for demonstration,  maintenance,  support
and training purposes.                                  

         o  A license to use, modify and prepare  derivative works of the source
            code of  NetObjects  Collage  solely to customize  and integrate the
software products into Merant's software products.      

         o  A license to use  identified  trademarks  to identify  the  software
            products for Merant's  marketing,  promotion and distribution of the
software products.                                      

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Royalties                                                     

         Merant  will pay us a  royalty  of  $15,000  per  copy of the  software
products  made or  distributed  by or for  Merant  under  the  software  license
agreement.  The $4 million  payment under the option  agreement will be credited
against royalty amounts otherwise due.                                          

Warranties and Indemnification                                

         We  will  make  warranties  to  Merant  with  respect  to the  software
products. If the software products breach the warranties,  we have the option to
repair  or  replace  the   software   products  so  that  they  conform  to  the
documentation, or to return the royalty payment paid for the defective products.
Merant will have no other  remedy for breach of warranty  except as described in
the prior sentence.                                                             

         In  addition,   we  agreed  to  indemnify   Merant  for  any  claim  of
infringement  by any  software  products  of  certain  third-party  intellectual
property  rights.  If the software  products  become subject to an  infringement
claim,  we have the option to obtain a license to  continue  using the  software
products, replace or modify the software products to make them non-infringing or
terminate  the software  license  agreement and refund the royalties and license
fees paid by Merant under the agreement.                                        

Term and Termination                                          

         The  software  license  agreement  would have an initial  term  through
December 31, 2003, but Merant can renew the software license agreement  annually
thereafter  by providing us with notice of renewal  within 60 days of the end of
each term. We can  terminate  the license  agreement and the licenses on 45 days
notice if Merant defaults.  In addition,  if the sale of the Enterprise Division
does not occur  and the  definitive  agreement  is  terminated,  we can elect to
refund the license fee and terminate the agreement.                             

Maintenance and Support                                       

         We  will  provide  Merant  will  Level  3  maintenance  service  at  no
additional cost to Merant. In addition,  at Merant's request,  we will assist in
the  customization  and  integration  of the  software  products  into  Merant's
software products at reasonable rates.                                          

Source Code Escrow                                            

         We agreed to deposit the source code for the software  products with an
escrow agent in an arrangement  substantially equivalent to the escrow described
under "Terms of the License Agreement" above. If Merant receives the source code
because of our  bankruptcy or ceasing  business,  the royalty will be reduced to
$10,000 per copy.                                                               

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                                                        [Enlarge/Download Table]
The following table sets forth information regarding the beneficial ownership of                               
the common  stock as of January 2, 2001 for (a) each  person  known to us to own                               
beneficially  more than 5% of our common stock,  (b) each of our directors,  (c)                               
the  Company's  Chief  Executive  Officer and each of the four other most highly                               
compensated  executive officers other than the CEO who were serving as executive                               
officers of the Company as of September 30, 2000 and (d) all executive  officers                               
and directors as a group.  Beneficial ownership is determined in accordance with                               
rules of the Securities and Exchange Commission,  and includes shares over which                               
the beneficial  owner  exercises  voting or investment  power.  Shares of common                               
stock subject to options or warrants currently exercisable or exercisable within                               
60 days of January 2, 2001 are deemed  outstanding  for the purpose of computing                               
the percentage ownership of the person holding the options or warrants,  but are                               
not deemed outstanding for the purpose of computing the percentage  ownership of                               
any other  person.  Except as  otherwise  indicated,  and  subject to  community                               
property laws where  applicable,  we believe,  based on information  provided by                               
these  persons,  that the persons  named in the table below have sole voting and                               
investment   power  with  respect  to  all  shares  of  common  stock  shown  as                               
beneficially  owned by them.  Unless  otherwise  indicated,  the  address of all                               
persons listed below is c/o NetObjects, Inc., 301 Galveston Drive, Redwood City,                               
CA 94062.                                                                                                      


                                                                                Shares Beneficially Owned (1)  
                                                                                -----------------------------  

Name of Beneficial Owner                                                            Number            Percent  
------------------------                                                            ------            -------  

                                                                                                               
International Business Machines Corporation (2)                                 15,542,050              48.5%  
New Orchard Road                                                                                               
Armonk, NY 10504                                                                                               

Current Directors:                                                                                             

Samir Arora (3)                                                                  2,137,779               6.6%  
Robert G. Anderegg                                                                      --                 --  
Lee A. Dayton                                                                           --                 --  
Blake Modersitzki(4)                                                                 5,417                  *  
Michael D. Zisman                                                                       --                 --  

Named Executive Officers who are not Directors:                                                                

Russell F. Surmanek (5)                                                            355,919               1.1%  
Mark Patton (6)                                                                    342,881               1.1%  
Jack Rotolo (7)                                                                    381,251               1.2%  
Steven Mitgang (8)                                                                 198,794                  *  

All directors and executive offers as a group (9 persons) (9)                    3,422,041              10.2%  
---------------------------------------------------------------------------------------------------------------

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<FN>                                                                                                           
* Represents beneficial ownership of less than 1% of the Company's common stock.                               

(1)  The number of shares of common stock issued and  outstanding  on January 2,                               
     2001  was  31,687,043.  Warrants  are  assumed  to  be  exercised  in  full                               
     notwithstanding  the warrant  holders'  right to exercise  the warrant on a                               
     "net" basis by surrendering  shares of common stock having a value equal to                               
     the warrant  exercise  price upon exercise of the warrant.  The persons and                               
     entities  named in the table have sole  voting and  dispositive  power with                               
     respect  to all  shares  shown as  beneficially  owned by them,  except  as                               
     described below.                                                                                          

(2)  Includes   warrants  to  purchase   253,195   shares  of  common  stock  at                               
     approximately  $6.68  per  share  that are  exercisable  on a net basis and                               
     expire on various dates in 2003 and 2004,  and warrants to purchase  83,333                               
     shares of common  stock at $10.80 per share that are  exercisable  on a net                               
     basis and expire in December 2003.                                                                        

(3)  Includes  options  held by Mr. Arora to purchase  656,424  shares of common                               
     stock that are exercisable within 60 days of January 2, 2001. Also includes                               
     299,457  shares of common stock owned by  Information  Capital LLC,  wholly                               
     owned  by Mr.  Arora,  and  362,129  shares  of  common  stock  held by Rae                               
     Technology  II LLC,  of which he is  President  and owns a majority  of the                               
     equity  interests.  Mr. Arora exercises shared voting and dispositive power                               
     over the shares held by Rae  Technology  II LLC, but  disclaims  beneficial                               
     ownership of those shares  except to the extent of his  pecuniary  interest                               
     therein.                                                                                                  

(4)  Represents  options  held by Mr.  Modersitzki  to purchase  5,417 shares of                               
     common stock that are exercisable within 60 days of January 2, 2001.                                      

(5)  Includes  options held by Mr. Surmanek to purchase 353,056 shares of common                               
     stock that are exercisable within 60 days of January 2, 2001.                                             

(6)  Includes  options held by Mr. Patton to purchase  269,523  shares of common                               
     stock that are exercisable within 60 days of January 2, 2001.                                             

(7)  Includes  options held by Mr. Rotolo to purchase  370,958  shares of common                               
     stock that are exercisable within 60 days of January 2, 2001.                                             

(8)  Includes  options held by Mr. Mitgang to purchase  190,647 shares of common                               
     stock that are exercisable within 60 days of January 2, 2001.                                             

(9)  Includes options and warrants to purchase  1,846,025 shares of common stock                               
     that are exercisable within 60 days of January 2, 2001.                                                   
</FN>                                                                                                          

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 COMPANY CONTACT INFORMATION

         All  inquiries  regarding  the  Company  should  be  addressed  to  the
Company's  principal executive offices:  NetObjects,  Inc., 301 Galveston Drive,
Redwood City, California 94063, attention: President; telephone (650) 482-3200. 

                         By Order of the Board of Directors:

 Samir Arora
Chairman  

January __, 2001                                                                

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘PRE 14C’ Filing	Date	First	Last	Other Filings

	12/31/03	17
	3/1/01	12	13	SC 13G
	1/31/01	13
Filed on:	1/11/01
For Period End:	1/8/01	2	11	DEF 14C
	1/5/01	8	16
	1/3/01	5
	1/2/01	3	19
	12/31/00	11		10-Q, 10-Q/A
	12/29/00	2		10-K
	12/21/00	9
	12/19/00	4	8
	10/30/00	7
	9/30/00	2	18	10-K, 10-K/A
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Netobjects Inc – ‘PRE 14C’ for 1/8/01

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