FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

               For the quarterly period ended September 30, 1996

                                       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

State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization                                Identification No.)

Delaware                                                       95-3757924

FILENET CORPORATION
3565 Harbor Boulevard
Costa Mesa, CA 92626
(714) 966-3400



     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  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock, as of the latest practicable date.

Title                                                      Outstanding

Common stock                                   15,184,532 as of November 4, 1996


<PAGE>


                               FILENET CORPORATION
                                      Index



                                                                         Page
                                                                        Number  
                                                                       --------


PART I.  FINANCIAL INFORMATION

Item 1.  Consolidated Balance Sheets 
         as of September 30, 1996 and December 31, 1995...................    1 

         Consolidated  Statements of Operations for the fiscal quarters 
         and nine months ended September 30, 1996 and October 1, 1995.....    2

         Consolidated Statements of Cash Flows for the nine months ended 
         September 30, 1996 and October 1, 1995...........................    3

         Notes to Consolidated Financial Statements.......................    4

Item 2.  Management's Discussion and Analysis of Financial Condition           
         and Results of Operations........................................    7

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings................................................   13

Item 5.  Certain Considerations...........................................   13

Item 6.  Exhibits and Reports on Form 8-K.................................   18

         SIGNATURE........................................................   19

         INDEX TO EXHIBITS................................................   20


<PAGE>
Part I.  Financial Information
Item 1.  Financial Statements
                               FILENET CORPORATION
                           Consolidated Balance Sheets
                      (In thousands, except share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                    September 30,   December 31,
                                                        1996            1995
                                                    ------------    ------------
                                     ASSETS
<S>                                                    <C>             <C>
Current assets:
     Cash and cash equivalents...................      $ 22,820        $ 43,378                                      
     Short-term marketable securities............        25,623          28,782
                                                        -------         -------
         Total cash and short-term marketable 
         securities..............................        48,443          72,160
                                                        -------         -------
     Accounts receivable, net....................        71,863          53,501
     Inventories.................................         8,128           6,620
     Prepaid expenses and other..................         8,152           6,573
     Deferred income taxes.......................         3,735           3,735
                                                        -------         -------
Total current assets.............................       140,321         142,589
                                                        -------         -------
Net property and equipment.......................        26,979          25,796
Other assets:
     Capitalized software, net...................           448           1,226
     Long-term marketable securities.............        12,608          18,395
     Other.......................................         1,851           1,676
                                                       --------        --------
Total other assets...............................        14,907          21,297
                                                         ------          ------
Total assets.....................................      $182,207        $189,682
                                                       ========        ========
                      
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
     Accounts payable.............................     $ 12,096        $ 16,073
     Accrued liabilities:
         Compensation.............................       11,943          10,997
         Income taxes payable.....................        3,117           2,228
         Unearned maintenance revenue.............        7,224           5,761
         Royalties................................        4,565           3,572
         Other....................................       16,284          17,604
                                                       --------        --------
Total current liabilities.........................       55,229          56,235
                                                       --------        --------
Deferred income taxes.............................        2,340           2,289

Stockholders' equity:
     Convertible  preferred  stock -  $.001  par  
       value;  authorized, 39,000,000 shares;
       35,232,029 issued and outstanding shares and
       1,531,536  common equivalent  shares at the
       liquidation preference at December 31, 1995.           -          19,879
     Common stock - $.01 par value;  authorized,  
       100,000,000 shares; issued and outstanding
       15,155,596 and 13,254,222 shares at
       September 30, 1996 and December 31, 1995,
       respectively................................     124,716         100,719
     Retained earnings.............................       4,642          10,518
     Other.........................................        (152)             42
                                                        -------         -------
         Total                                          129,206         131,158
Less Treasury shares at cost: 200,000 shares at
  September 30, 1996...............................       4,568               -
                                                        -------         -------                
Total stockholders' equity.........................     124,638         131,158
                                                        -------         -------
Total liabilities and stockholders' equity.........    $182,207       $ 189,682
                                                       ========       =========
</TABLE>
See accompanying notes to consolidated financial statements.
                                        1
<PAGE>

                               FILENET CORPORATION
                      Consolidated Statements of Operations
                    (In thousands, except per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>
                            Fiscal Quarter Ended           Nine Months Ended
                           ------------------------    ------------------------
                           September 30,  October 1,   September 30,  October 1,
                               1996         1995          1996          1995                                                 
                           ------------------------    ------------------------
<S>                          <C>                           <C> 
Revenue:
 Software revenue.......     $ 32,999    $ 26,911          $ 103,152   $ 78,668
 Service revenue........       20,462      17,056             57,770     49,022
 Hardware revenue.......       11,161      13,131             35,441     33,950
                               ------      ------             ------     ------
Total revenue...........       64,622      57,098            196,363    161,640
                               ------      ------            -------    -------               
Costs and expenses:
 Cost of software revenue..     3,520       3,738             12,164     10,929
 Cost of service revenue...    13,832      10,234             37,626     31,969
 Cost of hardware revenue..     6,729       7,993             22,326     21,407
 Research and development..     9,104       6,756             26,583     17,458
 Selling, general and                             
  administrative...........    27,492      23,339             86,368     67,968
 Merger, restructuring and   
  write-off of purchased 
  in-process research and 
  development costs........         -       6,393             16,011      6,393
                               --------   --------          ---------   --------
Total costs and expenses...     60,677     58,453            201,078    156,124
                               --------   --------          ---------   --------
Operating income (loss)          3,945     (1,355)            (4,715)     5,516

 Other income, net.........        630        711              2,224      2,036
                               --------   --------          ---------   --------
Income (loss) before 
 income taxes.............       4,575       (644)            (2,491)     7,552

Provision for income 
 taxes....................       1,144        822              3,385      4,538
                              ---------  ---------         ----------  --------
Net income (loss).........    $   3,431  $ (1,466)         $  (5,876)  $  3,014
                              =========  =========         ==========  ========
Net income (loss) per 
 share....................    $    0.22  $  (0.10)         $   (0.39)  $   0.19
                              =========  =========         ==========  ========
Weighted average common 
 and common equivalent 
 shares outstanding.......       15,560     14,506            14,999     15,757
                              =========  =========          =========  ========
</TABLE>
See accompanying notes to consolidated financial statements.







                                        2
<PAGE>
                               FILENET CORPORATION
                      Consolidated Statements Of Cash Flows
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                    Nine Months Ended
                                           -----------------------------------
                                               September 30,        October 1, 
                                                   1996               1995
                                           -------------------    -------------
<S>                                            <C>                 <C>  
Cash flows from operating activities:
     Net Income (loss)..................       $  (5,876)          $   3,014
     Adjustments to reconcile net 
      income (loss) to net cash 
      (used by)provided by operating 
      activities:
       Write-off of capitalized and 
         purchased in-process research 
         and development and associated 
         acquisition costs..............          10,011               1,393
       Depreciation and amortization....           8,647               7,587
       Capitalized software 
         amortization...................             778               1,800
       Provision for losses on accounts 
         receivable.....................             116                 598
       Changes in operating assets and 
         liabilities, net of acquisition:
           Accounts receivable..........         (18,478)             (9,746)
           Inventories..................          (1,508)             (2,181)
           Prepaid expenses.............          (1,579)             (3,334)
           Accounts payable.............          (3,977)              1,669
           Accrued liabilities:
             Compensation...............             946                (596)
             Income taxes payable.......             889               1,621
             Unearned maintenance 
               revenue..................           1,463               1,534
             Royalties..................             993               1,691
             Other......................             558               1,858
                                                --------             -------
Net cash (used by) provided by operating 
  activities............................          (7,017)              6,908
                                                --------             -------
Cash flows from investing activities:
     Proceeds from sale of equipment....           3,047                  97
     Capital expenditures...............         (12,825)             (9,244)
     Capitalized software...............               -              (1,600)
     Payment for purchase of IFSL.......         (11,711)                  -
     Purchase of marketable securities..         (22,037)            (35,161)
     Proceeds from sales and maturity 
      of marketable securities..........          30,435              24,950
                                                  ------              ------
Net cash used by investing activities...         (13,091)            (20,958)
                                                --------            --------
Cash flows from financing activities:
     Debt repayments, net...............               -                (163)
     Common stock repurchased...........          (4,568)                  -
     Proceeds from issuance of common 
      stock.............................           4,118               7,436
                                                --------            --------
Net cash (used by) provided by financing 
     activities.........................            (450)              7,273
                                                --------            --------
Net decrease in cash and cash 
     equivalents........................         (20,558)             (6,777)
Cash and cash equivalents, 
     beginning of year..................          43,378              24,950
                                                --------            --------
Cash and cash equivalents, 
     end of period......................       $  22,820           $  18,173
                                               =========           =========
Supplemental cash flow information:
     Interest paid.......................      $     293           $     180
     Income taxes paid...................      $   2,859           $   3,229
</TABLE>
See accompanying notes to consolidated financial statements.
                                        3

<PAGE>

                               FILENET CORPORATION
                   Notes To Consolidated Financial Statements



1.   In the opinion of the management of FileNet  Corporation  ("the  Company"),
     the  accompanying   unaudited  consolidated  financial  statements  reflect
     adjustments  (consisting  of normal  recurring  adjustments)  necessary  to
     present fairly the financial  position of the Company at September 30, 1996
     and the results of its operations  for the fiscal  quarters and nine months
     ended  September  30,  1996 and  October 1, 1995 and its cash flows for the
     nine  months  ended  September  30,  1996  and  October  1,  1995.  Certain
     information  and  footnote   disclosures  normally  included  in  financial
     statements have been condensed or omitted pursuant to rules and regulations
     of the Securities  and Exchange  Commission  ("SEC"),  although the Company
     believes that the disclosures in the consolidated  financial statements are
     adequate  to ensure the  information  presented  is not  misleading.  These
     consolidated  financial  statements  should be read in conjunction with the
     consolidated  financial  statements  and notes  thereto,  and  Management's
     Discussion  and Analysis of Financial  Condition  and Results of Operations
     contained in the  Company's  Annual Report on Form 10-K for the fiscal year
     ended December 31, 1995, with the Form S-4 Registration  Statement filed by
     the Company with the SEC on January 17, 1996, as amended  January 24, 1996,
     and with the Company's Current Report on Form 8-K, dated March 1, 1996, and
     filed by the  Company  with the SEC on  March  13,  1996.  The  results  of
     operations for the interim  periods are not  necessarily  indicative of the
     operating results for the year.

2.   Certain  reclassifications  have been made to the prior year's consolidated
     financial statements to conform with the current year's presentation.

3.   Net income per share for the quarter  ended  September 30, 1996 and for the
     nine months ended October 1, 1995 was computed  using the weighted  average
     number of common  and  common  equivalent  shares  outstanding  during  the
     period.  Common equivalent shares include  convertible  preferred stock and
     stock options. Net loss per share for the quarter ended October 1, 1995 and
     for the nine months  ended  September  30, 1996 was based upon the weighted
     average number of actual shares of common stock outstanding.

4.   On January 30, 1996, the Company purchased all of the outstanding shares of
     International Financial Systems Ltd. ("IFSL"), a New York corporation,  the
     developer of a Computer  Output to Laser Disk (COLD)  software  product for
     archiving  documents.  Pursuant to the Stock Purchase  Agreement,  the IFSL
     stockholders  received  $11.2  million in cash for all of their IFSL stock.
     The acquisition was accounted for as a purchase, and the purchase price was
     allocated  to net  assets  of $1.7  million  and  in-process  research  and
     development  costs of $9.5  million.  As a result of the  acquisition,  the
     Company  recorded  a pre-tax  charge of  approximately  $10.0  million  for
     acquisition  costs and the write-off of purchased  in-process  research and
     development costs.
                                         4                          
<PAGE> 
5.   On March 1, 1996,  FileNet  acquired  all the  outstanding  shares of Saros
     Corporation  ("Saros"), a Washington corporation (the "Saros Acquisition").
     The Saros Acquisition was consummated  pursuant to an Agreement and Plan of
     Merger (the "Saros Merger  Agreement")  dated January 17, 1996 by and among
     Saros,  the  Company,  and FileNet  Acquisition  Corporation  ("Acquisition
     Corp."),  a  Washington  corporation  and  wholly-owned  subsidiary  of the
     Company.  Pursuant to the Saros Merger  Agreement,  Acquisition  Corp.  was
     merged  with  and  into  Saros,  with  Saros  surviving  as a  wholly-owned
     subsidiary of the Company. The Saros stockholders  received an aggregate of
     approximately   1,878,000   shares  of  the  Company's   common  stock  and
     approximately  337,000  options to purchase the  Company's  common stock in
     exchange for all of their Saros stock and options. Approximately 188,000 of
     the total number of the Company's  shares issued to the Saros  stockholders
     (the  "Saros  Escrow  Shares")  were  placed  in  an  escrow  account  upon
     consummation  of the Saros  Acquisition.  Pursuant to the escrow  agreement
     entered into by the Company,  the stockholders' agent and the escrow agent,
     the Company may  recover  from the escrow up to the entire  amount of Saros
     Escrow Shares in the event the Company incurs any loss, expense,  liability
     or other damages (collectively,  "Damages") due to a breach by Saros of any
     of its  representations,  warranties  and  covenants  in the  Saros  Merger
     Agreement in the event Damages exceed $1.0 million in the aggregate.  If no
     claim for Damages is made by the  Company  within one year from the date of
     the  Merger,  the Saros  Escrow  Shares  will be  released  from escrow and
     distributed to the Saros stockholders.

     The Saros  Acquisition  was  accounted  for as a  pooling-of-interests  for
     financial reporting purposes. The pooling-of-interests method of accounting
     is  intended  to  present  as  a  single   interest   two  or  more  common
     stockholders' interests which were previously independent; accordingly, the
     historical  financial  statements for the periods prior to the  acquisition
     have been  restated as though the  companies  had been  combined.  Fees and
     expenses related to the Saros Acquisition and restructuring  costs incurred
     in connection  with the  consolidation  of certain  operations of Saros and
     Watermark Software Inc. ("Watermark"), were $6.0 million. The components of
     this charge include professional fees, elimination of duplicate facilities,
     write-off  of  certain   contractual   obligations  and  settlement  costs,
     write-off  of  certain  fixed  assets  (including  redundant  hardware  and
     software systems), transition and severance payments to employees and other
     integration and restructuring costs.

6.   During the quarter ended September 30, 1996, Watermark and Saros,  formerly
     wholly-owned subsidiaries of the Company, were merged into the Company.

7.   In July 1996,  the Company's  Board of Directors  authorized the Company to
     repurchase up to 200,000  shares of its common  stock.  As of September 30,
     1996,  the Company had  purchased  200,000  shares at an aggregate  cost of
     approximately $4.6 million.

                                        5 
<PAGE>
8.   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. 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
     is infringing three of the same patents asserted in the initial  complaint.
     On October  9, 1996,  Wang  withdrew  its claim that one of the  patents it
     initially   asserted  is   infringed   by  FileNet   products   which  were
     commercialized  before the initial complaint was filed.  Wang reserved  the
     right to assert that patent against FileNet products  commercialized  after
     that date in a separate lawsuit.  Based on the Company's  analysis of these
     Wang patents and their respective file histories, the Company believes that
     it has meritorious defenses to Wang's claims; however, the ultimate outcome
     or any  resulting  potential  loss cannot be determined at this time. If it
     should be determined that Wang's patents 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.

     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.
































                                        6
<PAGE>
Item 2.  Management's   Discussion  and  Analysis  of  Financial  Condition  and
         Results of Operations

                               FILENET CORPORATION

The following should be read in conjunction with the unaudited consolidated
financial statements and notes thereto included in Part I--Item 1 of this
Quarterly Report, the audited consolidated financial statements, and notes
thereto, and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in the registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, the Form S-4 Registration Statement
filed by the Company with the SEC on January 17, 1996, as amended January 24,
1996, and with the Company's Current Report on Form 8-K, dated March 1, 1996,
and filed by the Company with the SEC on March 13, 1996.

Results of Operations

Factors That May Affect Future Results. Future operating results will
depend upon many factors, including the demand for the Company's products, the
level of price competition, the length of the Company's sales cycle, seasonality
of individual customer buying patterns, the size and timing of individual
transactions, possible delays or deferrals 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 and distribution channels, the level 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. As a
result of these factors, revenue and operating results for any quarter may
fluctuate significantly. 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.

The Company's marketplace continues to be highly competitive. Other
companies offer lower priced products which in some applications compete with
FileNet products. Additionally, major computer suppliers and software companies
offer new competitive document-image, workflow and document management products.
The Company continues to experience competitive pricing pressures in all phases
of its operations and expects competition will continue to increase.

The market for the Company's products is characterized by rapid
technological developments, evolving industry standards, swift changes in
customer requirements and frequent new product introductions and enhancements.
The Company's continued success is dependent upon its ability to enhance its
existing products and to develop and introduce, in a timely manner, new products
incorporating technological advances which meet customer requirements. 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.

The Company has entered into a number of significant co-marketing
relationships with companies such as Hewlett-Packard Company and Sun
Microsystems, Inc. There can be no assurance that these companies will not

                                        7

<PAGE>
reduce or discontinue their relationship with or support of the Company and its
products. Disruption of these relationships could have a material adverse effect
on the Company's business and operating results.

The Company derives approximately one-third of its total revenue from
international sales. Its 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, foreign currency fluctuations, the burden of complying with a wide
variety of complex foreign laws, regulations and treaties and the possibility of
difficulties in collecting accounts receivable.

The Company acquired Watermark in August 1995 and Saros and IFSL in early
1996. These acquisitions have presented and continue to present the Company with
numerous challenges, including the effective assimilation of the operations,
technologies and personnel. While the company believes it is taking the
appropriate steps to effectively integrate these operations, difficulties in the
integration have had and could continue to have a negative impact on the
Company's overall financial results.

The Company believes that any of the above factors could have an adverse
effect on the Company's business and cause fluctuation in the Company's
operating results, perhaps substantially. In addition, in recent years the stock
market in general, and the market for shares of high technology stocks in
particular, have experienced extreme fluctuations which have often been
unrelated to operating performance. Such fluctuations could adversely affect the
market price of FileNet's common stock.

Revenue.

Domestic revenues increased 29% in the third quarter and 24% for the first
nine months of fiscal 1996 while international revenues decreased 12% in the
third quarter and increased 16% for the first nine months of fiscal 1996, when
compared to the corresponding periods in fiscal 1995. International revenues
constituted approximately 30% and 39% of total revenues in the third quarters of
fiscal 1996 and 1995, respectively, and 32% and 33% of total revenues in the
first nine months of fiscal 1996 and 1995, respectively. Management expects that
the Company's international operations will continue to provide a significant
portion of total revenues. However, international revenues could be adversely
affected if the U.S. dollar strengthens against international currencies.
<TABLE>
<CAPTION>
(In Millions)                 ------Third Quarter-----  -------Nine Months------
                                                %                           %  
                               1996    1995   Change      1996     1995   Change
<S>                           <C>     <C>       <C>      <C>      <C>       <C>
Software revenue              $33.0   $26.9     23%      $103.2   $ 78.7    31%
 ............................  ........................  ........................
 Percentage of total revenue    51%     47%                 53%      49%
 ............................  ........................  ........................
Service revenue                20.4    17.1    19%         57.8     49.0    18%
 ............................   .......................  ........................
 Percentage of total revenue    32%     30%                 29%      30%
 ............................  ........................  ........................
Hardware revenue               11.2    13.1    (15%)       35.4     33.9     4%
 ............................  ........................  ........................
 Percentage of total revenue    17%     23%                 18%      21%
 ............................  ........................  ........................
Total revenue                 $64.6   $57.1     13%      $196.4   $161.6    22%
 ............................  ........................  ........................
</TABLE>
                                        8
<PAGE>
Software revenue growth in the third quarter of 1996 compared to the same
period of 1995 was 23% and is due to an increase in the volume of product
shipments from the Company, additional revenue generated through the Company's
co-marketing arrangement with Hewlett-Packard Company, and the addition of new
products, reselling partners and direct sales force.

Service revenue increased by 19% for the quarter ended September 30, 1996
compared to the same period of 1995. Service revenue consists of revenue from
software and hardware maintenance services provided to the Company's customer
installed base and other revenue that includes professional services, training
and supplies. The increase was due to the growth of the Company's installed base
and the recognition of $2.5 million of revenue from the sale and repair of spare
parts in connection with the continued transition of hardware maintenance
activities to Hewlett Packard Company. The Company anticipates recognizing an
additional $2.0 million from spare parts sales for the quarter ended December
31, 1996. Such spare parts sales are not expected to be significant in 1997.

Hardware revenue decreased by 15% for the quarter ended September 30, 1996
compared to the same period of 1995. Hardware revenue as a percent of total
revenue declined, a trend which the Company expects will continue as it focuses
on increasing its higher margin software revenues.

For the nine months ended September 30, 1996, total revenue increased by 22% to
$196.4 million over the same period in 1995. Software and service revenue
increased by 31% and 18%, respectively, due to the reasons cited above.
Hardware revenue increased 4%, and as expected, decreased as a percent of
total revenue to 18% compared to 21% for the same period last year.

Cost of Revenue.
<TABLE>
<CAPTION>
               
(In Millions)                        ----Third Quarter----  ----Nine Months-----
                                                     %                     %
                                     1996   1995   Change   1996   1995  Change
<S>                                  <C>    <C>      <C>    <C>    <C>     <C>
Cost of software revenue             $ 3.5  $ 3.7    (5%)   $12.2  $10.9   12%
 .................................... .....................  ....................
 As a percentage of software revenue   11%    14%             12%    14%
 .................................... .....................  ....................
Cost of service revenue               13.8   10.2    35%     37.6   32.0   18%
 .................................... .....................  ....................
 As a percentage of service revenue    68%    60%             65%    65%
 .................................... .....................  ....................
Cost of hardware revenue               6.7    8.0   (16%)    22.3   21.4    4%
 .................................... .....................  ....................
 As a percentage of hardware revenue   60%    61%             63%    63%
 .................................... .....................  ....................
Total cost of revenue                $24.0  $21.9    10%    $72.1  $64.3   12%
 .................................... .....................  ....................
 As a percentage of total revenue      37%    38%             37%    40%
 .................................... .....................  ....................
</TABLE>
The cost of software revenue includes royalties paid to third parties,
amortization of capitalized software and the cost of software distribution.
The 3% decrease in the cost of software revenue as a percentage of software
revenue for the quarter ended September 30, 1996 as compared to the same
period of 1995 is primarily attributable to a favorable product mix and the
savings related to consolidation of software distribution activities.

                                        9
<PAGE>
The cost of service revenue includes the cost attributable to maintenance and
providing professional services. The cost of service revenue as a percentage of
service revenue increased by 8% in the third quarter of 1996 from the same
period of 1995 primarily due to lower margins associated with international
maintenance as a result of the continued transition of hardware maintenance
activities to Hewlett Packard Company.

The cost of hardware revenue includes the Company's cost of OSAR manufacturing,
third-party purchased hardware and the cost of hardware integration personnel
and related benefits and facilities expenses. The cost of hardware revenue as a
percentage of hardware revenue for the third quarter of 1996 decreased to 60%
from 61% in the same period of 1995 primarily due to a lower percentage of sales
of third-party purchased hardware.

For the nine months ended September 30, 1996, the cost of software revenue as a
percentage of software revenue decreased to 12% from 14% for the same period
last year due to the reasons cited above as well as lower amortization of
capitalized software expenses. The cost of service revenue as a percentage of
service revenue and the cost of hardware revenue as a percentage of hardware
revenue remained comparable for the first nine months of 1996 compared to the
same period in 1995.

Operating Expenses.
<TABLE>
<CAPTION>
(In Millions)                        ----Third Quarter----  ----Nine Months-----
                                                     %                     %
                                     1996   1995   Change   1996   1995  Change
<S>                                  <C>    <C>      <C>    <C>    <C>     <C>
Research and development             $ 9.1  $ 6.8    34%    $26.6  $17.5   52%
 ...................................  .....................  ....................
 As a percentage of total revenue      14%    12%             14%    11%
 ...................................  .....................  ....................
Selling, general and administrative  $27.5  $23.3    18%    $86.4  $68.0   27%
 ...................................  .....................  ....................
 As a percentage of total revenue      43%    41%             44%    42%
 ...................................  .....................  ....................
</TABLE>
Research and Development. Research and development expenses increased by 34% in
the third quarter of 1996 over the same quarter last year due to the addition of
development personnel and related facilities and depreciation expenses
associated with new development activities. As a percentage of total revenue,
research and development expenses increased to 14% from 12% for the same period
last year due to the reasons cited above, and the Saros and Watermark business
units research and development expenses growing more rapidly than corresponding
revenue.

For the nine months ended September 30, 1996, research and development expenses
increased by 52% over the same period of 1995 due to the reasons cited above as
well as a reduction in capitalized software development costs. As a percentage
of total revenue, research and development costs increased to 14% compared to
11% for the same period last year.

Selling, General and Administrative. Selling, general and administrative
expenses increased by 18% for the third quarter of 1996 compared to the same
period in 1995. The increase in 1996 was primarily due to the addition of
marketing and sales support personnel. As a percentage of total revenue,
selling, general and administrative expenses increased to 43% from 41% for the

                                       10
<PAGE>
same period last year primarily due to the reasons cited above.

For the nine months ended September 30, 1996, selling, general and
administrative expenses increased by 27% over the same period of 1995 for the
same reasons cited above. As a percentage of total revenue, selling, general and
administrative expenses increased to 44% compared to 42% for the same period
last year.

Merger, Restructuring and Write-off of Purchased In-process Research and
Development Costs. Merger, restructuring and write-off of purchased in-process
research and development costs for the nine months ended September 30, 1996,
consist of a $10.0 million charge for the write-off of purchased in-process
research and development and acquisition costs related to the IFSL purchase,
$6.0 million for fees and expenses related to the Saros Acquisition and
restructuring costs in connection with the consolidation of certain operations
of Saros and Watermark. Merger and other costs for the third quarter and nine
months ended October 1, 1995 consist of a charge for the buyout of certain
Watermark European marketing and manufacturing rights, a write-off of
capitalized research and development expenses for FileNet projects made
redundant by the Watermark acquisition, and other direct acquisition related
fees and expenses.

Interest and Other Income. Other income, net of other expenses, decreased in the
third quarter to $.6 million from $.7 million in the same quarter last year. For
the nine months ended September 30, 1996, other income, net of other expenses,
increased to $2.2 million from $2.0 million over the comparable period in 1995.

Effective Tax Rate. Non-deductible merger and other costs in the first quarter
of 1996 increased the estimated annual effective tax rate to 72% from 45%
previously estimated for 1996. The effect of the increased tax rate was recorded
in the first quarter. The effective rate for 1996 of 72% compares to 35% for
1995. The 1995 effective tax rate included the non-deductible merger costs for
the Watermark acquisition and preacquisition net operating losses incurred by
Watermark for which the Company did not receive a current year benefit.

Net Income. Net income for the third quarter ended September 30, 1996 was $3.4
million or $0.22 per share compared to a net loss of $1.5 million or $0.10 per
share for the same quarter in 1995. For the nine months ended September 30,
1996, net loss was $5.9 million or $0.39 per share compared to net income of
$3.0 million or $0.19 per share in 1995. Before merger, restructuring and
write-off of purchased in-process research and development costs of $16.0
million and $5.0 million, after tax for 1996 and 1995 respectively, net income
for the nine months ended September 30, 1996, was $10.1 million or $0.62 per
share on approximately 16.2 million weighted average common and common
equivalent shares, compared to $8.0 million or $0.51 cents per share on 15.8
million weighted average common and common equivalent shares for the same period
of 1995.




                                       11
<PAGE>
Liquidity and Capital Resources

As of September 30, 1996, combined cash, cash equivalents and short- and
long-term marketable securities totaled $61.1 million, down from $90.6 million
for the fiscal year ended December 31, 1995. For the nine months ended September
30, 1996, net cash used by operating activities was $7.0 million, primarily
resulting from an increase in accounts receivable. Net cash used by investing
activities totaled $13.1 million, consisting of the purchase of IFSL of $11.7
million, capital expenditures of $12.8 million, $8.4 million in net proceeds
from marketable securities and $3.0 million in proceeds from the sale of
equipment. Net cash used by financing activities was $.5 million, consisting of
the net effect of the repurchase of common stock and the proceeds from the
exercise of employee stock options.

The Company has an unsecured line of credit of $20 million available from a
commercial bank. This line of credit expires in April 1997 and is subject to the
maintenance of certain financial covenants. The Company also has several
borrowing arrangements with foreign banks which expire at various times
throughout 1996 pursuant to which the Company may borrow up to approximately $2
million. As of September 30, 1996, there were no borrowings against these credit
lines.

The Company anticipates that its present cash balances together with internally
generated funds and credit lines (which are expected to be renewed or replaced)
will be sufficient to meet its working capital and capital expenditure needs for
at least the next 12 months.

--------------------------------------------------------------------------------
This quarterly report on form 10-Q contains forward-looking statements that
involve risks and uncertainties, including those discussed below, in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the "Notes to Consolidated Financial Statements" contained herein,
and elsewhere in this report. The actual results that the Company achieves may
differ materially from any forward-looking statements due to such risks and
uncertainties.
--------------------------------------------------------------------------------























                                       12

<PAGE>
Part II.  Other Information

Item 1.   Legal Proceedings.

          In October 1994,  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. 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
          is  infringing  three  of the same  patents  asserted  in the  initial
          complaint. On October 9, 1996, Wang withdrew its claim that one of the
          patents it initially  asserted is infringed by FileNet  products which
          were  commercialized  before  the  initial  complaint was filed.  Wang
          reserved  the right to assert that  patent  against  FileNet  products
          commercialized  after  that date in a separate  lawsuit.  Based on the
          Company's  analysis of these Wang  patents and their  respective  file
          histories,  the Company  believes that it has meritorious  defenses to
          Wang's  claims;   however,  the  ultimate  outcome  or  any  resulting
          potential  loss  cannot be  determined  at this time.  If it should be
          determined  that Wang's  patents 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 from
          Wang on acceptable terms.

          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 5.   Certain Considerations.

          This quarterly report on form 10-Q contains forward-looking statements
          that involve risks and uncertainties, including those discussed below,
          in  "Management's  Discussion and Analysis of Financial  Condition and
          Results  of  Operations",   the  "Notes  to   Consolidated   Financial
          Statements" contained herein, and elsewhere in this report. The actual
          results  that the  Company  achieves  may differ  materially  from any
          forward-looking  statements due to such risks and  uncertainties.  All
          such factors should be considered by investors in the Company.

          RAPID TECHNOLOGICAL  CHANGE;  PRODUCT DEVELOPMENT.  The market for the
          Company's   products   is   characterized   by   rapid   technological
          developments,  evolving industry standards,  swift 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.  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

                                       13
<PAGE>
          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
          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,  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 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 of  future  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 the recent  acquisitions and achieve the desired
          levels of product sales from such  acquisitions,  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.  As a result  of these  factors,  revenues  and  operating
          results  for any quarter  are  subject to  variation,  and 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.

          COMPETITION.  The  imaging,  workflow,  computer  output to laser disk
          software  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

                                       14
<PAGE>         
          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 it 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, operating results and financial condition.

          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 or operating results.  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  which  may  give  rise  to  claims  of
          infringement. While no actions other than the ones 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 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 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. 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
          is  infringing  three  of the same  patents  asserted  in the  initial
          complaint. On October 9, 1996, Wang withdrew its claim that one of the
          patents it initially  asserted is infringed by FileNet  products which
          were  commercialized  before  the  initial  complaint was filed.  Wang
          reserved  the right to assert that  patent  against  FileNet  products
          commercialized  after that  date in a separate  lawsuit.  Based on the

                                       15
<PAGE>         
          Company's  analysis of these Wang  patents and their  respective  file
          histories,  the Company  believes that it has meritorious  defenses to
          Wang's  claims;   however,  the  ultimate  outcome  or  any  resulting
          potential  loss  cannot be  determined  at this time.  If it should be
          determined  that Wang's  patents 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 from
          Wang on acceptable terms.

          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,
          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.
          Disruption of these relationships could have a material adverse effect
          on the Company's business and operating results.

          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,  including  members of senior  management  and
          technical  personnel  of  acquired  companies.   The  Company  has  no
          agreements providing for the employment of any of its key employees or
          any  fixed  term  and the  Company's  key  employees  may  voluntarily
          terminate  their  employment with the Company at any time. The loss of
          the services of one or more key employees,  including key employees of
          acquired  companies,  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 is intense,  and 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,
          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.  There  can  be no
          assurance  that any of these factors will not have a material  adverse
          effect on the Company's business or operating results.

          ACQUISITION-RELATED   RISKS.  The  Company   recently   completed  the
          acquisitions of Watermark,  Saros and IFSL. These recent  acquisitions
          by the Company have  presented  and will  continue to  present it with


                                       16
<PAGE>        
          numerous challenges, including difficulties in the assimilation of the
          operations,  technologies  and products of the acquired  companies and
          managing separate geographic operations.  The challenges have absorbed
          and may continue to absorb significant management attention that would
          otherwise be available  for the ongoing  development  of the Company's
          business.  If the  Company's  management  does  not  respond  to these
          challenges  effectively,  the Company's results of operations could be
          adversely  affected.  Moreover,  there  can be no  assurance  that the
          anticipated benefits of the acquisitions will be realized. FileNet and
          the acquired  companies  could  experience  difficulties  or delays in
          integrating   their   respective   technologies   or  developing   and
          introducing new products.  In particular,  FileNet's interest in Saros
          is in part based on the Company's  evaluation of the market  potential
          for Saros' new products  including the recently  announced  @mezzanine
          and Saros Document  Server for BackOffice  which have yet to be proven
          in  the  marketplace,  as  well  as  other  products  currently  under
          development.  Delays in or  non-completion of the development of these
          new products,  or lack of market  acceptance of such  products,  could
          have an adverse  impact on the Company's  future results of operations
          and  result  in a  failure  to  realize  anticipated  benefits  of the
          acquisitions.

          PRODUCT  LIABILITY.  The Company's  license  agreements with customers
          typically  contain  provisions  designed  to limit  their  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 by
          them 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  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, 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.






                                       17
<PAGE>
Item 6.   Exhibits and Reports on Form 8-K

1.   Exhibits

          The list of exhibits  contained in the accompanying  Index to Exhibits
          is herein incorporated by reference.

2.   No reports on Form-8K were filed during the third quarter of fiscal 1996.









































                                       18

<PAGE>


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

By:/s/ Mark S. St. Clare
      -------------------
Mark S. St. Clare
Chief Financial Officer and Sr. Vice President, Finance
(Principal Financial Officer)

Date: November 13, 1996










































                                       19

<PAGE>
                                Index to Exhibits

Exhibit No.    Description
-----------    -----------------------------------------------------------------

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*          Amended and  Restated  Credit  Agreement  (Multicurrency)  by and
               among  the  Registrant  and Bank of  America  National  Trust and
               Savings  Association dated August 8, 1995,  effective May 1, 1995
               (filed as Exhibit 10.1 to Form 10-Q for the quarter ended July 2,
               1995).
10.2*          Substitution   Agreement   between   the   Registrant   and  AT&T
               Technologies,  Inc. dated October 23, 1984 (filed as Exhibit 10.9
               to the Form S-1).
10.3*          Sublicensing   Agreement   between   the   Registrant   and  AT&T
               Technologies,  Inc. dated October 23, 1984 (filed as Exhibit 10.9
               to the Form S-1).
10.4*          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).
10.5*          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).
10.6*          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).
10.7*          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).
10.8*          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).
10.11*         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).
10.12*         Software License  Agreement  between  the  Registrant and Mentat,
               Inc.  dated December 11, 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).
10.13*         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).

--------------------------------------------------
*    Incorporated herein by reference
                                       20
<PAGE>

Exhibit No.    Description
-----------    -----------------------------------------------------------------

10.14*         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).
10.15*         Memorandum  of  Agreement  effective  June 30, 1994  between  the
               Registrant  and Ing. C.  Olivetti & C.  S.p.A.  (filed as Exhibit
               10.24 to Form 10-Q for the quarter ended October 2, 1994).
10.16*         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).
10.17*         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).
10.18*         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).
10.19*         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  10.20 to form 10-K for
               the year ended December 31, 1995).
27.            Financial Data Schedule.

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* Incorporated herein by reference




























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