STELLENT INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------

FORM 10-K
(MARK ONE)

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

FOR THE FISCAL YEAR ENDED MARCH 31, 2003
OR

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

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NUMBER 0-19817

STELLENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MINNESOTA 41-1652566
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

7777 GOLDEN TRIANGLE DRIVE
EDEN PRAIRIE, MINNESOTA 55344-3736
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(952) 903-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: PREFERRED SHARE
PURCHASE RIGHTS; COMMON STOCK, PAR VALUE $.01 PER SHARE

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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12 b-2) Yes [X] No [ ]

The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of September 30, 2002, the last business day
of the registrant's most recently completed second fiscal quarter was
$75,156,299, based on the closing sale price for the registrant's common stock
on that date as reported by The Nasdaq Stock Market. For purposes of determining
such aggregate market value, all officers and directors of the registrant are
considered to be affiliates of the registrant, as well as shareholders holding
10% or more of the outstanding common stock as reflected on Schedules 13D or 13G
filed with the registrant. This number is provided only for the purpose of this
report on Form 10-K and does not represent an admission by either the registrant
or any such person as to the status of such person.

As of June 25, 2003, the registrant had 21,793,506 shares of common stock
issued and outstanding.
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STELLENT, INC.

FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2003

TABLE OF CONTENTS

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement dated for the
annual meeting of Shareholders to be held on August 27, 2003 are incorporated by
reference in Part III of this Annual Report on Form 10-K. (The Compensation
Committee Report and the stock performance graph contained in the registrant's
Proxy Statement are expressly not incorporated by reference in this Annual
Report on Form 10-K). The Proxy Statement will be filed within 120 days after
the end of the fiscal year ended March 31, 2003.

PART I

ITEM 1. BUSINESS

FORWARD-LOOKING STATEMENTS

The information presented in this Annual Report on Form 10-K under the
headings "Item 1. Business" and "Item 2. Properties" contain forward-looking
statements within the meaning of the safe harbor provisions of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking statements are based on
the beliefs of our company's management as well as on assumptions made by, and
information currently available to, us at the time such statements were made.
When used in the Annual Report on Form 10-K, the words "anticipate," "believe,"
"estimate," "expect," "intend," and similar expressions, as they relate to us,
are intended to identify such forward-looking statements. Although we believe
these statements are reasonable, such statements are subject to risks and
uncertainties, including those discussed under "Risk Factors" in Item 7 of this
Annual Report on Form 10-K, that could cause actual results to differ materially
from those projected. Because actual results may differ, readers are cautioned
not to place undue reliance on these forward-looking statements.

OVERVIEW

In 1997, we launched one of the first software product suites on the market
that was fully developed and created expressly for Web-based content and
document management. At the time, content management -- today considered a
critical component of an organization's communication and information technology
(IT) infrastructure -- was an emerging technology used to help companies easily
and quickly share information internally or externally using the Web.

Currently, our solutions -- which are comprised of Universal Content
Management software, Content Components software, and vertical
applications -- help customers worldwide solve real business problems related to
efficiently creating, managing and sharing critical information. Our company has
strategically grown to become one of the foremost content management software
vendors in the industry, having been ranked one of the top three content
management software providers by industry analyst firms Gartner Dataquest, Giga
Information Group and Aberdeen Group.

MARKETS AND CUSTOMERS

Approximately 1,100 Universal Content Management customers, 450 corporate
desktop viewing and conversion customers and 400 content component original
equipment manufacturer (OEM) customers have seamlessly integrated our technology
into their operations, helping them reduce costs, increase productivity, gain
competitive advantages and improve internal and external communications
processes.

Our offerings span a number of horizontal and vertical markets:

- Universal Content Management: Our Universal Content Management
architecture enables organizations of all sizes within a broad range of
industries to implement Web-based line-of-business and enterprise-wide
initiatives. These initiatives help our customers increase employee
productivity, reduce expenses, improve company-wide collaboration and
communication, and often completely transform the way they do business.

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- Content Components: Our Content Components software is used by many
independent software vendors, handheld device manufacturers and service
providers to provide robust viewing and conversion functionalities to
their end users. It is also integrated into our Universal Content
Management software.

- Vertical Applications and Integrations: We leverage our content
management expertise and flexible universal content architecture to
provide vertical solutions for industries such as government,
manufacturing, commercial real estate and insurance; for horizontal
applications such as Sarbanes-Oxley compliance and partner extranets; and
for integrations with other applications such as Lotus Notes and portals.

PRODUCTS

Our product set is comprised of three main components:

- Universal Content Management Software

- Content Components Software

- Vertical Applications and Integrations

UNIVERSAL CONTENT MANAGEMENT SOFTWARE

We provide the five key elements of content management from a single
technology platform. This universal content architecture addresses each key
aspect of content management from one platform, enabling customers to fully
leverage their content management investment across the organization and
throughout various applications. Organizations deploying the Universal Content
Management software use this architecture to build line-of-business solutions,
such as Web sites, intranets, extranets and portals, and enterprise-wide content
management deployments to solve real business problems.

Our architecture is built upon one core repository and one Java code base
and allows companies to deploy and integrate content management applications
typically using fewer products and consulting services than other content
management suites, which can lead to a lower total cost of ownership. For
example, while some content management providers have acquired products from
other companies to fulfill critical content management needs, integrating those
disparate systems is often difficult and requires customers to spend more time
and money on expensive consulting services to get the systems implemented.

Our Universal Content Management software blends well into the existing
business process by offering content owners multiple methods for easy content
contribution of any type of content. Since many types of content are not Web
friendly, we also provide the unique, automatic conversion of over 225 content
types to 'consumption' friendly formats such as HTML, WML, XML and PDF. Our
flexible contribution methods and automatic conversion capabilities help the
Universal Content Management software to be quickly adopted by users and easily
integrated into their work initiatives.

In addition, through its open, standards-based architecture, our Universal
Content Management software integrates easily with enterprise infrastructure and
e-business applications for a seamless solution. Integration options include Web
services, Enterprise JavaBeans (EJB)/J2EE, JSP Tag libraries, Com, Scripting,
Command Line Interface, Information Content and Exchange (ICE) and HTTP.

Our Universal Content Management offers core services consisting of:

- Library services

- Conversion services

- Security

- Personalization

- Workflow

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- Search

- User input

- Administration services

On top of these Universal Content Management core services, we build the
following five key content application services:

- Web Content Manager

- Document Manager

- Collaboration Manager

- Records Manager

- Digital Asset Manager

The core Universal Content Management software consists of Stellent Content
Server plus one or more of the above five key content application services,
described below:

STELLENT CONTENT SERVER

Stellent Content Server is a fully functional content management system
providing end-to-end content management and personalized delivery of that
content. It provides a rich set of library services such as check-in/check-out,
revision control, security, subscription services, discussion threads, graphical
workflow, metadata and full-text searching, archiving, thumb-nailing and content
replication.

The system provides both native format contribution and HTML-based
contribution templates; contribution through WebDAV; personalized navigation;
and a personalized search or content bookmark capability. Our Content Server
allows anyone -- regardless of technical ability -- to easily contribute any
kind of content, including rich media content such as e-learning files and
videos, to the system via a Web browser. Content can be contributed in any
format, such as a word processing document, spreadsheet or CAD file, and
Stellent automatically converts it to a variety of Web formats, such as PDF,
HTML, XML, WML and cHTML. This automatic conversion capability enables users to
easily publish content to Web sites, such as an employee portal or partner
extranet, without Webmaster assistance. As a result, many of our customers
applaud the fact that their employees are able to use the system with minimal
training and quickly adopt it as a critical piece of business technology that is
used on a daily basis.

Our system maintains a single, up-to-date version of each piece of content
that can be delivered to and used by multiple e-business applications throughout
an organization. Content Server offers two content storage options -- the
traditional repository that is optimized for standard business content and the
Tamino XML repository which is optimized for managing large amounts of pure XML
content.

Included with Stellent Content Server are the following:

- Stellent Dynamic Converter: Stellent Dynamic Converter brings a new
level of simplicity and productivity to providing Web-viewable business
content. With Dynamic Converter, users only need to store native files.
Dynamic Converter generates Web-viewable formats on demand and is able to
convert more than 225 file formats to HTML, WML or cHTML. With
sophisticated template technology, Stellent Dynamic Converter serves
content to Web sites with a consistent "look and feel." Using a metadata
rules-based mechanism, Webmasters can define conditions when files are
served as HTML or when particular templates are used. A graphical
template editor allows remote Web developers to create, edit and modify
conversion templates, all through the Web-based Universal Content
Management software.

- Stellent XML Converter: Stellent XML Converter enables the automatic
publishing of native business content to XML format. Upon the check-in of
new business content, a conversion to XML will occur. This XML file can
then be accessed from other enterprise applications, as well as
dynamically rendered to HTML using the Stellent Dynamic Converter.

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- Stellent Desktop: Stellent Desktop combines two powerful technologies to
directly link Stellent Content Server and enterprise authoring
applications. Stellent Desktop allows direct contribution from
ODMA-compliant applications, such as Word, WordPerfect, Excel and
PowerPoint, as well as drag and drop capabilities for non-ODMA or
non-WebDAV compliant applications. Our integration with Microsoft Outlook
also allows direct contribution from Outlook, including email messages as
well as attachments, and it allows users to attach content pulled
directly from the Stellent Content Server.

- Stellent Enterprise Search: Stellent Enterprise Search lets users search
for content across multiple Stellent Content Servers.

- Stellent Content Tracker: Stellent Content Tracker delivers both static
and dynamic reports allowing administrators to analyze Web site traffic,
perform clickstream analysis and track users within Stellent Content
Server. Using key metrics to evaluate Web site effectiveness and to
examine granular areas of a site, Content Tracker highlights areas of
improvement to help companies maintain customer, partner, and employee
interest in the site content.

CONTENT APPLICATION SERVICES

One or more of our key content application services are licensed in
addition to the Stellent Content Server to solve specific horizontal business
problems. Each application service consists of one or more products.

- Stellent Web Content Manager: Stellent Web Content Manager addresses the
need for businesses to create and manage multiple Web sites. Without
content management, Web site content can be inaccurate and stale;
Webmasters can be bottlenecks to updating it; multiple versions of
content can be posted to different Web Sites; content consumers can find
it difficult to find the information they need; central management and
control of Web site creation is difficult or non-existent; and the
architecture of Web sites is inconsistent from site to site. All of these
problems can diminish a site's usefulness and add to operational cost.
Our Web Content Manager helps solve these problems by providing a strong
underlying Web content management infrastructure; an easy to use,
in-context Web site authoring environment for business users; and a
consistent approach for Web site creation and contribution that enforces
IT standards for architecture, branding and corporate Web presence.
Stellent Web Content Manager consists of the following modules:

o Stellent Site Studio: Stellent Site Studio is an application that
optimizes, automates and enforces key Web site creation and contribution
methodologies to minimize time-to-deployment and maximize ROI. Stellent
Site Studio supports the growing trend of companies building multiple
(i.e. tens to hundreds) Web sites, enabling them to quickly deploy these
sites and easily maintain consistent branding, security and
infrastructure across all sites being developed by their various
business units. Site Studio is tightly integrated with the Stellent
Content Server to provide a structured, metadata-driven management
environment for multiple Web sites. Web developers and site designers
are provided with a robust tool to create template-driven and
fragment-based Web sites to minimize site complexity and development.

For decentralized Web site creation, Web development teams and graphic
artists can take advantage of Site Studio Designer's customizable
library to provide business units with reusable drag-and-drop layouts,
fragments, navigation and code that integrate with back-end applications
for developing their own unique Web sites -- yet with a consistent look
and feel. Site Studio enables business users to contribute content in a
user-friendly WYSIWYG XML form-based environment with regional-level
security and in-context preview, workflow and approval. Stellent Site
Studio can also take advantage of content authored in native
applications in which business users regularly work, such as Microsoft
Office or Lotus Suite, using Stellent Dynamic Converter.

o Stellent Content Publisher: Stellent Content Publisher provides
advanced template-based technology to automatically publish over 225
business-content formats to fully linked Web sites/pages in HTML, XML
and wireless formats. Content may be managed in a Stellent Content
Server or

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stored in a standard file system. Features include single source
publishing, abstraction, personalization, XML support, scripting
language inclusions, content release scheduling, layout template design
by HTML Editors and automated creation of navigation.

o Stellent Site Builder: Stellent Site Builder facilitates the use of
client software by a Webmaster to design, publish and maintain Web
sites. Site Builder defines the site hierarchy, the mapping between the
Web site and source content, the published format (HTML, XML, ASP, JSP,
etc.) and the look and feel of the Web site.

o Stellent Connection Server: Stellent Connection Server enables users to
easily deploy content from staging environments to production
environments and to roll-back to earlier versions of Web sites.
Connection Server's robust content distribution capabilities allow users
to move content to external sites, including business partners and
employees who may be working either online or offline.

- Stellent Document Manager: Stellent's Document Manager application
service consists of the following options on top of a Stellent Content
Server:

o Stellent Content Categorizer: Stellent Content Categorizer enables
organizations to quickly categorize and move content into a managed
environment, easily re-categorize managed content and efficiently
navigate and search for content. As an open API for third party
categorization engines, Content Categorizer enables customers to choose
the best categorization engine for their enterprise needs. Customers can
use our out-of-the-box categorization functionality or can leverage rule
sets and taxonomies from third-party categorization tools.

o Stellent PDF Converter: Stellent PDF Converter enables the automatic
publishing of native business content to a Web-viewable PDF upon
check-in. This Adobe PDF rendition maintains the fidelity of the content
and enables Web viewing without the need for the native application.

o Stellent Report Parser: Stellent Report Parser provides additional
functionality to the Stellent Content Server with report parsing and
loading capabilities. With Report Parser, business-critical information
from the enterprise reporting applications can easily be made available
in one centralized, secured, easy-to-use source. It allows customers to
intelligently read reports from disparate expert reporting systems, and
then manages the distribution of these reports through Content Server in
PDF, XML, text or HTML format.

o Stellent Legacy: Stellent Legacy automatically scans and converts an
organization's paper-based legacy data and content into Web-ready files.
Stellent Legacy uses both Adobe Acrobat Capture and Kofax Ascent Capture
scanning technology to provide users with a single, compact, fully
searchable file that exactly replicates the original paper version.

o Stellent Tiff Conversion: Stellent Tiff Conversion converts TIFF images
to a PDF format. Upon check-in of single or multi-page TIFF files, Tiff
Conversion will convert single TIFF images to a single PDF file or
convert the multi-page TIFF file to a multi-page PDF file.

o Stellent PDF Interchange: Stellent PDF Interchange provides the ability
to deliver a PDF file to a consumer in an HTML format. This capability
is ideal for extranet environments where the consumers may not have the
Acrobat Reader plug-in installed on their system.

o Stellent PDF Watermark: Stellent PDF Watermark is used by contributors
to specify various security attributes that will be applied to a
published PDF file, including the ability to overlay or underlay a
watermark, disable printing, disable text selection and disable note
creation. An example of a watermark may be the overlaying of the word
"CONFIDENTIAL" on a secure file within the Stellent repository.

o Stellent PDF Merge: Stellent PDF Merge is a Web-based content assembly
solution used to assemble disparate content into one composite PDF
document. The user may also apply a watermark, consecutively paginate
the document, add a Table of Contents, insert metadata and personalize
the assembled document with delimited data files.

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- Stellent Collaboration Manager: Stellent Collaboration Manager enables
individual users, such as employees and business partners, to easily
create and maintain online, ad-hoc collaboration environments for
content, projects or team spaces, without needing IT assistance. Stellent
Collaboration Manager facilitates collaborative, team-based content
creation with ad-hoc security using Access Control Lists (ACL),
discussion threads, user-initiated content routing and project level
search. Specific project content can also be "promoted" to Stellent
Content Server to be managed as enterprise business content. Stellent
Collaboration Manager extends content management to the workgroup level
and provides the same revolutionary empowerment to the business user for
project team definition, collaboration and management that Stellent
Content Server provides for enterprise business content management.

- Stellent Records Manager: Stellent Records Manager leverages the
functionality of the Stellent Content Server to designate content as
records to be stored, managed and archived for compliance with industry
regulations in vertical markets such as finance, healthcare, commercial
real estate and government industries. Stellent Records Manager provides
security to content records so that only authorized users can perform
specific tasks. We have a robust security model that distinguishes
between record creation, record deletion, file plan modification and
retention rules and can be modified for different types of content.
Stellent Records Manager provides metadata-based management to various
attributes applied to records, folders and file plans. Stellent Records
Manager also provides for date-and-date logic, which enables actions
based on dates in the past, present, and future. Finally, Stellent
Records Manager provides for the management of any record
type -- electronic, non-electronic, email, documents and rich media
(audio and video files).

- Stellent Digital Asset Manager: Stellent's Digital Asset Manager helps
to meet Global 2000 businesses' needs to access, manage and deliver
video, audio and graphical business content. Digital Asset Manager
enables companies to easily input, manage, publish and distribute the
rich media assets found within one's daily business activities -- items
such as e-learning files, videos and images.

o Stellent Audio Video Indexer: Stellent Audio Video Indexer provides
additional functionality to the Stellent Content Server, allowing for
more robust searching and retrieval of audio and video files. Stellent
Audio Video Indexer allows for the indexing of the audio portions of the
following audio and video file types: .mpg, .avi, .asf, .wmv. The voice
recognition results and file property information are formatted in XML,
allowing the end user the ability to perform a full text search and find
the timestamp associated with the keyword. Stellent Audio Video Indexer
also provides thumbnail images of the video on the search results
screen.

o Stellent Compression: Stellent Compression provides the ability to
check-in large image files and automatically convert them to a
compressed MrSID format or the ability to check-in pre-processed MrSID
files. The MrSID representation is visible as a thumbnail and provides
consumers a lightweight, Web-viewable image with panning and zooming
controls.

o Stellent Image Conversion: Stellent's image conversion capabilities
enable access to business content residing in scanning, marketing
communications and engineering environments by automatically rendering
more than 25 original image file formats to Web-friendly formats. For
example, Stellent conversion technology can convert non Web-viewable
file formats such as .DXF, .PCS Bitmap, Lotus PIC and TIFF to
Web-viewable formats, giving users access to the files without needing
to have the native application installed on their desktop.

o Stellent Thumbnailing: Stellent offers thumbnailing of a variety of
file formats, allowing users to quickly identify and retrieve the
content for which they are searching and even publish these renditions
to Web sites. These thumbnails can be generated for Microsoft Office
documents, emails, images/graphics, PowerPoint presentations, Visio
diagrams and other graphic-intensive content.

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CONTENT COMPONENTS SOFTWARE

Our Content Components software provides unique native file filtering,
conversion and presentation capabilities for our Universal Content Management
and original equipment manufacturer (OEM) customers such as IBM and Palm. The
technology gives application developers, device manufacturers and service
providers the ability to view, filter and convert more than 225 file formats
without using native applications. These technologies support multiple operating
systems and international environments and enable access to documents in
applications for diverse markets such as content management, search and
retrieval, security and policy management, mobile and wireless, messaging,
collaboration and publishing. From applications on desktop and handheld device
platforms to Web and wireless servers in high-throughput 7x24 environments, over
400 OEMs license our Content Components software for critical access to
unstructured data.

CONVERSION TECHNOLOGIES

Outside In conversion technologies are designed to automatically convert
business content stored in more than 225 common file formats to Web or
wireless-viewable formats, or for further processing or storage of a document as
XML. The Outside In conversion technologies include:

- Outside In Wireless Export

- Outside In HTML Export

- Outside In XML Export

- Outside In Image Export

- Outside In Content Access

PUBLISHING TECHNOLOGY

Our Transit publishing technology provides a fast and cost-effective way to
create and maintain Web sites. Once users have identified their source documents
(in a file system), Transit publishes the document to the Web in a HTML or XML
format. When source content changes, users can update the site easily and
thereby ensure that it's well maintained, up-to-date, and has reliable links.

VIEWING TECHNOLOGIES

Outside In and Quick View Plus viewing technologies and applications offer
developers file viewing and printing capabilities with the highest fidelity, for
the broadest number of file types across multiple operating systems. These
technologies include:

- Outside In Viewer Technology for Desktop Environments

- Outside In Viewer Technology for Mobile Devices

- Quick View Plus

VERTICAL APPLICATIONS AND INTEGRATIONS

We leverage our content management expertise and flexible Universal Content
Management architecture to provide solutions for vertical industries such as
government, manufacturing, commercial real estate and insurance; horizontal
applications such as Sarbanes-Oxley compliance and partner extranets; and
integrating with applications such as Lotus Notes and portals.

CONSULTING SERVICES

Our consulting services group is focused on delivering value-based content
management solutions to our customers. Our consulting services professionals
employ a combination of business analysis, enterprise architecture, application
analysis, installation, configuration, development and integration skills with
experi-

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ence-based project methodology and management knowledge to facilitate the
rollout of content management solutions at all levels of a customer's
organization. Available on a worldwide basis, we act as a business partner to
our customers by providing a broad spectrum of services including:

- Technical architecture analysis and needs assessment, e.g. software,
security and metadata analysis

- Solutions development and deployment strategies

- Software installation and configuration

- Custom application development

- Third party product integration

- Project management

- Knowledge transfer

These services can be offered in conjunction with our software products to
new customers, or on a stand alone basis to our existing customers to assist
them in driving additional content management solutions across their
enterprises. These services are sold in conjunction with our software products
and are offered for fees, the amount of which depends on the nature and scope of
the project.

PRODUCT SUPPORT

We offer several product support programs that allow customers to select
the offering(s) that best satisfies their maintenance and support requirements.
From the initial installation and configuration of Stellent to the point of
application deployment, our product support resources strive to provide
exceptional customer service through quick response time, effective
trouble-shooting and the delivery of complete and comprehensive technical
solutions. Customers may access product support resources on a worldwide basis
for assistance during the customer's normal business hours. Additional support
offerings are available which supplement the customer's product support
requirements.

Product support offerings are renewable on an annual basis and are
typically priced as a percentage of the product license fees.

PRODUCT TRAINING

We provide a full range of educational courses on our Universal Content
Management software. The comprehensive web-based modules and instructor-led
classes enable business end-users, administrators, site designers, and
developers to use Stellent tools more productively. Standard classes are
routinely scheduled at designated worldwide training facilities, and both
standard and customized classes are frequently taught at customer sites.

SALES AND MARKETING

We market and sell our products using a combination of direct and indirect
distribution channels primarily in North America and Europe. Our primary
distribution channel is our direct sales force, which targets mid- and
large-size organizations. Our sales approach is a solution selling sales model
which is a consultative approach to selling where sales personnel work in a
consultative manner with target accounts to uncover unsolved business needs
which can be remedied by the application of a business process solution built
around our Stellent Universal Content Management software. The solution
discovery process will typically include a business process and technical
systems evaluation performed by our pre-sales personnel, followed by
demonstrations of our products' capabilities and direct negotiations with our
sales staff. As part of our solution selling model, Stellent has chosen to focus
on specific vertical markets where we have developed subject matter expertise in
these markets to solve common business problems. Our initial vertical industries
of focus are manufacturing, insurance, commercial real estate and e-government.
We expect this to expand to other vertical industries in the future. In
addition, we have an internal telemarketing operation that is responsible for
customer prospecting, lead generation and follow-up. These activities identify
and develop leads for further
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sales efforts by our direct sales force. As of March 31, 2003, we had a
worldwide total of 113 direct and indirect sales and sales support personnel and
24 marketing personnel, which includes business development and alliances.

We also use indirect sales channels to increase the distribution and
visibility of our products through strategic alliances with resellers, OEMs, key
systems integrators and other channel partners in both domestic and
international markets.

We currently have operations or collaborations in Australia, France,
Germany, Japan, Korea, the Netherlands, the United Kingdom and the United
States. Our ability to achieve significant revenue growth in the future will
depend in large part on how successfully we recruit, train and retain sufficient
direct and indirect sales and support personnel, and how well we continue to
establish and maintain relationships with our strategic partners' resellers,
OEMs, key systems integrators and other channel partners.

We use a variety of marketing programs to build market awareness of our
brand name and of our products, as well as to attract potential customers to our
products. A broad mix of programs is used to accomplish these goals, including
market research, product and strategy updates with industry analysts, public
relations activities, direct mail and relationship marketing programs, seminars,
trade shows, speaking engagements, Web site marketing and joint marketing
programs. Our marketing organization produces marketing materials in support of
sales to prospective customers that include brochures, data sheets, white
papers, presentations and demonstrations.

RESEARCH AND DEVELOPMENT

We have made substantial investments in research and development through
both internal development and technology acquisitions. Our research and
development expenditures for fiscal 2001, 2002 and 2003, were approximately $9.8
million, $17.6 million and $15.8 million, respectively. Research and development
expenses represented 15%, 20% and 24%, respectively, of total revenue in those
years. We expect that we will continue to commit significant resources to
research and development in the future. As of March 31, 2003, we had 86
employees engaged in research and development activities.

In order to continue to provide product leadership in the content
management and content components market, we intend to make major product
releases approximately once per year. The success of new introductions is
dependent on several factors, including timely completion and market
introduction, differentiation of new products and enhancements from those of our
competitors and market acceptance of new products and enhancements.

The market for our products is characterized by rapid technological change,
frequent new product introductions and enhancements, evolving industry standards
and rapidly changing customer requirements. The introduction of products
incorporating new technologies and the emergence of new industry standards could
render existing products obsolete and unmarketable. Our future success will
depend in part on our ability to anticipate changes, enhance our current
products, develop and introduce new products that keep pace with technological
advancements and address the increasingly sophisticated needs of our customers.
We may not be successful in developing and marketing new products and
enhancements that respond to competitive and technological developments and
changing customer needs.

ACQUISITIONS

In September 1999, we acquired InfoAccess, a Web-based software company, in
a transaction accounted for using the pooling-of-interests method. This further
enhanced our conversion of various file types to Web formats, including XML and
HTML, and our ability to publish business data to the Web. Accordingly, our
financial information includes the results of operations of InfoAccess for all
periods presented.

In July 2000, we acquired the Information Exchange Division (now referred
to as our Content Components Division or "CCD") of eBT International, Inc.
(formerly Inso Corporation). CCD is a market leader in mobile and wireless
device viewing technologies and applications and Web conversion. CCD's products
provide conversion of over 225 different file types to Web formats including
XML, HTML or
9

Wireless Markup Language (WML). Additionally, CCD provides viewing technology
for the Windows CE and Symbian operating systems that allows users of applicable
mobile and wireless devices to readily view files from desktop applications. The
total cost of the acquisition, including transaction costs, was approximately
$55.3 million. The acquisition was accounted for as a purchase business
combination. Accordingly, the net fair value of tangible and intangible assets
acquired and liabilities assumed were recorded at their estimated fair values at
the effective date of the acquisition and the results of operations of CCD are
included for the periods subsequent to the date of the acquisition.

In July 2001, we acquired select assets of RESoft, Inc., a leading provider
of end-to-end content management solutions for the real estate and legal
industries, for 200,000 shares of our common stock. The acquisition was valued
at approximately $5.6 million, including acquisition costs. This acquisition has
been accounted for under the purchase method of accounting, and approximately
$4.6 million of the purchase price was allocated to goodwill, $0.5 million to
intangible assets and $0.5 million to fixed assets.

In April 2002, we acquired certain assets and assumed certain liabilities
of Kinecta Corporation, a provider of software infrastructure for digital
networks, for approximately $2.6 million in cash.

In March 2003, we acquired certain assets of Active IQ Corporation, a
provider of hosted solutions for the commercial real estate industry, for
approximately $0.7 million in cash.

COMPETITION

The market for content management and content component software is
intensely competitive, subject to rapid technological change and significantly
affected by new product introductions and other market activities of industry
participants. We expect competition to persist and intensify in the future. Our
primary source of competition is from Web content management or components
products offered by companies such as Documentum, Inc., FileNET Corporation,
Interwoven, Inc., Microsoft Corporation, Verity, Inc., and Vignette Corporation.
We also compete with current or potential customers who may develop solutions
internally.

Many of our competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources than we do and thus
may be able to respond more quickly to new or changing opportunities,
technologies and customer requirements. Also, many current and potential
competitors have greater name recognition and access to larger customer bases
than we have. Such competitors may be able to undertake more extensive
promotional activities and offer more attractive terms to purchasers than we
can. In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
enhance their products. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share.

Competition in our market could materially and adversely affect our ability
to obtain revenues from software license fees from new or existing customers on
terms favorable to us. Further, competitive pressures may require us to reduce
the price of our software. In either case, we cannot be sure that we will be
able to compete successfully with existing or new competitors or that
competition will not have a material adverse effect on our business, operating
results and financial condition.

PROPRIETARY RIGHTS AND LICENSING

We rely on a combination of copyright, trade secret, trademark,
confidentiality procedures and contractual provisions to protect our proprietary
rights. United States and international copyright laws provide limited
protections for our software, documentation and other written materials. We
license our products in object code format for limited use by customers. We
treat the source code for our products as a trade secret and we require all
employees and third-parties who need access to the source code to sign
non-disclosure agreements.

Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software exists, software piracy can be expected to be a persistent problem.
Litigation may be necessary in the future to
10

enforce our intellectual property rights, to protect our trade secrets, to
determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement or invalidity. However, the laws of many
countries do not protect our proprietary rights to as great an extent as do the
laws of the United States. Any litigation could result in substantial costs and
diversion of resources and could have a material adverse effect on our business,
operating results and financial condition. Our efforts to protect our
proprietary rights may not be adequate or our competitors may independently
develop similar technology. Our failure to meaningfully protect our property
could have a material adverse effect on our business, operating results and
financial condition.

We cannot be sure that third parties will not make claims of infringement
with respect to our current or future products. We expect that developers of
content management and content component products will increasingly be subject
to infringement claims as the number of products and competitors in our market
grows and as the functionality of products in different segments of the software
industry increasingly overlaps. Any claims, with or without merit, could be time
consuming to defend, result in costly litigation, divert management's attention
and resources, cause product shipment delays or require us to enter into royalty
or licensing agreements. Royalty or licensing agreements, if required, may not
be available on terms acceptable to us or at all. A successful claim of product
infringement against us and our failure or inability to license the infringed
technology or develop or license technology with comparable functionality could
have a material adverse effect on our business, operating results and financial
condition.

EMPLOYEES

As of March 31, 2003, we had 340 employees. Our future success will depend
in part on our ability to attract, retain, integrate and motivate highly
qualified sales, technical and management personnel, for whom competition is
intense. From time to time we also employ independent contractors to support our
services, product development, sales and marketing departments. Our employees
are not represented by any collective bargaining unit, and we have never
experienced a work stoppage. We believe our relations with our employees are
good.

GEOGRAPHIC INFORMATION

Financial information about geographic areas is incorporated by reference
from footnote 10 to our Consolidated Financial Statements included elsewhere in
this Annual Report on Form 10-K.

AVAILABLE INFORMATION

Our Web site is: http://www.stellent.com. We make available, free of
charge, through our Web site, our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as
soon as reasonably practicable after we electronically file such materials with,
or furnish them to, the Securities and Exchange Commission.

ITEM 2. PROPERTIES

In July 2000, we began a five-year lease of approximately 32,000 square
feet in Eden Prairie, Minnesota, which is our corporate headquarters facility.
We are currently sub-letting approximately 18,000 square feet of our former
headquarters pursuant to a lease expiring in July 2005, and approximately 6,000
square feet of office space in Scottsdale, Arizona pursuant to a lease expiring
in February 2004.

Additionally, we lease approximately 8,000 square feet of office space in
Boston, Massachusetts with lease terms expiring June 2004 and September 2006;
approximately 28,000 square feet of space in downtown Chicago, Illinois with a
lease term expiring September 2006; approximately 5,000 square feet of space in
New York, New York with a lease term expiring in January 2007; approximately
12,000 square feet in Redmond, Washington with a lease term expiring in December
2007; approximately 9,000 square feet in London, United Kingdom with a lease
term expiring in May 2016; and approximately 6,000 square feet in the
Netherlands with a lease term expiring in April 2006. Management believes that
our facilities are suitable and adequate for current office requirements.
11

ITEM 3. LEGAL PROCEEDINGS

In the normal course of business, we are subject to various claims and
litigation, including employment matters and intellectual property claims.
Management does not believe the outcome of any current legal matters will have a
material adverse effect on our consolidated financial position, results of
operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of our security holders during the fourth
quarter of the fiscal year ended March 31, 2003.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Executive Officers of the Registrant

The Executive Officers of our company are:

Robert F. Olson founded our business and has served as Chairman of the
Board of Stellent, Inc. and our predecessor company since 1990. He also served
as our Chief Executive Officer and Chairman of the Board from October 2000 to
July 2001, and as our President, Chief Executive Officer and Chairman of the
Board from 1990 to October 2000 and from April 2003 to present. From 1987 to
1990, he served as the General Manager of the Greatway Communications Division
of Anderberg-Lund Printing Company, an electronic publishing sales and service
organization. Prior to that time, Mr. Olson held management and marketing
positions in several electronic publishing service organizations.

David S. Batt has served as our Executive Vice President, Global Field
Operations, since February 2003. From October 2001 to October 2002, he was
Executive Vice President of Marketing, Sales and Services for Selectica, Inc., a
leading provider of product configuration and pricing solutions. From July 1999
to September 2001, Mr. Batt served as Vice President of CRM Sales for Oracle
Corp., an enterprise software company, and from September 1998 to June 1999 as
Senior Vice President of Sales for Adaytum Software, Inc., an enterprise
business planning software company. From April 1998 to August 1998, he served as
Vice President of Middle Markets Sales for Siebel Systems, an eBusiness
application software company. Prior to that time, Mr. Batt was employed by Wall
Data, Inc.

Frank A. Radichel has served as our Executive Vice President of Research
and Development since April 2003 and our Vice President of Research and
Development from March 1995 through March 2003. Prior to that, Mr. Radichel
served as CALS Project Leader and Technical Architect for Alliant TechSystems,
Inc.

Daniel P. Ryan has served as our Executive Vice President of Marketing and
Business Development since April 2003 and as our Senior Vice President of
Marketing and Business Development from April 2002 through March 2003. He has
also served as our Senior Vice President of Corporate and Business Development
from November 2001 to April 2002. From April 1999 to November of 2001, he served
as Vice President of Marketing and Business Development. From September 1997 to
April 1999, he served as Vice President of

12

Marketing for Foglight Software, Inc., a developer of enterprise performance
management solutions. Prior to that time, Mr. Ryan served as Director of
Marketing for Compact Devices, Inc.

Gregg A. Waldon has served as our Executive Vice President, Chief Financial
Officer, Secretary and Treasurer since April 2003 and Chief Financial Officer,
Secretary and Treasurer from April 1999 to March 2003. He has also served as a
director from April 1999 to August 2001. From 1992 to April 1999, he held
various financial management positions with GalaGen Inc., a publicly traded
biopharmaceutical and nutritional ingredients company, where he served as Chief
Financial Officer since November 1994. Prior to that time, Mr. Waldon was
employed by PricewaterhouseCoopers LLP.

Michael S. Rudy has served as our Vice President of Canada since April 2003
and was our Vice President of Alliances and Services from April 2002 through
March 2003. He has also served as our Vice President of Technology Services from
January 2001 to April 2002. From 1999 to 2000, Mr. Rudy was President and CEO of
Hypertree Corporation, a software startup providing Web infrastructure for
building corporate portals. Prior to that time, Mr. Rudy was employed by
Workgroup Technology, supplier of software for product data management, from
1994-1999 in various sales and management positions, and by ELDEC from 1983-1994
in various information services positions.

Officers of our company are chosen by and serve at the discretion of the
Board of Directors. There are no family relationships among any of the directors
or officers of our company.

13

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock, par value $0.01 per share, is traded on the Nasdaq
National Market tier of The Nasdaq Stock Market under the symbol STEL. At June
25, 2003, our common stock was held by approximately 4,900 shareholders
consisting of 332 record holders and an estimated 4,600 shareholders whose stock
was held in the name of a bank, broker or other nominee. On June 25, 2003, the
closing sale price of a share of our common stock was $5.10.

The high and low sale prices per share of our common stock for the four
quarters during the fiscal years ended March 31, 2002 and 2003 were as follows:

We have never paid cash dividends on the common stock. The Board of
Directors does not anticipate paying cash dividends in the foreseeable future.

EQUITY COMPENSATION PLAN INFORMATION

The information required by Item 201(d) of Regulation S-K is incorporated
by reference from Item 12 of this Annual Report on Form 10-K.

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ITEM 6. SELECTED FINANCIAL DATA

The Selected Consolidated Financial Data (in thousands except per share
data) presented below as of and for each of the fiscal years in the five year
period ended March 31, 2003 have been derived from our Consolidated Financial
Statements. The Selected Consolidated Financial Data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
related Notes.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

In 1997, we launched one of the first software product suites on the market
that was fully developed and created expressly for Web-based content and
document management. At the time, content management -- today considered a
critical component of an organization's communication and information technology
(IT) infrastructures -- was an emerging technology used to help companies easily
and quickly share information internally or externally using the Web.

Currently, our solutions -- which are comprised of universal content
management software, content components software and vertical
applications -- help customers worldwide solve real business problems related to
efficiently creating, managing and sharing critical information. Our company has
strategically grown to become one of the foremost content management software
vendors in the industry, having been ranked one of the top three content
management software providers by industry analyst firms Gartner Dataquest, Giga
Information Group and Aberdeen Group.

Our customers are primarily located throughout the United States and
Europe. We are responsible for developing our current business which was founded
in 1990. In July 1996, we merged with and into a publicly traded corporation,
which was organized under Minnesota law in November 1989. In July 2000, we
acquired the Information Exchange Division (currently our Content Components
Division or "CCD") of eBT

16

International, Inc. (formerly Inso Corporation) in a transaction accounted for
as a purchase. In July 2001, we acquired select assets of RESoft, a leading
provider of end-to-end content management solutions for the real estate and
legal industries. This acquisition has been accounted for under the purchase
method of accounting. In April 2002 and in March 2003, we acquired certain
assets of Kinecta Corporation and Active IQ Corporation, respectively. On August
29, 2001, we changed our name to Stellent, Inc. Our headquarters is located in
Eden Prairie, Minnesota and we have operations or collaborations in Australia,
France, Germany, Japan, Korea, the Netherlands, the United Kingdom and in other
cities in the United States.

Beginning in April 2002 and continuing through April 2003, we have
implemented several cost cutting measures, including a reduction in work force
of approximately 30% since our December 2001 quarter. These restructuring
measures were in response to the economic slowdown both in the United States and
internationally and were in all functional areas and geographies. However, we
have recently been investing in certain areas in order to expand our customer
base and grow our revenues. Because of this, we anticipate that the percentage
of expenses as compared to total revenues represented by sales and marketing
expenses, research and development expenses and general and administrative
expenses will fluctuate from period to period depending primarily on when we
hire new personnel, the timing of certain sales and marketing programs, the
research programs that we put in place and the potential expansion of
operations. In addition, our limited operating history makes it difficult for us
to predict future operating results. We cannot be certain that we will sustain
revenue growth.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are more fully described in Note 1 to
our consolidated Financial Statements. The policies described below are
particularly important to understanding our financial position and results of
operations and may require management to make estimates or judgments that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Revenue Recognition

We currently derive all of our revenues from licenses of software products
and related services. We recognize revenue in accordance with Statement of
Position (SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions, and Securities and Exchange Commission Staff Accounting Bulletin
101, "Revenue Recognition in Financial Statements."

Product license revenue is recognized under SOP 97-2 when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is
fixed or determinable, and (iv) collectibility is probable and supported and the
arrangement does not require services that are essential to the functionality of
the software.

Persuasive Evidence of an Arrangement Exists -- We determine that
persuasive evidence of an arrangement exists with respect to a customer under,
i) a signature license agreement, which is signed by both the customer and us,
or, ii) a purchase order, quote or binding letter-of-intent received from and
signed by the customer, in which case the customer has either previously
executed a signature license agreement with us or will receive a shrink-wrap
license agreement with the software. We do not offer product return rights to
end users or resellers.

Delivery has Occurred -- Our software may be either physically or
electronically delivered to the customer. We determine that delivery has
occurred upon shipment of the software pursuant to the billing terms of the
arrangement or when the software is made available to the customer through
electronic delivery. Customer acceptance generally occurs at delivery.

The Fee is Fixed or Determinable -- If at the outset of the customer
arrangement, we determine that the arrangement fee is not fixed or determinable,
revenue is typically recognized when the arrangement fee becomes due and
payable. Fees due under an arrangement are generally deemed fixed and
determinable if they are payable within twelve months.
17

Collectibility is Probable and Supported -- We determine whether
collectibility is probable and supported on a case-by-case basis. We may
generate a high percentage of our license revenue from our current customer
base, for whom there is a history of successful collection. We assess the
probability of collection from new customers based upon the number of years the
customer has been in business and a credit review process, which evaluates the
customer's financial position and ultimately their ability to pay. If we are
unable to determine from the outset of an arrangement that collectibility is
probable based upon our review process, revenue is recognized as payments are
received.

With regard to software arrangements involving multiple elements, we
allocate revenue to each element based on the relative fair value of each
element. Our determination of fair value of each element in multiple-element
arrangements is based on vendor-specific objective evidence ("VSOE"). We limit
our assessment of VSOE for each element to the price charged when the same
element is sold separately. We have analyzed all of the elements included in our
multiple-element arrangements and have determined that we have sufficient VSOE
to allocate revenue to consulting services and post-contract customer support
("PCS") components of our license arrangements. We sell our consulting services
separately, and have established VSOE on this basis. VSOE for PCS is determined
based upon the customer's annual renewal rates for these elements. Accordingly,
assuming all other revenue recognition criteria are met, revenue from perpetual
licenses is recognized upon delivery using the residual method in accordance
with SOP 98-9, and revenue from PCS is recognized ratably over their respective
terms, typically one year.

Our direct customers typically enter into perpetual license arrangements.
Our Content Components Division generally enters into term-based license
arrangements with its customers, the term of which generally exceeds one year in
length. We recognize revenue from time-based licenses at the time the license
arrangement is signed, assuming all other revenue recognition criteria are met,
if the term of the time-based license arrangement is greater than twelve months.
If the term of the time-based license arrangement is twelve months or less, we
recognize revenue ratably over the term of the license arrangement.

Services revenue consists of fees from consulting services and PCS.
Consulting services include needs assessment, software integration, security
analysis, application development and training. We bill consulting services fees
either on a time and materials basis or on a fixed-price schedule. In general,
our consulting services are not essential to the functionality of the software.
Our software products are fully functional upon delivery and implementation and
generally do not require any significant modification or alteration for customer
use. Customers purchase our consulting services to facilitate the adoption of
our technology and may dedicate personnel to participate in the services being
performed, but they may also decide to use their own resources or appoint other
professional service organizations to provide these services. Software products
are billed separately from professional services. We recognize revenue from
consulting services as services are performed. Our customers typically purchase
PCS annually, and we price PCS based on a percentage of the product license fee.
Customers purchasing PCS receive product upgrades, Web-based technical support
and telephone hot-line support.

Customer advances and billed amounts due from customers in excess of
revenue recognized are recorded as deferred revenue.

Cost of Revenues

We expense all manufacturing, packaging and distribution costs associated
with product license revenue as cost of revenues. We expense all technical
support service costs associated with service revenue as cost of revenues. We
also expense amortization of capitalized software from acquisitions as cost of
revenues.

In January 2002, the FASB issued Emerging Issues Task Force (EITF) Issue
No. 01-14, Income Statement Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred, which requires companies to report
reimbursements of "out-of-pocket" expenses as revenues and the corresponding
expenses incurred as costs of revenues within the income statement. We report
our out-of-pocket expenses reimbursed by customers as revenue and the
corresponding expenses incurred as costs of revenues within the statement of
operations. As a result, this EITF did not have a material effect on our
consolidated financial statements.

18

Investments in and Notes with Other Companies

Investments in other equity securities and related notes with other
companies in the software industry are classified as long-term as we anticipate
holding them for more than one year. We hold less than 20% interest in, and do
not directly or indirectly exert significant influence over, any of the
respective investees. A portion of these investments are publicly traded and are
deemed by management to be available for sale. We use the specific
identification method to determine cost and fair value for computing gains and
losses. Accordingly, these investments are reported at fair value with net
unrealized gains or losses reported within shareholders' equity as accumulated
other comprehensive income or loss. No sales of available for sale investments
have occurred through March 31, 2003. During fiscal 2001, 2002 and 2003, we
determined that permanent declines in the value of these publicly traded
investments had occurred. As a result, we recorded write-downs of $0.4 million,
$0.1 million, and $1.1 million during the years ended March 31, 2001, 2002 and
2003, respectively. Investments in other companies also include investments in
several non-public, start-up technology companies for which we use the cost
method of accounting. For the years ended March 31, 2002 and 2003, we determined
that a permanent decline in value of certain investments had occurred and
recorded a $5.6 million and $0.7 million write-down on the investments in and
advances to these entities. We determined the permanent declines in value of
these public and non-public companies using quarterly procedures such as
reviewing their operating results and financial position, discussions with
company management and review of the overall business climate.

Accounts Receivable

Our accounts receivable balances are due from companies across a broad
range of industries -- Government, Finance, Manufacturing, Consumer, Aerospace
and Transportation, Health Care/Insurance, and High Tech/Telecom. Credit is
extended based on evaluation of a customer's financial condition and, generally,
collateral is not required. Accounts receivable from sales of services are
typically due from customers within 30 days and accounts receivable from sales
of licenses are due over terms ranging from 30 days to nine months. Accounts
receivable balances are stated at amounts due from customer net of an allowance
for doubtful accounts. Accounts outstanding longer than the contractual payments
terms are considered past due. We determined our allowance by considering a
number of factors, including the length of time trade receivables are past due,
our previous loss history, the customer's current ability to pay its obligation
to us, and the condition of the general economy and the industry as a whole. We
write-off accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for
doubtful accounts.

No customer accounted for 10% or more of our revenues in the years ended
March 31, 2001, 2002, and 2003.

Goodwill and Other Acquired Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of
net assets acquired. Prior to April 1, 2002, goodwill was amortized on a
straight-line basis over three years. Effective April 1, 2002, we adopted
Statement of Financial Accounting Standards (SFAS) 142, Goodwill and Other
Intangible Assets, which provides that goodwill, as well as identifiable
intangible assets with indefinite lives, should not be amortized but reviewed
for impairment annually. Accordingly, we ceased amortization of goodwill as of
April 1, 2002.

At March 31, 2002, other acquired intangible assets represented core
technology, customer base, workforce, capitalized software, trademarks, and
other intangible assets acquired through business acquisitions, and were
amortized on a straight-line basis over three to four years. Effective April 1,
2002, we adopted SFAS 141, Business Combinations, which requires that all
business combinations be accounted for utilizing the purchase method of
accounting and specifies the criteria to use in determining whether intangible
assets identified in purchase accounting must be recorded separately from
goodwill. We determined that our acquired workforce did not meet the
separability criteria of SFAS 141, and therefore the net unamortized balance at
March 31, 2002 was reclassified to goodwill effective April 1, 2002, and
amortization of the balance

19

ceased. The remaining other acquired intangible assets continue to be amortized
on a straight-line basis over their remaining, definite useful lives.

The carrying value of goodwill and other intangible assets is tested for
impairment on an annual basis or when factors indicating impairment are present.
We completed our transitional goodwill impairment test on April 1, 2002 and
determined that no impairment existed at that time. We have elected to complete
the annual impairment test of goodwill on January 1 of each year. We engaged an
independent outside professional services firm to assist us in our impairment
testing of goodwill. Based on this assistance, we completed our annual goodwill
impairment test on January 1, 2003 and determined that there was no impairment
of goodwill at that time. Additionally, no circumstances occurred during the
fourth quarter of the year ended March 31, 2003 which would have created an
impairment loss at March 31, 2003.

Impairment of Long-Lived Assets

We evaluate the recoverability of its long-lived assets in accordance with
SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS
144 requires recognition of impairment of long-lived assets in the event that
events or circumstances indicate an impairment may have occurred and when the
net book value of such assets exceeds the future undiscounted cash flows
attributed to such assets. We assess the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. No impairment of long-lived assets has occurred through the
year ended March 31, 2003.

New Accounting Pronouncements

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, which requires the assets, liabilities and results of operations of
variable interest entities (VIE) be consolidated into the financial statements
of the company that has controlling financial interest. FIN 46 is not
anticipated to have a material effect on our consolidated financial statements.

Accounting for Income Taxes

Deferred tax liabilities and deferred tax assets reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. The valuation allowance has been established due to the uncertainty of
future taxable income, which is necessary to realize the benefits of the
deferred tax assets. The Company had net operating loss (NOL) carryforwards of
approximately $84,300 at March 31, 2003, which begin to expire in 2011. These
NOL's are subject to annual utilization limitations due to prior ownership
changes.

Realization of the NOL carryforwards and other deferred tax temporary
differences are contingent on future taxable earnings. The deferred tax asset
was reviewed for expected utilization using a "more likely than not" approach as
required by SFAS No. 109, Accounting for Income Taxes, by assessing the
available positive and negative evidence surrounding its recoverability.
Accordingly, in fiscal 2003 we increased the valuation allowance to fully offset
the deferred tax asset. The increase in the valuation allowance has been
recognized as a reduction in paid in capital to the extent that a tax benefit
from employee stock option exercises was previously recognized as additional
paid in capital.

We will continue to assess and evaluate strategies that will enable the
deferred tax asset, or portion there of, to be utilized, and will reduce the
valuation allowance appropriately at such time when it is determined that the
"more likely than not" approach is satisfied.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. In general, these

20

estimates and assumptions are based on historical experience of our management;
but may include consideration of industry trends or information from other
outside sources. Actual results could differ from those estimates.

RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE
MONTHS ENDED MARCH 31, 2002

REVENUES

Total revenues increased by $2.8 million, or 20%, to $16.8 million for the
three months ended March 31, 2003 from $14.0 million for the three months ended
March 31, 2002. The increase in total revenues was primarily attributable to an
increase in Content Components revenues in the United States and an increase in
post-contract customer support due to a larger installed base of products.

Product Licenses. Revenues for product licenses increased by $1.7 million,
or 20%, to $10.0 million for the three months ended March 31, 2003 from $8.3
million for the three months ended March 31, 2002. The increase in revenues was
primarily attributable to an increase in Content Components software revenues in
the United States.

Services. Revenues for services, consisting of consulting services,
training and post-contract customer support, increased by $1.1 million, or 20%,
to $6.8 million for the three months ended March 31, 2003 from $5.7 million for
the three months ended March 31, 2002. Expressed as a percentage of total
service revenue, consulting services and training was approximately 38% and
post-contract customer support was 62% in the March 31, 2003 quarter, and 37%
and 63%, respectively in the March 31, 2002 quarter. The increase in revenues
for services was primarily attributable to increases in consulting services and
post-contract customer support due to a larger installed base of products.

COST OF REVENUES AND GROSS PROFIT

Total cost of revenues increased by $0.1 million, or 1.5%, to $5.2 million
for the three months ended March 31, 2003 from $5.1 million for the three months
ended March 31, 2002. Total cost of revenues as a percentage of total revenues
was 31% for the three months ended March 31, 2003 compared to 37% for the three
months ended March 31, 2002. Gross profit increased by $2.7 million, or 31%, to
$11.6 million for the three months ended March 31, 2003 from $8.9 million for
the three months ended March 31, 2002. Total gross profit as a percentage of
total revenues was 69% for the three months ended March 31, 2003 compared to 63%
for the three months ended March 31, 2002. The increase in gross profit dollars
and percentage was primarily due to increased revenues for product licenses and
post-contract customer support.

Product Licenses. Cost of revenues for product licenses decreased by $0.1
million, or 4%, to $1.4 million for the three months ended March 31, 2003 from
$1.5 million for the three months ended March 31, 2002. Gross profit as a
percentage of revenues for product licenses was 85% for the three months ended
March 31, 2003 compared to 82% for the three months ended March 31, 2002. The
decrease in gross profit percentage was due primarily to increased sales of
Content Components software in the quarter ended March 31, 2003 versus the
quarter ended March 31, 2002. Our Content Components software typically has a
lower cost of revenues than our Universal Content Management software.

Amortization of capitalized software from acquisitions. Cost of revenues
related to amortization of capitalized software from acquisitions increased $0.2
million for the three months ended March 31, 2003 to $0.5 million from $0.3
million for the three months ended March 31, 2002. The increase in cost of
revenues for amortization of capitalized software from acquisitions was
primarily attributable to the amortization of capitalized software obtained in
the acquisition of the assets of Kinecta Corporation in April 2002.

Services. Cost of revenues, consisting of primarily personnel for
consulting services, training and post-contract customer support, decreased by
$0.1 million, or 3%, to $3.3 million for the three months ended March 31, 2003
from $3.4 million for the three months ended March 31, 2002. Expressed as a
percentage of total services costs, consulting services and training were
approximately 72% and post-contract customer

21

support 28% in the March 31, 2003 quarter, respectively, and 72% and 28% in the
March 31, 2002 quarter, respectively. Gross profit as a percentage of revenues
for services was 52% for the three months ended March 31, 2003 and 41% for the
three months ended March 31, 2002. The increase in the gross profit dollars and
as a percentage of revenues for services was primarily due to the increase in
revenues from post-contract customer support from a larger installed base of
products.

OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses decreased by $2.2
million, or 20%, to $8.8 million for the three months ended March 31, 2003 from
$11.0 million for the three months ended March 31, 2002. Sales and marketing
expenses as a percentage of total revenues were 52% for the three months ended
March 31, 2003 compared to 78% for the three months ended March 31, 2002. The
decrease in sales and marketing expense was primarily due to decreased staffing
and related costs as a result of the restructurings undertaken during the year
and decreased marketing expenses for name and brand awareness, advertising, and
trade shows.

General and Administrative. General and administrative expenses decreased
by $1.0 million, or 23% to $3.4 million for the three months ended March 31,
2003 from $4.4 million for the three months ended March 31, 2002. General and
administrative expenses as a percentage of total revenues were 20% for the three
months ended March 31, 2003 compared to 31% for the three months ended March 31,
2002. General and administrative expenses decreased due primarily to decreased
staffing and related costs as a result of the restructurings undertaken during
fiscal year 2003 and a decrease in the provision for doubtful accounts.

Research and Development. Research and development expenses decreased by
$1.4 million, or 31%, to $3.2 million for the three months ended March 31, 2003
from $4.6 million for the three months ended March 31, 2002. Research and
development expenses as a percentage of total revenues were 19% for the three
months ended March 31, 2003 compared to 33% for the three months ended March 31,
2002. The decrease in research and development expenses was primarily due to
decreased staffing related to the restructurings undertaken by the company.

Acquisition and Related Costs. For the three months ended March 31, 2003,
acquisition and related costs represent charges associated with the payment of
employee costs which resulted from the acquisition of certain assets of Active
IQ Corporation in March 2003. For the three months ended March 31, 2002
acquisition and related costs primarily represent costs associated with
developing the Japanese market through a potential acquisition.

Amortization of Intangibles. A portion of the purchase price of CCD was
allocated to excess cost over fair value of net assets acquired, core
technology, customer base, trademarks and other intangibles, and is being
amortized over the assets' estimated useful lives of three years. A portion of
the purchase price of RESoft was allocated to certain intangible assets, such as
trademarks, and is also being amortized over their useful lives of three years.
Intangible amortization and other expense was $1.7 million for the three month
period ended March 31, 2003 and $3.4 million for the three months ended March
31, 2002. The decrease in amortization expense was primarily due to the adoption
of SFAS 142 in April 2002.

Restructuring Charges. In the quarter ended March 31, 2003, in connection
with management's plan to reduce costs and improve operating efficiencies, we
recorded a restructuring charge of approximately $0.4 million. The restructuring
charge was comprised primarily of severance pay and benefits related to the
involuntary termination of several employees.

OTHER INCOME (EXPENSE)

Interest income was $0.3 million for the three months ended March 31, 2003
compared to $0.8 million for the three months ended March 31, 2002. Interest
income is primarily related to marketable securities purchased with the proceeds
of our public stock offerings completed in June 1999 and March 2000. The
decrease in net interest income was primarily due to decreases in the interest
rates earned by invested funds,

22

which have declined over 50%, and a reduction in the amount of invested funds
due to use of cash in acquisitions and in operations.

RESULTS OF OPERATIONS -- FISCAL YEAR ENDED MARCH 31, 2003 COMPARED TO FISCAL
YEAR ENDED MARCH 31, 2002

REVENUES

Total revenues decreased by $22.9 million, or 26%, to $65.4 million for the
year ended March 31, 2003 from $88.3 million for the year ended March 31, 2002.
The decrease in revenues was primarily attributable to a shortfall in our
product license revenue as a result of the worldwide economic slowdown, which
has resulted in a reduction in overall customer spending in information
technology initiatives.

Product Licenses. Revenues for product licenses decreased by $26.5
million, or 40%, to $40.4 million for the year ended March 31, 2003 from $66.9
million for the year ended March 31, 2002. The decrease in revenues was
primarily attributable to the worldwide economic slowdown, which has resulted in
a reduction in overall customer spending in information technology initiatives.

Services. Revenues for services, consisting of consulting services,
training and post-contract customer support, increased by $3.7 million, or 17%,
to $25.1 million for the year ended March 31, 2003 from $21.4 million for the
year ended March 31, 2002. Expressed as a percentage of total service revenue,
consulting services and training was approximately 31% and post-contract
customer support was 69% in the year ended March 31, 2003, and 45% and 55%,
respectively in the year ended March 31, 2002. The increase in revenues for
services was primarily attributable to post-contract customer support due to a
larger installed base of products and partially offset by a decrease in
consulting services due to a decrease in product license revenue.

COST OF REVENUES AND GROSS PROFIT

Total cost of revenues increased by $1.1 million, or 6%, to $20.5 million
for the year ended March 31, 2003 from $19.4 million for the year ended March
31, 2002. Total cost of revenues as a percentage of total revenues was 31% for
the year ended March 31, 2003 compared to 22% for the year ended March 31, 2002.
Gross profit decreased by $24.1 million, or 35%, to $44.9 million for the year
ended March 31, 2003 from $69.0 million for the year ended March 31, 2002. Total
gross profit as a percentage of total revenues was 69% for the year ended March
31, 2003 compared to 78% for the year ended March 31, 2002. The decrease in
gross profit dollars and percentage was primarily attributable to the decrease
in product license revenues described above.

Product Licenses. Cost of revenues for product licenses increased by $1.5
million or 29%, to $6.5 million for the year ended March 31, 2003 from $5.0
million for the year ended March 31, 2002. Gross profit as a percentage of
revenues for product licenses was 84% for the years ended March 31, 2003 and 93%
for the year ended March 31, 2002. The increase in cost of revenues and
resulting decrease in gross profit dollars and percentage for product licenses
was primarily attributable to decreased revenues and the increased amortization
of prepaid royalties and the increased amortization of capitalized software
developed for us by a third party or purchased from a third party. The fixed
costs associated with the amortization of these prepaid royalties and
capitalized software was approximately $3.1 million for the year ended March 31,
2003 versus approximately $2.0 million for the year ended March 31, 2002.

Amortization of Capitalized Software from Acquisitions. Cost of revenues
related to amortization of capitalized software from acquisitions increased $0.9
million for the year ended March 31, 2003 to $1.9 million from $1.0 million for
the year ended March 31, 2002. The increase in cost of revenues for amortization
of capitalized software from acquisitions was primarily attributable to the
amortization of capitalized software obtained in the acquisition of the assets
of Kinecta Corporation in April 2002.

Services. Cost of revenues, consisting of primarily personnel for
consulting services, training and post-contract customer support, decreased by
$1.3 million, or 9%, to $12.1 million for the year ended March 31, 2003 from
$13.4 million for the year ended March 31, 2002. Expressed as a percentage of
total service cost,
23

consulting services and training was approximately 69% and post-contract
customer support 31% in the year ended March 31, 2003 and 75% and 25% in the
year ended March 31, 2002, respectively. The gross profit as a percentage of
revenues for services was 52% for the year ended March 31, 2003 compared to 38%
for the year ended March 31, 2002. The increase in the gross profit dollars and
as a percentage of revenues for services was primarily due to decreased employee
headcount and other staffing costs for consulting services personnel associated
with restructurings.

OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses decreased by $8.4
million, or 18%, to $38.3 million for the year ended March 31, 2003 from $46.7
million for the year ended March 31, 2002. Sales and marketing expenses as a
percentage of total revenues were 59% for the year ended March 31, 2003 compared
to 53% for the year ended March 31, 2002. The decrease in sales and marketing
expense was primarily due to reduced commission expense as a result of decreased
sales, decreased travel expense, and decreased staffing related to the
restructurings of our company during the year ended March 31, 2003. Sales and
marketing expenses increased as a percentage of revenues due primarily to the
decrease in product license revenues as described above.

General and Administrative. General and administrative expenses decreased
by $0.6 million, or 5%, to $11.3 million for the year ended March 31, 2003 from
$11.9 million for the year ended March 31, 2002. General and administrative
expenses as a percentage of total revenues were 17% for the year ended March 31,
2003 and 13% for the year ended March 31, 2002. General and administrative
expense dollars decreased primarily due to decreased personnel expenses
associated with fewer personnel as a result of the restructurings offset by an
increase in the allowance for doubtful accounts.

Research and Development. Research and development expenses decreased by
$1.8 million, or 10%, to $15.8 million for the year ended March 31, 2003 from
$17.6 million for the year ended March 31, 2002. Research and development
expenses as a percentage of total revenues were 24% for the year ended March 31,
2003 and 20% for the year ended March 31, 2002. The decrease in research and
development expense dollars was primarily due to decreased staffing and related
costs as a result of the restructurings and a decrease in purchased services.

Acquisition and Related Costs. Acquisition and related costs were $1.1
million in the year ended March 31, 2003 and $0.2 million in the year ended
March 31, 2002. For the year ended March 31, 2003, these costs were primarily
related to a potential transaction with a Japanese company that would have given
us new wireless technologies and an avenue to generate revenues for our
Universal Content Management software. After proceeding with the due-diligence,
it was determined that the target company was not situated well enough for us to
accomplish previously established goals. Approximately $0.7 million of expenses
are associated with this project and represent funds that we advanced to the
company for a trade show, product integration testing, test marketing costs of
the products and other. The remaining $0.4 million of acquisition costs
represent final development milestone and bonus payments related to the
acquisition of Kinecta Corporation in April 2002 and the acquisition of selected
assets of Active IQ Corporation.

Amortization of Acquired Intangible Assets and Other. Amortization of
intangible assets acquired related to our acquisition of CCD in July 2000, our
acquisition of RESoft in July 2001, and our acquisition of Kinecta in April
2002. Amortization of goodwill and acquired workforce ceased as of April 1, 2002
in connection with the adoption of SFAS 142. As a result, amortization expense
decreased $6.3 million for the year ended March 31, 2003 as compared to fiscal
year 2002.

OTHER INCOME (EXPENSE)

Interest income was $2.0 million for the year ended March 31, 2003 compared
to $3.8 million for the year ended March 31, 2002. Interest income for both
years was primarily related to short-term investments purchased with the
proceeds of our public stock offerings completed in June 1999 and March 2000.
Investment impairment expense was $1.7 million for the year ended March 31, 2003
compared to $5.7 million for the year ended March 31, 2002. Investment
impairment expense for both years related to the permanent
24

decline in the values of certain investments we made. The decrease in net
interest income was primarily due to decreases in the interest rates earned by
invested funds resulting from decreases in market interest rates, which have
declined over 50%.

RESULTS OF OPERATIONS -- FISCAL YEAR ENDED MARCH 31, 2002 COMPARED TO FISCAL
YEAR ENDED MARCH 31, 2001

REVENUES

Total revenues increased by $21.6 million, or 32%, to $88.3 million for the
year ended March 31, 2002 from $66.7 million for the year ended March 31, 2001.
The increase in revenues was primarily attributable to the growth in of our
customer base and the increase in customers as a result of our acquisition of
CCD, increased sales to existing customers and increased sales of our Universal
Content Management software.

Product Licenses. Revenues for product licenses increased by $13.0
million, or 24%, to $66.9 million for the year ended March 31, 2002 from $53.9
million for the year ended March 31, 2001. The increase in revenues was
primarily attributable to growth in our customer base and the increase in
customers as a result of our acquisition of CCD, increased sales to existing
customers and increased sales of our Universal Content Management software.

Services. Revenues for services, consisting of consulting services,
training and post-contract customer support, increased by $8.6 million, or 67%,
to $21.4 million for the year ended March 31, 2002 from $12.9 million for the
year ended March 31, 2001. Expressed as a percentage of total service revenue,
consulting services and training was approximately 45% and post-contract
customer support 55% in the year ended March 31, 2002, respectively, and 49% and
51% in the year ended March 31, 2001. The increase in revenues for services was
primarily attributable to a larger installed base of products.

COST OF REVENUES AND GROSS PROFIT

Total cost of revenues increased by $7.6 million, or 64%, to $19.4 million
for the year ended March 31, 2002 from $11.8 million for the year ended March
31, 2001. Total cost of revenues as a percentage of total revenues was 22% for
the year ended March 31, 2002 compared to 18% for the year ended March 31, 2001.
Gross profit increased by $14.1 million, or 26%, to $69.0 million for the year
ended March 31, 2002 from $54.9 million for the year ended March 31, 2001. Total
gross profit as a percentage of total revenues was 78% for the year ended March
31, 2002 compared to 82% for the year ended March 31, 2001. The increase in
gross profit dollars was primarily attributable to the increase in product
license revenues while the decrease in gross profit percentage was primarily due
to lower gross profits on services.

Product Licenses. Cost of revenues for product licenses increased by $1.1
million or 28%, to $5.0 million for the year ended March 31, 2002 from $3.9
million for the year ended March 31, 2001. Gross profit as a percentage of
revenues for product licenses was 93% for the years ended March 31, 2002 and
2001.

Amortization of Capitalized Software from Acquisitions. Cost of revenues
related to amortization of capitalized software from acquisitions increased $0.3
million for the year ended March 31, 2002 to $1.0 million from $0.7 million for
the year ended March 31, 2001. The increase in cost of revenues for amortization
of capitalized software from acquisitions was primarily attributable to the
amortization of capitalized software obtained in the acquisition of the assets
of RESoft in July 2001.

Services. Cost of revenues, consisting of primarily personnel for
consulting services, training and post-contract customer support, increased by
$6.2 million, or 86%, to $13.4 million for the year ended March 31, 2002 from
$7.2 million for the year ended March 31, 2001. Expressed as a percentage of
total service cost, consulting services and training was approximately 75% and
post-contract customer support was 25% in the year ended March 31, 2002 and 73%
and 27%, respectively in the year ended March 31, 2001. The gross profit as a
percentage of revenues for services was 38% for the year ended March 31, 2002
compared to 44% for the year ended March 31, 2001. The decrease in the gross
profit as a percentage of revenues for services was primarily due to increased
employee headcount and other staffing costs for consulting services personnel
associated with increased training for our partners for which we receive minimal
revenue, and an increase in
25

the amount of services work performed by our partners, which typically would
have been performed by us and which led to under-utilization of certain of our
employees in the quarters ended September 30, 2001 and December 31, 2001.

OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses increased by $17.2
million, or 58%, to $46.7 million for the year ended March 31, 2002 from $29.5
million for the year ended March 31, 2001. Sales and marketing expenses as a
percentage of total revenues were 53% for the year ended March 31, 2002 compared
to 44% for the year ended March 31, 2001. Sales and marketing expenses increased
as a percentage of total revenues primarily due to the decrease in fourth
quarter fiscal year 2002 revenues.

General and Administrative. General and administrative expenses increased
by $2.9 million, or 32%, to $11.9 million for the year ended March 31, 2002 from
$9.0 million for the year ended March 31, 2001. General and administrative
expenses as a percentage of total revenues were 13% for the years ended March
31, 2002 and 2001. General and administrative expense dollars increased
primarily due to increased personnel expenses of approximately $2.4 million,
increased professional services of approximately $0.3 million and an increase in
the allowance for doubtful accounts.

Research and Development. Research and development expenses increased by
$7.8 million, or 80% to $17.6 million for the year ended March 31, 2002 from
$9.8 million for the year ended March 31, 2001. Research and development
expenses as a percentage of total revenues were 20% for the year ended March 31,
2002 and 15% for the year ended March 31, 2001. The increase in research and
development expenses was primarily due to increased staffing and related costs
of $6.3 million, and purchased services of $0.7 million.

Acquisition and Related Costs. Acquisition costs of approximately $0.2
million in the year ended March 31, 2002 consisted of uncapitalized costs
related to our acquisition of RESoft in July 2001 and the costs associated with
developing the Japanese market through a potential acquisition. The acquisition
costs of approximately $0.8 million in the fiscal year ended March 31, 2001
consisted primarily of uncapitalized costs related to our acquisition of CCD in
July 2000, accounted for as a purchase.

Amortization of Acquired Intangible Assets and Other. Amortization of
intangible assets acquired related to our acquisition of CCD in July 2000, and
our acquisition of RESoft in July 2001, accounted for as purchases. Amortization
of goodwill and acquired workforce ceased as of April 1, 2002 in connection with
the adoption of SFAS 142.

OTHER INCOME (EXPENSE)

Interest income was $3.8 million for the year ended March 31, 2002 compared
to $7.0 million for the year ended March 31, 2001. Interest income for both
years was primarily related to short-term investments purchased with the
proceeds of our public stock offerings completed in June 1999 and March 2000.
The decrease in net interest income was primarily due to decreases in the
interest rates earned by invested funds resulting from decreases in market
interest rates, which have declined over 50%. Investment impairment expense of
$5.7 million for the year ended March 31, 2002 related to the permanent decline
in the values of certain investments that we made.

26

QUARTERLY RESULTS

The following tables present unaudited consolidated statements of
operations data both in absolute dollars and as a percentage of total revenues
for each of our last eight quarters. This data has been derived from unaudited
consolidated financial statements that have been prepared on the same basis as
the annual audited consolidated financial statements and, in our opinion,
include all normal recurring adjustments necessary for a fair presentation of
such information. These unaudited quarterly results should be read in
conjunction with the Consolidated Financial Statements and related Notes
appearing elsewhere in this Annual Report on Form 10-K. The consolidated results
of operations for any quarter are not necessarily indicative of the results for
any future period.

As a result of our limited operating history and the significant changes
that are occurring in the Web content management software sector in which we
compete, it is difficult for us to forecast our revenues or earnings accurately.
It is possible that in some future periods our results of operations may not
meet or exceed the expectations of current and future public market analysts and
investors. For instance, if revenues or earnings per share do not meet
projections, we expect our business, operating results and financial condition
to be materially adversely affected and the price of our common stock to
decline. We expect our revenues and operating results may vary significantly
from quarter to quarter. Factors that have caused our results to fluctuate in
the past, and will likely cause fluctuations in the future, include:

- demand for our products and services;

- the timing of new product introductions and sales of our products and
services;

- unexpected delays in introducing new products and services;

- increased expenses, whether related to sales and marketing, research and
development or administration;

- changes in the rapidly evolving market for Web content management
solutions;

- the mix of revenues from product licenses and services, as well as the
mix of products licensed;

- the mix of services provided and whether services are provided by our
staff or third-party contractors;

- the mix of domestic and international sales;
28

- costs related to possible acquisitions of technology or businesses;

- general economic conditions; and

- public announcements by our competitors.

In addition, our products are typically shipped when the orders are
received, so our license backlog at the beginning of any quarter in the past has
represented only a small portion of expected license revenues for that quarter.
Further, we recognize a substantial percentage of product license revenues in
the last month of the quarter, frequently in the last week or even the last days
of the quarter. As a result, our sales pipeline at the beginning of a quarter
may not give us reasonable assurance about the sales that will be closed in that
quarter, and the delay or cancellation of any large orders could result in a
significant shortfall from anticipated revenues. Since our expenses are
relatively fixed in the near term, any shortfall from anticipated revenues could
result in significant variations in operating results from quarter to quarter.

As a result of these and other factors, we believe that period-to-period
comparisons of our results of operations may not be meaningful and should not be
relied upon as indicators of our future performance.

PRO FORMA NET INCOME (LOSS) PER COMMON SHARE

In addition to reporting financial results in accordance with generally
accepted accounting principles, or GAAP, we include non-GAAP supplemental pro
forma financial information in our earnings press releases. Our non-GAAP
supplemental pro forma net income (loss) and net income (loss) per share results
generally exclude from the comparable GAAP amounts the effects of acquisition
related charges, such as amortization of capitalized software from acquisitions
and acquisition and related costs, and certain other charges such as
amortization of intangible assets and other, investment impairment and
restructuring charges. Our management believes the non-GAAP supplemental pro
forma financial information is useful to investors because it excludes certain
non-cash expenses and facilitates meaningful comparison of our performance
between periods. In accordance with SFAS 142, we discontinued the amortization
of goodwill effective April 1, 2002. The exclusion of amortization expense from
the non-GAAP supplemental pro forma financial information before and after April
1, 2002 enhances the comparability of our results between those periods.
Investment impairment charges and restructuring charges occur on an irregular
basis, are difficult to predict and often reflect in a single reporting period
long-term strategic decisions or external factors. The exclusion of such charges
from the non-GAAP supplemental pro forma financial information enhances
comparisons of our tactical performance between periods. Management uses the
non-GAAP supplemental pro forma financial information to evaluate our financial
results, develop budgets and manage expenditures. These non-GAAP measures may
differ from the non-GAAP measures used by other companies.

The pro forma supplemental financial information is presented for
informational purposes only and is not a substitute for the historical financial
information presented in accordance with accounting principles generally
accepted in the United States of America. Our pro forma basic net income (loss)
per share is computed by dividing pro forma net income by the weighted average
number of outstanding common shares and our pro forma diluted net income (loss)
per share is computed by dividing pro forma net income (loss) by the weighted
average number of outstanding common shares and common share equivalents
relating to stock options and warrants, when dilutive. Common stock equivalent
shares consist of stock options and warrants (using the treasury stock method).
We urge readers to review and consider carefully the GAAP financial information
contained within our SEC filings.

29

NET OPERATING LOSS CARRYFORWARDS

As of March 31, 2003, we had net operating loss carryforwards of
approximately $84.3 million. The net operating loss carryforwards will expire at
various dates beginning in 2011, if not utilized. The Tax Reform Act of 1986
imposes substantial restrictions on the utilization of net operating losses and
tax credits in the event of an "ownership change" of a corporation. Our ability
to utilize net operating loss carryforwards on an annual basis will be limited
as a result of "ownership changes" in connection with the sale of equity
securities. We have provided a valuation allowance against the entire amount of
the deferred tax asset as of March 31, 2003 because of uncertainty regarding its
full realization. Our accounting for deferred taxes involves the evaluation of a
number of factors concerning the realizability of our deferred tax assets. In
concluding that a valuation allowance was required, management considered such
factors as our history of operating losses, potential future losses and the
nature of our deferred tax assets. See Note 7 to the Consolidated Financial
Statements included in Item 16 (a)1.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations and satisfied our capital expenditure
requirements primarily through revolving working capital and term loans from
banking institutions, private placements and public offerings of securities and
proceeds from the sales of assets related to prior lines of business. Net cash
used in operating activities was $8.0 million for the year ended March 31, 2003,
compared to net cash used in operating activities of $2.9 million for the year
ended March 31, 2002. The increase in cash used in operations is due primarily
to the net loss generated by operations.

To date, we have invested our capital expenditures primarily in property
and equipment, consisting largely of computer hardware and software. Capital
expenditures for the year ended March 31, 2003 and 2002 were $1.0 and $3.4
million, respectively. We have also entered into capital and operating leases
for facilities and equipment. We expect that our capital expenditures will
increase as our employee base grows. At March 31, 2003, we did not have any
material commitments for capital expenditures.

30

As of March 31, 2003, we had $81.2 million in cash and marketable
securities and $69.8 million in working capital. Net cash used in financing
activities was $2.7 million for the year ended March 31, 2003 while net cash
provided by financing activities was $1.1 million for the year ended March 31,
2002. In March 2000, we completed a public offering of our common stock that
raised approximately $100.1 million in proceeds for us, net of underwriting
discounts and offering costs of approximately $5.7 million. In April 2000, the
underwriters exercised their over-allotment option, raising additional net
proceeds of approximately $22.7 million.

We currently believe that our cash and cash equivalents on hand will be
sufficient to meet our working capital requirements for the foreseeable future,
particularly through March 31, 2004. On a longer term basis, we may require
additional funds to support our working capital requirements or for other
purposes and may seek to raise such additional funds through public or private
equity financings or from other sources. We cannot be certain that additional
financing will be available on terms favorable to us, or on any terms, or that
any additional financing will not be dilutive.

We continue to evaluate potential strategic acquisitions that could utilize
equity and/or cash resources. Such opportunities could develop quickly due to
market and competitive factors.

We lease all of our facilities under operating leases that have various
expiration dates. Our contractual obligations as of March 31, 2003 consisted of
a total of $13.4 million, of which, $3.9 million is payable in the next year,
$2.7 million in one to two years, $2.0 million in three to four years, and $4.8
million after four years. The amounts reflected for operating leases represent
primarily noncancelable lease payments on our office facility locations.

RELATED PARTY TRANSACTIONS

In December 2001 we entered into a note receivable of $3.5 million with a
distributor. Through March 2002, the distributor had paid the minimum payments
required under the note receivable with its own cash, and at the end of March
2002, it paid off the remaining note receivable with short-term bridge
financing. The distributor completely repaid this short-term bridge financing in
April 2002 through a traditional banking relationship. The short-term bridge
financing was provided at normal market rates by Beartooth Capital, a venture
financing organization controlled and funded by Robert F. Olson, a shareholder
and our Chairman, President and Chief Executive Officer. There was no
relationship prior to the bridge financing, and there is no existing
relationship between Beartooth Capital and the distributor. Furthermore, we
provided no compensation or guarantees to Beartooth Capital or Robert F. Olson
for the short-term bridge financing, nor were we otherwise involved in this
transaction.

During the year ended March 31, 2002, we held investments in five
non-public companies in which we recognized license revenue of approximately
$2.0 million from companies in which we had an equity investment, including
approximately $1.4 million from Active IQ in December 2001. At March 31, 2003,
we had no accounts receivable balance associated from these transactions. No
license revenue was generated in our fiscal year ended March 31, 2003 from any
company in which we held an investment. License revenue recognized for the year
ended March 31, 2001 from companies in which we had an equity investment was
approximately $2,400. We also acquired intellectual property from Active IQ in
April 2001 for approximately $706, which was capitalized and is being amortized
over a three-year period.

At March 31, 2003 we held remaining investments in two non-public start-up
technology companies, owning approximately 8% and 11% of these companies, and in
a publicly traded technology company listed on Nasdaq, Active IQ, of which we
owned 5.3%, excluding warrants. The value of these investments at March 31, 2003
is approximately $1.1 million. We wrote down to zero our investment in Active IQ
during the March 2003 quarter. Certain officers and a director also held
investment interests in Active IQ through February 2002 approximating 2%,
excluding warrants, at which time those investments were sold.

In December 2001 and March 2003, we entered into software license
agreements with H.B. Fuller Company for approximately $0.3 million and $0.4
million, respectively. H.B. Fuller's Chief Financial Officer is

31

a member of our Board of Directors. The terms and conditions, including fees,
with respect to the H.B. Fuller transactions were substantially similar to those
with unaffiliated third parties negotiated at arms length.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the FASB issued FASB Interpretation Number (FIN) 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 addresses the disclosure
requirements of a guarantor in its interim and annual financial statements about
its obligations under certain guarantees that it has issued. FIN 45 also
requires a guarantor to recognize, at the inception of guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
disclosure requirements of FIN 45 were effective for our quarter ended December
31, 2002. The liability recognition requirements are applicable to all
guarantees issued or modified after December 31, 2002. Other than the additional
disclosure requirements related to warranties and our indemnification
obligations, this pronouncement is not anticipated to have a material effect on
our consolidated financial position or results of operations.

In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure: an amendment of FASB Statement 123
(SFAS 123). This statement provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. Additionally, the statement amends the disclosure
requirements of SFAS 123, Accounting for Stock-Based Compensation, to require
prominent disclosure in both annual and interim financial statements about the
method of accounting for stock based employee compensation and the effect of the
method used on reported results. We utilize the intrinsic value method for
stock-based employee compensation, and they elected not to adopt the
transitional provision to the fair value method under SFAS 148; however, we did
adopt the expanded annual disclosure provisions of SFAS 148 effective March 31,
2003. We will adopt the interim disclosure provisions of SFAS 148 during the
first quarter of fiscal year 2004.

In November 2002, the FASB reached a consensus on EITF Issue No. 00-21,
Accounting for Revenue Arrangements with Multiple Deliverables. This EITF sets
out criteria for whether revenue can be recognized separately from other
deliverables in a multiple deliverable arrangement. The criteria considers
whether the delivered item has stand-alone value to the customer, whether the
fair value of the delivered item can be reliably determined and the rights of
returns for the delivered item. We are required to adopt this EITF beginning
April 1, 2004. The adoption of this EITF is not anticipated to have a material
effect on our consolidated financial statements.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, which requires the assets, liabilities and results of operations of
variable interest entities (VIE) be consolidated into the financial statements
of the company that has controlling financial interest. FIN 46 is not
anticipated to have a material effect on our consolidated financial statements.

RISK FACTORS

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K for the fiscal year ended March 31, 2003 contains certain
forward-looking statements within the meaning of the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements are
based on the beliefs of our management as well as on assumptions made by, and
information currently available to, us at the time such statements were made.
When used in this Form 10-K, the words "anticipate", "believe", "estimate",
"expect", "intend" and similar expressions, as they relate us, are intended to
identify such forward-looking statements. Although we believe these statements
are reasonable, readers of this Form 10-K should be aware that actual results
could differ materially from those projected by such forward-looking statements
as a result of the risk factors listed below. Readers of this Form 10-K should
consider carefully the factors listed below, as well as the other information
and data contained in this Form 10-K. We caution the reader, however, that such
list of factors under the caption "Risk Factors" in our Form 10-K may not be
exhaustive and that those or other factors, many of which are outside of our
control, could have a
32

material adverse effect on us and our results of operations. All forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements set forth hereunder. 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.

FLUCTUATIONS IN OUR OPERATING RESULTS MAY MAKE IT DIFFICULT TO PREDICT OUR
FUTURE PERFORMANCE.

While our products and services are not seasonal, our revenues and
operating results are difficult to predict and may fluctuate significantly from
quarter to quarter. If our quarterly revenues or operating results fall below
the expectations of investors or securities analysts, the price of our common
stock could fall substantially. A large part of our sales typically occurs in
the last month of a quarter, frequently in the last week or even the last days
of the quarter. If these sales were delayed from one quarter to the next for any
reason, our operating results could fluctuate dramatically. In addition, our
sales cycles may vary, making the timing of sales difficult to predict.
Furthermore, our infrastructure costs are generally fixed. As a result, modest
fluctuations in revenues between quarters may cause large fluctuations in
operating results. These factors all tend to make the timing of revenues
unpredictable and may lead to high period-to-period fluctuations in operating
results.

Our quarterly revenues and operating results may fluctuate for several
additional reasons, many of which are outside of our control, including the
following:

- demand for our products and services;

- the timing of new product introductions and sales of our products and
services;

- unexpected delays in introducing new products and services;

- increased expenses, whether related to sales and marketing, research and
development or administration;

- changes in the rapidly evolving market for Web content management
solutions;

- the mix of revenues from product licenses and services, as well as the
mix of products licensed;

- the mix of services provided and whether services are provided by our
staff or third-party contractors;

- the mix of domestic and international sales;

- costs related to possible acquisitions of technology or businesses;

- general economic conditions; and

- public announcements by our competitors.

POTENTIAL ACQUISITIONS MAY BE DIFFICULT TO COMPLETE OR TO INTEGRATE AND MAY
DIVERT MANAGEMENT'S ATTENTION.

We may seek to acquire or invest in businesses, products or technologies
that are complementary to our business. If we identify an appropriate
acquisition opportunity, we may be unable to negotiate favorable terms for that
acquisition, successfully finance the acquisition or integrate the new business
or products into our existing business and operations. In addition, the
negotiation of potential acquisitions and the integration of acquired businesses
or products may divert management time and resources from our existing business
and operations. To finance acquisitions, we may use a substantial portion of our
available cash or we may issue additional securities, which would cause dilution
to our shareholders.

WE MAY NOT BE PROFITABLE IN THE FUTURE.

Our revenues may not grow in future periods and we may not achieve
quarterly pro forma profitability. If we do not regain our pro forma
profitability, the market price of our stock may fall. Our ability to regain our

33

pro forma profitable operations depends upon many factors beyond our direct
control. These factors include, but are not limited to:

- the demand for our products;

- our ability to quickly introduce new products;

- the level of product and price competition;

- our ability to control costs; and

- general economic conditions.

THE INTENSE COMPETITION IN OUR INDUSTRY MAY REDUCE OUR FUTURE SALES AND PROFITS.

The market for our products is highly competitive and is likely to become
more competitive. We may not be able to compete successfully in our chosen
marketplace, which may have a material adverse effect on our business, operating
results and financial condition. Additional competition may cause pricing
pressure, reduced sales and margins, or prevent our products from gaining and
sustaining market acceptance. Many of our current and potential competitors have
greater name recognition, access to larger customer bases, and substantially
more resources than we have. Competitors with greater resources than ours may be
able to respond more quickly than we can to new opportunities, changing
technology, product standards or customer requirements.

WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY PERSONNEL.

We are a small company and depend greatly on the knowledge and experience
of our senior management team and other key personnel. If we lose any of these
key personnel, our business, operating results and financial condition could be
materially adversely affected. Our success will depend in part on our ability to
attract and retain additional personnel with the highly specialized expertise
necessary to generate revenue, engineer, design and support our products and
services. Like other software companies, we face intense competition for
qualified personnel. We may not be able to attract or retain such personnel.

WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON SALES OF OUR UNIVERSAL CONTENT
MANAGEMENT SOFTWARE AND CONTENT COMPONENT SOFTWARE PRODUCTS FOR OUR REVENUES.

We currently derive all of our revenues from product licenses and services
associated with our system of content management and viewing software products.
The market for content management and viewing software products is new and
rapidly evolving. We cannot be certain that a viable market for our products
will continue or that it will be sustainable. If we do not increase employee
productivity and revenues related to our existing products or generate revenues
from new products and services, our business, operating results and financial
condition may be materially adversely affected. We will continue to depend on
revenues related to new and enhanced versions of our software products for the
foreseeable future. Our success will largely depend on our ability to increase
sales from existing products and generate sales from product enhancements and
new products. We cannot be certain that we will be successful in upgrading and
marketing our existing products or that we will be successful in developing and
marketing new products and services. The market for our products is highly
competitive and subject to rapid technological change. Technological advances
could make our products less attractive to customers and adversely affect our
business. In addition, complex software product development involves certain
inherent risks, including risks that errors may be found in a product
enhancement or new product after its release, even after extensive testing, and
the risk that discovered errors may not be corrected in a timely manner.

34

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGY.

If we are unable to protect our intellectual property, or incur significant
expense in doing so, our business, operating results and financial condition may
be materially adversely affected. Any steps we take to protect our intellectual
property may be inadequate, time consuming and expensive. We currently have no
patents and one pending patent application. Without significant patent or
copyright protection, we may be vulnerable to competitors who develop
functionally equivalent products. We may also be subject to claims that our
current products infringe on the intellectual property rights of others. Any
such claim may have a material adverse effect on our business, operating results
and financial condition.

We anticipate that software product developers will be increasingly subject
to infringement claims due to growth in the number of products and competitors
in our industry, and the overlap in functionality of products in different
industries. Any infringement claim, regardless of its merit, could be
time-consuming, expensive to defend, or require us to enter into royalty or
licensing agreements. Such royalty or licensing agreements may not be available
on commercially favorable terms, or at all. We are not currently involved in any
intellectual property litigation.

We rely on trade secret protection, confidentiality procedures and
contractual provisions to protect our proprietary information. Despite our
attempts to protect our confidential and proprietary information, others may
gain access to this information. Alternatively, other companies may
independently develop substantially equivalent information.

OUR PRODUCTS MAY NOT BE COMPATIBLE WITH COMMERCIAL WEB BROWSERS AND OPERATING
SYSTEMS.

Our products utilize interfaces that are compatible with commercial Web
browsers. In addition, our Stellent Content Management System is a server-based
system written in Java that functions in both Windows NT and UNIX environments.
We must continually modify our products to conform to commercial Web browsers
and operating systems. If our products were to become incompatible with
commercial Web browsers and operating systems, our business would be harmed. In
addition, uncertainty related to the timing and nature of product introductions
or modifications by vendors of Web browsers and operating systems may have a
material adverse effect on our business, operating results and financial
condition.

WE COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS IF OUR PRODUCTS FAIL TO PERFORM
TO SPECIFICATIONS.

If software errors or design defects in our products cause damage to
customers' data and our agreements do not protect us from related product
liability claims, our business, operating results and financial condition may be
materially adversely affected. In addition, we could be subject to product
liability claims if our security features fail to prevent unauthorized third
parties from entering our customers' intranet, extranet or Internet Web sites.
Our software products are complex and sophisticated and may contain design
defects or software errors that are difficult to detect and correct. Errors,
bugs or viruses spread by third parties may result in the loss of market
acceptance or the loss of customer data. Our agreements with customers that
attempt to limit our exposure to product liability claims may not be enforceable
in certain jurisdictions where we operate.

FUTURE REGULATIONS COULD BE ADOPTED THAT RESTRICT OUR BUSINESS.

Federal, state or foreign agencies may adopt new legislation or regulations
governing the use and quality of Web content. We cannot predict if or how any
future laws or regulations would impact our business and operations. Even though
these laws and regulations may not apply to our business directly, they could
indirectly harm us to the extent that they impact our customers and potential
customers.

35

SIGNIFICANT FLUCTUATION IN THE MARKET PRICE OF OUR COMMON STOCK COULD RESULT IN
SECURITIES LITIGATION AGAINST US.

In the past, securities class action litigation has been brought against
publicly held companies following periods of volatility in the price of their
securities. If the we were subject to such litigation due to volatility in our
stock price, we may incur substantial costs. Such litigation could divert the
attention of our senior management away from our business, which could have a
material adverse effect on our business, operating results and financial
condition. The market price of our common stock has fluctuated significantly in
the past and may do so in the future. The market price of our common stock may
be affected by each of the following factors, many of which are outside of our
control:

- variations in quarterly operating results;

- changes in estimates by securities analysts;

- changes in market valuations of companies in our industry;

- announcements of significant events, such as major sales;

- acquisitions of businesses or losses of major customers;

- additions or departures of key personnel; and

- sales of our equity securities.

OUR PERFORMANCE WILL DEPEND ON THE CONTINUING GROWTH AND ACCEPTANCE OF THE WEB.

Our products are designed to be used with intranets, extranets and the
Internet. If the use of these methods of electronic communication does not grow,
our business, operating results and financial condition may be materially
adversely affected. Continued growth in the use of the Web will require ongoing
and widespread interest in its capabilities for communication and commerce. Its
growth will also require maintenance and expansion of the infrastructure
supporting its use and the development of performance improvements, such as high
speed modems. The Web infrastructure may not be able to support the demands
placed on it by continued growth. The ongoing development of corporate intranets
depends on continuation of the trend toward network-based computing and on the
willingness of businesses to reengineer the processes used to create, store,
manage and distribute their data. All of these factors are outside of our
control.

OUR EXISTING SHAREHOLDERS HAVE SIGNIFICANT INFLUENCE OVER US.

As of March 31, 2003, Robert F. Olson, our President, Chief Executive
Officer and the Chairman, of our Board of Directors holds approximately 10.0% of
our outstanding common stock. Accordingly, Mr. Olson is able to exercise
significant control over our affairs. As a group, our directors and executive
officers beneficially own approximately 14.9% of our common stock. These persons
have significant influence over our affairs, including approval of the
acquisition or disposition of assets, future issuances of common stock or other
securities and the authorization of dividends on our common stock. Our directors
and executive officers could use their stock ownership to delay, defer or
prevent a change in control of our company, depriving shareholders of the
opportunity to sell their stock at a price in excess of the prevailing market
price.

WE CAN ISSUE SHARES OF PREFERRED STOCK WITHOUT SHAREHOLDER APPROVAL, WHICH COULD
ADVERSELY AFFECT THE RIGHTS OF COMMON SHAREHOLDERS.

Our Articles of Incorporation permit us to establish the rights,
privileges, preferences and restrictions, including voting rights, of unissued
shares of our capital stock and to issue such shares without approval from our
shareholders. The rights of holders of our common stock may suffer as a result
of the rights granted to holders of preferred stock that may be issued in the
future. In addition, we could issue preferred stock to prevent a change in
control of our company, depriving shareholders of an opportunity to sell their
stock at a price in excess of the prevailing market price.

36

OUR SHAREHOLDER RIGHTS PLAN AND CERTAIN PROVISIONS OF MINNESOTA LAW MAY MAKE A
TAKEOVER OF STELLENT DIFFICULT, DEPRIVING SHAREHOLDERS OF OPPORTUNITIES TO SELL
SHARES AT ABOVE-MARKET PRICES.

Our shareholder rights plan and certain provisions of Minnesota law may
have the effect of discouraging attempts to acquire Stellent without the
approval of our Board of Directors. Consequently, our shareholders may lose
opportunities to sell their stock for a price in excess of the prevailing market
price.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our interest income on cash and marketable securities is affected by
changes in interest rates in the United States. Through March 31, 2003, changes
in these rates have had a significant effect on our company. Interest rates
earned on invested funds have fallen by over 50% since December 2000. We believe
that there may be future exposure to interest rate market risk.

Our investments are primarily held in commercial paper which are affected
by equity price market risk and other factors. We do not anticipate that
exposure to these risks will have a material impact on us, due to the nature of
our investments.

We have no history of, and do not anticipate in the future, investing in
derivative financial instruments. Most transactions with international customers
for our Universal Content Management software, particularly Europe, are entered
into in foreign currencies whereas most transactions entered into for our
Content Management software are entered into in U.S. dollars. Transactions that
are currently entered into in foreign currency are not anticipated to have
significant exchange gains or losses. Thus, the exposure to market risk is not
material.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Financial Statements and notes thereto incorporated by reference from
page F-1 of this Annual Report on Form 10-K, and quarterly results incorporated
by reference from Item 7 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Directors of the Registrant

Incorporated herein by reference is the information appearing under the
headings "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in our definitive Proxy Statement for the annual meeting
of Shareholders to be held on August 27, 2003 (the "Proxy Statement").

(b) Executive Officers of the Registrant

Incorporated herein by reference is the information appearing herein under
Item 4a.

(c) Compliance with Section 16(a) of the Exchange Act

Incorporated by reference is the information appearing under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive
Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated herein by reference is the information appearing under the
headings "Executive Compensation" in our Proxy Statement.
37

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of March 31, 2003 for
compensation plans under which equity securities may be issued.

- -------------------------
(1) Includes securities available for future issuance under shareholder approved
compensation plans other than upon the exercise of an outstanding option,
warrant or right, as follows: 256,115 shares under the 1994-1997 Stock
Option Plan, 110,000 shares under the 1997 Director Stock Option Plan, and
956,903 under the 2000 Stock Incentive Plan.

(2) Includes securities available for future issuance under non-shareholder
approved compensation plans other than upon the exercise of an outstanding
option, warrant or right, as follows: 794,200 shares under the 1999 Stock
Option Plan, 0 shares under the InfoAcess, Inc. 1995 Stock Option Plan, and
1,085,505 under the 2000 Employee Stock Incentive Plan.

EQUITY COMPENSATION PLANS NOT APPROVED BY SECURITY HOLDERS

STELLENT, INC. 1999 EMPLOYEE STOCK OPTION AND COMPENSATION PLAN

In November 1999, the Board adopted the 1999 Employee Stock Option and
Compensation Plan (the "1999 Plan"). The 1999 Plan has not been approved by the
shareholders of the Company.

Shares Subject to the 1999 Plan. As of March 31, 2003, 160,450 shares of
the Company's common stock were subject to outstanding awards granted and
794,200 shares remained available for future award grants under the 1999 Plan.
If any award granted pursuant to the 1999 Plan expires or terminates without
being exercised in full, the unexercised shares released from such award will
again become available for issuance under the 1999 Plan. The number of shares
available for future grant and previously granted but unexercised awards are
subject to adjustment for any future stock dividends, splits, combinations, or
other changes in capitalization as described in the 1999 Plan.

Plan Administration. The 1999 Plan is administered by a committee of two or
more members of the Board or if the Board has not designated a committee, the
Board will constitute the committee and administer the 1999 Plan.

Eligibility. All employees of the Company and its subsidiaries who are not
also officers or directors of the Company, and consultants to the Company or its
subsidiaries, are eligible to receive awards under the 1999 Plan.

Incentive and Non-Statutory Stock Options. Both incentive stock options and
non-statutory stock options may be granted under the terms of the 1999 Plan.
However, since the 1999 Plan has not been approved by the Company's
shareholders, under the Internal Revenue Code of 1986, as amended, incentive
stock options may

38

not be granted under the 1999 Plan. The exercise price of an option is
determined by the committee. The exercise price may not be less than 100% of the
fair market value, as defined in the 1999 Plan, of the Company's common stock on
the date the option is granted. Stock options may be granted and exercised at
such times as the committee may determine, provided that the term shall not
exceed ten years and one day from the date of grant. The purchase price for
common stock purchased upon the exercise of stock options may be payable in
cash, uncertified or certified check, bank draft, by delivery of shares of
Company common stock having a fair market value on the date the option is
exercised equal to all or any part of the option price of the stock being
purchased, by instructing the Company to withhold from the shares of common
stock issuable upon exercise of the stock option shares having fair market value
on the date the option is exercised equal to all or any part of the option price
of the stock being purchased or any other manner authorized by the committee.

Stock Appreciation Rights. A stock appreciation right may be granted under
the 1999 Plan with or without reference to any related stock option. The
recipient of a stock appreciation right receives, without payment to the
Company, a number of shares of common stock, cash or any combination thereof,
the amount of which is determined by dividing: (x) the number of shares of
common stock as to which the stock appreciation right is exercised multiplied by
the amount by which the fair market value of the shares on the exercise date
exceeds the purchase price of shares of common stock under the related stock
option or, if there is no related stock option, an amount determined by the
committee at the time of grant, by (y) the fair market value of a share of
common stock on the exercise date.

Performance Shares. A performance share consists of an award that is paid
in shares of common stock. Performance shares entitle the recipient to payment
in amounts determined by the committee based upon the achievement of specified
performance targets during a specified term. Performance shares may be subject
to additional terms and conditions as determined by the committee.

Restricted Stock and Other Stock-Based Awards. The committee may grant,
either alone or in combination with other types of awards, restricted stock and
other stock-based awards. Restricted stock may contain such restrictions,
including provisions requiring forfeiture and imposing restrictions on stock
transfer, as the committee may determine. To enforce the restrictions imposed by
the committee, a recipient must enter into an agreement with the Company setting
forth the conditions of the grant.

Acceleration of Awards, Lapse of Restrictions, Forfeiture. The committee
may provide in a recipient's agreement for the lapse or waiver of restrictions
or conditions on restricted stock or other awards, or acceleration of the
vesting of stock options, stock appreciation rights and other awards, or
acceleration of the term with respect to which the achievement of performance
targets for performance shares is determined in the event of a fundamental
change in the corporate structure of the Company, or the replacement of the
majority of the Board members within a period of less than two years by
directors not nominated and approved by the Board, or, upon a change of control
of the Company or a recipient's death, disability or retirement. Options and
stock appreciation rights automatically vest upon death or disability, unless
otherwise provided in a recipient's agreement, or upon the occurrence of a
change in control of the Company. If a recipient's employment or other
relationship with the Company or its affiliates is terminated for any reason
other than death or disability, then any unexercised portion of such recipient's
award will generally be forfeited, except as provided in the 1999 Plan or such
recipient's agreement or by the committee.

Adjustments, Modifications, Termination. The 1999 Plan gives the committee
discretion to adjust the kind and number of shares available for awards or
subject to outstanding awards, the limitations on the number and type of
securities that may be issued to an individual recipient, the exercise price of
outstanding stock options, and performance targets for, and payments under,
outstanding awards of performance shares upon mergers, recapitalizations, stock
dividends, stock splits or similar changes affecting the Company. Adjustments in
performance targets and payments on performance shares are also permitted upon
the occurrence of such other events as may be specified by the committee. The
1999 Plan also gives the Board the right to terminate, suspend or modify the
1999 Plan. Amendments to the 1999 Plan are subject to shareholder approval,
however, if needed to comply with applicable laws or regulations. The committee
may generally also alter or amend any agreement covering an award granted under
the 1999 Plan to the extent permitted by law.

39

Under the 1999 Plan, the committee generally may cancel outstanding stock
options and stock appreciation rights in exchange for the payment of cash or
other consideration to the recipients upon dissolutions, liquidations, mergers,
statutory share exchanges or similar events involving the Company.

STELLENT, INC. 2000 EMPLOYEE STOCK INCENTIVE PLAN

In May 2000, the Board adopted the 2000 Employee Stock Incentive Plan (the
"2000 Employee Plan"). The Plan was amended in October 2001. The 2000 Employee
Plan has not been approved by the shareholders of the Company.

Shares Subject to the 2000 Employee Plan. As of March 31, 2003, 1,105,466
shares of the Company's common stock were subject to outstanding awards granted
and 1,085,505 shares remained available for future award grants under the 2000
Employee Plan. If any award granted pursuant to the 2000 Employee Plan expires
or terminates without being exercised in full, the unexercised shares released
from such award will again become available for issuance under the 2000 Employee
Plan. The number of shares available for future grant and previously granted but
unexercised awards are subject to adjustment for any future stock dividends,
splits, combinations, or other changes in capitalization as described in the
2000 Employee Plan.

Plan Administration. The 2000 Employee Plan is administered by a committee
of three or more members of the Board or if the Board has not designated a
committee, the Board will constitute the committee and administer the 2000
Employee Plan. The committee may delegate all or any part of its
responsibilities under the 2000 Employee Plan to officers or other persons for
purposes of determining and administering awards.

Eligibility. All employees of the Company and its affiliates are eligible
to receive awards under the 2000 Employee Plan. Awards may be granted by the
committee to any individuals or entities who are not employees of the Company,
but who provide services to the Company or its affiliates as a consultant or
adviser.

Non-Qualified Stock Options. Non-qualified stock options may be granted
under the 2000 Employee Plan. The exercise price of an option is determined by
the committee. The exercise price for stock options may not be less than 100% of
the fair market value of the Company's common stock on the date the option is
granted. Stock options may be granted and exercised at such times as the
committee may determine. No more than 500,000 shares of common stock underlying
stock options and stock appreciation rights may be granted to any one person in
any year. The purchase price for common stock purchased upon the exercise of
stock options may be payable in cash, in the Company's common stock having a
fair market value on the date the option is exercised equal to the option price
of the stock being purchased, or a combination of cash and stock, as provided in
each stock option agreement. In addition, the committee may permit recipients of
stock options to simultaneously exercise options and sell the common stock
purchased upon exercise and to use the sale proceeds to pay the purchase price.

Stock Appreciation Rights and Performance Shares. The recipient of a stock
appreciation right receives all or a portion of the amount by which the fair
market value of a specified number of shares, as of the date the right is
exercised, exceeds a price specified by the committee at the time the right is
granted. The price specified by the committee must be at least 100% of the fair
market value of the Company's common stock on the date the right is granted. No
more than 500,000 shares of stock underlying stock appreciation rights and stock
options may be awarded to any one person in any year. Performance shares entitle
the recipient to payments in amounts determined by the committee based upon the
achievement of specified performance targets during a specified term. No person
may receive performance shares relating to more than 500,000 shares of the
Company's common stock in any year. Payments with respect to stock appreciation
rights and performance shares may be paid in cash, shares of the Company's
common stock, or a combination of cash and shares, as determined by the
committee.

Restricted Stock and Other Stock-Based Awards. The committee may grant,
either alone or in combination with other types of awards, restricted stock and
other stock-based awards. Restricted stock may contain such restrictions,
including provisions requiring forfeiture and imposing restrictions on stock
transfer, as the committee may determine and set forth in each restricted stock
agreement. No award of restricted stock

40

may vest earlier than one year from the date of grant, except as provided in
each restricted stock agreement. No more than 400,000 of the shares of common
stock subject to the 2000 Employee Plan may be granted as restricted stock
subject to performance conditions or subject to other stock-based awards.

Acceleration of Awards, Lapse of Restrictions, Forfeiture. The committee
may provide in an award agreement for the lapse or waiver of restrictions or
conditions on restricted stock or other awards, or acceleration of the vesting
of stock options, stock appreciation rights and other awards, or acceleration of
the term with respect to which the achievement of performance targets for
performance shares is determined in the event of a fundamental change in the
corporate structure of the Company, upon a change of control of the Company or
upon a recipient's death, disability or retirement. If a recipient's employment
or other relationship with the Company or its affiliates is terminated for any
reason, then any unexercised portion of such employee's award will generally be
forfeited, except as provided in that employee's award agreement or by the
committee.

Adjustments, Modifications, Termination. The 2000 Employee Plan gives the
committee discretion to adjust the kind and number of shares available for
awards or subject to outstanding awards, the limitations on the number and type
of securities that may be issued to an individual participant, the exercise
price of outstanding stock options, and performance targets for, and payments
under, outstanding awards of performance shares upon a merger, recapitalization,
stock dividend, stock split or similar change affecting the Company. Adjustments
in performance targets and payments on performance shares are also permitted
upon the occurrence of such other events as may be specified by the committee.
The 2000 Employee Plan also gives the Board the right to terminate, suspend or
modify the 2000 Employee Plan. Amendments to the 2000 Employee Plan are subject
to shareholder approval, however, only if needed to comply with any applicable
law or regulation. Termination, suspension or modification of the 2000 Employee
Plan generally may not materially and adversely affect any right an individual
participant may have acquired before the termination, suspension or
modification, unless otherwise provided in that individual's award agreement, or
otherwise, or required by law. The Company (with the approval of the committee)
may amend any agreement covering an award granted under the 2000 Employee Plan
unless the committee determines that the amendment would be materially adverse
to the recipient and is not required by law. Under the 2000 Employee Plan, the
committee generally may cancel outstanding stock options and stock appreciation
rights in exchange for the payment of cash or other consideration to the
recipients upon dissolutions, liquidations, mergers, statutory share exchanges
or similar events involving the Company.

INFOACCESS PLANS

In connection with the acquisition of InfoAccess, Inc. by the Company on
September 29, 1999, the Company assumed the (1) InfoAccess, Inc. 1990 Stock
Option Plan (the "InfoAccess 1990 Plan") and (2) InfoAccess, Inc. 1995 Stock
Option Plan (the "InfoAccess 1995 Plan" and together with the InfoAccess 1990
Plan, the "InfoAccess Plans"). The InfoAccess 1990 Plan was approved by the
InfoAccess, Inc. shareholders on July 26, 1991 and the InfoAccess 1995 Plan was
approved by the InfoAccess, Inc. shareholders on May 10, 1995, but the
InfoAccess Plans have not been approved by the shareholders of the Company.

Shares Subject to the InfoAccess Plans. As of March 31, 2003, (a) no shares
of the Company's common stock were subject to outstanding awards granted under
the InfoAccess 1990 Plan and no shares remained available for future award
grants under the InfoAccess 1990 Plan and (b) 36,119 shares of the Company's
common stock were subject to outstanding awards granted under the InfoAccess
1995 Plan and no shares remained available for future award grants under the
InfoAccess 1995 Plan. No additional stock options may be granted under either of
the InfoAccess Plans.

Plan Administration. The InfoAccess 1990 Plan is administered by the
compensation committee of the Board, unless the compensation committee is not
duly constituted at which time the Board may administer the InfoAccess 1990
Plan. The InfoAccess 1995 Plan is administered by the Board or a committee
appointed by the Board. The Board or committee has the authority, subject to the
terms of the specific InfoAccess Plan, to

41

interpret provisions of that InfoAccess Plan and the options granted under them
and to adopt rules and regulations for administering that InfoAccess Plan.

Eligibility. All employees of InfoAccess were eligible to receive option
grants under the InfoAccess Plans prior to their adoption by the Company.
Non-statutory stock options could also be granted under the InfoAccess 1995 Plan
prior to its adoption by the Company to individuals or entities that were not
employees of InfoAccess, Inc., but that provided services to InfoAccess, Inc. or
its affiliates as consultants or independent contractors.

Types of Awards under the InfoAccess Plans. Both incentive stock options
and non-statutory stock options could be granted under both of the InfoAccess
Plans. The exercise price of an option was determined by the committee of the
board of directors of InfoAccess, Inc. administering the InfoAccess Plans at the
time of the grant. The exercise price for incentive stock options under the
InfoAccess 1990 Plan and all options under the InfoAccess 1995 Plan could not be
less than 100% of the fair market value of the shares on the date of the grant.
The exercise price for incentive stock options granted to persons who
beneficially owned 10% or more of the outstanding stock of InfoAccess, Inc. at
the time of the grant could not be less than 110% of the fair market value of
the shares on the date of grant. The exercise price for non-qualified stock
options under the InfoAccess 1990 Plan may be less than, equal to or greater
than the fair market value of the common stock of InfoAccess, Inc. on the date
the option was granted. The number of shares and purchase price of each
recipient's option grant has been adjusted to reflect the exchange ratio of
InfoAccess, Inc. shares for the Company's shares in the merger of the companies.
Stock options were granted and may be exercised at such times as the committee
of the board of directors of InfoAccess, Inc. administering the InfoAccess Plans
at the time of the grant determined; however, under the InfoAccess 1995 Plan, if
no exercise schedule is set forth in a recipient's agreement, 25% of the shares
subject to the option shall vest two years following the start of the
recipient's continuous relationship with the Company, and an additional 25% of
the shares subject to the option shall vest following each additional year of
the recipient's continuous relationship with the Company. The purchase price for
common stock purchased upon the exercise of stock options may be payable in cash
or the committee may, subject to approval by the Board, permit recipients of
stock options to deliver a promissory note as full or partial payment for the
exercise of a stock option. In addition, under the InfoAccess 1995 Plan, shares
may be purchased in the Company's common stock, that a recipient has held at
least six months, having a fair market value on the date the option is exercised
equal to the option price of the stock being purchased.

Termination of Employment or Relationship.

InfoAccess 1990 Plan. If a recipient's employment with the Company or its
affiliates is terminated, then any unexercised portion of such recipient's
option grants will be forfeited, except as provided in the InfoAccess 1990 Plan
or such recipient's option agreement; provided that: (a) if a recipient's
employment with the Company or its affiliates is terminated by such recipient's
death while such recipient is an employee of the Company or its affiliates, or
during the period in which options granted under the InfoAccess 1990 Plan may be
exercised due to the termination of such recipient's employment based on such
recipient's dismissal other than for cause, disability or qualified retirement,
such recipient's legal representative may exercise vested but unexercised
options granted to that recipient under the InfoAccess 1990 Plan for a period of
one year after that recipient's death, subject to the expiration of the option
under the terms of such recipient's option agreement; (b) if a recipient's
employment with the Company or its affiliates is terminated by such recipient's
dismissal (other than for cause, as defined in the InfoAccess 1990 Plan) or
qualified retirement, such recipient may exercise vested but unexercised options
granted under the InfoAccess 1990 Plan for a period of three months after such
recipient's termination date, subject to the expiration of the option under the
terms of such recipient's agreement; and (c) if a recipient's employment with
the Company or its affiliates is terminated by such recipient's disability, as
defined in the InfoAccess 1990 Plan, such recipient may exercise vested but
unexercised options granted under the InfoAccess 1990 Plan for a period of one
year after such recipient's termination date, subject to the expiration of the
option under the terms of such recipient's agreement.

InfoAccess 1995 Plan. If a recipient's relationship with the Company or its
affiliates is terminated for any reason other than for cause (as defined in the
InfoAccess 1995 Plan), death or total disability, then any

42

portion of the recipient's option grant that is vested but unexercised may be
exercised for a period of thirty days following the termination of employment,
unless the option by its terms expires earlier, and except as otherwise provided
in the InfoAccess 1995 Plan or such recipient's agreement. If a recipient's
relationship with the Company or its affiliates is terminated for cause, as
defined in the InfoAccess 1995 Plan, such recipient's options granted under the
InfoAccess 1995 Plan will automatically terminate as of the first discovery by
the Company of any reason for that recipient's termination for cause. If a
recipient's employment with the Company or its affiliates is terminated by such
recipient's total disability, as defined in the InfoAccess 1995 Plan, such
recipient may exercise vested but unexercised options granted under the
InfoAccess 1995 Plan for a period of three months after such recipient's
termination date, subject to the expiration of the option under the terms of
such recipient's agreement. If a recipient's employment with the Company or its
affiliates is terminated by such recipient's death while an employee of the
Company or its affiliates, or during the period in which options granted under
the InfoAccess 1995 Plan may be exercised due to the termination of such
recipient's employment with the Company or its affiliates other than for cause
(as defined in the InfoAccess 1995 Plan) or such recipient's total disability,
such recipient's legal representative may exercise vested but unexercised
options granted to that recipient under the InfoAccess 1995 Plan for a period of
one year after that recipient's death, subject to the expiration of the option
under the terms of such recipient's option agreement.

Adjustments and Modifications. The InfoAccess 1995 Plan provides that each
option will be proportionately adjusted for any increase or decrease in the
number of issued shares of common stock of the Company resulting from a split-up
or consolidation of shares or any like capital adjustment, or the payment of any
stock dividend. The InfoAccess 1990 Plan gives the committee discretion to
adjust the kind and number of shares subject to outstanding grants, and the
exercise price of outstanding stock options upon mergers, consolidations,
reorganizations, recapitalizations, stock dividends, stock splits, combinations
of shares, exchanges of shares, or similar changes affecting the Company. The
InfoAccess Plans each give the Board the right to terminate, suspend, or modify
the corresponding InfoAccess Plan as long as the rights and obligation related
to outstanding option grants are not adversely affected.

MERRILL LYNCH WARRANTS

In February 2000, the Company issued Merrill, Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") a warrant with a five-year term in exchange for
various product related marketing services. The warrant entitles Merrill Lynch
to purchase up to 150,000 shares of the Company's common stock at an exercise
price of $35.89 per share. As of March 31, 2003, all of the shares have vested.
The purchase price for common stock purchased upon the exercise of the warrant
may be payable by certified bank check or by canceling a portion of the common
stock to be purchased by Merrill Lynch under the warrant and using the proceeds
from difference between the fair market value of the cancelled shares and the
exercise price of such cancelled shares to pay for the remaining shares. Merrill
Lynch may transfer the warrant provided that a registration statement under the
Securities Act covering the warrant or its underlying shares remains effective
or Merrill Lynch delivers an opinion of counsel that a transfer of the warrant
or the underlying shares is exempt from registration under the Securities Act
and applicable state securities laws. The number of shares is subject to
adjustment for any future stock dividends, splits, combinations, or other
changes in capitalization as described in the warrant.

In June 2000 and September 2000, the Company issued Merrill Lynch
additional warrants with a five-year term in exchange for various product
related marketing services. These warrants entitle Merrill Lynch to purchase up
to an aggregate of 50,000 shares of the Company's common stock at an exercise
price of $41.2125 per share and up to an aggregate of 25,000 shares of the
Company's common stock at an exercise price of $45.925 per share. As of March
31, 2003, all shares have vested. The purchase price for common stock purchased
upon the exercise of the warrants may be payable by certified bank check or by
canceling a portion of the common stock to be purchased by Merrill Lynch under
the warrant and using the proceeds from difference between the fair market value
of the cancelled shares and the exercise price of such cancelled shares to pay
for the remaining shares. Merrill Lynch may transfer the warrants provided that
a registration statement under the Securities Act covering the warrants or their
underlying shares remains effective or

43

Merrill Lynch delivers an opinion of counsel that a transfer of the warrants or
the underlying shares are exempt from registration under the Securities Act and
applicable state securities laws. The number of shares is subject to adjustment
for any future stock dividends, splits, combinations, or other changes in
capitalization as described in the warrants.

Incorporated herein by reference is the information appearing under the
heading "Security Ownership of Principal Shareholders" in our Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated herein by reference is the information appearing under the
heading "Certain Relationships and Related Transactions" in our Proxy Statement.

ITEM 14. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our President and Chief Executive Officer and Chief Financial Officer
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934, within 90 days of the filing date of
this report (the "Evaluation Date"). Based on this evaluation, our President and
Chief Executive Officer and Chief Financial Officer concluded as of the
Evaluation Date that our disclosure controls and procedures were effective such
that the material information required to be included in our SEC reports is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms relating to us, including our consolidated subsidiaries
and was made known to them by others within those entities, particularly during
the period when this report was being prepared.

(b) Changes in Internal Controls

There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the
Evaluation Date. We have not identified any significant deficiencies or material
weaknesses in our internal controls, and therefore there were no corrective
actions taken.

ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The disclosure for this item is not yet required.

44

PART IV

ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report:

1. Financial Statements:

2. The following consolidated financial statement schedules of our
company are included in Item 16(d):

Schedule II Valuation and Qualifying Accounts

3. See Item 16(c) below for a listing of exhibits filed as part of
this Annual Report on Form 10K.

(b) Reports on Form 8-K

No reports on Form 8-K were filed for the quarter ended March 31, 2003.

(c) Exhibits:

The following exhibits are filed as part of this Annual Report on Form 10-K
for the year ended March 31, 2003.

EXHIBITS

- ---------------
* Management contract, compensation plan or arrangement.

47

(d) Schedule Stellent, Inc and Subsidiaries

SCHEDULE II VALUATION OF QUALIFYING ACCOUNTS

- ---------------
* Includes $1,389 of additions resulting from the acquisition of CCD in July
2000, not recognized as expense, and a valuation allowance related to foreign
currency transactions.

48

REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ON SCHEDULE

To the Board of Directors and Shareholders
Stellent, Inc.

In connection with our audits of the consolidated financial statements of
Stellent, Inc. and subsidiaries referred to in our report dated April 28, 2003,
which is included in the Annual Report to Shareholders and incorporated by
reference in Part II of this form, we have also audited Schedule II for each of
the three years in the period ended March 31, 2003. In our opinion, this
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information required to
be set forth therein.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota
April 28, 2003

49

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, on June 30, 2003.
STELLENT, INC.

By /s/ ROBERT F. OLSON
------------------------------------
Robert F. Olson, Chief Executive
Officer and President

POWER OF ATTORNEY

Each of the undersigned hereby appoints Robert F. Olson and Gregg A.
Waldon, and each of them (with full power to act alone), as attorneys and agents
for the undersigned, with full power of substitution, for and in the name, place
and stead of the undersigned, to sign and file with the Securities and Exchange
Commission under the Securities Act of 1934, as amended, any and all amendments
and exhibits to this Annual Report on Form 10-K and any and all applications,
instruments, and other documents to be filed with the Securities and Exchange
Commission pertaining to this Annual Report on Form 10-K or any amendments
thereto, with full power and authority to do and perform any and all acts and
things whatsoever requisite and necessary or desirable. Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed
by the following persons on behalf of the registrant and in the capacities
indicated on June 30, 2003.

/s/ ROBERT F. OLSON
--------------------------------------
Robert F. Olson,
Chairman of the Board,
Chief Executive Officer
and President (Principal Executive
Officer)

/s/ GREGG A. WALDON
--------------------------------------
Gregg A. Waldon,
Executive Vice President,
Chief Financial Officer,
Secretary, Treasurer
(Principal Financial Officer
and Principal Accounting Officer)

/s/ KENNETH H. HOLEC
--------------------------------------
Kenneth H. Holec, Director

/s/ PHILIP E. SORAN
--------------------------------------
Philip E. Soran, Director

/s/ RAYMOND A. TUCKER
--------------------------------------
Raymond A. Tucker, Director

/s/ STEVEN C. WALDRON
--------------------------------------
Steven C. Waldron, Director

50

CERTIFICATION

I, Robert F. Olson, President and Chief Executive Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Stellent, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this annual report;

4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its consolidated
subsidiaries, is made known to the Registrant by others within those
entities, particularly during the period in which this annual report is
being prepared;

(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have identified
for the Registrant's auditors any material weaknesses in internal controls;
and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's internal
controls; and

6. The Registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ ROBERT F. OLSON
--------------------------------------
Robert F. Olson
President and Chief Executive Officer

Date: June 30, 2003

51

CERTIFICATION

I, Gregg A. Waldon, Executive Vice President, Chief Financial Officer, Secretary
and Treasurer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Stellent, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this annual report;

4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its consolidated
subsidiaries, is made known to the Registrant by others within those
entities, particularly during the period in which this annual report is
being prepared;

(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have identified
for the Registrant's auditors any material weaknesses in internal controls;
and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's internal
controls; and

6. The Registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ GREGG A. WALDON
--------------------------------------
Gregg A. Waldon
Executive Vice President, Chief
Financial Officer, Secretary and
Treasurer

Date: June 30, 2003

52

STELLENT, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
Stellent, Inc.

We have audited the accompanying consolidated balance sheets of Stellent,
Inc. and subsidiaries as of March 31, 2002 and 2003, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended March 31, 2003. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Stellent, Inc. and subsidiaries as of March 31, 2002 and 2003 and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended March 31, 2003 in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets on April 1, 2002.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota
April 28, 2003

F-2

STELLENT, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

The accompanying notes are an integral part of the consolidated financial
statements.

F-3

STELLENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of the consolidated financial
statements.

F-4

STELLENT, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)

The accompanying notes are an integral part of the consolidated financial
statements.

F-5

STELLENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

The accompanying notes are an integral part of the consolidated financial
statements.

F-6

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In 1997, Stellent (the "Company") launched one of the first software
product suites on the market that was fully developed and created expressly for
Web-based content and document management. At the time, content management,
which currently is considered a critical component of an organization's
communication and information technology (IT) infrastructures, was an emerging
technology used to help companies easily and quickly share information
internally or externally using the Web. Currently, the Company's solutions,
which are comprised of content components, universal content management and
vertical applications, help customers worldwide solve real business problems
related to efficiently creating, managing and sharing critical information. The
Company's customers are primarily located throughout the United States and
Europe. Its headquarters are located in Eden Prairie, Minnesota and the company
has operations or collaborations in Australia, France, Germany, Japan, Korea,
the Netherlands, the United Kingdom and in other cities in the United States.

Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany transactions and balances have been eliminated.

Revenue Recognition: The Company currently derives all of its revenues
from licenses of software products and related services. The Company recognizes
revenue in accordance with Statement of Position (SOP) 97-2, Software Revenue
Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue
Recognition with Respect to Certain Transactions, and Securities and Exchange
Commission Staff Accounting Bulletin 101, "Revenue Recognition in Financial
Statements."

Product license revenue is recognized under SOP 97-2 when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is
fixed or determinable, and (iv) collectibility is probable and supported and the
arrangement does not require additional services or modifications that are
essential to the functionality of the software.

Persuasive Evidence of an Arrangement Exists -- The Company determines that
persuasive evidence of an arrangement exists with respect to a customer
under i) a signature license agreement, which is signed by both the
customer and the Company, or ii) a purchase order, quote or binding
letter-of-intent received from and signed by the customer, in which case
the customer has either previously executed a signature license agreement
with the Company or will receive a shrink-wrap license agreement with the
software. The Company does not offer product return rights to end users or
resellers.

Delivery has Occurred -- The Company's software may be either physically or
electronically delivered to the customer. The Company determines that
delivery has occurred upon shipment of the software pursuant to the billing
terms of the arrangement or when the software is made available to the
customer through electronic delivery. Customer acceptance generally occurs
at delivery.

The Fee is Fixed or Determinable -- If at the outset of the customer
arrangement, the Company determines that the arrangement fee is not fixed
or determinable, revenue is typically recognized when the arrangement fee
becomes due and payable. Fees due under an arrangement are generally deemed
fixed and determinable if they are payable within twelve months.

Collectibility is Probable and Supported -- The Company determines whether
collectibility is probable and supported on a case-by-case basis. The
Company may generate a high percentage of its license revenue from its
current customer base, for whom there is a history of successful
collection. The Company assesses the probability of collection from new
customers based upon the number of years the customer has been in business
and a credit review process, which evaluates the customer's financial
position and ultimately their ability to pay. If the Company is unable to
determine from the outset of an

F-7

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

arrangement that collectibility is probable based upon its review process,
revenue is recognized as payments are received.

With regard to software arrangements involving multiple elements, the
Company allocates revenue to each element based on the relative fair value of
each element. The Company's determination of fair value of each element in
multiple-element arrangements is based on vendor-specific objective evidence
("VSOE"). The Company limits its assessment of VSOE for each element to the
price charged when the same element is sold separately. The Company has analyzed
all of the elements included in its multiple-element arrangements and has
determined that it has sufficient VSOE to allocate revenue to consulting
services and post-contract customer support ("PCS") components of its license
arrangements. The Company sells its consulting services separately, and has
established VSOE on this basis. VSOE for PCS is determined based upon the
customer's annual renewal rates for these elements. Accordingly, assuming all
other revenue recognition criteria are met, revenue from perpetual licenses is
recognized upon delivery using the residual method in accordance with SOP 98-9,
and revenue from PCS is recognized ratably over their respective terms,
typically one year.

The Company's direct customers typically enter into perpetual license
arrangements. The Company's Content Components Division generally enters into
term-based license arrangements with its customers, the term of which generally
exceeds one year in length. The Company recognizes revenue from time-based
licenses at the time the license arrangement is signed, assuming all other
revenue recognition criteria are met, if the term of the time-based license
arrangement is greater than twelve months. If the term of the time-based license
arrangement is twelve months or less, the Company recognizes revenue ratably
over the term of the license arrangement.

Services revenue consists of fees from consulting services and PCS.
Consulting services include needs assessment, software integration, security
analysis, application development and training. The Company bills consulting
services fees either on a time and materials basis or on a fixed-price schedule.
In general, the Company's consulting services are not essential to the
functionality of the software. The Company's software products are fully
functional upon delivery and implementation and generally do not require any
significant modification or alteration for customer use. Customers purchase the
Company's consulting services to facilitate the adoption of the Company's
technology and may dedicate personnel to participate in the services being
performed, but they may also decide to use their own resources or appoint other
professional service organizations to provide these services. Software products
are billed separately from professional services. The Company recognizes revenue
from consulting services as services are performed. The Company's customers
typically purchase PCS annually, and the Company prices PCS based on a
percentage of the product license fee. Customers purchasing PCS receive product
upgrades, Web-based technical support and telephone hot-line support.

Customer advances and billed amounts due from customers in excess of
revenue recognized are recorded as deferred revenue.

Cost of Revenues: The Company expenses all manufacturing, packaging and
distribution costs associated with product license revenue as cost of revenues.
The Company expenses all technical support service costs associated with service
revenue as cost of revenues. The Company also expenses amortization of
capitalized software from acquisitions as cost of revenues.

In January 2002, the FASB issued Emerging Issues Task Force (EITF) Issue
No. 01-14, Income Statement Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred, which requires companies to report
reimbursements of "out-of-pocket" expenses as revenues and the corresponding
expenses incurred as costs of revenues within the income statement. The Company
reports its out-of-pocket expenses reimbursed by customers as revenue and the
corresponding expenses incurred as costs of revenues within the

F-8

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

statement of operations. As a result, this EITF did not have a material effect
on the Company's consolidated financial statements.

Cash and Equivalents: The Company considers all short-term, highly liquid
investments that are readily convertible into known amounts of cash and have
original maturities of three months or less to be cash equivalents. At March 31,
2002 and 2003, $1,871 and $2,965, respectively, was held at various financial
institutions located in Europe and other foreign countries.

Marketable Securities: Investments in debt securities with a remaining
maturity of one year or less at the date of purchase are classified as
short-term marketable securities. Investments are held in debt securities of the
United States government and with corporations that have the highest possible
credit rating. Investments in debt securities with a remaining maturity of
greater than one year are classified as long-term marketable securities. All
investments are classified as held to maturity and recorded at amortized cost as
the Company has the ability and positive intent to hold to maturity. At March
31, 2002 and 2003, cost approximated market value of these investments.
Purchases of investments were $1,015,661 and $255,089 for the years ended March
31, 2002 and 2003. Maturities of investments were $1,038,018 and $280,861 for
the years ended March 31, 2002 and 2003, respectively. The contractual
maturities of the marketable securities held at March 31, 2003 are $28,497 in
fiscal 2004 and $15,233 in fiscal 2005.

Investments in and Notes with Other Companies: Investments in other equity
securities and related notes with other companies in the software industry are
classified as long-term as the Company anticipates holding them for more than
one year. The Company holds less than 20% interest in, and does not directly or
indirectly exert significant influence over any of the respective investees.

A portion of these investments are publicly traded and are deemed by
management to be available for sale. The Company uses the specific
identification method to determine cost and fair value for computing gains and
losses. Accordingly, these investments are reported at fair value with net
unrealized gains or losses reported within shareholders' equity as accumulated
other comprehensive income or loss. No sales of available for sale investments
have occurred through March 31, 2003. During fiscal 2001, 2002 and 2003, the
Company determined that permanent declines in the value of these publicly traded
investments had occurred. As a result, the Company recorded write-downs of $400,
$96, and $1,083 during the years ended March 31, 2001, 2002 and 2003,
respectively.

Investments in other companies also include investments in several
non-public, start-up technology companies for which the Company uses the cost
method of accounting. During fiscal 2002 and 2003, the Company determined that a
permanent decline in value of certain investments had occurred and recorded a
$5,626 and $650 write-down on the investments in and advances to these entities.

Accounts Receivable: The Company's accounts receivable balances are due
from companies across a broad range of industries -- Government, Finance,
Manufacturing, Consumer, Aerospace and Transportation, Health Care/Insurance,
and High Tech/Telecom. Credit is extended based on evaluation of a customer's
financial condition and, generally, collateral is not required. Accounts
receivable from sales of services are typically due from customers within 30
days and accounts receivable from sales of licenses are due over terms ranging
from 30 days to nine months. Accounts receivable balances are stated at amounts
due from customer net of an allowance for doubtful accounts. Accounts
outstanding longer than the contractual payment terms are considered past due.
The Company determined its allowance by considering a number of factors,
including the length of time trade receivables are past due, the Company's
previous loss history, the customer's current ability to pay its obligation to
the Company, and the condition of the general economy and the industry as a
whole. The Company writes-off accounts receivable when they become
uncollectible, and payments subsequently received on such receivables are
credited to the allowance for doubtful accounts.

F-9

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

No customer accounted for 10% or more of the Company's revenues in the
years ended March 31, 2001, 2002, and 2003.

Property and Equipment: Property and equipment, including leasehold
improvements, are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, ranging from
two to eight years, or the life of the lease for leasehold improvements,
whichever is shorter. Maintenance, repairs and minor renewals are expensed when
incurred.

Goodwill and Other Acquired Intangible Assets: Goodwill represents the
excess of the purchase price over the fair value of net assets acquired. Prior
to April 1, 2002, goodwill was amortized on a straight-line basis over three
years. Effective April 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) 142, Goodwill and Other Intangible Assets, which
provides that goodwill, as well as identifiable intangible assets with
indefinite lives, should not be amortized but reviewed for impairment annually.
Accordingly, the Company ceased amortization of goodwill as of April 1, 2002.

At March 31, 2002, other acquired intangible assets represented core
technology, customer base, workforce, capitalized software, trademarks, and
other intangible assets acquired through business acquisitions, and were
amortized on a straight-line basis over three to four years. Effective April 1,
2002, the Company adopted SFAS 141, Business Combinations, which requires that
all business combinations be accounted for utilizing the purchase method of
accounting and specifies the criteria to use in determining whether intangible
assets identified in purchase accounting must be recorded separately from
goodwill. The Company determined that its acquired workforce did not meet the
separability criteria of SFAS 141, and therefore the net unamortized balance at
March 31, 2002 was reclassified to goodwill effective April 1, 2002, and
amortization of the balance ceased. The remaining other acquired intangible
assets continue to be amortized on a straight-line basis over their remaining,
definite useful lives.

Goodwill and intangible assets consist of the following at:

F-10

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Estimated amortization expense for other acquired intangible assets is as
follows for the years ended March 31:

2004........................................................ $3,405
2005........................................................ 1,225
2006........................................................ 207
------
$4,837
======

The carrying value of goodwill and other intangible assets is tested for
impairment on an annual basis or when factors indicating impairment are present.
The Company completed its transitional goodwill impairment test on April 1, 2002
and determined that no impairment existed at that time. The Company has elected
to complete the annual impairment test of goodwill on January 1 of each year.
The Company completed its annual goodwill impairment test on January 1, 2003 and
determined that there was no impairment of goodwill at that time. Additionally,
no circumstances occurred during the fourth quarter of the year ended March 31,
2003 which the Company believes would have created an impairment loss at March
31, 2003.

The following is a summary of what reported net loss would have been in all
periods presented, exclusive of the amortization expense recognized in those
periods related to goodwill and intangible assets no longer being amortized:

Impairment of Long-Lived Assets: The Company evaluates the recoverability
of its long-lived assets in accordance with SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 requires recognition of
impairment of long-lived assets in the event that events or circumstances
indicate an impairment may have occurred and when the net book value of such
assets exceeds the future undiscounted cash flows attributed to such assets. The
Company assesses the impairment of long-lived assets whenever events or changes
in circumstances indicate that the carrying value may not be recoverable. No
impairment of long-lived assets has occurred through the year ended March 31,
2003.

Restructuring Charges: In June 2002, the Financial Accounting Standards
Board (FASB) issued SFAS 146, Accounting for Costs Associated with Exit or
Disposal Activities. SFAS 146 addresses accounting and reporting costs
associated with exit or disposal activities and requires the recognition of a
liability for a cost associated with an exit or disposal activity when the
liability is incurred versus the date a company commits to an exit plan. SFAS
146 is effective for exit or disposal activities that are initiated after

F-11

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

December 31, 2002. The Company adopted SFAS 146 effective January 1, 2003 and
has accounted for the restructuring charge initiated during the fourth quarter
of the year ended March 31, 2003 under SFAS 146.

Software Development Costs: Software development costs may be capitalized
once the technological feasibility of the project is established. The amount of
software development costs that may be capitalized is subject to limitations
based on the net realizable value of the potential product. Typically the period
between achieving technological feasibility of the Company's products and the
general availability of the products has been short. Consequently, prior to
fiscal 2002, software development costs qualifying for capitalization were
immaterial and were generally expensed to research and development costs.

During fiscal 2002 and 2003, the Company capitalized $2,000 and $354 in
software development costs. Prior to fiscal 2002, software development costs
have been immaterial. Developed capitalized software is amortized on a
straight-line basis over three years, and accumulated amortization was $328 and
$1,088 at March 31, 2002 and 2003. Amortization expense of developed capitalized
software is included in Cost of Revenues -- Product Licenses. The capitalized
software primarily relates to software purchased from a third party or developed
for the Company by a third party. The gross amount and the description of the
capitalized software is broken down into four main projects, as follows:

- Content Categorizer is a module sold by the Company for use in
contributing large amounts of text-based content. This software was
purchased in the June 30, 2001 quarter from Active IQ for $706;

- ExtraSite Server is a server sold by the Company and built on J2EE
architecture for high-end Web site consumption. The Company contracted
with an outside independent entity to build this for the Company for
$947. The product was generally released in the June 30, 2002 quarter;

- Localization of certain of the Universal Content Management software into
French and German was done by an outside entity for approximately $448.
These products were generally released in the September 30, 2001 quarter;
and

- Contents Components Division purchased third party software to enhance
the Company's development of multiple viewing and conversion products for
approximately $253.

In addition to the capitalized software developed for the Company described
above, the fair value of certain software that has been capitalized relating to
acquisitions have been recorded (see note 2).

Warranties: In November 2002, the FASB issued FASB Interpretation Number
(FIN) 45, Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 addresses the
disclosure requirements of a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.
FIN 45 also requires a guarantor to recognize, at the inception of guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN 45 were effective for the Company
for its quarter ended December 31, 2002. The liability recognition requirements
are applicable to all guarantees issued or modified after December 31, 2002.
Other than the additional disclosure requirements related to warranties and the
Company's indemnification obligations, this pronouncement is not anticipated to
have a material effect on the Company's consolidated financial position or
results of operations.

The Company generally warrants its software products for a period of 30 to
90 days from the date of delivery and estimates probable product warranty costs
at the time revenue is recognized. The Company exercises judgment in determining
its accrued warranty liability. Factors that may affect the warranty liability
include historical and anticipated rates of warranty claims, material usage, and
service delivery costs. Warranty costs incurred have not been material.

F-12

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Indemnification Obligations: The Company generally provides to its
customers intellectual property indemnification in its arrangements for the
Company's software products or services. Typically these arrangements provide
that the Company will indemnify, defend and hold the customers harmless against
claims by third parties that the Company's software products or services
infringe upon the copyrights, trademarks, patents or trade secret rights of such
third parties.

Translation of Foreign Currencies: Foreign currency assets and liabilities
of the Company's international subsidiaries are translated using the exchange
rates in effect at the balance sheet date. Results of operations are translated
using the average exchange rates prevailing throughout the year. The effects of
exchange rate fluctuations on translating foreign currency assets and
liabilities into U.S. dollars are accumulated as part of the foreign currency
translation adjustment in shareholders' equity.

Comprehensive Income (Loss): Comprehensive income (loss) includes foreign
currency translation adjustments and unrealized gains or losses on the Company's
available for sale securities.

Marketing: The Company expenses the cost of marketing as it is incurred.
Marketing expense for the years ended March 31, 2001, 2002 and 2003 was $3,044,
$4,451 and $3,557.

The Company enters into cooperative marketing programs with some of its
resellers, and when the Company receives an identifiable benefit in return for
consideration, and the Company can reasonably estimate the fair value of the
benefit received, the cooperative marketing is accounted for as marketing
expense. If the fair value cannot be estimated or an identifiable benefit is not
received the cooperative marketing is accounted for as a reduction of revenue.

Net Loss per Common Share: The Company's basic net loss per share amounts
have been computed by dividing net loss by the weighted average number of
outstanding common shares. The Company's diluted net loss per share is computed
by dividing net loss by the weighted average number of outstanding common shares
and common share equivalents relating to stock options and warrants, when
dilutive. For the years ended March 31, 2001, 2002 and 2003, the Company
incurred net losses and therefore, basic and diluted per share amounts are the
same. Common stock equivalent shares consist of stock options and warrants
(using the treasury stock method), of 2,005, 1,191 and 129 shares for the years
ended March 31, 2001, 2002 and 2003.

Options and warrants to purchase 906, 3,607 and 5,327 shares of common
stock were outstanding at March 31, 2001, 2002 and 2003, but were excluded from
the computation of common share equivalents because they were antidilutive.

Stock-based Compensation: In December 2002, the FASB issued SFAS 148,
Accounting for Stock-Based Compensation -- Transition and Disclosure: an
amendment of FASB Statement 123 (SFAS 123). This statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. Additionally, the statement
amends the disclosure requirements of SFAS 123, Accounting for Stock-Based
Compensation, to require prominent disclosure in both annual and interim
financial statements about the method of accounting for stock based employee
compensation and the effect of the method used on reported results. The Company
utilizes the intrinsic value method for stock-based employee compensation, and
it elected not to adopt the transitional provision to the fair value method
under SFAS 148; however, the Company did adopt the expanded annual disclosure
provisions of SFAS 148 effective March 31, 2003. The Company will adopt the
interim disclosure provisions of SFAS 148 during the first quarter of fiscal
year 2004.

The Company has stock option plans for employees and a separate stock
option plan for directors, as described more fully in Note 5. The intrinsic
value method is used to value the stock options issued to employees and
directors, and the Company accounts for those plans under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. In

F-13

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

the years presented, no stock-based employee compensation cost is reflected in
net loss, as all options granted under those plans had an exercise price equal
to the market value of the underlying common stock on the date of grant. Had the
fair value method been applied, the compensation expense would have been
different. The following table illustrates the effect on net loss and net loss
per share if the Company had applied the fair value method for the following
fiscal years:

Fair Value of Financial Instruments: The Company's financial instruments
including cash and cash equivalents, short-term marketable securities, long-term
marketable securities, accounts receivable and accounts payable, and are carried
at cost, which approximates fair value due to the short-term maturity of these
instruments.

Use of Estimates: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

New Accounting Pronouncements: In November 2002, the FASB reached a
consensus on EITF Issue No. 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables. This EITF sets out criteria for whether revenue can be
recognized separately from other deliverables in a multiple deliverable
arrangement. The criteria considers whether the delivered item has stand-alone
value to the customer, whether the fair value of the delivered item can be
reliably determined and the rights of returns for the delivered item. This EITF
is required to be adopted by the Company beginning April 1, 2004. The adoption
of this EITF is not anticipated to have a material effect on the Company's
consolidated financial statements.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, which requires the assets, liabilities and results of operations of
variable interest entities (VIE) be consolidated into the financial statements
of the company that has controlling financial interest. FIN 46 is not
anticipated to have a material effect on the Company's consolidated financial
statements.

Reclassifications: Certain reclassifications have been made to the 2001
and 2002 financial statements to conform to the presentation used in 2003. These
reclassifications had no effect on shareholders' equity or net loss as
previously reported.

2. BUSINESS COMBINATIONS

On July 10, 2000, the Company acquired the Information Exchange Division
("IED" now referred to as "CCD") of eBT International, Inc. (formerly Inso
Corporation ("Inso")). CCD is a producer of software

F-14

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

products used in mobile and viewing technologies, applications and Web file
conversions. The total cost of the acquisition, including transaction costs, was
approximately $55,270. The transaction was accounted for under the purchase
method of accounting and, accordingly, the acquired net assets were recorded at
their estimated fair values at the date of acquisition. The following table
presents the allocation of the purchase price:

In-process research and development......................... $10,400
Core technology............................................. 13,200
Customer base............................................... 3,500
Workforce................................................... 3,000
Capitalized software........................................ 2,800
Trademarks.................................................. 1,700
Other intangibles........................................... 1,400
Excess of cost over fair value of net assets acquired....... 15,212
Net fair value of tangible assets acquired and liabilities
assumed................................................... 4,058
-------
Purchase price.............................................. $55,270
=======

In connection with the acquisition of CCD, $10,400 of purchased in-process
research and development was charged to operations. The fair value of the
in-process research and development projects acquired were estimated utilizing a
discounted economic income method which is based on estimates of operating
results and capital expenditures for an eight to ten year estimated life
including a life-cycle phase out beginning in year seven to nine and a risk
adjusted discount rate of 26.0%. Since the acquisition date these projects have
been completed and the Company has begun to receive the resulting benefits. The
purchased in-process research and development consisted of the following:

OIVT Symbian Viewer -- The Symbian Viewer technology is a port of the
Outside in Viewer Technology to the Symbian operating system platform. The
technology is targeted at wireless devices built on the Symbian platform
that require viewing business documents. This project was estimated to be
75% complete as of the acquisition date. At the date of acquisition, the
fair value of the project was $3,000 and the total cost to complete the
project was estimated to be approximately $500, primarily consisting of
engineering salaries. The project was completed as expected in August 2000.

WML Export -- The WML Export technology adds value to any wireless
application that requires access to documents created in current legacy
word processing, spreadsheet, and presentation applications. WML Export is
designed to be incorporated into a server-side application with no
additional software requirements on the wireless device beyond a
WAP-compatible micro-browser. This project was estimated to be 50% complete
as of the acquisition date with the Beta Version of WML Export for Windows
NT having been released on March 15, 2000 and CCD focusing on an additional
beta release. At the date of acquisition the fair value of the project was
$1,000 and the total cost to complete the project was estimated to be
approximately $10, primarily consisting of engineering salaries. The
project was completed as expected in July 2000.

XML Export -- XML Export provides fully attributed access to a wide range
of business documents through XML using an Inso defined DTD. This project
includes development of an enterprise grade XML-based transformation
architecture applicable to a wide range of conversion markets. As of the
acquisition date, the Beta 2 version was in the market and CCD was focused
on reaching the final release. This project was estimated to be 95%
complete as of the acquisition date. At the date of acquisition, the fair
value of the project was $6,400 and the total cost to complete the project
was estimated to be approximately $55, primarily consisting of engineering
salaries. The project was completed as expected in July 2000.

F-15

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

On July 10, 2001, the Company acquired certain assets of RESoft, a leading
provider of end-to-end content management solutions for the real estate and
legal industries, for 200 shares of Stellent common stock. The acquisition was
valued at approximately $5,600, including transaction costs, with approximately
$4,600 of the purchase price allocated to goodwill, $500 to other intangible
assets and $500 to property and equipment. Goodwill related to this acquisition
has not been amortized.

On April 3, 2002, the Company acquired certain assets and assumed certain
liabilities of Kinecta Corp., a provider of software infrastructure for digital
networks. The acquisition was valued at $2,800 including transaction costs, with
$2,760 of the purchase price allocated to capitalized software, $224 to property
and equipment and $184 to deferred revenue.

On March 14, 2003, the Company acquired certain assets of Active IQ, a
provider of hosted solution technology. The acquisition was valued at $686,
including transactions costs, with $619 of the purchase price allocated to
capitalized software and $67 to property and equipment.

3. RELATED PARTY TRANSACTIONS

In December 2001, Stellent entered into a note receivable of $3,500 with a
distributor. Through March 2002, the distributor paid the minimum payments
required under the note receivable with its own cash, and at the end of March
2002, it paid off the remaining note receivable with short-term bridge
financing. The distributor completely repaid this short-term bridge financing in
April 2002 through a traditional banking relationship. The short-term bridge
financing was provided at normal market rates by Beartooth Capital, a venture
financing organization controlled and funded by Robert Olson, a shareholder and
chairman of Stellent. There was no relationship prior to the bridge financing,
and there is no existing relationship between Beartooth Capital and the
distributor. Furthermore, Stellent provided no compensation or guarantees to
Beartooth Capital or Robert Olson for the short-term bridge financing, nor was
Stellent otherwise involved in this transaction.

At March 31, 2002, the Company held investments in and notes with five
non-public start-up technology companies, owning approximately 3% to 12% of
these companies, and in publicly traded technology companies listed on Nasdaq,
primarily Active IQ, in which the Company owned 5.4%, exclusive of warrants. At
March 31, 2003, the Company had investments in two non-public companies, owning
approximately 9% to 13% of the companies, for which a permanent decline in value
had not been recorded. Investments in these companies were made with the
intention of giving the Company opportunities to have new technologies developed
for the Company or to give the Company leverage into certain vertical markets
that the Company may not otherwise be able to obtain on its own. The value of
these investments at March 31, 2002 and 2003 was approximately $3,100 and
$1,100, respectively. At March 31, 2002, the market value of the Company's
equity in Active IQ was approximately $127 more than the investment value of
$1,158. This difference was reported as "accumulated other comprehensive income
(loss)" in the shareholders' equity section on the consolidated balance sheet
for the year ended March 31, 2002. Upon the Company's acquisition of certain
assets of Active IQ (see note 2) in March 2003, the Company recorded an
impairment of approximately $1,100 related to its investment in Active IQ. For
substantially all of the year ended March 31, 2003, the Company's investment in
Active IQ was less than 5%.

During the year ended March 31, 2002, the Company recognized license
revenue of approximately $2,000 from companies in which the Company had an
equity investment, including approximately $1,400 coming from Active IQ in
December 2001. At March 31, 2002, the Company had an account receivable balance
of $125 associated from these transactions. License revenue recognized for the
year ended March 31, 2001 from companies in which the Company had an equity
investment was approximately $2,400. The Company also acquired intellectual
property from Active IQ in April 2001 for approximately $700, which was
capitalized and is being amortized over a three-year period.
F-16

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Certain officers and directors of the Company also held investment
interests in Active IQ during the year ended March 31, 2002, approximating 2%.
These investments were sold at no gain during the year ended March 31, 2002.

In December 2001 and March 2003, the Company entered into software license
agreements with a company whose Chief Financial Officer is a member of the
Company's Board of Directors. Revenue of $273 and $393, respectively, from these
sales transactions were recorded. At March 31, 2003, the Company has an account
receivable balance of $340 associated with the March 2003 transaction. The terms
and conditions, including fees, with respect to the transactions were
substantially similar to those with unaffiliated third parties negotiated at
arms length.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

5. SHAREHOLDERS' EQUITY

Common Stock: On April 10, 2000, 520 shares of the underwriters'
overallotment option from the Company's March 9, 2000 secondary offering were
issued for net proceeds of $22,646.

Warrants: The Company has 225 stock purchase warrants with exercise prices
of $35.89 to $45.93 outstanding at March 31, 2003. The warrants expire on
various dates through September 2005.

In February 2000, the Company issued a warrant with a five-year term in
exchange for various product related marketing services. The warrant entitles
the holder to purchase 150 shares of the Company's common stock at an exercise
price of $35.89 per share. An independent valuation of the warrant was used to
value the marketing services received at $460. During fiscal 2001, the Company
issued 75 additional warrants for product related marketing services at an
average exercise price of $42.78 per share. These services were valued at $248.

Stock Repurchase: In April 2000, the board of directors authorized the
repurchase of up to $10,000 of the Company's common stock at a price not
exceeding $20 per share. In September 2001, the board of directors authorized
the repurchase of up to $20,000 of the Company's common stock at a price not
exceeding $15 per share. During fiscal 2002 and 2003, the Company reacquired 261
and 757 shares of common stock at a cost of $3,592 and $3,465, respectively,
which was equal to the fair value of the shares on the date acquired. No common
stock was repurchased during fiscal 2001.

Shareholder Rights Plan: On May 29, 2002, the Board of Directors of the
Company approved a shareholder rights plan which provides for fair and equal
treatment of all shareholders in the event an unsolicited attempt is made to
acquire the Company. Under the plan, the Company declared a dividend of one
preferred share purchase right for each outstanding share of common stock of the
Company, payable to shareholders of record on June 13, 2002. Each right entitles
the holder to purchase from the Company one-

F-17

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

hundredth of a Series A junior participating preferred share of the Company at
an exercise price of $75. The rights will separate from the common shares and a
distribution for the rights will occur, subject to certain criteria, in the
event an investor group acquires 15% or more of the Company's common stock. The
rights are not exercisable until the distribution date and expire on June 13,
2012.

Stock Options: The Company maintains the 1994-1997 Stock Option Plan, the
1997 Director Stock Option Plan, the 1999 Employee Stock Option and Compensation
Plan, the 2000 Employee Stock Incentive Plan and the 2000 Stock Incentive Plan
(collectively, the "Plan"), pursuant to which options and other awards to
acquire an aggregate of 3,100, 500, 1,000, 2,300 and 3,100 shares, respectively,
of the Company's common stock may be granted. The Company integrated all
previously granted options into the Plan. The Plan is administered by the Board
of Directors, which has the discretion to determine the number and purchase
price of shares subject to stock options (which may be below the fair market
value of the common stock on the date thereof), the term of each option, and the
terms of exercisability.

Certain options have exercise prices less than the fair market value of the
Company's common stock on the date of the grant. The Company recognizes the
compensation element of these grants over the vesting period of the related
options, generally five years. The options generally vest over periods of one to
five years.

A summary of the Company's stock option activity, and related information
through March 31, 2003 is as follows:

- ---------------
* Includes 2,196 stock options forfeited in connection with a stock option
exchange program.

F-18

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table summarizes information about the stock options
outstanding at March 31, 2003:

Pro forma information regarding the fair value of stock options is
determined at the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions:

Stock Option Exchange Program: In December 2002, the Company conducted a
voluntary stock option exchange program for its employees. Under the program,
options to purchase 2,196 shares of common stock were exchanged by employees for
promises to grant options to purchase 700 shares of common stock at a future
date, which is anticipated to be July 1, 2003. The Company expects there will be
no variable compensation charges to the Company as a result of this stock option
exchange program.

6. EMPLOYEE BENEFIT PLANS

The Company maintains pre-tax salary reduction/profit sharing plans under
the provisions of Section 401(k) of the Internal Revenue Code. The plans cover
substantially all full-time employees who have reached the age of 21. Total
Company contributions to the plans for the years ended March 31, 2001, 2002, and
2003 were $536, $1,086 and $631.

The Company has an employee stock purchase plan (the Plan), which allows
eligible employees to purchase stock of the Company at 85% of its fair market
value through elected payroll deductions equal up to 10% of their compensation.
During fiscal 2001, 2002 and 2003, 21, 46 and 187 shares of common stock,
respectively, had been purchased under the Plan.

F-19

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

7. INCOME TAXES

Due to net operating loss carryforwards through March 2002, the Company has
recorded no current income tax provision. The tax effects of temporary
differences giving rise to deferred income taxes consisted of the following:

Deferred tax liabilities and deferred tax assets reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. The valuation allowance has been established due to the uncertainty of
future taxable income, which is necessary to realize the benefits of the
deferred tax assets. The Company had net operating loss (NOL) carryforwards of
approximately $84,300 at March 31, 2003, which begin to expire in 2011. These
NOL's are subject to annual utilization limitations due to prior ownership
changes.

Realization of the NOL carryforwards and other deferred tax temporary
differences are contingent on future taxable earnings. The deferred tax asset
was reviewed for expected utilization using a "more likely than not" approach as
required by SFAS No. 109, Accounting for Income Taxes, by assessing the
available positive and negative evidence surrounding its recoverability.
Accordingly, in fiscal 2003 the Company increased the valuation allowance to
fully offset the deferred tax asset. The increase in the valuation allowance has
been recognized as a reduction in paid in capital to the extent that a tax
benefit from employee stock option exercises was previously recognized as
additional paid in capital.

The Company will continue to assess and evaluate strategies that will
enable the deferred tax asset, or portion there of, to be utilized, and will
reduce the valuation allowance appropriately at such time when it is determined
that the "more likely than not" approach is satisfied.

F-20

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The Company's provision for income taxes differs from the expected tax
benefit amount computed by applying the statutory federal income tax rate of
34.0% to loss before taxes as a result of the following:

8. COMMITMENTS AND CONTINGENCIES

Operating Leases: The Company has entered into certain non-cancelable
operating lease agreements related to office/warehouse space, equipment and
vehicles. Total rent expense under operating leases net of sublease income, was,
$2,804, $5,104 and $5,814 for the years ended March 31, 2001, 2002 and 2003.

Minimum remaining rental commitments under operating leases net of sublease
arrangements are as follows as of March 31, 2003:

For the year ended March 31,
2004...................................................... $ 3,874
2005...................................................... 2,690
2006...................................................... 1,952
2007...................................................... 1,169
2008...................................................... 512
Thereafter................................................ 3,245
-------
$13,442
=======

Software Royalties: The Company has entered into several software royalty
agreements whereby it is required to pay a royalty amount based upon
predetermined payment schedules. At March 31, 2002 and 2003, the Company
recorded advanced royalties as prepaid expense of $6,394 and $4,269,
respectively. Royalties are recognized as expense based on sales. During the
years ended March 31, 2001, 2002 and 2003 royalty expense totaled $3,064, $3,490
and $4,365, respectively.

Legal Proceedings: The Company is subject to legal proceedings in the
normal course of business. Management believes these proceedings will not have a
material adverse effect on the consolidated financial statements.

9. RESTRUCTURING CHARGES

During the year ended March 31, 2003, in connection with management's plans
to reduce costs and improve operating efficiencies, the Company recorded
restructuring charges of $4,368. The Company initiated four plans during the
year in an effort to better align its expenses and revenues in light of the
continued economic slowdown.

F-21

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

These cost saving efforts resulted in the termination of 112 employees
throughout all functional areas and geographies. The Company recorded charges of
$3,221 associated with involuntary terminations, which included severance
payments and benefits. The workforce reductions associated with these plan were
substantially completed as of March 31, 2003, and $327 is included in accrued
expenses at March 31, 2003 associated with future severance payments related to
terminations which had been communicated prior to March 31, 2003.

The cost saving efforts included an evaluation of the Company's current
facilities requirements and identified facilities that were in excess of current
and estimated future needs. As a result of this analysis, the Company recorded
$1,147 in exit costs in relation to four vacated facilities in Germany, Arizona,
California, and Massachusetts. The closing of these facilities were
substantially completed as of March 31, 2003, and $347 is included in accrued
expenses at March 31, 2003 associated with future lease payments. It is
reasonably possible that actual results could differ from these estimates in the
near term as a result of actual sublease income attributable to vacated
facilities deviating from the assumptions used to calculate the Company's
accrual for facility lease commitments.

As part of the Company's fourth restructuring plan, which occurred during
March 2003, the Company anticipates the recording of approximately $400 during
the first quarter of fiscal 2004 related to employee termination costs for five
employees who were identified to be terminated as part of the plan, but had not
been communicated their termination until after March 31, 2003. This plan also
included the closing of an office facility as part of its acquisition of Active
IQ (see note 2). The Company anticipates the facility will be closed during the
first quarter of fiscal 2004 and approximately $50 will be recorded to facility
closing costs and future lease payments. The Company is estimating restructuring
costs of $450 will be recorded in the first quarter of fiscal 2004 in accordance
with SFAS 146 as at March 31, 2003 the liabilities associated with the exit plan
and restructuring have not been incurred.

F-22

STELLENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

10. SEGMENTS OF BUSINESS AND GEOGRAPHIC AREA INFORMATION

The Company operates in two operating segments which meet the aggregation
criteria for a single reporting segment. A summary of the Company's operations
by geographic area follows:

Sales are attributed to countries or region based on the location of the
customer.

F-23

EXHIBITS

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* Management contract, compensation plan or arrangement.