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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-59331
PROSPECTUS
521,031 Shares
DOCUMENTUM, INC.
Common Stock
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This Prospectus covers 521,031 shares (the "Shares") of the Common
Stock, $.001 par value ("Common Stock"), of Documentum, Inc., a Delaware
corporation ("Documentum" or the "Company"), which are being offered and sold by
certain stockholders of the Company (the "Selling Stockholders"). The Selling
Stockholders, directly or through agents, broker-dealers or underwriters, may
sell the Common Stock offered hereby from time to time on terms to be determined
at the time of sale, in transactions on the NASDAQ National Market or in
privately negotiated transactions or in a combination of such methods of sale,
at fixed prices related to such prevailing prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders or
the purchasers of the shares for whom such broker-dealers may act as agents or
to whom they sell as principal or both (which compensation to a particular
broker-dealer may be in excess of customary commissions). The Company will not
receive any proceeds from the sale of shares by the Selling Stockholders. See
"Selling Stockholders" and "Plan of Distribution."
The Common Stock of the Company is quoted on the NASDAQ National
Market under the symbol "DCTM." Application will be made to list these shares
on the NASDAQ National Market. The last reported sales price of the Company's
Common Stock on the NASDAQ National Market on July 21, 1998 was $45.25 per
share.
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THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
No underwriting commissions or discounts will be paid by the Company
in connection with this offering. Estimated expenses payable by the Company in
connection with this offering are estimated to be $50,000. The aggregate
proceeds to the Selling Stockholders from the Common Stock will be the purchase
price of the Common Stock sold less the aggregate agents' commissions and
underwriters' discounts, if any, and other expenses of issuance and distribution
not borne by the Company. See "Plan of Distribution."
The Selling Stockholders and any agents, broker-dealers or
underwriters that participate in the distribution of the Common Stock may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Act"), and any commission received by them and any profit on the
resale of the Common Stock purchased by them may be deemed to be underwriting
discounts or commissions under the Act. The Company has agreed to indemnify the
Selling Stockholders and certain other persons against certain liabilities,
including liabilities under the Act.
July 21, 1998
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AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected and copied
at the Commission's Public Reference Section, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, as well as at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also makes electronic filings publicly available on the Internet. The
Commission's Internet address is http://www.sec.gov. The Commission's Web site
also contains reports, proxy and information statements, and other information
regarding the Company that has been filed electronically with the Commission.
The Common Stock of the Company is quoted on the NASDAQ National Market.
Reports and other information concerning the Company may be inspected at the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the Commission
under the Act. This Prospectus does not contain all of the information
contained in such Registration Statement and the exhibits and schedules thereto,
certain portions of which have been omitted pursuant to the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus regarding the contents of any contract or any other
documents are not necessarily complete and, in each instance, reference is
hereby made to the copy of such contract or document filed as an exhibit to the
Registration Statement. The Registration Statement, including exhibits thereto,
may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
Public Reference Section, Securities and Exchange Commission, Washington, D.C.,
20549, upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), are incorporated in this Prospectus by
reference: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997; (ii) the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998; (iii) the Company's Form 8-K filed July 17,
1998; and (iv) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed under Section 12 of the
Exchange Act, including any amendment or report updating such description.
Each document filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering made hereby shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such document (all such documents, and the documents enumerated above,
being hereinafter referred to as "Incorporated Documents").
Any statement contained in an Incorporated Document shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, including any beneficial owner, upon the
written or oral request of such person, a copy of any or all of the Incorporated
Documents, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference therein. Requests for such copies should
be directed to Documentum, Inc. 5671 Gibraltar Drive, Pleasanton, California
94588-8547, Attention: Investor Relations (telephone: (925) 463-6800 or by
electronic mail at [email protected]). The information relating to the
Company contained in this Prospectus does not
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purport to be comprehensive and should be read together with the information
contained in the Incorporated Document.
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Documentum(R), Documentum Workspace(R), Documentum DocPage Server,
Documentum RightSite, Documentum SiteSpace, Documentum SmartSpace, Documentum
ViewSpace, Documentum DocViewer, Documentum DocPage Builder, Documentum
AutoRender Pro, Documentum DocInput, Documentum CADLink, Documentum UnaLink,
Documentum DocLink and Documentum DocSolutions are trademarks of Documentum,
Inc. All other trademarks or service marks appearing in this Prospectus are the
property of their respective holders.
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THE COMPANY
Documentum, Inc. ("Documentum" or the "Company") develops, markets
and supports a family of intranet and client/server software-based solutions
that enable companies to share, manage and reuse the vital corporate knowledge
contained in documents. The Documentum Enterprise Document Management System
(EDMS) is the choice of Global 1000 companies that require a fast-payback
document management solution designed for rapid and flexible deployment, ease of
use and high return on investment. With the Documentum EDMS, these companies are
achieving dramatic improvements in business-critical document processes with
powerful benefits: accelerated time to market, improved product quality,
enhanced operational efficiencies and guaranteed regulatory or contract
compliance.
The Documentum EDMS family of object-oriented client/server and
intranet software is designed to address the unstructured business-critical data
management requirements of a business enterprise. Documentum's EDMS has three
major product components: the DocPage Server (including RightSite), Documentum
end-user products (WorkSpace, SmartSpace and ViewSpace), and Documentum
integration tools for other enterprise applications and platforms, such as
DocPage Builder. The DocPage Server provides a rich set of document management
services and is the technology behind the Docbase, a unique document repository
for managing business documents and their associated processes. Documentum's
WorkSpace, SmartSpace and ViewSpace clients are graphical, drag-and-drop user
environments that provide the appropriate DocPage Server and RightSite
functionality to different classes of users. The DocPage Builder is an
application development environment that enables users to customize screens and
dialogues.
The Company's objective is to be the leading worldwide supplier of
enterprise document management software solutions. To achieve this objective,
the Company's strategy includes extending its technology leadership, penetrating
global industries vertically, leveraging its technology partnerships, focusing
on enterprise deployments and utilizing multiple distribution channels. In
particular, Documentum has identified strategic vertical markets with compelling
business-critical needs for the Company's EDMS, namely, industries where more
efficient management of unstructured information and intellectual capital
results in an immediate and substantial payback.
The Company was incorporated in Delaware in January 1990. The
Company's principal executive offices are located at 5671 Gibraltar Drive,
Pleasanton, California 94588. Its telephone number is (925) 463-6800. The
Company's home page can be located on the World Wide Web at
http://www.documentum.com. As used in this Prospectus, the "Company" and
"Documentum" refer to Documentum, Inc. and its subsidiaries.
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RISK FACTORS
In addition to the other information in this Prospectus and in the
documents incorporated by reference herein, the following Risk Factors should be
carefully considered in evaluating the Company and its business before
purchasing the Common Stock offered by this Prospectus
Uncertainty of Future Operating Results; Fluctuations in Quarterly
Operating Results. Prior growth rates in the Company's revenue and operating
results should not be considered indicative of future growth, if any, or of
future operating results. Future operating results will depend upon many
factors, including the demand for the Company's products, the level of product
and price competition, the length of the Company's sales cycle, the size and
timing of individual license transactions, the delay or deferral of customer
implementations, the budget cycles of the Company's customers, the Company's
success in expanding its direct sales force and indirect distribution channels,
the timing of new product introductions and product enhancements by the Company
and its competitors, the mix of products and services sold, levels of
international sales, activities of and acquisitions by competitors, the timing
of new hires, changes in foreign currency exchange rates, the ability of the
Company to develop and market new products and control costs and general
domestic and international economic and political conditions. The Company's
first quarter revenues and earnings in any year are typically flat or lower as
compared to the immediate preceding fourth quarter, due to seasonality, which
the Company believes is common in the software industry. Moreover, the Company
typically recognizes a substantial amount of its revenue in the last month,
weeks or even days of each quarter. The Company's license sales generally
reflect a relatively high amount of revenues per order and the number of large
individual license sales has continued to increase. The loss or delay of
individual orders, therefore, could have a significant impact on the revenues
and quarterly results of the Company. In addition, the timing of license revenue
is difficult to predict because of the length of the Company's sales cycle,
which is typically six to 12 months from the initial contact. Also, the
Company's strategy to provide customers with whole solutions could result in
software licenses being bundled with services. Therefore, with certain future
transactions, the delivery of services may delay recognition of license revenue.
Because the Company's operating expenses are based on anticipated
revenue trends and because a high percentage of the Company's expenses are
relatively fixed, any shortfall from anticipated revenue or a delay in the
recognition of revenue from a limited number of license transactions could cause
significant variations in operating results from quarter to quarter and could
result in losses. As a result of these factors, operating results for any
quarter are subject to significant variation, and the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful related to future performance and should not be relied upon as
indications of future performance. Furthermore, due to all of the foregoing
factors, it is likely that in some future quarter the Company's operating
results will be below the expectations of public market analysts or investors.
In such event, the market price of the Company's common stock would likely be
materially adversely affected.
Lengthy Sales and Implementation Cycles. The license of the Company's
software products is often an enterprise-wide decision by prospective customers
and generally requires the Company to engage in a lengthy sales cycle (typically
between six and 12 months) to provide a significant level of education to
prospective customers regarding the use and benefits of the Company's products.
Additionally, the size of the transaction and the complexity of the arrangement
can also cause delays in the sales cycle. The implementation by customers of the
Company's products involves a significant commitment of resources by such
customers over an extended period of time and is commonly associated with
substantial business reengineering efforts. For these and other reasons, the
sales and customer implementation cycles are subject to a number of significant
delays over which the Company has little or no control. Delay in the sale or
customer implementation of a limited number of license transactions could have a
material adverse effect on the Company's business, financial condition and
results of operations and cause the Company's operating results to vary
significantly from quarter to quarter.
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Product Concentration. To date, substantially all of the Company's revenues
have been attributable to sales of licenses of the Documentum EDMS family of
products and related services. The Company currently expects the Documentum EDMS
family of products and related services to account for substantially all of its
future revenues. As a result, factors adversely affecting the pricing of or
demand for the Documentum EDMS products such as competition or technological
change could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's future financial performance
will depend, in significant part, on the successful development, introduction
and customer acceptance of new and enhanced versions of the Documentum EDMS
family of products. There can be no assurance that the Company will continue to
be successful in developing and marketing the Documentum EDMS products.
New Products and Rapid Technological Change. The document management
software and services market is characterized by rapid technological change,
change in customer requirements, frequent new product introductions and
enhancements and emerging industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards can
render existing products obsolete and unmarketable. Accordingly, the life cycles
of the Company's products are difficult to estimate. The Company's future
success will depend in part upon its ability to enhance current products and to
continue to develop and introduce new products that respond to evolving customer
requirements and keep pace with technological developments and emerging industry
standards, such as new operating systems, hardware platforms, user interfaces,
the Internet, corporate intranets and RDBMS software. The Company's future
success will also depend in part on its ability to execute on its strategy to
develop whole-product solutions in certain target vertical industries. In
addition, the Company's future success will depend in part upon its ability to
maintain and enhance relationships with its technology partners, such as RDBMS
vendors, in order to provide its customers with integrated product solutions.
There can be no assurance that the Company will be successful in maintaining
these relationships or in developing and marketing product enhancements or in
delivering products that respond to technological change, updates and
enhancements to third party products used in conjunction with the Company's
products, changes in customer requirements or emerging industry standards; that
the Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of new products and
enhancements; or that any new products or enhancements that the Company may
introduce will adequately meet the requirements of the marketplace and achieve
market acceptance. Moreover, the Company has in the past experienced delays in
the release dates of enhancements to its products. If release dates of any
future product enhancements are delayed or, if when released, fail to achieve
market acceptance, the Company's business, financial condition and results of
operations could be materially adversely affected. To date, the delays the
Company has experienced have been minor in nature and are often the result of
adding enhancements or functionality based upon customer feedback during beta
product versions. These delays have generally not exceeded six months in
duration from the Company's scheduled internal release dates; however, there can
be no assurance that the Company may not experience future delays in product
introduction. The inability of the Company, for technological or other reasons,
to develop and introduce new products or enhancements in a timely manner in
response to changing customer requirements, technological change or emerging
industry standards, would have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Emerging Markets. The market for document management software
and services is intensely competitive, highly fragmented and subject to rapid
change. The Company's future financial performance will depend primarily on
growth in the number of document management applications developed for use in
client/server environments. There can be no assurance that the market for
document management software and services will continue to grow or that, if it
does grow, organizations will adopt the Company's products. The Company has
spent, and intends to continue to spend, significant resources educating
potential customers about the benefits of its products. However, there can be no
assurance that such expenditures will enable the Company's products to achieve
any additional degree of market acceptance, and if the document management
software and services market fails to grow or grows more slowly than the Company
currently anticipates, the Company's business, financial condition and results
of operations would be materially adversely affected.
Intense Competition. The market for the Company's products is intensely
competitive, subject to rapid change and significantly affected by new product
introductions and other market activities of industry participants. The
Company's products are targeted at the emerging market for open, client/server
software solutions, and the
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Company's competitors offer a variety of products and services to address this
market. The Company currently encounters direct competition from a number of
public and private companies such as FileNet, OpenText, PC DOCS and Novasoft.
Several competitors have longer operating histories, greater financial,
technical, marketing and other resources, greater name recognition and a larger
installed base of customers than the Company.
In addition, other enterprise software vendors, such as Microsoft, Oracle
and Lotus (a division of IBM), may compete with the Company in the future. Like
the Company's current competitors, many of these companies have longer operating
histories, significantly greater resources, name recognition and a larger
installed base of customers than the Company. Microsoft, Oracle, Lotus and other
potential competitors have well-established relationships with current and
potential customers and strategic partners of the Company, have extensive
knowledge of the enterprise software industry and have the resources to enable
them to more easily offer a single vendor solution. As a result, these
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products, than can the Company.
The Company also faces indirect competition from systems integrators. The
Company relies on a number of systems consulting and systems integration firms
for implementation and other customer support services, as well as
recommendations of its products during the evaluation stage of the purchase
process. Although the Company seeks to maintain close relationships with these
service providers, many of these third parties have similar, and often more
established, relationships with the Company's principal competitors. If the
Company is unable to develop and maintain effective, long-term relationships
with these third parties, the Company's competitive position would be materially
adversely affected. Further, there can be no assurance that these third parties,
many of which have significantly greater resources than the Company, will not
market software products in competition with the Company in the future or will
not otherwise reduce or discontinue their relationships with or support of the
Company and its products.
The Company also expects that competition will increase as a result of
software industry consolidations. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their products to address the
needs of the Company's prospective customers. Accordingly, it is possible that
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition may result in price reductions,
reduced gross margins and loss of market share, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that the Company will be able to
compete successfully against current and future competitors or that competitive
pressures faced by the Company will not materially and adversely affect its
business, financial condition and results of operations.
End User Customer and Industry Concentration. A relatively small number of
end user customers account for a significant percentage of the Company's
revenues. In addition, the Company's customers are somewhat concentrated in the
process and discrete manufacturing, pharmaceutical and architectural engineering
and construction industries. The Company expects that sales of its products to a
limited number of customers and industry segments will continue to account for a
high percentage of revenue for the foreseeable future. In addition, the future
success of the Company will depend in part on its ability to obtain orders from
new customers and its ability to successfully market its products to customers
in new industry segments. The loss of a major customer or any reduction or delay
in orders by such customers, or the failure of the Company to successfully
market its products outside existing targeted industry segments, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Reliance on Certain Relationships. The Company has established strategic
relationships with a number of organizations that it believes are important to
its worldwide sales, marketing and support activities. The Company's
relationships with indirect channel partners and other consultants provide
marketing and sales opportunities for the Company's direct sales force, expand
the distribution of its products and broaden its product offerings through
product bundling. These relationships also assist the Company in keeping pace
with the technological and marketing developments of major vendors, and in
certain instances, provide the Company with technical assistance for the
Company's product development efforts. There can be no assurance that any
customer, systems integrator or
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distributor will continue to market or to purchase the Company's products. The
failure by the Company to maintain these relationships, or to establish new
relationships in the future, could have a material adverse effect on the
Company's business, financial condition and results of operations.
Management of Growth; Dependence Upon Key Personnel. The Company's ability
to compete effectively and to manage future anticipated growth will require the
Company to expand, train and manage its employee work force. The Company's plans
include hiring a significant number of highly-qualified technical, sales and
managerial personnel. In particular, as part of the Company's strategy of
delivering comprehensive solutions, the Company expects to hire additional
professional service personnel in addition to the employees that joined the
Company in connection with the Company's January 1998 acquisition of WMI.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to attract, assimilate or retain such key employees.
International Operations. The Company's sales are primarily to large
multinational companies. To service the needs of such companies, both
domestically and internationally, the Company and its support partners must
provide worldwide product support services. As a result, the Company intends to
continue expanding its existing international operations and enter additional
international markets, which will require significant management attention and
financial resources and could adversely affect the Company's operating margins
and earnings, if any. The Company has offices in London, Paris, and Munich, and
opened offices in Tokyo and Seoul in December 1997. The Company operates its own
European technical support operation, located in the London office, and recently
expanded this operation into Munich during 1997. In order to successfully expand
international sales, the Company must establish additional foreign operations,
hire additional personnel and develop relationships with additional
international vendors. To the extent that the Company is unable to do so in a
timely manner, the Company's growth, if any, in international sales will be
limited, and the Company's business, financial condition and results of
operations could be materially adversely affected. In addition, there can be no
assurance that the Company will be able to maintain or increase international
market demand for its products.
Additional risks inherent in the Company's international business
activities generally include currency fluctuations, unexpected changes in
regulatory requirements, tariffs and other trade barriers, the Company's limited
experience in localizing products for foreign countries, cost of localization,
lack of acceptance of localized products in foreign countries, longer accounts
receivable payment cycles, difficulties in managing international operations,
potentially adverse tax consequences, including restrictions on the repatriation
of earnings, and the burdens of complying with a wide variety of foreign laws.
To date, a significant portion of the Company's international revenues have been
denominated in U.S. dollars. Although exposure to currency fluctuations to date
has been insignificant, there can be no assurance that fluctuations in the
currency exchange rates in the future will not have a material adverse impact on
revenues from international sales and thus the Company's business, financial
condition and results of operations.
Dependence on Proprietary Technology; Risks of Infringement. The Company's
success is heavily dependent upon proprietary technology. The Company relies
primarily on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company seeks to protect its software, documentation and other
written materials under trade secret and copyright laws, which afford only
limited protection. The Company presently has no patents or patent applications
pending. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary.
Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to as great an extent as do the laws of the United States.
There can be no assurance that the Company's means of protecting its proprietary
rights will be adequate or that the Company's competitors will not independently
develop similar technology. The Company is not aware that any of its products
infringe the proprietary rights of third parties. There can be no assurance,
however, that third parties will not claim infringement by the Company with
respect to current or future products. The Company expects that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in the Company's industry segment grows and the
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functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all,
which could have a material adverse effect upon the Company's business,
operating results and financial condition.
In addition, the Company also relies on certain software that it licenses
from third parties, including software that is integrated with internally
developed software and used in the Company's products to perform key functions.
There can be no assurances that such firms will remain in business, that they
will continue to support their products or that their products will otherwise
continue to be available to the Company on commercially reasonable terms. The
loss or inability to maintain any of these software licenses could result in
delays or reductions in product shipments until equivalent software can be
developed, identified, licensed and integrated, which would adversely affect the
Company's business, financial condition and results of operations.
Product Liability. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. However, it is possible that the limitation
of liability provisions contained in the Company's license agreements may not be
effective under the laws of certain jurisdictions. Although the Company has not
experienced any product liability claims to date, the sale and support of
products by the Company may entail the risk of such claims, and there can be no
assurance that the Company will not be subject to such claims in the future. A
successful product liability claim brought against the Company could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
Risk of Product Defects. Software products as complex as those offered by
the Company frequently contain errors or failures, especially when first
introduced or when new versions are released. Although the Company conducts
extensive product testing, the Company has in the past released products that
contain defects, and has discovered software errors in certain of its new
products and enhancements after their introduction. The Company could in the
future lose or delay recognition of revenues as a result of software errors or
defects. The Company's products are typically intended for use in applications
that may be critical to a customer's business. As a result, the Company expects
that its customers and potential customers have a greater sensitivity to product
defects than the market for software products generally. Although the Company's
business has not been adversely affected by any such errors to date, there can
be no assurance that, despite testing by the Company and by current and
potential customers, errors will not be found in new products or releases after
commencement of commercial shipments, resulting in loss of revenue or delay in
market acceptance, diversion of development resources, damage to the Company's
reputation, or increased service and warranty costs, any of which could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
Risks Associated with Acquisitions. As part of its business strategy, the
Company expects to make acquisitions of, or significant investments in,
businesses that offer complementary products and technologies. For example, the
Company recently acquired both WMI and Relevance Technologies, Inc. Such
acquisitions will, and any future acquisitions or investments would, expose the
Company to the risks commonly encountered in acquisitions of businesses. Such
risks include, among others, difficulty of assimilating the operations;
information systems and personnel of the acquired businesses; the potential
disruption of the Company's ongoing business; the inability of management to
maximize the financial and strategic position of the Company through the
successful incorporation of acquired employees and customers; the maintenance of
uniform standards, controls, procedures and policies; and the impairment of
relationships with employees and customers as a result of any integration of new
management personnel. There can be no assurance that any potential acquisition
will be consummated or, if consummated, that it will not have a material adverse
effect on the Company's business, financial condition and results of operations.
Possible Volatility of Stock Price. The trading price of the Company's
Common Stock is subject to significant fluctuations in response to variations in
quarterly operating results, the gain or loss of significant orders, changes in
earning estimates by analysts, announcements of technological innovations or new
products by the Company or its competitors, general conditions in the software
and computer industries and other events or factors.
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In addition, the stock market in general has experienced extreme price and
volume fluctuations which have affected the market price for many companies in
industries similar or related to that of the Company and which have been
unrelated to the operating performance of these companies. These market
fluctuations may adversely affect the market price of the Company's Common
Stock.
Effect of Certain Charter Provisions: Antitakeover Effects of Certificate
of Incorporation, Bylaws and Delaware Law. The Company's Board of Directors has
the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the price, rights, preferences, privileges and restrictions, including
voting rights, of those shares without any further vote or action by the
stockholders. The Preferred Stock could be issued with voting, liquidation,
dividend and other rights superior to those of the Common Stock. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. The Company has no
current plans to issue any shares of Preferred Stock. Further, certain
provisions of the Company's Amended and Restated Certificate of Incorporation,
including provisions that create a classified board of directors, and certain
provisions of the Company's Amended and Restated Bylaws and of Delaware law
could delay or make more difficult a merger, tender offer or proxy contest
involving the Company.
Year 2000. In the next two years, most companies will face a potentially
serious information systems problem because many software application and
operational programs written in the past may not properly recognize calendar
dates beginning in the year 2000. This problem could force computers to either
shut down or provide incorrect data or information. During 1997 the Company
began to assess the changes, if any, required to its computer programs and
hardware. Efforts will be made to modify or replace any non-compliant software,
systems and equipment by the year 1999. Further, the Company is aware of the
risks to third parties and the potential adverse impact on the Company resulting
from the failure by these parties to adequately address the year 2000 problem.
The Company has expended and will continue to expend appropriate resources to
address this issue on a timely basis. However, no estimate of the expected total
cost of this effort can be made at this time, nor can any assurance be given
that the year 2000 problem will not have an adverse impact on the Company's
earnings.
9.
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
DIVIDEND POLICY
The Company has never paid any cash dividends on its capital stock. The
Company currently intends to retain any future earnings to finance the growth
and development of its business and therefore does not anticipate paying any
cash dividends in the foreseeable future.
10.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders, the
number of shares of Common Stock owned beneficially by the Selling Stockholders
as of July 16, 1998 and the number of shares which may be offered pursuant to
this Prospectus. This information is based upon information provided by the
Selling Stockholders. The Selling Stockholders may offer all, some or none of
their Shares.
<TABLE>
<CAPTION>
Name Shares Beneficially Shares Shares Beneficially
---- Owned Prior to Being Owned After
Offering Offered Offering(1)
-------- ------- -----------
Number Percent(2) Number Percent(2)
------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Crosspoint Venture Partners (1996) (3) 163,862 1.0 143,338 20,524 *
CE Software Holdings, Inc. 114,182 * 99,880 14,302 *
Stanford H. Goodman (4) 86,867 * 75,985 10,882 *
Scott I. Wiener (5) 86,867 * 75,985 10,882 *
IAI U.S. Venture Fund II, LP (6) 86,806 * 75,933 10,873 *
Michael Grant (7) 10,486 * 9,173 1,313 *
Laurence Fishkin (8) 9,709 * 8,493 1,216 *
Charles Barbour (9) 8,921 * 1,783 7,138 *
John Cate (10) 5,437 * 4,756 681 *
Eagle Ventures II, LLC (11) 3,213 * 2,811 402 *
Frank Leahy (12) 2,718 * 2,378 340 *
G&H Partners 2,505 * 2,191 314 *
Venture Lending & Leasing 1,861 * 1,628 233 *
Richard A. Cohler 1,553 * 1,358 195 *
Robert A. Kliger 162,076 * 15,000 147,076 *
Maggie Law (13) 1,699 * 339 1,360 *
</TABLE>
- ---------------------
* Less than one percent
(1) Assumes the sale of all shares offered hereby.
(2) Applicable percentage of ownership is based on 16,529,524 shares of Common
Stock outstanding (net of treasury shares) as of July 16, 1998.
(3) Subsequent to the date of this Prospectus, the shares held by Crosspoint
Venture Partners (1996) may be distributed to Ameritech Pension Trust,
Andrea A. Billante, Andrew Alcon, Antoinette M. Belt, Barbara N. Lubash,
Benedict A. Itri, Bobby R. Johnson, Jr., Brody Family Trust U/D/T 8/15/96,
C. Preston Butcher, Chad W. Keck, Charles S. and Nan Y. Stauch Living Trust
dtd 10/26/82, Church Pension Fund, Civil Aviation Authority Pension Scheme;
Nortrust Nominees Limited, Custodian, Computrol Limited, BVI, Crosspoint
Associates (1996), Dench Living Trust dtd 6/16/94; Robert H. Dench and
Gloria E. Dench, Trustees, Douglas Metz, Fell & Nicholson Companies, Gary
Rosenbach, George A. Needham, Harvard Private Capital Holdings, Inc.,
Heimbuck Family Trust dtd 8/13/85, Howard S. Flagg, John B. Mumford, John
Breese Mumford and Christine Joyce Mumford Trusts, U/D/T dtd 10/13/83; John
Breese Mumford and Christine Joyce Mumford, Trustees, John F. Nicholson,
John Selling, Kenneth and Roberta Eldred Revocable Trust, U/A dtd 1/28/83;
Kenneth and Roberta Eldred, Trustees, Leeway & Co., Lorinda Mosca, Louis E.
Hallman, III and Sherry L. Mesman Family Trust, Louis E. Hallman III &
Sherry L. Mesman, Co-Trustees U.T.D. 5/29/98, Massachusetts Institute of
Technology, Mellon Bank, N.A. as Trustee for the Bell Atlantic Master
Trust, Milder Community Property Trust dtd 11/7/91; Donald B. and Terri L.
Milder, Trustees, Needham & Company, Inc., Norwest Equity Capital, L.L.C.,
Oberlin College, Okoboji Trust dtd 6/19/85; James F. Willenborg, Trustee,
Price Trust, Raj Rajaratnam, Rector and Visitors of The University of
Virginia, Rich Shapero, Richard I. Keeler Revocable Trust Restated dtd
7/19/94, As May Be Amended, Robert A. Hoff, Robert C. Hawk, Robert M. Fell,
Roxanne Cooley, Seth Neiman, Silicon Valley Bancshares, Stradling, Yocca,
Carlson & Rauth Profit Sharing Plan, The William and Flora Hewlett
Foundation, University of Chicago, Wallace R. Hawley and Alexandra Hawley
Revocable Trust U/A/D/ 7/2/92, Walton Investment, L.L.C., Wellcome Trust,
William P. Cargile, WS Investment Company 96A and Yale University.
(4) Includes 27,444 shares held by Ford H. Goodman and Lynn Goodman as
community property. Also includes 2 shares of Common Stock that Mr. Goodman
may acquire upon the exercise of options exercisable within 60 days of July
16, 1998. Also includes 14,293 shares subject to repurchase by the Company.
(5) Includes 27,444 shares held by Scott I. Wiener and Catherine Mikkelsen as
community property. Also includes 2 shares of Common Stock that Mr. Wiener
may acquire upon the exercise of options exercisable within 60 days of July
16, 1998. Also includes 14,293 shares subject to repurchase by the Company.
(6) Subsequent to the date of this Prospectus, the shares held by IAI U.S.
Venture Fund II, LP may be distributed to Dain Rauscher, Incorporated, TSB
Group Pension Trust, Ltd., Paul Colombo, Wisconsin Alumni Research
Foundation, Minneapolis Police Relief Association, Marchard Cook & Cie,
S.A., Bank, Babylone Investissement, Rolf Dienst, Massachusetts Bay
Transportation Authority Retirement Fund, Minnesota State Board of
Investment, Fidulex Management Inc., Polux Investment Corporation, Pictet &
Cie, Samuel H. Hertogs, Sean Hill, Herbert P. Koch Trust, Lawin
Enterprises, LLC, City of Austin Police Retirement System, Overseas
International Ltd., John Lindahl, RJM Properties, Ltd., Camrose Services
Limited, Iowa Farm Bureau Federation, Board of Regents of University of
Texas System, Arend John Kuijvenhoven, Caroline Hunt Trust Estate, The
Permanent University Fund of the State of Texas, JVK, L.P., Todd Peterson,
Becharo N.V., BL Investments Limited, Active International Investment Fund,
ADEC Investment L.P. II, Phillips Partners, Ltd., Paul Ranheim, Burstein
Hertogs Olsen & McFarland, P.A., Thomson Family Partners, Farm Bureau Life
Insurance Company, and Jochen Wawersik.
(7) Includes 5,972 shares subject to repurchase by the Company.
(8) Represents the shares held by Laurence G. Fishkin as Trustee of the
Laurence Green Fishkin Trust Under Agreement Dated April 13, 1998. Includes
7,282 shares subject to repurchase by the Company.
(9) Includes 6,883 shares of Common Stock that Mr. Barbour may acquire upon the
exercise of options exercisable within 60 days of July 16, 1998.
(10) Includes 2,719 shares subject to repurchase by the Company.
(11) Subsequent to the date of this Prospectus, the shares held by Eagle
Ventures II, LLC may be distributed to Jeff Applebaum, James Behnke, Jim
Beloff, Archie Black, Anthony Daffer, Susan Haedt, Ron Henriksen, Bill
Joas, I.P. (Kip) Knelman, Angelina Lawton, Adriana Rahn, Mark Rahn, Noel
Rahn, Noel Rahn, Jr., Chris Smith, Jim Sorenson, R. David Spreng, Rich
Struthers, Jeffrey Tollefson and Scott Wolf.
(12) Includes 2,039 shares subject to repurchase by the Company.
(13) Represents shares held by Margaret T. Law and Robert Duncan as community
property. Includes 1,311 shares of Common Stock that Ms. Law may acquire
upon the exercise of options exercisable within 60 days of July 16, 1998.
Also includes 178 shares subject to repurchase by the Company.
11.
<PAGE>
PLAN OF DISTRIBUTION
The Company is registering the Shares offered by the Selling Stockholders
(except Robert A. Kliger) hereunder pursuant to contractual registration rights
contained in a Registration Rights Agreement by and among the Company and the
Selling Stockholders, dated July 16, 1998 (the "Registration Rights Agreement").
The Company is registering the Shares offered by Mr. Kliger pursuant to a
contractual arrangement between Mr. Kliger and the Company. Sales may be made
on the NASDAQ National Market or in private transactions or in a combination of
such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders and any persons who
participate in the distribution of the Shares offered hereby may be deemed to be
underwriters within the meaning of the Act, and any discounts, commissions or
concessions received by them and any provided pursuant to the sale of the Shares
by them might be deemed to be underwriting discounts and commissions under the
Act. The Selling Stockholders will be subject to the applicable provisions of
the Exchange Act, and the rules and regulations thereunder, including without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of any of the Common Stock by the Selling Stockholders.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the Shares may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
The Company has agreed in the Registration Rights Agreement to register the
shares of the Company's Common Stock received by the Selling Stockholders
pursuant to the Agreement and Plan of Merger and Reorganization among the
Company, RTI Acquisition Corp., a Delaware corporation, Relevance Technologies,
Inc., a Delaware corporation ("Relevance") and certain stockholders of Relevance
under applicable Federal and state securities laws under certain circumstances
and at certain times. Pursuant to such agreement, the Company has filed a
registration statement related to the shares offered hereby and has agreed to
keep such registration statement effective until the earliest of (i) July 16,
1999 (the first anniversary of the closing of the Relevance acquisition), (ii)
the satisfaction of all requirements to sell all such Shares under Rule 144
during any ninety (90) day period, or (iii) the sale of all the securities
registered thereunder. The Company will pay substantially all of the expenses
incident to the offering and sale of the Common Stock to the public, other than
commissions, concessions and discounts of underwriters, dealers or agents. Such
expenses (excluding such commissions and discounts) are estimated to be $50,000.
The Registration Rights Agreement provides for cross-indemnification of the
Selling Stockholders and the Company to the extent permitted by law for losses,
claims, damages, liabilities and expenses arising, under certain circumstances,
out of any registration of the Common Stock.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Cooley Godward LLP, Menlo Park, California
("Cooley Godward").
EXPERTS
The financial statements incorporated by reference to the Annual Report on
Form 10-K of Documentum, Inc. for the year ended December 31, 1997 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on authority of said firm as experts in auditing
and accounting.
12.
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such other information and representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. The delivery of this
Prospectus at any time does not imply that the information herein is correct as
of any time subsequent to the date hereof.
-----------------
TABLE OF CONTENTS
Page
----
Available Information.................................................._ 1
Additional Information................................................._ 1
Incorporation of Certain
Documents by Reference................................................_ 1
The Company............................................................_ 3
Risk Factors..........................................................._ 4
Use of Proceeds........................................................_ 10
Dividend Policy........................................................_ 10
Selling Stockholders..................................................._ 11
Plan of Distribution..................................................._ 12
Legal Matters.........................................................._ 12
Experts................................................................_ 12
---------------------
================================================================================
================================================================================
521,031 Shares
DOCUMENTUM, INC.
Common Stock
--------------
PROSPECTUS
--------------
July 21, 1998
================================================================================
