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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ----------------

                                Amendment No. 2
                                    Form 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 1999

                         Commission File Number: 0-25427

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

                                NETOBJECTS, INC.
             (Exact name of Registrant as specified in its charter)



                   Delaware                                 94-3233791

        State or Other Jurisdiction of                  (I.R.S. Employer
        Incorporation or Organization)                 Identification No.)


301 Galveston Drive, Redwood City, California                 94063

  (Address of Principal Executive Offices)                  (Zip Code)


                                 (650) 482-3200

              (Registrant's Telephone Number, Including Area Code)

                                      None
           Securities registered pursuant to Section 12(b) of the Act

                          Common Stock, par value $0.01
           Securities registered pursuant to Section 12(g) of the Act

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days.   Yes  X     No
                                        -----     -----

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements incorporated herein by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [   ]

As of September  30, 1999,  the  aggregate  market value of voting stock held by
non-affiliates  of the  Registrant,  based upon the closing  sales price for the
Registrant's  Common  Stock,  as reported  on the Nasdaq  National  Market,  was
approximately  $45.7  million  Shares  of Common  Stock held by each officer and
director and by each person who owns 5% or more of the outstanding  Common Stock
have been  excluded in that such  persons may be deemed to be  affiliates.  This
determination of affiliate status is not necessarily a conclusive  determination
for any other purpose.

As of November 30, 1999, Registrant had outstanding  26,979,369 shares of Common
Stock, $.01 par value.

                       DOCUMENTS INCORPORATED BY REFERENCE

The following  documents (or parts thereof) are  incorporated  by reference into
the following parts of this Form 10-K: Certain information  required in Part III
of this Form 10-K is incorporated from the registrant's  Proxy Statement for its
Annual meeting of Stockholders.

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<PAGE>


                                    Part III

Item 10. Directors and Executive Officers ..................................   1

Item 11. Executive Compensation.............................................   4

Item 12. Share Ownership ...................................................   7

Item 13. Certain Relationships and Related Transactions.....................   8

Signatures .................................................................  11


         This Form 10-K contains  forward-looking  statements within the meaning
of Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing,  the words  "believes,"  "anticipates,"  "plans,"  "expects," and
similar expressions are intended to identify forward-looking  statements.  These
forward-looking  statements include,  without  limitation,  statements about the
market  opportunity for website  building  software and services,  our strategy,
competition and expected expense levels,  and the adequacy of our available cash
resources.  Our actual results could differ  materially  from those expressed or
implied by these  forward-looking  statements  as a result of  various  factors,
including  the risk  factors  described  in Risk  Factors and  elsewhere in this
report.  We  undertake no  obligation  to update  publicly  any  forward-looking
statements for any reason,  even if new information  becomes  available or other
events occur in the future.

         The following information is contained in the registrant's  preliminary
proxy statement filed electronically with the Securities and Exchange Commission
on January 28, 2000 and definitive proxy statement filed electronically with the
Commission on February 11, 2000.


                                       ii


<PAGE>
ITEM 10. Directors and Executive Officers


Directors

         The Company's  bylaws provide that the number of Directors shall be six
until changed by approval of the  stockholders  or a majority of the  Directors.
Each Director is elected to serve until the next annual meeting of  stockholders
and until the election and  qualification  of his or her successor or his or her
earlier resignation or removal.

         The names of the Company's Directors and certain information about them
are set forth below:

          Name                    Age             Positions with the Company
          ----                    ---             --------------------------
Samir Arora                       34           Chairman of the Board, Chief
                                               Executive Officer and President
Robert G. Anderegg                50           Director
Lee A. Dayton                     56           Director
Blake Modersitzki                 33           Director
John Sculley                      60           Director
Michael D. Zisman                 50           Director

                  Samir  Arora  has  served  as  Chairman  of the  Board,  Chief
Executive Officer and President since the Company's  inception in November 1995.
In 1992, Mr. Arora founded Rae Technology,  a provider of software applications,
and from 1992 through  November 1995 served as its CEO.  From 1986 to 1992,  Mr.
Arora served in several management roles at Apple Computer, Inc. Mr. Arora holds
a diploma in sales and marketing  from the London  Business  School and attended
INSEAD,  France and BITS, India. Samir Arora is the brother of Sal Arora, who is
the Company's Chief Technology Architect and Vice President, Engineering Desktop
Products and Online Services.

                  Robert G.  Anderegg  has been a Director of the Company  since
April 11, 1997. Mr. Anderegg has served as Vice President and Assistant  General
Counsel at IBM since August 1998. He has been appointed to serve on the Board of
Directors by IBM as one of its  representatives.  Mr.  Anderegg has served as an
Assistant  General  Counsel or Associate  General Counsel at IBM since 1988. Mr.
Anderegg holds a B.S.  degree from Georgia  Institute of Technology and received
his J.D. from Harvard Law School.

                  Lee A. Dayton has been a Director  of the Company  since April
11, 1997. Mr. Dayton is Vice President, Corporate Development and Real Estate at
IBM. He has been  appointed  to serve on the Board of Directors by IBM as one of
its  representatives.  Mr. Dayton has held various  management  positions at IBM
since he  joined in 1965 as a  systems  engineer.  Mr.  Dayton  holds a B.S.  in
Engineering from Northwestern University.

                  Blake  Modersitzki  has been a director  of the Company  since
January 2000.  He has been an employee of Novell for the past five years.  He is
presently Managing Director of Novell Ventures,  in which position he has served
since March 1998. He served as Business  Development  Director from January 1997
to March  1998 and  Senior  Manager,  Sales and  Marketing  for  Small  Business
Networks from May 1995 to January 1997.

                  John Sculley has been a Director of the Company since December
20, 1996. Since April 1994, Mr. Sculley has been a partner of Sculley  Brothers,
an investment  capital firm. Mr. Sculley also is a director of General Wireless,
Inc., a wireless  communications  services provider,  Talk City, Inc., an online
chat  community,  and NFO Worldwide,  Inc., a market research firm. From 1983 to
1993, Mr. Sculley served as Chief Executive Officer of Apple Computer,  Inc. Mr.
Sculley holds a B.A. in Architectural  Design from Brown  University,  an M.B.A.
from the  Wharton  School at the  University  of  Pennsylvania  and holds  eight
honorary doctorates from various schools.

                                        1
<PAGE>

                  Michael D.  Zisman has been a Director  of the  Company  since
April 11, 1997.  Mr. Zisman is an Executive  Vice President of Lotus, a position
that he has held since October 1996. He has been appointed to serve on the Board
of  Directors  by IBM as one of its  representatives.  From July 1994 to October
1996, he held other  executive  positions at Lotus.  Mr. Zisman is also the Vice
President  of Strategy  for the IBM  Software  Group.  Mr.  Zisman was the Chief
Executive Officer of Soft-Switch,  Inc., a software  development  company,  from
1979 to July 1994. Mr. Zisman is a director of Strategic Weather Services, Inc.,
a privately-held  company.  Mr. Zisman holds a B.S. from Lehigh  University,  an
M.S.  from the  University  of  Pennsylvania  Moore School and a Ph.D.  from The
Wharton School at the University of Pennsylvania.

Committees of the Board of Directors and Meetings

         The Company's  Board of Directors has standing  Audit and  Compensation
Committees.  The Audit Committee  currently has two members:  Robert G. Anderegg
and John Sculley. Christopher M. Stone was a member of the Audit Committee prior
to his resignation from the Board of Directors  effective  January 25, 2000. The
Compensation  Committee  currently  has two  members:  Lee A.  Dayton  and  John
Sculley.  Samir Arora was a member of the Compensation Committee until the Board
of Directors  reduced the Committee's size at its June 30, 1999 meeting.  During
the fiscal year ended September 30, 1999, there were eight meetings of the Board
of  Directors,  no  meetings  of the Audit  Committee  and two  meetings  of the
Compensation Committee. Mr. Stone attended fewer than 75% of the total number of
meetings of the Board of  Directors.  In  addition,  the members of the Board of
Directors  and the  Compensation  Committee  acted at various times by unanimous
written consent pursuant to Delaware law.

Compensation of Directors

         The  Company's  Directors  do not receive cash  compensation  for their
services as Directors or members of Committees  of the Board of  Directors.  The
Company's Amended and Restated 1997 Stock Option Plan provides for the automatic
grant of options  to  purchase  20,000  shares of Common  Stock to each  outside
Director  upon  initially  joining the Board of Directors.  The option  exercise
price is equal to the fair market  value of a share of Common  Stock at the date
of  grant,  the  option  term is six  years,  and the  options  vest and  become
exercisable  pro rata at the end of each  month for 48 months  while the  option
holder continues to serve as a Director.

         Messrs.  Stone,  Sculley and Modersitzki  have received these automatic
option grants.  Mr. Stone's options ceased vesting upon his resignation from the
Board of  Directors,  at which time  options to purchase  3,333 shares of Common
Stock  were  vested  and  exercisable  for 30  days  following  the  date of his
resignation.  The Company also has granted an option to Mr.  Sculley to purchase
up to 50,000  shares of Common  Stock at an  exercise  price of $7.50 per share,
vesting over four years,  and  reimburses him for certain  expenses  incurred to
attend Board of Directors meetings.

  Contractual Arrangements

         The  Company is party to a voting  agreement  with IBM (the "IBM Voting
Agreement")  which  provides  that IBM will vote its shares of voting stock in a
way that  limits  the number of IBM  representatives  on a  six-member  Board of
Directors  to three,  notwithstanding  IBM's right to elect a greater  number of
directors under the Delaware General  Corporation Law. The agreement  defines an
IBM  representative  as an officer,  director or other agent or employee of IBM,
IBM's  subsidiaries  or any  other  entity  controlled  by IBM,  other  than the
Company.  The voting  agreement also obligates the Company and IBM to maintain a
Board of Directors consisting of six members unless the holders of a majority of
outstanding  voting stock,  excluding IBM's shares,  approve an amendment to the
Company's  Amended and Restated Bylaws or Restated  Certificate of Incorporation
to change the size of the Board of Directors.  The IBM Voting Agreement  remains
in effect until IBM holds less than 45% of the Company's voting  securities on a
fully-diluted basis (as defined in the IBM Voting Agreement) for a period of 180
consecutive  days. As of December 31, 1999,  IBM held  approximately  52% of the
Company's voting  securities as calculated on this  fully-diluted  basis,  which
takes into account outstanding warrants and options to purchase shares of Common
Stock.  While the IBM Voting  Agreement  remains  effective,  it may allow IBM's
representatives on the Board of Directors

                                        2
<PAGE>

to control any determinations with respect to most material transactions outside
the  ordinary  course of the  Company's  business,  including  mergers  or other
business  combinations,  the acquisition or disposition of the Company's assets,
future  issuances  of  Company  equity or debt  securities  and the  payment  of
dividends.

Executive Officers

<TABLE>
         The names of, and certain information regarding,  executive officers of
the  Company who are not  Directors  of the  Company  are set forth  below.  The
executive officers serve at the pleasure of the Board of Directors and the Chief
Executive Officer.

<CAPTION>
            Name                Age                              Positions with the Company
            ----                ---                              --------------------------
<S>                             <C>    <C>
Russell F. Surmanek             42     Executive Vice President, Finance and Operations and Chief Financial Officer
Morris Taradalsky               53     Executive Vice President and General Manager, Enterprise
Mark Patton                     42     Executive Vice President and General Manager, Small Business Markets
Peter Shaw                      53     Executive Vice President, Corporate Development
Steven Mitgang                  38     Executive Vice President, Small Business and Corporate Marketing
Jack Rotolo                     39     Senior Vice President, Worldwide Sales
Gagan (Sal) Arora               26     Chief Technology Architect and Vice President, Engineering
</TABLE>

                  Russell F.  Surmanek has served as Executive  Vice  President,
Finance & Operations, and Chief Financial Officer since April 1999. From 1990 to
1999, Mr. Surmanek served in several senior  financial  management  positions at
Oracle Corporation,  most recently as Vice President,  Finance & Administration,
Worldwide  Operations.  From 1989 to 1990, Mr.  Surmanek was  Controller,  North
America Sales & Support for International  Computers Limited (ICL). From 1983 to
1989 Mr. Surmanek held various  financial  management  positions at Racal-Milgo,
Inc.,  a data  communications  equipment  manufacturer.  From 1981 to 1983,  Mr.
Surmanek held various finance positions at Northern  Telecom,  Inc. Mr. Surmanek
holds a B.S. in Business Administration from the State University of New York at
Buffalo, and an M.B.A. from the University of Michigan.

                  Morris  Taradalsky  has  served in  various  senior  executive
capacities since joining the Company in April 1997, and was appointed  Executive
Vice President and General  Manager,  Enterprise in August 1999. From April 1994
to April 1997,  Mr.  Taradalsky  served as Chief  Executive  Officer of MicroNet
Technology,  Inc., a privately-held storage systems supplier. From December 1988
to April 1994, Mr. Taradalsky was employed at Apple Computer,  Inc. where he was
General Manager of the Apple Business Systems  Division.  Prior to joining Apple
Computer,  Mr.  Taradalsky  was  employed  by IBM for 18 years  in a  number  of
positions,   including  Vice  President  and  General   Manager,   Santa  Teresa
Laboratory.  Mr. Taradalsky  graduated magna cum laude from  Pennsylvania  State
University with a B.S. in Mathematics.

                  Mark Patton was appointed Executive Vice President and General
Manager,  Small Business  Markets in October 1999,  having served as Senior Vice
President,  Worldwide  Sales and Corporate  Marketing  since December 1996. From
February  1995 to  November  1996,  Mr.  Patton was Vice  President  and General
Manager of the Digital and Applied Imaging Division at Eastman Kodak,  Inc. From
February  1994 to  February  1995,  Mr.  Patton was Vice  President  and General
Manager,  American Division at Logitech,  Inc., a computer  peripheral  products
manufacturer.  From August 1985 to February  1994, Mr. Patton held various sales
management  positions at Apple Computer,  Inc. Mr. Patton holds a B.A. in Speech
Communication from the University of Washington.

                  Peter Shaw was appointed  Executive Vice President,  Corporate
Development  in  October  1999.  Prior to  joining  the  Company,  Mr.  Shaw was
Chairman, CEO and President of Sitematic Corporation. From December 1995 to June
1997, Mr. Shaw was senior vice president of NetManage,  where he was responsible
for the company's international operations and key North American accounts. From
August 1989 to November  1995,  Mr. Shaw was President and CEO of AGE Logic,  an
Intranet  connectivity software company that he founded and subsequently sold to
NetManage. From September 1976 to February 1983, he was founder,  President, and
CEO of Megatek Graphic Systems. Mr. Shaw holds a B.S.E. in engineering from City
College of New York, and an MBA from the University of Connecticut.

                                        3
<PAGE>

                  Steven Mitgang was appointed  Executive Vice President,  Small
Business and Corporate  Marketing in October 1999. Prior to joining the Company,
Mr. Mitgang was Senior Vice  President of Marketing and Business  Development at
Sitematic.  From  December  1995 to August  1998,  Mr.  Mitgang  was Senior Vice
President of Marketing for Jostens Learning  Corporation,  a curriculum software
company. Mr. Mitgang held executive-level  positions with the Upper Deck Company
from August 1991 to January 1995 and with Reebok  International from August 1989
to August 1991. From June 1984 to August 1989, Mr. Mitgang  managed  accounts in
the New York  office of  Chiat/Day  Advertising.  Mr.  Mitgang  holds an A.B. in
Architecture from the University of California, Berkeley.

                  Jack Rotolo was  appointed  Senior Vice  President,  Worldwide
Sales in August 1999.  From 1997 until August,  Mr.  Rotolo was Vice  President,
Sales.  Prior to joining the  Company,  Mr.  Rotolo was senior  manager of Apple
Computer's consumer markets solution development organization from February 1993
to February 1996. While at Apple, Mr. Rotolo also managed the business, consumer
and higher  education  channel  strategy  organization  and held  various  sales
management positions in the reseller operations group. Before joining Apple, Mr.
Rotolo worked as regional manager for Pepsi-Cola Bottling Group. He holds a B.S.
in Finance from the University of Dayton.

                  Sal Arora has served as Chief  Technology  Architect  and Vice
President,  Engineering,  Desktop  Products and Online  Services  since November
1995.  From  September 1994 to November 1995, Mr. Arora was the lead engineer at
Rae  Technology.  From June 1992 to  September  1994,  Mr.  Arora was a software
engineer at ACIUS Inc.  Mr.  Arora holds a B.A.  in  Computer  Science  from the
University of California, Berkeley. Sal Arora is the brother of Samir Arora, who
is Chairman of the Board, Chief Executive Officer and President of the Company.

ITEM 11.

                             EXECUTIVE COMPENSATION

Summary Compensation Table

<TABLE>
         The following Summary Compensation Table sets forth summary information
as to compensation received by the Company's Chief Executive Officer and each of
the four other most highly  compensated  persons who were  serving as  executive
officers of the Company as of  September  30,  1999,  (collectively,  the "named
executive  officers")  for  services  rendered to the Company in all  capacities
during the two fiscal years ended September 30, 1999.

<CAPTION>
                                                                                          Long-Term Compensation
                                                            Annual Compensation                   Awards
                                                      --------------------------------- ----------------------------
                                                                                           Securities Underlying
                                                                                                  Options
     Name and Principal Position         Fiscal Year       Salary            Bonus             #'s of shares
----------------------------------------------------- -----------------  -------------   --------------------------
<S>                                         <C>           <C>              <C>                   <C>
Samir Arora                                 1999          $183,129         $ 55,987                 --
Chairman of the Board, Chief Executive      1998           175,338           47,434                 --
Officer, and President

Russell F. Surmanek                         1999           108,447          113,750              235,000
Executive Vice President, Finance and       1998              --               --                   --
Operations, Chief Financial Officer

Morris Taradalsky                           1999           176,073           24,343               63,333
Executive Vice President and General        1998           166,048           86,095                 --
Manager, Enterprise

Mark Patton                                 1999           162,525          105,754               71,666
Executive Vice President and General        1998           150,000           35,555                 --
Manager, Small Business Markets

Jack Rotolo (1)                             1999           119,923           53,774              166,666
Senior Vice President, Worldwide            1998              --               --                   --
Sales
<FN>
--------------------------
(1)  Mr. Rotolo became an executive officer in August 1999, and these figures reflect his compensation for the entire fiscal
     year.
</FN>
</TABLE>
                                                                4
<PAGE>

Option Grants in Last Fiscal Year

<TABLE>
         The following table provides  information  regarding the grant of stock
options during fiscal year 1999 to the named executive officers.

<CAPTION>
                                                 Individual Grants
                               -----------------------------------------------------
                                                                                     Potential Realizable Value
                                                                                      at Assumed Annual Rate of
                                                % of Total                             Stock Price Appreciation
                                 Number of       Options                                     for Option
                                   Shares       Granted to     Exercise                        Term (7)
                                 Underlying     Employees        Price     Expiration ---------------------------
            Name                Options (1)     in Fiscal      ($/share)      Date         5%          10%
-----------------------------------------------------------------------------------------------------------------
<S>                               <C>              <C>        <C>          <C>         <C>         <C>
Samir Arora                           --           --%        $     --         --      $     --    $     --

Russell F. Surmanek               235,000(2)       13             7.50     24-Mar-09    1,108,427   2,808,971

Morris Taradalsky                  33,333(3)        2             7.50     09-Dec-08      157,223     398,432
                                   30,000(5)        2            7.375     01-Jul-09      139,143     352,615

Mark Patton                        41,666(3)        2             7.50     09-Dec-08      196,526     498,037
                                   30,000(5)        2            7.375     01-Jul-09      139,143     352,615

Jack Rotolo                        16,666(3)        1             7.50     12-Sep-08       78,609     199,210
                                   10,000(4)        1            12.00     05-May-09       75,467     191,249
                                   40,000(5)        2             8.06     30-Jun-09      202,755     513,823
                                  100,000(6)        5             5.81     25-Aug-09      365,388     925,961
<FN>
----------------
(1)  Options  are  incentive   stock   options  to  the  extent   qualified  and
     nonstatutory  options  otherwise.  The options generally  terminate 30 days
     following the  executive's  employment  with the company or the  expiration
     date, whichever  occurs  earlier.  The  exercise  price of each  option was
     determined  to be equal to or greater  than the fair market value per share
     of the Common Stock at the grant date.

(2)  Options to purchase  35,000 shares fully vested three months  following the
     date of grant.  Options to purchase  200,000  shares  vest as follows:  25%
     after six months, 2.5% per month for the next six months; 50% shall vest in
     twenty-four equal monthly  installments  thereafter,  and 10% shall vest in
     equal  monthly  installments  for the next twelve  months.  See  "Executive
     Compensation--Employment Contracts."

(3)  Options  vest as to 25% after one year,  and 1/36 monthly  thereafter.

(4)  Options vest in 12 equal monthly installments.

(5)  Options vest in 24 equal monthly installments.

(6)  Options vest as to 35,000 shares after three months,  and as to the balance
     of the shares over the next 24 months in equal  installments,  and  vesting
     will  accelerate  on a change of control so that 70% of the total number of
     shares subject to options will be fully vested on the date of the change of
     control.

(7)  Amounts  represent  hypothetical  gains  that  could  be  achieved  for the
     respective  options if exercised at the end of the option term. These gains
     are  based  on  assumed  rates of stock  price  appreciation  of 5% and 10%
     compounded  annually from the date the  respective  options were granted to
     their  expiration  date.  The gains  shown are net of the  option  exercise
     price, but do not include deductions for taxes or other expenses associated
     with the exercise of the option or the sale of the underlying  shares.  The
     actual  gains,  if any, on the exercise of stock options will depend on the
     future  performance  of the Common  Stock,  the option  holder's  continued
     employment  throughout  the option period and the date on which the options
     are exercised.
</FN>
</TABLE>
                                        5
<PAGE>


Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values

<TABLE>
         The  following  table  provides  information  regarding  the  aggregate
exercises of options by each of the named executive officers. In addition,  this
table   includes  the  number  of  shares  covered  by  both   exercisable   and
unexercisable  stock  options  as of  September  30,  1999,  and the  values  of
"in-the-money"  options,  which values represent the positive spread between the
exercise  price  of any  such  options  and the  fiscal  year-end  value  of the
Company's Common Stock.
<CAPTION>
                                                                                           Value of the Unexercised
                                                                Number of Securities                In-The
                                                               Underlying Unexercised     Money Options at Fiscal Year
                                  Shares                     Options at Fiscal Year End              End(2)
                               Acquired on        Value      ------------------------------------------------------------
           Name                  Exercise     Realized(1)    Exercisable   Unexercisable  Exercisable  Unexercisable
-------------------------------------------------------------------------------------------------------------------------
<S>                               <C>             <C>           <C>           <C>              <C>          <C>
Samir Arora                         --            $  --        140,625         84,375     $   558,984  $    335,390

                                                                                                 --            --
Russell F. Surmanek                 --               --         35,000        200,000


Morris Taradalsky                   --               --         83,055        113,611         332,289       217,709


Mark Patton                       73,358          486,639       16,051        107,255          64,188       177,335


Jack Rotolo                       19,069          111,914       13,421        180,627         197,747        85,104
<FN>
-------------------
(1)  The value  realized  represents  the  aggregate  market value of the shares
     covered by the option on the date of exercise less the  aggregate  exercise
     price paid by the executive officer.

(2)  The value of unexercised  in-the-money options at fiscal year end assumes a
     fair market  value for the  Company's  Common  Stock of $5.63,  the closing
     market  price per share of the  Company's  Common  Stock as reported on the
     Nasdaq National Market on September 30, 1999.
</FN>
</TABLE>

Employment Contracts

         The  Company  entered  into an  employment  agreement  with  Russell F.
Surmanek,  Executive Vice President,  Finance and Operations and Chief Financial
Officer, as of April 5, 1999. The employment  agreement has a term of 24 months.
Under the  agreement,  Mr.  Surmanek is entitled to receive an annual  salary of
$220,000 plus a 15% sales target bonus payable  semi-monthly,  20% of his annual
salary as an annual fiscal year bonus, and a starting bonus of $100,000.  If Mr.
Surmanek's  employment is  terminated  without cause before April 5, 2001, he is
entitled to be paid the  remaining  salary which would have been payable  during
the term,  including pro-rata bonus amounts.  Additionally,  under the agreement
the Company  granted  options to purchase  235,000 shares of Common Stock to Mr.
Surmanek. See "Executive  Compensation - Option Grants in the Last Fiscal Year."
If Mr. Surmanek's employment is terminated for any reason, other than for cause,
the agreement  provides for the  acceleration of vesting of his stock options so
that 65% of the shares  underlying  the options will be vested as of the date of
termination.  If the company is acquired by another company,  the vesting of Mr.
Surmanek's  stock  options  also will  accelerate  by one calendar  year,  or as
necessary  to provide for vesting of at least 65% of the shares  underlying  the
options as of the date of the acquisition.

                                        6

<PAGE>

Loans to Officers and Directors

         In October 1999, the Company advanced  $200,000 to Russell F. Surmanek,
which is  evidenced  by a promissory  note  bearing  interest at the  applicable
federal rate as defined in Section 1274(d) of the Internal Revenue Code of 1986,
as  amended  (the  "Code").  The note is due in full two years  from the date of
issuance.  Prior to the due date,  under the terms of the  promissory  note, Mr.
Surmanek is obligated to repay the advance only from certain  proceeds  from the
sale of 15,000 shares to be acquired upon the exercise of stock options.

ITEM 12.                    SHARE OWNERSHIP

<TABLE>
         The  following  table sets forth  information  as of December  31, 1999
concerning the ownership of Common Stock by (i) each  stockholder of the Company
known  by  the  Company  to be the  beneficial  owner  of  more  than  5% of the
outstanding  shares of Common  Stock,  (ii) each current  member of the Board of
Directors of the Company,  (iii) each executive  officer of the Company named in
the Summary  Compensation Table appearing under "Executive  Compensation"  below
and (iv) all current Directors and executive officers of the Company as a group.

<CAPTION>
                                                                                   Shares Beneficially
                           Name and Address                                             Owned (1)
                           ----------------                             -------------------------------------------
                                                                             Number                  Percent
                                                                        ------------------      -------------------
<S>                                                                       <C>                          <C>
International Business Machines Corporation (2)                           16,295,208                   52.7%
   New Orchard Road
   Armonk, NY 10504

Current Directors:
Samir Arora (3)                                                            1,688,406                    6.2%
Robert G. Anderegg                                                              --                       --
Lee A. Dayton                                                                   --                       --
Blake Modersitzki                                                               --                       --
John Sculley (4)                                                              68,684                     *
Michael D. Zisman                                                               --                       --

Named Executive Officers who are not Directors:
Russell F. Surmanek (5)                                                      161,334                     *
Morris Taradalsky (6)                                                        189,491                     *
Mark Patton (7)                                                              173,470                     *
Jack Rotolo (8)                                                              126,084                     *
All executive officers and Directors as a group (13 persons) (9)           3,194,796                   11.4%
<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 December 31,
     1999 was  27,102,781.  The  calculation  of  percentages  is based upon the
     number of shares of Common Stock issued and  outstanding on such date, plus
     shares of Common  Stock  subject to  options  and/or  warrants  held by the
     respective  persons on  December  31, 1999 and  exercisable  within 60 days
     thereafter.  Such  shares are not  deemed  outstanding  for the  purpose of
     computing  the  percentage  ownership  of any other  person.  Warrants  are
     assumed to be exercised in full  notwithstanding the warrant holders' right
     to exercise the warrant on a "net" basis by  surrendering  shares of Common
     Stock having a value equal to the warrant  exercise  price upon exercise of
     the warrant.  The persons and entities  named in the table have sole voting
     and  dispositive  power with  respect to all shares  shown as  beneficially
     owned by them, except as described below.

(2)  Includes  warrants  to  purchase   3,482,838  shares  of  Common  Stock  at
     approximately  $6.66  per  share  that are  exercisable  on a net basis and
     expire  on  April  11,  2000,   warrants  to  purchase  253,194  shares  at
     approximately  $6.68  per  share  that are  exercisable  on a net basis and
     expire on various dates in 2003 and 2004,  and warrants to purchase  83,333
     shares of Common  Stock at $10.80 per share that are  exercisable  on a net
     basis and expire in December 2000.

(3)  Includes 191,841 shares subject to options to purchase Common Stock held by
     Mr. Arora that are  exercisable  within 60 days of December  31, 1999,  and
     warrants to purchase 59,672 shares of Common Stock at $10.80 per share that
     are  exercisable on a net basis and expire on March 14, 2000. Also includes
     299,457  shares of Common Stock owned by  Information  Capital LLC,  wholly
     owned  by Mr.  Arora,  and  362,129  shares  of  Common  Stock  held by Rae
     Technology  II LLC,  of which he is  President  and owns a majority  of the
     equity  interests.  Mr. Arora exercises shared voting and dispositive power
     over the shares held by Rae  Technology  II LLC, but  disclaims  beneficial
     ownership of those shares  except to the extent of his  pecuniary  interest
     therein.
                                        7
<PAGE>

(4)  Includes  18,959 shares subject to options to purchase Common Stock held by
     Mr. Sculley that are exercisable  within 60 days of December 31, 1999. Also
     includes  warrants to purchase  13,580 shares of Common Stock at $10.80 per
     share that are exercisable on a net basis and expire on March 14, 2000.

(5)  Includes 160,554 shares subject to options to purchase Common Stock held by
     Mr. Surmanek that are exercisable within 60 days of December 31, 1999.

(6)  Includes 165,554 shares subject to options to purchase Common Stock held by
     Mr.  Taradalsky that are  exercisable  within 60 days of December 31, 1999.
     Also includes  warrants to purchase  3,563 shares of Common Stock of $10.80
     per share that are exercisable on a net basis and expire on March 14, 2000.
     Also includes  20,374 shares of Common Stock held by Rae Technology II LLC,
     which represent Mr. Taradalsky's  indirect pecuniary interest therein.  Mr.
     Taradalsky  is a member of the Board of Managers of Rae  Technology  II LLC
     and may be deemed to have voting and dispositive power over the shares that
     it holds.  He disclaims  beneficial  ownership of all such shares except to
     the extent of his pecuniary interest.

(7)  Includes 100,112 shares subject to options to purchase Common Stock held by
     Mr. Patton that are exercisable within 60 days of December 31, 1999.

(8)  All 126,084 shares are subject to options to purchase  Common Stock held by
     Mr. Rotolo that are exercisable within 60 days of December 31, 1999.

(9)  Includes  865,250 shares  subject to options to purchase  Common Stock that
     are  exercisable  within 60 days of December 31, 1999 and 362,129 shares of
     Common Stock held by Rae Technology II LLC.
</FN>
</TABLE>

ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Set forth below is a summary of certain material  transactions  between
the Company and any of its Directors, executive officers or holders of more than
5% of the Company's  Common  Stock,  or between the Company and persons in which
Directors,  executive  officers  or such  stockholders  have  direct or indirect
material interests for the period October 1, 1998 through December 31, 1999.

Transactions with IBM

         Notes and Warrants.  In October and December  1998,  the Company issued
10%   convertible   notes  for   approximately   $10.1   million  and  $825,000,
respectively,  to IBM. The notes,  including  accrued  interest,  converted into
1,979,875 shares of Common Stock on the closing of the Company's  initial public
offering. With the notes, the Company also issued warrants to purchase shares of
Series E-2 Preferred  Stock to IBM at an exercise price of  approximately  $6.68
per share,  which converted into the right to purchase  189,062 shares of Common
Stock  on the  closing  of the  initial  public  offering.  These  warrants  are
exercisable  for five years from their  respective  issuance dates and, at IBM's
option, are exercisable on a net basis by surrendering shares of Common Stock as
payment of the exercise price.

         On February 4, 1999,  IBM agreed to purchase up to  approximately  $3.4
million of 10% notes and  additional  warrants.  The notes  were  similar to the
earlier issued notes, but were not convertible into Preferred Stock. The warrant
terms were identical to the earlier issued  warrants.  The Company issued a note
in the amount of $2.0  million  and a warrant to  purchase  shares of Series E-2
Preferred  Stock to IBM on February  18, 1999.  On March 23,  1999,  the Company
issued a note for  approximately  $1.4  million  and an  additional  warrant  to
purchase  shares of Series E-2  Preferred  Stock to IBM. The Company  repaid all
indebtedness  under the additional  notes upon the closing of the initial public
offering,  at which time the two warrants became exercisable for the purchase of
a total of 64,132 shares of Common Stock.

         On April 23, 1999, the Company obtained an additional $2.0 million loan
from IBM under a 10% unsecured demand note. The Company repaid the principal and
interest due under the note from the proceeds of the  Company's  initial  public
offering.

         Software License Agreement. The Company and IBM have a 10-year software
license  agreement,  originally  entered into on March 18, 1997.  The  agreement
provides for payment of royalties by IBM to the Company in connection with sales
of product  bundles that include the  Company's  products and for payment to the
Company for services performed in connection with the IBM WebSphere project. The
agreement  has been  amended a number  of times.  The  agreement  obligates  the
Company to place all of its source code into an escrow. IBM may obtain access to
the source  code upon  events of default  related  to the  Company's  failure to
provide  required  maintenance and support or its bankruptcy or similar event of
financial reorganization.  IBM may use the source code that it obtains to create
derivative  works,  which it will own  subject  to the  Company's  rights in the
underlying software.  Additional terms of the software license agreement and its
amendments  and certain  transactions  occurring  under the agreement as amended
since October 1, 1998 are as follows:

                                       8
<PAGE>

         o    Amendment  Number 1 and Amendment  Number 4 license IBM to use the
              Company's  products  in its  internal  operations  by  paying  for
              upgrade  copies at an annual  rate of 25% of  $402,000 or at a per
              copy  royalty  rate.  Amendment  Number 4 also sets forth  royalty
              rates for the  Company's  products if they are bundled and sold by
              IBM with IBM  products.  These  rates are based on the  percentage
              which the value of the Company's  product bears to the total value
              of all of the other  products in the  bundle.  If the value of the
              Company's product is equivalent to or less than the total value of
              all of the other products in the bundle,  the Company receives 37%
              of IBM's average  selling  price for a stand-alone  license of the
              Company's product during a calendar  quarter.  If the value of the
              Company's  product  is more than the value of the other  products,
              the Company  receives  69% of IBM's  average  selling  price for a
              stand-alone  license of the  Company's  product  during a calendar
              quarter.  If IBM sells the Company's  products alone,  the Company
              receives  75% of IBM's  average  selling  price for a  stand-alone
              license of the Company's product during a calendar quarter.

         o    In  Amendment  Number 3 and  Amendment  Number  7, IBM  agreed  to
              translate the Company's software into languages other than English
              for which we are required to pay 115% of the costs associated with
              the translation.  The costs are recovered through the sales of the
              Company's  products  outside of the United States by IBM and Lotus
              by  reducing  the royalty  rate  otherwise  due to us by 50%.  The
              Company  is  permitted  to repay  the  translation  costs  over an
              extended  period of time, and the repayment is derived solely from
              earned international royalties. This agreement expired on December
              31, 1999.

         o    The  Company  became an IBM  "Business  Partner"  under  Amendment
              Number 5, which permits the Company to resell IBM products and pay
              IBM 50% of the royalty payment received by the Company.

         o    The  Company  agreed  to  perform  services  for IBM to  make  its
              products  compatible with and to integrate its products with IBM's
              WebSphere  products in Amendment  Number 6 and Amendment Number 8.
              Under  Amendment  Number 6, the  Company  was to receive a minimum
              amount  of  license   fees  equal  to  the  total  amount  of  our
              expenditures on the project,  plus a 20% profit margin.  Amendment
              No. 8  modified  the  arrangement  to  provide  for the  Company's
              receipt  of  services  revenues  equal to the total  amount of our
              expenditures  plus a 5% profit margin  instead.  These  amendments
              further  provided  for the  Company  to  receive  license  fees on
              bundles of its products with IBM's WebSphere products, calculated,
              generally,  at 50% of the applicable  software  license  agreement
              royalty rate, as described above.

         o    IBM has paid the Company  $350,000 for  developing a capability in
              one of our products so that it supports  wireless  markup language
              for IBM's wireless group.

         o    The  Company  and IBM  amended a letter  agreement  subject to all
              other terms of the software license agreement to bundle NetObjects
              Fusion with Lotus'  Designer for Domino,  extending  the term from
              September  30,  1998 to June 30, 1999 and  increasing  the minimum
              amount of license fees payable under the agreement by $500,000 and
              the minimum number of copies.  In April 1999, the Company  entered
              into a new contract to bundle a version of NetObjects  Fusion with
              Lotus Designer  Application Studio for Domino R5, which expired on
              December 31, 1999.  The Company and IBM also entered into a letter
              agreement,  dated December 22, 1999, in which the Company  granted
              IBM the right to bundle  copies of  NetObjects'  Fusion  3.01 with
              Lotus SmartSuite during calendar year 2000, for which IBM paid the
              Company a one-time  fee of $1.0  million.  The  Company  agreed to
              reimburse IBM for up to $400,000 for  promotional  and advertising
              expenditures that IBM incurs in marketing these bundles.

         o    IBM  granted  the  Company a  non-exclusive  right to  incorporate
              utilities  for Lotus  FastSite  into  NetObjects  Fusion 5.0 for a
              one-time fee of $75,000.

         Other License Agreements.

         During fiscal year 1999:

         o    The Company  entered into a trademark  license  agreement with IBM
              that  permits  IBM to use  the  NetObjects   trademark  on certain
              products developed by IBM in Japan. IBM must pay the Company fifty
              cents for each use.

         o    IBM  granted  the  Company  a  license  to  reproduce  and  create
              derivative  works from and to distribute a value-added  version of
              IBM's Build-IT  software  until IBM  terminates  the license.  The
              Company must pay IBM 10% of the gross  revenues  received  when it
              distributes  the software.  There is a minimum royalty of $5 and a
              maximum royalty of $20 per software bundle.

                                        9
<PAGE>

         o    Lotus granted the Company a license to copy and  distribute  Lotus
              FastSite for NAS, version 2.0, a document  conversion  program for
              use with  NetObjects  Authoring  Server,  for a one-year term. The
              Company is obligated to pay Lotus a per copy royalty of 25% of our
              average  selling  price up to 5,000  units and 20% of our  average
              selling  price for copies in excess of that,  but in no event less
              than  $15  per  copy.   The   Company   has  granted  to  Lotus  a
              royalty-free,  perpetual right to copy and distribute  software it
              developed that facilitates  integration between Lotus FastSite and
              NetObjects Authoring Server.

         Loan and Security  Agreement.  Upon completion of the Company's initial
public offering in May 1999, the Company repaid  approximately  $19.0 million in
total principal  amount under  convertible  revolving credit notes issued to IBM
Credit Corp  pursuant to the terms of a revolving  loan and  security  agreement
dated December 23, 1997.

         Voting Agreement. In January 1999, the Company and IBM entered into the
IBM Voting Agreement.

Distribution Agreement with Novell

         During fiscal year 1999, Novell bundled NetObjects Fusion with Novell's
NetWare for Small Business product offering under a license agreement  providing
for  royalties on a per unit basis as products  are sold by Novell.  The Company
was  entitled  to receive a minimum of $500,000  of  royalties  under the Novell
agreement.  This license agreement  automatically renews for additional one-year
periods  unless  terminated by either party,  and is currently in effect.  After
September 30, 2000, either party may terminate the agreement on 90 days' written
notice. Christopher M. Stone, a former Executive Vice President with Novell, was
a Director of the Company until January 25, 2000.  Blake  Modersitzki,  Managing
Director of Novell Ventures, was elected as a Director on January 25, 2000.

Other Transactions

         Novell  purchased  333,333 shares of the Company's Series F-2 Preferred
Stock for $9.00 per share,  under a stock purchase  agreement  dated October 16,
1998. Under the stock purchase  agreement,  Novell received the right to have an
observer attend meetings of the Board of Directors so long as Novell remains the
beneficial  owner of not  less  than 1% of the  Company's  stock,  assuming  the
exercise or  conversion  of all options and  warrants.  The  Company's  Board of
Directors may terminate  this right in its  discretion at any time after October
26, 1999.

         During the fiscal year ended  September  30,  1999,  the  Company  sold
44,918  and 37,432  shares of Series E  Preferred  Stock at a purchase  price of
approximately  $6.68 per share to Samir Arora and one former executive  officer,
David Kleinberg, respectively.

         The  Company is a licensee of Rae  Technology,  Inc.  patents  under an
April 10, 1997 license  agreement.  Samir Arora is a director,  President  and a
majority  shareholder  of Rae  Technology,  Inc.  During  fiscal year 1999,  the
Company reimbursed Rae Technology  approximately  $30,000 for patent prosecution
expenses under the terms of the license agreement.

                                       10
<PAGE>

                                   Signatures


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned,  thereunto duly authorized, on the 11th day of
February, 2000.

                      NetObjects, Inc.

                By:   /s/  Samir Arora
                      --------------------------------------------
                      Samir Arora
                      Chairman of the Board, Chief Executive Officer,
                      and President (principal executive officer)


                      /s/  Russell Surmanek
                      --------------------------------------------
                      Russell Surmanek
                      Executive Vice President, Finance & Operations,
                      and Chief Financial Officer (principal financial officer)


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  amendment has been signed below by the following  persons on behalf of the
Registrant and in the capacities and on the dates indicated:




/s/ Samir Arora
---------------------------   Chairman of the Board,        February 11, 2000
    Samir Arora               Chief Executive Officer,
                              and President

/s/ Russell F. Surmanek
---------------------------   Executive Vice President,     February 11, 2000
    Russell F. Surmanek       Finance & Operations, and
                              Chief Financial Officer
*/s/ Robert G. Anderegg
---------------------------   Director                      February 11, 2000
    Robert G. Anderegg

*/s/ Lee A. Dayton
---------------------------   Director                      February 11, 2000
    Lee A. Dayton

/s/ John Sculley
---------------------------   Director                      February 11, 2000
    John Sculley

/s/ Michael D. Zisman
---------------------------   Director                      February 11, 2000
    Michael D. Zisman

* By /s/ Russel F. Surmanek
     ----------------------
     Russel F. Surmanek
As attrorney-in-fact, pursuant
to power of attorney previously
filed with the Commission.

                                       11