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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997
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 0-15997
FILENET CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 95-3757924
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3565 Harbor Boulevard, Costa Mesa, California 92626
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (714) 966-3400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange which registered
Common stock, $0.01 par value Nasdaq
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 whether the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Based on the closing sale price of March 17, 1998, the aggregate market value of
the 14,981,441 shares of voting stock of the Registrant held by nonaffiliates of
the Registrant on such date was $579,631,952. For purposes of such calculation,
only executive officers, board members and beneficial owners of more than 10% of
the Company's outstanding common stock are deemed to be affiliates.
The number of shares outstanding of the Registrant's common stock was 15,145,900
at March 17, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive proxy statement for its 1998 Annual Meeting
are incorporated by reference into Part III as set forth herein. Portions of
Registrant's Annual Report to Stockholders for the fiscal year ended December
31, 1997 are incorporated by reference into Parts II, III and IV as set forth
herein.
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FILENET CORPORATION
FORM 10-K
For the Year Ended December 31, 1997
INDEX
PART I Page
Item 1. Business..............................................................3
Item 2. Properties...........................................................10
Item 3. Legal Proceedings....................................................10
Item 4. Submission of Matters to a Vote of Security Holders..................11
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters..................................................11
Item 6. Selected Financial Data..............................................12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................13
Item 8. Financial Statements and Supplementary Data..........................13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.............................................13
PART III
Item 10. Directors and Executive Officers of the Registrant..................13
Item 11. Executive Compensation..............................................13
Item 12. Security Ownership of Certain Beneficial Owners and Management......13
Item 13. Certain Relationships and Related Transactions......................13
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.....14
Signatures...................................................................19
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PART I
Item 1. Business
GENERAL
FileNET Corporation (FileNET or the Company) develops, markets and services a
family of integrated document management software products designed for managing
information and enhancing enterprise productivity. Additionally, the Company
manufactures and sells a line of 12-inch optical storage and retrieval
libraries. The Company markets its products in more than 60 countries through a
global sales, services and support organization, including its ValueNET(R)
partner program of resellers, system integrators and application developers.
MARKETS AND APPLICATIONS
The Company offers a family of complementary products which enable users to
manage, on an enterprise-wide basis, the storage, processing and workflow for
documents and other unstructured information, including scanned images, faxes,
text, spreadsheets, graphics, drawings, photographs, computer output reports,
voice, and video. The Company's products provide a client server/based document
management architecture that can be implemented on a modular basis and
organizations can choose one, some, or all of the Company's products to build
the system that most effectively meets their needs. The Company's customers are
typically those organizations which have active paper document files, process
significant numbers of electronic documents in their day-to-day operations, or
have complex, mission-critical business processes for a variety of applications
such as mortgage loan servicing, credit card customer service, insurance claims
processing, retirement account management, engineering drawings management, web
based document management, medical records management, personnel records
management, company policies and procedures, accounts payable and receivable,
traffic, property and criminal records. Additionally, the Company's products
address ad hoc business processes at the departmental and workgroup levels to
improve overall enterprise productivity and integrate with industry standard
productivity applications like Microsoft Office, Lotus Notes and Novell
GroupWise.
The Company markets its products in more than 60 countries through a direct
sales force and through its ValueNET(R) partner program consisting of systems
integrators, value-added resellers and distributors. A number of firms,
including Andersen Consulting and American Management Systems, operate as
third-party resellers under the Company's ValueNET(R) program and combine
FileNET products with vertical market-specific value-added services to provide
turnkey solutions and complex systems integration for customers. Other firms
such as Tech Data, Law Cypress, IAI Canada, Image Choice and Paperlink are
distributors of the Company's products selling to hundreds of resellers
throughout the world. The Company also has OEM agreements with other firms
involving the Company's software products.
The Company offers software maintenance service for its products in the United
States and in countries where it has direct international sales operations. The
Company's international resellers offer maintenance in the countries in which
they operate. The Company subcontracts hardware maintenance to Hewlett-Packard
Corporation (HP) and other third parties.
In September 1995, the Company entered into an agreement with SAP AG to deliver
data archiving and document solutions for their client/server-based R/3
enterprise application systems environment as a Complementary Software Partner.
Deliveries of this product commenced in December 1995.
The Company also has porting and licensing agreements with HP and Sun
Microsystems, Inc. (Sun) to co-market versions of FileNET's document imaging and
workflow software products to users of those companies' products. Sales of the
HP based product commenced in December 1993 and the Sun based product in March
1995. In 1996, the Company became a Global Partner with HP's General Systems
Division. In September 1997, the company signed an IBM Market Development
Program Agreement with IBM's Solution Developer Marketing Alliance group to
become an IBM Business Partner.
The Company is a Certified Microsoft Solutions Developer and will continue to
develop and certify products for the Microsoft BackOffice computing environment.
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PRODUCTS
SOFTWARE
The following software products are currently being offered by the Company:
Integrated Document Management
In February 1998, the Company introduced the Panagon family of Integrated
Document Management (IDM) software that combines imaging, electronic document
management, and workflow into a unified architecture. The Panagon family of
products includes new desktop and web services software applications being
released by the Company for the first time and a rebranding of existing products
for client and server environments. With Panagon, the Company has created a
software infrastructure that allows companies to capture any type of document
electronically, then quickly and easily access, manage, and integrate the
information with their existing critical business applications throughout the
enterprise. Using Microsoft's Windows Explorer or web browsers familiar to most
business professionals, companies can search the entire enterprise network for
information, retrieve documents of all types, easily work with the information,
and then route it as needed for further review, processing, or decision making.
The new Panagon IDM Desktop range of products are built around Microsoft's
component software architecture (COM) and allow applications to be quickly and
easily developed and tailored to meet an organization's specific requirements.
Panagon IDM Desktop reduces the ongoing cost of ownership through the ability to
easily deploy applications on the Web or in a client/server environment. Cost of
ownership is also reduced through the use of rapid application development (RAD)
techniques and compatibility with industry-standard programming tools such as
Visual Basic, PowerBuilder and more. As a result, it takes less time to develop
customized IDM applications, less time to integrate the software components into
a company and less time to train users.
The Panagon family includes a complete suite of IDM software components that are
built to work together, eliminating integration issues when combining products
from different vendors. Panagon products include:
Panagon IDM Desktop and IDM Web Services are software applications that
offer best-of-class integrated document management for ad hoc query and
access or mission critical applications. Companies can access all
documents stored in enterprise libraries from within a Microsoft
Windows Explorer, Internet browser interface or via a custom
application integrated into line of business systems. Panagon IDM
Desktop delivers "out-of-the-box" integration with Microsoft Windows
environments and productivity applications such as Microsoft Office,
seamlessly managing and viewing more than 200 document formats. Once
located, users can create work processes to include others that need to
share, distribute, or approve, with the built-in workflow and
integrated e-mail features.
Panagon IDM Services is a server based integrated document management
solution incorporating imaging and document services for medium to
large business. IDM Services is the high performance repository system
that integrates with Panagon IDM Desktop and IDM Web Services for
managing all types of documents. IDM Services can be used as both an
imaging and document system together or as separate applications.
Panagon Visual WorkFlo is an enterprise-wide, scalable business process
automation solution that can be used to easily create applications that
reflect the way work processes are performed. It allows managers to
control and modify work processes to meet the needs of a dynamic
business environment, and integrates information flow between software
applications within a company's business processes. Panagon Visual
WorkFlo supports multiple client, server and applications development
environments and integrates with leading business process reengineering
products for reduced implementation time. The product features
object-oriented technology to enhance developer productivity through
reusability of applications and a wide variety of vertical and
horizontal solutions for out-of-the-box functionality.
Panagon Report Manager is a high-performance, client/server computer
output to laser disk (COLD) product that eliminates printing and
distributing computer-generated reports and statements. It
significantly lowers costs and inefficiencies by allowing companies to
index, store, retrieve, view, print, fax, and distribute
computer-generated output on magnetic or optical disk. Panagon Report
Manager is built around industry standards and has an intuitive,
easy-to-use graphical interface with report mining capabilities.
Panagon Capture is an enterprise document capture application that has
a complete set of highly configurable components for capturing
virtually all document types, scanned paper documents, fax, e-mail,
word processing documents, spreadsheets, HTML forms, audio and
video-clips, computer generated reports, and electronic data
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interchange (EDI) information-and making them immediately available to
users. Its modular components can be configured to meet simple capture
requirements in distributed environments or enterprise-wide capture
requirements for production operations.
The new Panagon family of products is available to new and existing
customers. New customers will receive the benefits of a more
comprehensive range of integrated document management functions as
opposed to acquiring separate document management technologies from
multiple vendors. Existing customers can deploy new IDM applications
independently or along side existing applications using FileNET
software. Existing customers wanting to take advantage of Panagon's
broader IDM capabilities for applications already deployed can recreate
the existing applications using the IDM development environment.
Document Imaging
FileNET Panagon WorkGroup(TM) software is a midrange document imaging and work
management product based on a subset of the Panagon IDM products combined with
certain prepackaged software applications.
Document Warehouse(TM) for SAP software is a document and data archiving
application certified by SAP, for use with the popular R/3 Enterprise Resource
Planning (ERP) application suite.
The Company's Watermark(R) software products enable users worldwide to exchange,
process and share scanned images, faxes and other electronic documents within
departments and workgroups of large enterprises and throughout midsize and small
business environments. Watermark documents and folders are easily integrated
into existing line-of-business applications and take advantage of the latest
Microsoft operating systems, database technologies and Internet capabilities.
The Watermark family consists of the following products:
Watermark Client software replaces document handling procedures with
integrated electronic processing of scanned images, faxes and other
electronic documents. The software provides easy-to-use tools for
document capturing, filing, viewing, annotation and OCR that
image-enable any OLE- or ODMA- compatible Windows application, such as
e-mail, databases and workflows.
Watermark Server software is used for organizing, storing and
optimizing shared network access to scanned documents, faxes and
electronic files. The software intelligently captures the business
rules governing document security, version control, migration and
storage through easy client-based administration and reporting tools
designed for Microsoft BackOffice.
Watermark DiskExtender software extends the document storage and
retrieval capacity of the Watermark Server by providing Windows NT
services to migrate documents to and from high-density optical media.
Watermark Fax Router software is a fax management solution that
streamlines inbound fax communications with customers, suppliers and
other business partners. The software delivers documents electronically
to the intended recipient and immediately routes for processing. Faxes
are securely managed side-by-side with all other business documents.
Watermark Developer's Toolkit software allows a developer to build
client/server and intranet applications by taking advantage of the full
power and range of Watermark functionality via OLE Objects and ActiveX
Controls specifically designed to simplify application building.
Workflow
Panagon Visual WorkFlo(R) software provides an open, flexible, component
software framework for workflow application development. This product enables
users and ValueNET(R) partners to automate business processes using
object-oriented programming technology, and supports standard tools such as C++,
Visual Basic, PowerBuilder, Microsoft Windows-compatible tools, and FileNET's
other WorkFlo products. All work management functions, including routing,
queuing, exception handling, and management control, are managed by Visual
WorkFlo using standard Windows interfaces and graphical tools.
FileNET Ensemble(TM) is a general purpose workflow tool introduced in 1996 that
automates a wide range of everyday business processes and is integrated with
Microsoft Exchange and Novell GroupWise to enhance these messaging (e-mail)
system products. FileNET markets this product through all of its direct and
indirect sales channels worldwide. Novell markets a version of this software
under the product name "GroupWise Workflow."
5
Electronic Document Management
The Company's electronic document management software products simplify the
management and maintenance of electronic documents and other unstructured
information, ensuring the right information is always available. Needed
information is readily accessible, providing total manageability and security.
Panagon IDM Document Services is a server software product that enables
electronic document management applications across large enterprise
LANs and WANs. It acts as a network librarian, simplifying the
management and maintenance of all files on the user's network.
@mezzanine(R) is a software product used to organize, protect and
maintain documents published on the World Wide Web. @mezzanine provides
improved organization and access methods to the Web browser and special
document management features such as version control, security and
archiving needed by the Web server.
COLD
The Company's Panagon Report Manager software product stores and retrieves
computer-generated reports to replace the use of printed reports and computer
output to microfiche. It also enables the user to search for specific
information located in one or more reports and extract the information to use
with popular desktop software applications. It is a client/server software
product running on servers using the Microsoft Windows NT Server operating
system and PC workstations running Microsoft Windows. It also integrates with
FileNET's IMS software product to provide large capacity archival storage
capabilities.
HARDWARE
The Company markets an optional integration service, offering customers the
option to purchase complete solutions, including industry standard hardware,
directly from FileNET. The Company also manufactures and markets an optical
storage and retrieval library (OSAR(R)) based on 12-inch optical disk storage
technology.
All named products mentioned in this Form 10-K, other than the Company's named
products, are trademarks or registered trademarks of the respective holder
RESEARCH AND DEVELOPMENT
The Company's research and development activities are focused on software
product development. Research and development expenditures were $39.6 million,
$36.5 million and $24.7 million for the years ended December 31, 1997, 1996, and
1995, respectively. The Company believes that its future success depends upon
its ability to continue to enhance its existing software products and to develop
new software products that satisfactorily meet market needs. Accordingly, the
Company intends to continue to make substantial investments in its research and
development activities.
BACKLOG
The Company typically ships its products within a short period of time after
acceptance of orders, which is common in the computer software industry. The
Company does not consider the level of backlog to be a significant or important
indicator of future revenue or earnings.
SERVICES, SUPPORT AND MANUFACTURING
The Company maintains service and support organizations that provide both
pre-sales and post-sales services in the United States and the foreign countries
where the Company has direct operations.
The Company's integration facilities in Costa Mesa, California and Dublin,
Ireland, conduct software manufacturing, integration, test and quality control.
The Company operates a Response Center in Costa Mesa to provide telephone
technical support to customers who have entered into support agreements with the
Company. The Company is in the process of opening an additional Response Center
in Dublin, Ireland and also plans to open a Response Center for the Asia Pacific
region in Singapore.
6
EMPLOYEES
As of December 31, 1997, the Company had 1,490 full-time employees of which 343
were employed in research and development; 924 in sales, marketing, professional
services and customer support; 131 in operations; and 92 in finance and
administration. Employees in the Company's German subsidiary are represented by
a labor union. No other employees are represented by labor unions, and the
Company has never experienced a work stoppage. The Company believes that it
enjoys good employee relations.
COMPETITION
The market for the Company's products is highly competitive. The Company's
principal competitors for its various product lines include the following
companies: 1) Workflow and document imaging-- Banctec, Inc., IBM, Keyfile,
Optika, Unisys Corporation, Mosaix, Eastman Software, a Kodak company, 2)
Electronic Document Management--Documentum, IBM, Interleaf, Novasoft, Novell,
Open Text, PC DOCS, and 3) COLD--Computron, IBM and Microbank. Numerous smaller
software vendors also compete in each product area. The Company also experiences
competition from systems integrators who configure hardware and software into
customized systems.
In addition, RDBMS vendors, such as Oracle, Sybase and Informix, may compete
with the Company in the future. Oracle has announced products that compete with
the Company's document management products. It is also possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. The Company also expects that competition will
increase as a result of software industry consolidations. See "Certain
Considerations - Competition" below.
PATENTS AND LICENSES
The Company holds three patents for its OSAR product which expire August 26,
2003, June 23, 2004 and August 4, 2004, respectively. The Company has also
entered into non-exclusive license arrangements with a number of organizations,
including IBM and Oracle, which permit the Company and its resellers to grant
sublicenses to end users of the Company's systems to use software developed by
these third-party vendors. See "Certain Considerations - Intellectual Property
and Other Proprietary Rights" below.
CERTAIN CONSIDERATIONS
This Annual Report on Form 10-K contains forward-looking statements that involve
risks and uncertainties, including those discussed in the Company's Annual
Report to Stockholders for the year ended December 31, 1997, certain sections of
which are incorporated herein by reference as set forth in Items 7 and 8 of this
report. The actual results that the Company achieves may differ materially from
any forward-looking statements, which reflect management's opinions only as of
the date hereof. The Company undertakes no obligation to revise or publicly
release the results of any revisions to these forward-looking statements.
Readers should carefully review the factors described below and in other
documents the Company files from time to time with the Securities and Exchange
Commission, including its 1997 Annual Report to Stockholders and the Quarterly
Reports on Form 10-Q to be filed by the Company in 1998.
Rapid Technological Change; Product Development The market for the
Company's products is characterized by rapid technological developments,
evolving industry standards, changes in customer requirements and frequent new
product introductions and enhancements. The Company's success will be dependent
upon its ability to enhance its existing products, develop and introduce, in a
timely manner, new products incorporating technological advances and respond to
customer requirements. Specifically, the Company has announced plans to deliver
a new range of desktop software products providing integrated document
management capability for existing and new users. To the extent one or more of
the Company's competitors introduce products that more fully address customer
requirements, the Company's business could be adversely affected. There can be
no assurance that the Company will be successful in developing and marketing
enhancements to its existing products or new products on a timely basis or that
any new or enhanced products will adequately address the changing needs of the
market-place. If the Company is unable to develop and introduce new products or
enhancements to existing products in a timely manner in response to changing
market conditions or customer requirements, the Company's business, financial
condition or results of operations could be adversely affected. From time to
time, the Company or its competitors may announce new products, capabilities or
technologies that have the potential to replace or shorten the life cycles of
the Company's existing products. There can be no assurance that such
announcements will not cause customers to delay their purchasing decisions in
anticipation of such products, resulting in a material adverse effect on the
Company's business, financial condition or results of operations.
Uncertainty of Future Operating Results; Fluctuations in Quarterly
Operating Results Future operating results will depend upon many factors,
including the demand for the Company's products, the effectiveness of the
Company's efforts to continue to integrate various products it has developed or
acquired through acquisition of others and to achieve the desired levels of
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sales from such product integration, the level of product and price competition,
the length of the Company's sales cycle, seasonality of individual customer
buying patterns, the size and timing of individual transactions, the delay or
deferral of customer implementations, the budget cycles of the Company's
customers, the timing of new product introductions and product enhancements by
the Company and its competitors, the mix of sales by products, services and
distribution channels, levels of international sales, acquisitions by
competitors, 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. Accordingly, the
Company's quarterly results are difficult to predict and revenues and net income
for any one quarter have in the past and may again fall significantly short of
anticipated levels. Additionally, a large percentage of orders for any one
quarter are usually received from customers very late in the quarter and, as a
result, the Company is not able to identify possible revenue and net income
shortfalls to any significant extent until the end of the quarter.
As a result of these factors, revenues and operating results for any
quarter are subject to variation and are not predictable with any significant
degree of accuracy. Therefore, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. Moreover, such
factors could cause the Company's operating results in a given quarter to be
below the expectations of public market analysts and investors and the price of
the Company's common stock could be materially adversely affected.
Competition The document imaging, workflow, computer output to laser
disk and document management software markets are highly competitive, and there
are certain competitors of the Company with substantially greater sales,
marketing, development and financial resources. The Company believes that the
competitive factors affecting the market for its products and services include
vendor and product reputation; product quality, performance and price; the
availability of products on multiple platforms; product scalability; product
integration with other enterprise applications; product functionality and
features; product ease of use; and the quality of customer support services and
training. The relative importance of each of these factors depends upon the
specific customer involved. While the Company believes it competes favorably in
each of these areas, there can be no assurance that it will continue to do so.
Moreover, the Company's present or future competitors may be able to develop
products comparable or superior to those offered by the Company, offer lower
price products or adapt more quickly than the Company to new technologies or
evolving customer requirements. Competition is expected to intensify. In order
to be successful in the future, the Company must respond to technological
change, customer requirements and competitors' current products and innovations.
There can be no assurance that the Company will be able to continue to compete
effectively in its market or that future competition will not have a material
adverse effect on its business, financial condition or results of operations. 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 markets served by the
Company. 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, financial condition or results of operations.
Intellectual Property and Other Proprietary Rights The Company's
success depends, in part, on its ability to protect its proprietary rights to
the technologies used in its principal products. The Company relies on a
combination of copyrights, trademarks, trade secrets, confidentiality procedures
and contractual provisions to protect its proprietary rights. There can be no
assurance that the Company's existing or future copyrights, trademarks, trade
secrets or other intellectual property rights will be of sufficient scope or
strength to provide meaningful protection or commercial advantage to the
Company. FileNET has no software patents. Also, in selling certain of its
products, the Company relies on "shrink wrap" licenses that are not signed by
licensees and, therefore, may be unenforceable under the laws of certain
jurisdictions. In addition, the laws of some foreign countries do not protect
the Company's proprietary rights to the same extent as do the laws of the United
States. There can be no assurance that such factors would not have a material
adverse effect on the Company's business, financial condition or results of
operations. In addition, the Company also relies on certain software that it
licenses from third parties, including software that is integrated with
internally developed software used in the Company's products to perform key
functions. There can be no assurance that such third parties will remain in
business, that they will continue to support their products, that their products
are, or will be, year 2000 compliant, 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 theses software licenses could result in
delays or reductions in product shipments until equivalent software can be
developed, identified, licensed and integrated, any of which could adversely
affect the Company's business, financial condition or results of operations.
The Company may, from time to time, be notified that it is infringing
certain patent or intellectual property rights of others. Combinations of
technology acquired through past or future acquisitions and the Company's
technology will create new products and technology that may give rise to claims
of infringement. While no actions other than those discussed below are currently
pending against the Company for infringement of patent or other proprietary
rights of third parties, there can be no assurance that third parties will not
initiate infringement actions against the Company in the future. Infringement
actions can result in substantial cost to, and diversion of, resources of the
Company. If the Company were found to infringe upon the rights of others, no
assurance can be given that licenses would be obtainable on acceptable terms or
8
at all, that significant damages for past infringement would not be assessed or
that further litigation relative to any such licenses or usage would not occur.
The failure to successfully defend any claims or obtain necessary licenses or
other rights, the ultimate disposition of any claims or the advent of litigation
arising out of any claims of infringement, could have a material adverse effect
on the Company's business, financial condition or results of operations.
In October 1994, Wang Laboratories, Inc. (Wang) filed a complaint in
the United States District Court for the District of Massachusetts alleging that
the Company is infringing five patents held by Wang (the FileNET Case). On June
23, 1995, Wang amended its complaint to include an additional related patent. On
July 2, 1996, Wang filed a complaint in the same court alleging that Watermark
Software Inc., formerly a wholly owned subsidiary that was merged into the
Company, is infringing three of the same patents asserted in the initial
complaint (the Watermark Case). On October 9, 1996, Wang withdrew its claim in
the FileNET Case that one of the patents it initially asserted is infringed by
the Company's products that were commercialized before the initial complaint was
filed. Wang reserved the right to assert that patent against the Company's
products commercialized after that date in a separate lawsuit.
In March 1997, Eastman Kodak Company (Kodak) purchased the Wang imaging
business unit that has responsibility for this litigation. The patents in the
suit have been transferred to a Kodak subsidiary, Kodak Limited of England,
which, in turn, has exclusively licensed them to another Kodak subsidiary,
Eastman Software, Inc. in the United States (Eastman). On July 30, 1997, the
Court permitted Eastman and Kodak Limited of England to be substituted in the
litigation in place of Wang.
FileNET has moved for summary judgement on noninfringement as to each
of the five patents in the suit, and for summary judgment of invalidity as to
one of the patents. Eastman moved for summary judgment as to FileNET's
unenforceability defense on one of the patents. A trial date has not been set.
If it should be determined that the patents at issue in the litigation
are valid and are infringed by any of the Company's products, including
Watermark products, the Company will, depending on the product, redesign the
infringing products or seek to obtain a license to market the products. There
can be no assurance that the Company will be able to obtain such a license on
acceptable terms. Based on the Company's analysis of these Eastman patents and
their respective file histories, the Company believes that it has meritorious
defenses to Eastman's claims; however, the ultimate outcome or any resulting
potential loss cannot be determined at this time.
Dependence on Certain Relationships The Company has entered into a
number of co-marketing relationships with other companies such as Microsoft
Corporation, Compaq Computer Corporation, SAP AG, HP and Sun Microsystems, Inc.
There can be no assurance that these companies will not reduce or discontinue
their relationships with, or support of, the Company and its products.
Dependence on Key Management and Technical Personnel The Company's
success depends to a significant degree upon the continued contributions of its
key management, marketing, technical and operational personnel. In general, the
Company does not utilize employment agreements for its key employees. The loss
of the services of one or more key employees could have a material adverse
effect on the Company's operating results. The Company also believes its future
success will depend in large part upon its ability to attract and retain
additional highly skilled management, technical, marketing, product development
and operational personnel. Competition for such personnel, particularly
engineers and other technical personnel, is intense, and there can be no
assurance that the Company will be successful in attracting and retaining such
personnel. In addition, the Company may experience increased compensation costs
in order to attract and retain skilled personnel.
International Sales Historically, the Company has derived more than 30%
of its total revenues from international sales. Six percent of the Company's
1997 revenues were generated in the Asia-Pacific region (including 4% in
Australia). International business is subject to certain risks including varying
technical standards, tariffs and trade barriers, political and economic
instability, reduced protection for intellectual property rights in certain
countries, difficulties in staffing and maintaining foreign operations,
difficulties in managing foreign distributors, potentially adverse tax
consequences, currency exchange fluctuations, the burden of complying with a
wide variety of complex operations, foreign laws, regulations and treaties, and
the possibility of difficulties in collecting accounts receivable. In
particular, the current economic crisis in the Asia Pacific region may limit
future growth or cause a decline in international revenues. There can be no
assurance that any of these factors will not have a material adverse effect on
the Company's business, financial condition or results of operations.
Product Liability Products as complex as those sold by the Company are
susceptible to errors or failures, especially when first introduced or when new
versions are released. The Company's products are often intended for use in
applications that are critical to a customer's business. As a result, the
Company's customers may rely on the effective performance of the software to a
greater extent than the market for software products generally. The Company
conducts extensive product testing to ensure that its products are free of
significant errors and defects. In addition, the Company has designed and tested
the most current versions of its products to be year 2000 compliant. However,
some of the Company's customers are running earlier product versions that are
9
not year 2000 compliant. Although the Company has been encouraging such
customers to migrate to current product versions, no assurance can be given that
all of them will do so in a timely fashion, if at all. Moreover, the Company
also relies on certain software that it licenses from third parties, including
software that is integrated with internally developed software and is used in
the Company's products to perform key functions. There can be no assurance that
such third-party software will be free of errors and defects or be year 2000
compliant in a timely fashion. Although the Company has not experienced any
material product liability claims to date, there can be no assurance that errors
or defects, whether associated with year 2000 functions or otherwise, will not
result in product liability claims against the Company in the future. The
Company's license agreements with customers typically contain provisions
designed to limit the Company's exposure to potential product liability claims;
however, it is possible that such limitation of liability pro-visions may not be
effective under the laws of certain jurisdictions. Defective products or
releases could result in loss of revenues, increased service and warranty costs
and product liability claims, and could adversely affect the Company's market
penetration and reputation, any of which could have a material adverse effect on
the Company's business, financial condition and results of operations.
Stock Price Volatility The Company believes that a variety of factors
could cause the price of its common stock to fluctuate, perhaps substantially,
including quarter-to-quarter variations in operating results; announcements of
developments related to its business; fluctuations in its order levels; general
conditions in the technology sector or the worldwide economy; announcements of
technological innovations, new products or product enhancements by the Company
or its competitors; key management changes; changes in joint marketing and
development pro-grams; developments relating to patents or other intellectual
property rights or disputes; and developments in the Company's relationships
with its customers, distributors and suppliers. In addition, in recent years,
the stock market in general, and the market for shares of high-technology stocks
in particular, has experienced extreme price fluctuations which have often been
unrelated to the operating performance of affected companies. Such fluctuations
could adversely affect the market price of the Company's common stock.
Item 2. Properties
The Company currently leases 250,000 square feet of office, development and
manufacturing space in Costa Mesa, California and 42,000 square feet of office
and development space in Bellevue, Washington. The Company also leases sales and
support offices in 34 locations in the United States, 13 in Europe, 3 in
Australia, 3 in Canada, and 4 in Asia. The Company believes that the Costa Mesa
and Bellevue facilities will be adequate for the Company's anticipated needs
through 1998.
Item 3. Legal Proceedings
In October 1994, Wang Laboratories, Inc. (Wang) filed a complaint in
the United States District Court for the District of Massachusetts alleging that
the Company is infringing five patents held by Wang (the FileNET Case). On June
23, 1995, Wang amended its complaint to include an additional related patent. On
July 2, 1996, Wang filed a complaint in the same court alleging that Watermark,
formerly a wholly-owned subsidiary that was merged into the Company, is
infringing three of the same patents asserted in the initial complaint (the
Watermark Case). On October 9, 1996, Wang withdrew its claim in the FileNET Case
that one of the patents it initially asserted is infringed by the Company's
products that were commercialized before the initial complaint was filed. Wang
reserved the right to assert that patent against the Company's products
commercialized after that date in a separate lawsuit.
In March 1997, Eastman Kodak Company (Kodak) purchased the Wang imaging
business unit that has responsibility for this litigation. The patents in the
suit have been transferred to a Kodak subsidiary, Kodak Limited of England,
which, in turn, has exclusively licensed them to another Kodak subsidiary,
Eastman Software, Inc. in the United States (Eastman). On July 30, 1997, the
Court permitted Eastman and Kodak Limited of England to be substituted in the
litigation in place of Wang.
FileNET has moved for summary judgement on noninfringement as to each
of the five patents in the suit, and for summary judgment of invalidity as to
one of the patents. Eastman moved for summary judgment as to FileNET's
unenforceability defense on one of the patents. A trial date has not been set.
If it should be determined that the patents at issue in the litigation
are valid and are infringed by any of the Company's products, including
Watermark products, the Company will, depending on the product, redesign the
infringing products or seek to obtain a license to market the products. There
can be no assurance that the Company will be able to obtain such a license on
acceptable terms. Based on the Company's analysis of these Eastman patents and
their respective file histories, the Company believes that it has meritorious
defenses to Eastman's claims; however, the ultimate outcome or any resulting
potential loss cannot be determined at this time.
On December 20, 1996, plaintiff Michael I. Goldman (the Plaintiff) filed a
class action complaint against the Company and certain of its officers and
directors in the Superior Court of California, County of Orange (the State
10
Action). The action was purportedly filed on behalf of a class of purchasers of
the Company's common stock during the period October 19, 1995 through July 2,
1996. The Plaintiff alleges that the Company and other defendants violated Cal.
Corp. Code ss.ss. 25400 and 25500, Cal. Civ. Code ss.ss. 1709-1710 and Cal. Bus.
& Prof. Code ss.ss. 17200 et seq. in connection with various public statements
made by the Company and certain of its officers and directors during the
putative class period. The complaint seeks unspecified compensatory and punitive
damages, interest, payment of attorney's fees and costs, and equitable or
injunctive relief.
On April 1, 1997, The Plaintiff filed another class action complaint
against the Company and certain of its officers and directors in the United
States District Court for the Central District of California (the Federal
Action). The action purportedly was filed on behalf of the same class of
purchasers of the Company's common stock as the State Action. The allegations
contained in the Federal Action are very similar to the allegations contained in
the State Action, except that the Federal Action asserts claims under Sections
10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5. The complaint
seeks unspecified compensatory damages, interest, attorneys' fees, expert
witness fees, costs and equitable or injunctive relief. On July 2, 1997, the
court granted plaintiff's motion to be appointed "lead plaintiff" under the
Private Securities Litigation Reform Act.
In the Federal Action, defendants have filed a motion to dismiss the
complaint in its entirety. Plaintiff has filed a motion to stay the Federal
Action, in light of the parallel State Action. The court is scheduled to hear
both of these motions during April 1998.
In the State Action, defendants moved to stay the action, in light of the
parallel Federal Action. The trial court granted the motion to stay the action
as to discovery on September 8, 1997. Defendants also demurred and moved to
strike the complaint. The trial court overruled the demurrer and denied the
motion to strike on October 21, 1997. On January 14, 1998, the court entered an
order dismissing with prejudice two of plaintiff's three causes of action: the
claims under Cal. Civ. Code ss.ss. 1709-1710 and Cal. Bus. & Prof. Code ss.ss.
17200 et seq.
On January 30, 1998, the trial court in the State Action granted the
Plaintiff's motion to certify a class composed of persons who bought FileNET
stock in California only between October 19, 1995 and July 2, 1996. This ruling
is subject to revision based on the decisions to be rendered by the California
Supreme Court in Diamond Multimedia Systems, et al. v. Superior Court (Pass) and
StorMedia, Inc., et al. v. Superior Court (Werczberger). The trial court also
denied the Plaintiff's motion to lift the discovery stay.
The Company believes that all of the allegations contained in the
complaints filed in the State and Federal Actions are without merit and intends
to defend the actions vigorously.
The Company, in the normal course of business, is subject to various
other legal matters. While the results of litigation and claims cannot be
predicted with certainty, the Company believes that the final outcome of these
other matters will not have a materially adverse effect on the Company's
consolidated results of operations or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
There is hereby incorporated herein by reference the information appearing
under the caption "Stock Market and Dividend Information," which appears on page
42 of the Registrant's Annual Report to Stockholders for the year ended December
31, 1997 and is filed herewith as Exhibit 13.1.
11
Item 6. Selected Financial Data
The following table summarizes certain selected financial data:
For Fiscal Years Ended
--------------------------------------------------------------------------------------
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Jan. 1, 1995 Jan. 2, 1994
(1997) (1996) (1995) (1994) (1993)
-------------- --------------- ---------------- ------------- -------------
(In thousands, except per share amounts)
Consolidated statements of operations data:
Revenue:
Software revenue $132,723 $140,659 $116,052 $ 81,102 $ 54,067
Service revenue 89,280 82,118 67,174 60,753 60,933
Hardware revenue 29,422 46,136 46,152 50,480 51,410
------------ ---------- ---------- ---------- ----------
Total revenue 251,425 268,913 229,378 192,335 166,410
Costs and expenses:
Cost of software revenue 14,768 16,464 15,146 12,472 7,831
Cost of service revenue 56,503 53,568 44,277 41,645 42,812
Cost of hardware revenue 20,330 29,633 28,800 30,999 34,116
Research and development 39,575 36,502 24,711 18,274 15,247
Selling, general and administrative 125,122 117,761 96,499 71,267 61,711
Merger, restructuring, write-off of
purchased in-process research and
development and other costs 6,000 16,011 6,393 0 0
------------ ---------- ---------- ---------- ----------
Total costs and expenses 262,298 269,939 215,826 174,657 161,717
------------ ---------- ---------- ---------- ----------
Operating income (loss) (10,873) (1,026) 13,552 17,678 4,693
Other income, net 3,160 2,838 2,780 1,821 333
------------- ---------- ---------- ---------- ----------
Income (loss) before income taxes (7,713) 1,812 16,332 19,499 5,026
Provision (benefit) for income taxes (2,187) 4,456 8,116 5,356 4,760
------------- ----------- ---------- ----------- ----------
Net income (loss) $ (5,526) $ (2,644) $ 8,216 $ 14,143 $ 266
============= =========== ========== =========== ==========
Basic earnings (loss) per share $ (0.36) $ (0.18) $ 0.57 $ 1.04 $ 0.02
Diluted earnings (loss) per share $ (0.36) $ (0.18) $ 0.52 $ 0.95 $ 0.02
Weighted average shares outstanding - basic
15,155 15,007 14,430 13,661 12,567
Weighted average shares outstanding -
diluted 15,155 15,007 15,856 14,834 13,178
Consolidated balance sheet data:
Working capital $ 82,887 $ 89,339 $ 86,354 $ 63,149 $ 47,819
Total assets 179,870 195,679 189,682 152,642 124,986
Long-term debt, excluding current portion 163
Stockholders' equity 118,811 132,806 131,158 101,006 78,383
Certain reclassifications have been made to the prior years' selected
financial data to conform with the current year's presentation.
12
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
There is hereby incorporated herein by reference the information appearing under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which appears on pages 18 through 24 of the Registrant's
Annual Report to Stockholders for the year ended December 31, 1997 and is filed
herewith as Exhibit 13.2.
Item 8. Financial Statements and Supplementary Data
There is hereby incorporated herein by reference the information appearing on
pages 25 through 40 of the Registrant's Annual Report to Stockholders for the
year ended December 31, 1997 and is filed herewith as Exhibit 13.3. The
accompanying Independent Auditors' Report is also incorporated herein by
reference and filed herewith as Exhibit 13.3.
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
There is hereby incorporated herein by reference the information appearing under
the caption "Election of Directors," under the caption "Executive Officers of
the Company," and under the caption "Compliance with Securities Laws" of the
Registrant's definitive Proxy Statement for its 1998 Annual Meeting to be filed
with the Securities and Exchange Commission.
Item 11. Executive Compensation
There is hereby incorporated herein by reference the information appearing under
the caption "Executive Compensation" and under the caption "Election of
Directors" of the Registrant's definitive Proxy Statement for its 1998 Annual
Meeting to be filed with the Securities and Exchange Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management
There is hereby incorporated herein by reference the information appearing under
the caption "Voting Securities and Principal Holders Thereof" of the
Registrant's definitive Proxy Statement for its 1998 Annual Meeting to be filed
with the Securities and Exchange Commission.
Item 13. Certain Relationships and Related Transactions
There is hereby incorporated herein by reference the information appearing under
the caption "Note 12: Related Party Transactions," which appears on page 39 of
the Registrant's Annual Report to Stockholders for the year ended December 31,
1997 and is filed herewith as Exhibit 13.4.
13
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) Financial statements
1. The list of financial statements contained in the accompanying
Index to Consolidated Financial Statements covered by the
Independent Auditors' Report is herein incorporated by
reference.
2. Financial statement schedule
The listed financial statement schedule contained in the
accompanying Index to Consolidated Financial Statements
covered by the Independent Auditors' Report is herein
incorporated by reference.
3. Exhibits
The list of exhibits contained in the accompanying Index to
Exhibits is herein incorporated by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1997.
Index to Consolidated Financial Statements Covered
by Independent Auditors' Report
Item 14(a) (1) and (2)
Page Reference
--------------------------
1997 Annual
Report to
Form 10-K Stockholders
The information under the following captions, which is included in the 1997
Annual Report to Stockholders, is incorporated herein by reference:
Independent Auditors' Report 40
Consolidated balance sheets at December 31, 1997 and December 31, 1996 25
Consolidated statements of operations for each of the years ended December
31, 1997, 1996 and 1995 26
Consolidated statements of stockholders' equity for each of the years ended
December 31, 1997, 1996 and 1995 27
Consolidated statements of cash flows for each of the years ended December
31, 1997, 1996 and 1995 28
Notes to consolidated financial statements 29
Independent Auditors' Report on Schedule 15
Schedule for each of the three years ended December 31, 1997, 1996
and 1995
II. Valuation and qualifying accounts and reserves 16
14
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Stockholders and the Board of Directors
FileNET Corporation
Costa Mesa, California
We have audited the consolidated financial statements of FileNET Corporation and
its subsidiaries as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997, and have issued our report thereon
dated February 3, 1998. Such consolidated financial statements and report are
included in your 1997 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of
FileNET Corporation and its subsidiaries, listed in Item 14. The consolidated
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
February 3, 1998
Costa Mesa, California
15
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
($ in thousands)
Balance at Additions -
Beginning of Charged to Costs Balance at End
Description Period and Expenses Deductions of Period
- ----------------------------------------- ---------------- -------------------- --------------- ----------------
Year ended December 31, 1997:
Inventory reserves $ 660 $ 380 $ 710 (1) $ 330
Allowance for doubtful accounts 2,140 350 800 (2) 1,690
Reserve for returned systems 3,185 460 (3) 2,725
Year ended December 31, 1996:
Inventory reserves 573 635 548 (1) 660
Allowance for doubtful accounts 1,540 1,205 605 (2) 2,140
Reserve for returned systems 3,153 32 3,185
Year ended December 31, 1995:
Inventory reserves 651 482 560 (1) 573
Allowance for doubtful accounts 731 857 48 (2) 1,540
Reserve for returned systems 2,747 869 463 (3) 3,153
- --------------------------
(1) Consists primarily of the write-off of excess/obsolete inventories.
(2) Consists primarily of uncollectible invoice amounts.
(3) Consists primarily of returned systems.
16
Index to Exhibits
Exhibit
No. Description
- ----- ----------------------------------------------------------------------
3.1* Restated Certificate of Incorporation, as amended(filed as Exhibit 3.1
to Form S-4 filed on January 26, 1996; Registration No.333-00676).
3.1.1* Certificate of Amendment of Restated Certificate of Incorporation
(filed as Exhibit 3.1.1 to Form S-4 filed on January 26, 1996,
Registration No. 333-00676).
3.2* Bylaws (filed as Exhibit 3.2 of the Registrant's registration
statement on Form S-1, Registration No. 33-15004 (the "Form S-1")).
4.1* Form of certificate evidencing Common Stock (filed as Exhibit 4.1 to
the Form S-1, Registration No. 33-15004).
4.2* Rights Agreement, dated as of November 4, 1988 between FileNET
Corporation and the First National Bank of Boston, which includes
the form of Rights Certificate as Exhibit A and the Summary of
Rights to Purchase Common Shares as Exhibit B (filed as Exhibit 4.2
to Form S-4 filed on January 26, 1996; Registration No. 333-00676).
10.1* Second Amended and Restated Credit Agreement (Multicurrency) by and
among the Registrant and Bank of America National Trust and Savings
Association dated June 25, 1997, effective June 1, 1997 (filed as
Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 1997).
10.2* Business Alliance Program Agreement between the Registrant and Oracle
Corporation dated July 1, 1996, as amended by Amendment One thereto
(filed as Exhibit 10.4 to Form 10-QA for the quarter ended June 30,
1996).
10.3* Runtime Sublicense Addendum between the Registrant and Oracle
Corporation dated July 1, 1996, as amended by Amendment One thereto
(filed as Exhibit 10.4 to Form 10-QA for the quarter ended June 30,
1996).
10.4* Full Use and Deployment Sublicense Addendum between the Registrant and
Oracle Corporation dated July 1, 1996, as amended by Amendment One
thereto (filed as Exhibit 10.4 to Form 10-QA for the quarter ended
June 30, 1996).
10.5* Lease between the Registrant and C. J. Segerstrom & Sons for the
headquarters of the Company, dated April 30, 1987 (filed as Exhibit
10.19 to the Form S-1).
10.6* Third Amendment to the Lease between the Registrant and C.J.
Segerstrom & Sons dated April 30, 1987, for additional facilities at
the headquarters of the Company, dated October 1, 1992 (filed as
exhibit 10.7 to Form 10-K filed on April 4, 1997).
10.7* Fifth Amendment to the Lease between the Registrant and C.J.Segerstrom
& Sons dated April 30, 1987, for the extension of the term of the
lease, dated March 28, 1997 (filed as exhibit 10.8 to Form 10-Q for
the quarter ended March 31, 1997).
10.8* 1989 Stock Option Plan for Non-Employee Directors of FileNET
Corporation, as amended by the First Amendment, Second Amendment,
Third Amendment thereto (filed as Exhibit 10.9 to Form S-4 filed on
January 26, 1996; Registration No. 333-00676).
10.9* Amended and Restated 1995 Stock Option Plan of FileNET Corporation as
approved by stockholders at the Registrant's Annual Meeting on May 8,
1996 (filed as Exhibit 99.1 to Form S-8 filed on July 29, 1996).
10.10* Second Amended and Restated Stock Option Plan of FileNET Corporation,
together with the forms of Incentive Stock Option Agreement and
Non-Qualified Stock Option Agreements (filed as Exhibits 4(a), 4(b)and
4(c), respectively, to the Registrant's Registration Statement on Form
S-8, Registration No. 33-48499), and an Amendment thereto (filed as
Exhibit 4(d) to the Registrant's Registration Statement on Form S-8,
Registration No. 33-69920), and the Second Amendment thereto (filed as
Appendix A to the Registrant's Proxy Statement for the Registrant's
1994 Annual Meeting of Stockholders, filed on April 29, 1994).
- --------------------------------------------
* Incorporated herein by reference
17
Exhibit
No. Description
- -------- ----------------------------------------------------------------------
10.11* Non-Statutory Stock Option Agreement (with Notice of Grant of Stock
Option and Special Addendum) between Registrant and Mr. Lee Roberts
(filed as exhibit 99.17 to Form S-8 on August 20, 1997).
10.12* Non-Statutory Stock Option Agreement (with Notice of Grant of Stock
Option and Special Addendum) between Registrant and Mr. Ron Ercanbrack
(filed as exhibit 99.19 to Form S-8 on August 20, 1997).
10.13* Agreement for the Purchase of IBM products dated December 20, 1991
(filed on May 5, 1992 with the Form 8 amending the Company's Form 10-K
for the fiscal year ended December 31, 1991).
10.14* Amendment #A1011-941003-01 dated September 30, 1994, to the Agreement
for the Purchase of IBM products dated December 20, 1991 (filed as
exhibit 10.12 to form 10-K for the fiscal year ended December 31,
1996).
10.15* Development and Initial Supply Agreement between the Registrant and
Quintar Company dated August 20, 1992 (filed as Exhibit 10.21 to Form
10-K for the year ended January 3, 1993).
10.16* Amendment dated December 22, 1992 to the Development and Initial
Supply Agreement between the Registrant and Quintar Company dated
August 20, 1992 (filed as Exhibit 10.22 to Form 10-K for the year
ended January 3, 1993).
10.17* Product License Agreement between the Registrant and Novell, Inc.
dated May 16, 1995 (filed as Exhibit 10.26 to Form 10-Q for the
quarter ended July 2, 1995).
10.18* Agreement and Plan of Merger between the Registrant and Watermark
Software Inc. dated July 18, 1995 (filed as Exhibit 10.27 to Form 10-Q
for the quarter ended July 2, 1995).
10.19* Agreement and Plan of Merger between the Registrant and Saros
Corporation, as amended, dated January 17, 1996 (filed as Exhibits
2.1, 2.2, 2.3, and 2.4 to Form 8-K on March 13, 1996).
10.20* Stock Purchase Agreement by and Among FileNET Corporation, IFS
Acquisition Corporation, Jawaid Khan and Juergen Goersch dated January
17, 1996 and Amendment 1 to Stock Purchase Agreement dated January 30,
1996 (filed as Exhibit 10.2 to form 10-K for the year ended December
31, 1995).
13.1 Market for the Registrant's Common Stock and Related Stockholder
Matters incorporated by reference to page 42 of the 1997 Annual
Report.
13.2 Management's Discussion and Analysis of Financial Condition and
Results of Operations incorporated by reference to pages 18 through 24
of the 1997 Annual Report.
13.3 Financial Statements incorporated by reference to pages 25 through 40
of the 1997 Annual Report.
13.4 Certain Relationships and Related Transactions incorporated by
reference to page 12 of the 1997 Annual Report.
21.1 List of subsidiaries of Registrant (filed as FileNET Corporation
Subsidiary Information). 23.1 Consent of Deloitte & Touche LLP
(filed as Independent Auditors' Consent).
27 Financial Data Schedule.
- ---------------------------------------------
* Incorporated herein by reference
18
Signatures
Pursuant to the requirements 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.
FILENET CORPORATION
Date: March 30, 1998 By: /s/ T. J. Smith
------- -----------------------------------
T. J. Smith
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: March 30, 1998 By: /s/ T. J. Smith
------- --------------------------------------
T. J. Smith
Chief Executive Officer
(Principal Executive Officer)
Director
Date: March 30, 1998 By: /s/ Lee D. Roberts
------- -------------------------------------
Lee D. Roberts
President and
Chief Operating Officer
Date: March 30, 1998 By: /s/ Mark S. St. Clare
------- -------------------------------------
Mark S. St. Clare
Chief Financial Officer and
Sr. Vice President, Finance
(Principal Financial Officer)
Date: March 30, 1998 By: /s/ Lee M. Kim
------- -------------------------------------
Lee M. Kim
Controller and
Chief Accounting Officer
Date: March 30, 1998 By: /s/ Frederick K. Fluegel
------- -------------------------------------
Frederick K. Fluegel
Director
Date: March 30, 1998 By: /s/ John C. Savage
------- -------------------------------------
John C. Savage
Director
Date: March 30, 1998 By: /s/ William P. Lyons
------- -------------------------------------
William P. Lyons
Director
19