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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, 1998
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 of (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 22, 1999, the aggregate market value of
the 31,623,336 shares of voting stock of the Registrant held by nonaffiliates of
the Registrant on such date was $243,183,454. 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 31,934,143
at March 22, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive proxy statement for its 1999 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, 1998 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, 1998
INDEX
Page
PART I
Item 1. Business...............................................................3
Item 2. Properties.............................................................9
Item 3. Legal Proceedings......................................................9
Item 4. Submission of Matters to a Vote of Security Holders............. .....10
PART II
Item 5. Market for the Registrant's Common Stock and Related .................11
Stockholder Matters
Item 6. Selected Financial Data...............................................11
Item 7. Management's Discussion and Analysis of Financial Condition ..........12
and Results of Operations
Item 8. Financial Statements and Supplementary Data...........................12
Item 9. Changes in and Disagreements with Accountants on Accounting ..........12
and Financial Matters
PART III
Item 10. Directors and Executive Officers of the Registrant...................12
Item 11. Executive Compensation...............................................12
Item 12. Security Ownership of Certain Beneficial Owners and Management.......12
Item 13. Certain Relationships and Related Transactions.......................12
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K......13
Signatures....................................................................18
2
PART I
Item 1. Business
GENERAL
FileNET Corporation (FileNET or the Company) develops, markets and services a
family of Integrated Document Management (IDM) software products that provide
solutions for managing unstructured information thereby enhancing an
enterprise's productivity. The Company also offers professional services
relative to the implementation of these products. FileNET's Panagon(TM) software
allows users to access, edit, process, organize, secure, store and archive
documents in client/server and Web-based environments. Additionally, the Company
manufactures and sells a line of 12-inch optical storage and retrieval libraries
(OSARs(R)).
MARKETS AND APPLICATIONS
The Company offers a family of complementary products under the brand name
Panagon, which enable users to manage, on an enterprise-wide basis, the storage,
processing and workflow of documents and other unstructured information that are
part of a centralized or distributed server repository or Web site, including
scanned images, faxes, text, spreadsheets, HTML pages, graphics, drawings,
photographs, computer output reports, voice, and video. The Company's products
provide both client/server-based and Web-centric document management
architecture solutions that can be implemented on a modular basis. Organizations
can choose one, some, or all of the Company's products to build the solution
that most effectively meets their needs. The Company's customers are typically
those enterprises that 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, customer relationship management, enterprise resource
planning, insurance claims processing, regulatory compliance, accounts payable
and receivable, and Web-based document management. 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 SAP R/3.
The Company markets its products in more than 70 countries through a direct
sales force and its ValueNET(R) partner community consisting of systems
integrators, value-added resellers and distributors. More than 350 firms,
operate as third-party resellers under the Company's ValueNET 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 Law Cypress, and MicroAge Image Choice are distributors of the
Company's software products selling to resellers throughout North America. The
Company also has OEM agreements with other firms involving the Company's
software products.
The Company's Customer Support operating segment offers software maintenance
service for its products worldwide. The Company's Professional Services
operating segment offers implementation and other technical consulting services
to both end-users of the Company's products and to resellers. Professional
Services are marketed by the Company's direct sales force and its resellers.
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 IDM software. The
Panagon family of products includes new desktop and Web services software and a
rebranding of then-existing server based products. With Panagon, the Company
created a software infrastructure that allows customers to capture any type of
document electronically, then access, manage, publish and integrate the
information with their existing critical business applications throughout the
enterprise. Using Microsoft's Windows Explorer or Netscape, customers can search
the enterprise network for information, retrieve documents of all types, work
with the information, and then route it as needed for further review,
processing, or decision making.
The Panagon IDM Desktop products are built around Microsoft's component software
architecture (COM) and allow applications to be developed and tailored to meet
an organization's business requirements. Panagon IDM Desktop reduces the cost of
ownership through the ability to 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
Java. As a result, it takes less time to develop customized IDM applications,
less time to integrate the software components and deploy across the enterprise,
and less time to train users.
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The Panagon family includes a complete suite of IDM software components that are
built to work together, eliminating integration issues competitors have when
combining products from different vendors. Panagon products include:
Panagon IDM Desktop (Thick Client) and Panagon IDM Web Services (Thin
Client) are software applications that offer best-of-class integrated
document management for ad hoc query and access, or mission-critical
applications. Customers can access all documents stored in enterprise
libraries from within an 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. 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 IDM solution incorporating
Panagon IDM Image Services and Panagon Document Services technologies.
This is the high-performance repository system that integrates with
Panagon IDM Desktop and Panagon IDM Web Services for managing all types
of documents. Panagon IDM Services can be used as both an imaging and
document system together or as separate applications.
Panagon Visual WorkFlo(R) is an object-oriented, enterprise-wide,
scaleable business process automation solution that can be used to
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 such as Java and integrates with
leading business process reengineering products for reduced
implementation time.
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,
graphical user 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, audio and video-clips,
and images 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.
Panagon 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.
Panagon Web Publisher simplifies and automates Web publishing
operations for Internet, intranet, and extranet Web sites. It
eliminates virtually all HTML hand coding, dramatically reducing
workloads for Web masters, Information Technology (IT) staff, and Web
publishers. It automatically updates entire Web sites and on-line
compound documents with no manual intervention, avoids problems with
broken links, and virtually eliminates out-of-date Web documents. Web
Publisher can be further extended using Microsoft Active Server Pages
(ASPs) to deliver customized Web applications. Panagon Web Publisher is
an advanced Web publishing solution that leverages FileNET's IDM
software.
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 pre-packaged software applications.
4
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 integrated into existing line-of-business applications and
take advantage of the latest Microsoft operating systems and database
technologies.
The Panagon family of products is available to new and existing
customers. New customers will receive the benefits of integrated
document and image management functions as opposed to separate
solutions offered by competitors. Existing customers can deploy new
IDM applications independently or along-side existing applications
that were created with FileNET's legacy software. Existing customers
choosing to take advantage of Panagon's broader IDM capabilities for
applications already deployed can recreate the existing applications
using the IDM development environment.
HARDWARE
The Company manufactures and markets an OSAR product based on 12-inch optical
disk storage technology and also offers optional integration services providing
customers the ability to purchase complete solutions.
All named products mentioned in this Form 10-K, other than the Company's named
products, may reference trademarks or registered trademarks owned by the
respective holder.
RESEARCH AND DEVELOPMENT
The Company's research and development activities are focused on software
product development. Research and development expenditures were $50.1 million,
$40.9 million and $37.6 million for the years ended December 31, 1998, 1997, and
1996, 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 on a worldwide basis.
The Company's Customer Support segment provides software maintenance and
technical support services to customers and resellers who have contracted for
such services. This service is provided through telephone response centers in
Costa Mesa, California; Dublin, Ireland; Sydney, Australia; and Singapore, or
through on-site visits to customer sites when necessary. Customer Support will
also provide support on a fee-per-service basis for those customers and
resellers who have not entered into a maintenance contract with the Company.
During 1998, the Company completed the process of transferring hardware
maintenance it previously provided to Hewlett-Packard (HP). Customers who
require maintenance of hardware products bought from the Company will now
contract directly with HP or other service providers for such service.
Previously, customers had contracted with the Company, which in turn
subcontracted the maintenance work to HP.
The Company's Professional Services segment provides consulting services to
customers, primarily on a time and material basis. These services range from
management of large-scale implementations of the Company's products to
pre-packaged standard services such as software installation. Services are
provided by consultants employed directly by the Company and through a network
of qualified partners.
5
The Company's support facilities in Costa Mesa, California and Dublin, Ireland,
conduct software manufacturing, localization, integration, test and quality
control.
EMPLOYEES
As of December 31, 1998, the Company had 1,666 full-time employees of which 387
were employed in research and development; 491 in sales, 76 in marketing, 157 in
professional services, 296 in customer support; 95 in operations; and 164 in
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. According to the
GartnerGroup, the market for imaging, workflow, and document management is
serviced by over 50 software companies. 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, and
Hummingbird 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.
Database vendors such as Oracle, Sybase and Informix and messaging vendors such
as Microsoft and IBM may compete with the Company in the future. 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 within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of
the Securities Exchange Act of 1934, as amended and Section 27A of the
Securities Act of 1933, as amended, and is subject to the safe harbors created
by those sections. These forward looking statements involve risks and
uncertainties, including those discussed in the Company's Annual Report to
Stockholders for the year ended December 31, 1998, 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 1998 Annual Report to Stockholders and the Quarterly Reports on Form 10-Q to
be filed by the Company in 1999.
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 continued success will be
dependent upon its ability to continue to enhance its existing products, develop
and introduce, in a timely manner, new products incorporating technological
advances and respond to customer requirements, including without limitation
enhancements to certain specified Company software products to achieve year 2000
compliance. There can be no assurance that the Company will be successful in
developing and marketing new products or enhancements to its existing products
on a timely basis or that any new or enhanced products will adequately address
the changing needs of the marketplace. 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, including
without limitation enhancements to certain existing software products to achieve
year 2000 compliance, the Company's business and operating results 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 announcements of currently planned or other new products
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will not cause customers to delay their purchasing decisions in anticipation of
such products, which could have a material adverse effect on the Company's
business and operating results.
Uncertainty of Future Operating Results; Fluctuations in Quarterly Operating
Results: Prior growth rates in the Company's revenue and operating results
should not necessarily be considered indicative of future growth or 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 and to
achieve the desired level of sales from such product integration; the level of
product and price competition; the length of the Company's sales cycle;
improvements in the productivity of the Company's sales force; 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
including EURO exchange rates beginning in 1999; the ability of the Company to
develop and market new products and control costs; and general domestic and
international economic and political conditions.
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. In either case, the price
of the Company's common stock could be materially adversely affected.
Competition: The document imaging, workflow, computer output to laser disk and
electronic 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 a commercial advantage to the
Company. The Company 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 these software licenses could result in
delays or reductions in product shipments until equivalent software can be
developed, identified, licensed and integrated, 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
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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 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
certain of the Company's products, which 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.
The Company 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 the Company's
unenforceability defense on one of the patents. In July 1998, the Magistrate
Judge assigned to the case, heard oral arguments on the Company's motion for
summary judgement that U.S. Patent 4,918,588 is not infringed and is invalid.
The Magistrate Judge has not yet decided these motions. The Company believes
that after he has ruled on these motions, he will hear oral arguments in the
remaining motions in the sequence in which they were filed. 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
key relationships with other companies such as Microsoft Corporation, IBM Global
Services, SAP AG, Hewlett-Packard Company, 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 pay scales in the
software industry are increasing. There can be no assurance that the Company
will be successful in attracting and retaining such personnel.
International Sales: Historically, the Company has derived approximately
one-third of its total revenues from international sales. 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;
varying requirements for localized products; potentially adverse tax
consequences; currency exchange fluctuations including those related to the EURO
beginning in 1999; the burden of complying with a wide variety of complex
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 and Latin America 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.
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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 products that are 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 its exposure to potential product liability claims. However,
it is possible that such limitation of liability provisions 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 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, operating results and financial
condition.
Stock Price Volatility: The Company believes that a variety of factors could
cause the trading 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 programs; 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, have experienced extreme price fluctuations that have often been
unrelated to the operating performance of affected companies. Such fluctuations
could adversely affect the trading price of the Company's common stock.
Item 2. Properties
The Company currently leases 280,000 square feet of office, development and
manufacturing space in Costa Mesa, California and 92,000 square feet of office
and development space in Kirkland, Washington. The Company also leases sales and
support offices in 31 locations in the United States, 17 in Europe, 3 in
Australia, 4 in Canada, and 4 in Asia. The Company believes that the Costa Mesa
and Kirkland facilities will be adequate for the Company's anticipated needs
through 1999.
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 the Company's
unenforceability defense on one of the patents. In July 1998, the Magistrate
Judge assigned to the case, heard oral arguments on the Company's motion for
summary judgement that U.S. Patent 4,918,588 is not infringed and is invalid.
9
The Magistrate Judge has not yet decided these motions. The Company believes
that after he has ruled on these motions, he will hear oral arguments in the
remaining motions in the sequence in which they were filed. 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 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 Goldman State 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 alleged 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. On September 30, 1998, the Court entered an order dismissing this action
in its entirety without prejudice.
On April 1, 1997, plaintiff Michael I. Goldman 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 Goldman
Federal Action). The action purportedly was filed on behalf of the same class of
purchasers of the Company's common stock as the Goldman State Action. The
allegations contained in the Goldman Federal Action were very similar to the
allegations contained in the Goldman State Action, except that the Goldman
Federal Action asserts claims under Sections 10(b) and 20(a) of the Securities
Exchange Act and Rule 10b-5. On September 23, 1998, the Court entered an order
dismissing this action in its entirety without prejudice.
On October 23, 1998, plaintiff Avram Gart 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 Gart State Action). The action was purportedly
filed on behalf of a class of purchasers of the Company's common stock during
the period January 13, 1998 through October 7, 1998. The plaintiff alleges that
the Company and the other defendants violated Cal. Corp. Code ss.ss. 25400 and
25500 in connection with various public statements made by the Company and
certain of its officers and directors during the putative class period. On
November 5, 1998, the court entered an order dismissing this action in its
entirety without prejudice.
On October 27, 1998, plaintiff Thomas P. Nyquist filed a 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 Nyquist
Federal Action). The action was purportedly filed on behalf of a class of
purchasers of the Company's common stock during the period April 16, 1998
through October 7, 1998. The plaintiff alleges claims under Sections 10(b) and
20(a) of the Securities Exchange Act and Rule 10b-5 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
damages, interest, attorneys' fees, expert witness fees and costs. Plaintiff has
filed a motion for the appointment of lead plaintiffs and consolidation of any
future related actions. Defendants have not yet responded to the complaint. The
Company believes that all of the allegations contained in the Nyquist Federal
Action are without merit and intends to defend the actions vigorously.
Subsequent to December 31, 1998, the former shareholders of Saros Corporation
filed a demand for mandatory arbitration to release approximately 0.2 million
shares which were held in escrow pursuant to the Agreement and Plan of Merger
dated January 17, 1996 between FileNET Corporation, FileNET Acquisition
Corporation and Saros Corporation and for damages. The Company believes that it
has meritorious reasons for not releasing the shares and other defenses to the
claims; however, the ultimate outcome or any resulting potential loss cannot be
presently determined.
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
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
10
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 48 of
the Registrant's Annual Report to Stockholders for the year ended December 31,
1998 and is filed herewith as Exhibit 13.1.
Item 6. Selected Financial Data
The following table summarizes certain selected financial data:
For Fiscal Years Ended
-------------------------------------------------------------------------------
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Jan. 1, 1995
(1998) (1997) (1996) (1995) (1994)
-------------------------------------------------------------------------------
(In thousands, except per share amounts)
Consolidated statements of operations data:
Revenue:
Software revenue $171,153 $132,723 $140,659 $116,052 $ 81,102
Service revenue 115,501 89,280 82,118 67,174 60,753
Hardware revenue 23,579 29,422 46,136 46,152 50,480
---------- --------- --------- --------- ----------
Total revenue 310,233 251,425 268,913 229,378 192,335
Costs and expenses:
Cost of software revenue 16,814 13,416 15,389 14,688 12,307
Cost of service revenue 73,786 56,503 53,568 44,277 41,645
Cost of hardware revenue 13,181 20,330 29,633 28,800 30,999
Research and development 50,132 40,927 37,577 25,169 18,439
Selling, general and administrative 156,813 125,122 117,761 96,499 71,267
Merger, restructuring, write-off of
purchased in-process research and
development and other costs 2,000 6,000 16,011 6,393 0
---------- --------- ---------- --------- ----------
Total costs and expenses 312,726 262,298 269,939 215,826 174,657
---------- --------- ---------- --------- ----------
Operating income (loss) (2,493) (10,873) (1,026) 13,552 17,678
Other income, net 3,840 3,160 2,838 2,780 1,821
---------- --------- ---------- --------- ----------
Income (loss) before income taxes 1,347 (7,713) 1,812 16,332 19,499
Provision (benefit) for income taxes 391 (2,187) 4,456 8,116 5,356
---------- --------- ---------- --------- ----------
Net income (loss) $ 956 $ (5,526) $ (2,644) $ 8,216 $ 14,143
========== ========= ========== ========= ==========
Basic earnings (loss) per share $ 0.03 $ (0.18) $ (0.09) $ 0.28 $ 0.52
Diluted earnings (loss) per share $ 0.03 $ (0.18) $ (0.09) $ 0.26 $ 0.48
Weighted average shares outstanding - basic 31,083 30,310 30,014 28,860 27,322
Weighted average shares outstanding - diluted 33,367 30,310 30,014 31,712 29,668
Consolidated balance sheet data:
Working capital $ 67,722 $ 79,091 $ 85,475 $ 83,797 $ 63,149
Total assets 206,822 179,440 192,274 187,393 152,642
Stockholders' equity 130,320 118,811 132,806 131,158 101,006
Certain reclassifications have been made to the prior years' selected financial data to conform with the current year's
presentation.
11
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 16 through 26 of the Registrant's
Annual Report to Stockholders for the year ended December 31, 1998 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 27 through 46 of the Registrant's Annual Report to Stockholders for the
year ended December 31, 1998 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 1999 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 1999 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 1999 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 13: Related Party Transactions," which appears on page 44 of
the Registrant's Annual Report to Stockholders for the year ended December 31,
1998 and is filed herewith as Exhibit 13.4.
12
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 1998.
Index to Consolidated Financial Statements Covered
by Independent Auditors' Report
Item 14(a) (1) and (2)
Page Reference
-----------------------------
1998 Annual
Report to
Form 10-K Stockholders
The information under the following captions, which is included in the 1998
Annual Report to Stockholders, is incorporated herein by reference:
Independent Auditors' Report 46
Consolidated balance sheets at December 31, 1998 and December 31, 1997 27
Consolidated statements of operations for each of the years ended December 31,
1998, 1997 and 1996 28
Consolidated statements of comprehensive income (loss) for each of the years
ended December 31, 1998, 1997 and 1996 29
Consolidated statements of stockholders' equity for each of the years ended
December 31, 1998, 1997 and 1996 30
Consolidated statements of cash flows for each of the years ended December 31,
1998, 1997 and 1996 31
Notes to consolidated financial statements 32
Independent Auditors' Report on Schedule 14
Schedule for each of the three years ended December 31, 1998, 1997 and 1996
- Schedule II. Valuation and Qualifying Accounts and Reserves 15
13
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 (the Company) as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998, and have issued our
report thereon dated January 26, 1999 (March 10, 1999 as to Note 8). Such
consolidated financial statements and report are included in the Company's 1998
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
January 26, 1999 (March 10, 1999 as to Note 8)
Costa Mesa, California
14
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands)
Balance at Additions Balance at
Beginning Charged to End
Description of Period Costs & Exp Deductions of Period
- --------------------------------------------------------------------------------------------------------
Year ended December 31, 1998:
Inventory reserves $ 330 $ 381 $ 310 (1) $ 401
Allowance for doubtful accounts $ 1,690 $ 1,041 $ 668 (2) $ 2,063
Allowance for sales returns $ 2,725 $ 52 $ 458 (3) $ 2,319
Year ended December 31, 1997:
Inventory reserves $ 660 $ 380 $ 710 (1) $ 330
Allowance for doubtful accounts $ 2,140 $ 350 $ 800 (2) $ 1,690
Allowance for sales returns $ 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
Allowance for sales returns $ 3,153 $ 32 $ 3,185
(1) Consists primarily of the write-off of excess/obsolete inventories.
(2) Consists primarily of uncollectible invoice amounts.
(3) Consists primarily of returned systems.
15
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).
4.3* Amendment One dated July 31, 1998 and Amendment Two dated November 9,
1998 to Rights Agreements between FileNET Corporation and BANKBOSTON
N.A. formerly known as The First National Bank of Boston (filed as
Exhibit 4.3 to Form 10-Q for the quarter ended September 30, 1998).
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).
10.3.1* Runtime Sublicense Addendum between the Registrant and Oracle
Corporation dated July 1, 1996; as amended by Amendments Two through
Six thereto (filed as Exhibit 10.3.1 to Form 10-Q for the quarter
ended September 30, 1998).
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 (filed as
Exhibit 99.1 to Form S-8 filed on November 9, 1998; Registration
No. 333-66997).
- --------------------------------------------
* Incorporated herein by reference
16
Exhibit
No. Description
- ------- -----------------------------------------------------------------------
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).
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 Amendment 2 dated December 18, 1998 to the Product License Agreement
between the Registrant and Novell, Inc. dated May 16, 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).
10.21* Amended and Restated FileNET Corporation 1998 Employee Stock Purchase
Plan (filed as Exhibit 99.15 to Form S-8, filed on November 9, 1998;
Registration No. 333-66997).
10.22* FileNET Corporation International Employee Stock Purchase Plan. (filed
as Exhibit 99.16 to Form S-8, filed on November 9, 1998; Registration
No. 333-66997).
13.1 Market for the Registrant's Common Stock and Related Stockholder Matters
incorporated by reference to page 48 of the 1998 Annual Report.
13.2 Management's Discussion and Analysis of Financial Condition and Results
of Operations incorporated by reference to pages 16 through 26 of the
1998 Annual Report.
13.3 Financial Statements incorporated by reference to pages 27 through 46 of
the 1998 Annual Report.
13.4 Certain Relationships and Related Transactions incorporated by reference
to page 44 of the 1998 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
17
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, 1999 By: /s/ Lee D. Roberts
------- ------------------------------------
Lee D. Roberts
President and 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, 1999 By: /s/ Lee D. Roberts
------- ------------------------------------
Lee D. Roberts
President and Chief Executive Officer
(Principal Executive Officer)
Director
Date: March 30, 1999 By: /s/ Mark S. St. Clare
------- ------------------------------------
Mark S. St. Clare
Chief Financial Officer and
Sr. Vice President, Finance
(Principal Financial Officer)
Date: March 30, 1999 By: /s/ Brian A. Colbeck
------- ------------------------------------
Brian A. Colbeck
Controller and
Chief Accounting Officer
Date: March 30, 1999 By: /s/ Theodore J. Smith
------- ------------------------------------
Theodore J. Smith
Chairman of the Board
Date: March 30, 1999 By: /s/ L. George Klaus
------- ------------------------------------
L. George Klaus
Director
Date: March 30, 1999 By: /s/ William P. Lyons
------- ------------------------------------
William P. Lyons
Director
Date: March 30, 1999 By: /s/ John C. Savage
------- ------------------------------------
John C. Savage
Director
Date: March 30, 1999 By: /s/ Roger S. Siboni
------- ------------------------------------
Roger S. Siboni
Director
Date: March 30, 1999 By: /s/ Carolyn M. Ticknor
------- -------------------------------------
Carolyn M. Ticknor
Director
18