FORM 10-Q/A

                       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 June 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                                    14,997,327 as of August 8, 1996


<PAGE>



                               FILENET CORPORATION
                                      Index


                                                                         Page
                                                                        Number
                                                                        ------
PART I.  FINANCIAL INFORMATION

Item 1.  Consolidated Balance Sheets
         as of June 30, 1996 and December 31, 1995.......................  1
 
         Consolidated Statements of Operations for the fiscal quarters
         and six months ended June 30, 1996 and July 2, 1995.............  2

         Consolidated Statements of Cash Flows for the six months ended
         June 30, 1996 and July 2, 1995..................................  3

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

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

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings............................................... 11

Item 4.  Submission of Matters to a Vote of Securities Holders........... 11

Item 5.  Certain Considerations.......................................... 12

Item 6.  Exhibits and Reports on Form 8-K................................ 15

         SIGNATURE....................................................... 16

         INDEX TO EXHIBITS............................................... 17


<PAGE>
Part I. Financial Information
Item 1. Financial Statements.

                               FILENET CORPORATION
                           Consolidated Balance Sheets
                      (In thousands, except share amounts)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                           June 30,    December 31,
                                                                             1996         1995
                                                                           -------     -----------
                                        ASSETS
<S>                                                                       <C>            <C>
Current assets:
     Cash and cash equivalents.......................................     $ 26,860       $ 43,378
     Short-term marketable securities................................       26,129         28,782
                                                                            ------         ------
         Total cash and short-term marketable securities.............       52,989         72,160
                                                                            ------         ------
     Accounts receivable, net........................................       65,385         53,501
     Inventories.....................................................        7,426          6,620
     Prepaid expenses and other......................................        9,884          6,573
     Deferred income taxes...........................................        3,735          3,735
                                                                             -----          -----
Total current assets.................................................      139,419        142,589
                                                                           -------        -------
Net property and equipment...........................................       26,664         25,796

Other assets:
     Capitalized software, net.......................................          895          1,226
     Long-term marketable securities.................................       16,998         18,395
     Other...........................................................        1,928          1,676
                                                                             -----          -----
Total other assets...................................................       19,821         21,297
                                                                            ------         ------
Total assets.........................................................     $185,904       $189,682
                                                                          ========       ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable................................................     $ 13,604       $ 16,073
     Accrued liabilities:
         Compensation................................................       12,017         10,997
         Income taxes payable........................................        2,312          2,228
         Unearned maintenance revenue................................        7,842          5,761
         Royalties...................................................        4,604          3,572
         Other.......................................................       18,211         17,604
                                                                            ------         ------
Total current liabilities............................................       58,590         56,235
                                                                            ------         ------
Deferred income taxes................................................        2,346          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  15,091,088 and 13,254,222  shares at
         June 30, 1996 and December 31, 1995, respectively...........      123,883        100,719
     Retained earnings...............................................        1,211         10,518
     Other...........................................................         (126)            42
                                                                              ----             --
Total stockholders' equity...........................................      124,968        131,158
                                                                           -------        -------
Total liabilities and stockholders' equity...........................     $185,904       $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         Six Months Ended
                                                  --------------------       ---------------------
                                                  June 30,      July 2,      June 30,      July 2,
                                                    1996         1995          1996         1995
                                                  -------       ------       -------       -------
<S>                                              <C>           <C>          <C>           <C>
Revenue:
     Software revenue........................... $33,035       $28,183      $ 70,153      $ 51,757
     Service revenue............................  20,093        17,439        37,308        31,966
     Hardware revenue...........................  11,869        10,499        24,280        20,819
                                                  ------        ------        ------        ------
Total revenue...................................  64,997        56,121       131,741       104,542
                                                  ------        ------       -------       -------
Costs and expenses:
     Cost of software revenue...................   4,781         3,723         8,644         7,191
     Cost of service revenue....................  12,344        12,309        23,794        21,735
     Cost of hardware revenue...................   7,378         7,410        15,597        13,414
     Research and development...................   9,057         6,002        17,479        10,702
     Selling, general and administrative........  28,849        24,021        58,876        44,629
     Merger, restructuring and write-off of
       purchased in-process research and
       development costs........................       -             -        16,011             -
                                                  ------        ------        ------        ------
Total costs and expenses........................  62,409        53,465       140,401        97,671
                                                  ------        ------       -------        ------
Operating income (loss)                            2,588         2,656        (8,660)        6,871

     Other income, net..........................     763           698         1,594         1,325
                                                     ---           ---         -----         -----

Income (loss) before income taxes...............   3,351         3,354        (7,066)        8,196

Provision for income taxes......................     838         2,023         2,241         3,716
                                                     ---         -----         -----         -----

Net income (loss)............................... $ 2,513       $ 1,331       $(9,307)      $ 4,480
                                                 =======       =======       =======       =======

Net income (loss) per share..................... $  0.15       $  0.09       $ (0.62)      $  0.29
                                                 =======       =======       =======       =======

Weighted average common and common
     equivalent shares outstanding..............  16,366        15,655        15,021        15,544
                                                  ======        ======        ======        ======
</TABLE>
See accompanying notes to consolidated financial statements.
                                       2
<PAGE>

                               FILENET CORPORATION
                      Consolidated Statements of Cash Flows
                                 (In thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                Six Months Ended
                                                                         -----------------------------
                                                                         June 30, 1996  July 2, 1995
<S>                                                                        <C>            <C>
Cash flows from operating activities:
     Net income (loss)...................................................  $ (9,307)      $  4,480
     Adjustments to reconcile  net income  (loss) to net cash
    (used by) provided by operating activities:
         Write-off of purchased in-process research and
          development and associated acquisition costs...................    10,011              -
         Depreciation and amortization...................................     5,628          5,010
         Capitalized software amortization...............................       331          1,800
         Provision for losses on accounts receivable.....................       108            505
         Changes in operating assets and liabilities, net of acquisition:
              Accounts receivable........................................   (11,992)          (841)
              Inventories................................................      (806)        (1,720)
              Prepaid expenses...........................................    (3,311)        (2,228)
              Accounts payable...........................................    (2,469)          (442)
              Accrued liabilities:
                  Compensation...........................................     1,020           (160)
                  Income taxes payable...................................        84          1,934
                  Unearned maintenance revenue...........................     2,081          1,915
                  Royalties..............................................     1,032            737
              Other......................................................     2,347         (2,266)
                                                                              -----         ------
Net cash (used by) provided by operating activities......................    (5,243)         8,724
                                                                             ------          -----
Cash flows from investing activities:
     Proceeds from sale of equipment.....................................     2,887             83
     Capital expenditures................................................    (9,327)        (6,290)
     Capitalized software................................................         -         (1,600)
     Payment for purchase of IFSL........................................   (11,711)             -
     Purchase of marketable securities...................................   (15,214)       (11,476)
     Proceeds from maturity of marketable securities.....................    18,805         15,095
                                                                             ------         ------
Net cash used by investing activities....................................   (14,560)        (4,188)
                                                                            -------         ------
Cash flows from financing activities:
     Debt repayments, net................................................         -           (163)
     Proceeds from issuance of common stock..............................     3,285          5,224
                                                                              -----          -----
Net cash provided by financing activities................................     3,285          5,061
                                                                              -----          -----

Net increase (decrease) in cash and cash equivalents.....................   (16,518)         9,597
Cash and cash equivalents, beginning of year.............................    43,378         24,950
                                                                             ------         ------
Cash and cash equivalents, end of period.................................  $ 26,860       $ 34,547
                                                                           ========       ========

Supplemental cash flow information:
     Interest paid.......................................................  $    217       $    112
     Income taxes paid...................................................  $  2,440       $  2,141
</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 June 30, 1996 and
     the results of its operations for the fiscal  quarters and six months ended
     June 30, 1996 and July 2, 1995 and its cash flows for the six months  ended
     June  30,  1996  and  July  2,  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  June 30,  1996 and for the
     quarter and six months ended July 2, 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 six  months  ended June 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.

5.   On March 1, 1996,  the Company  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.

                                       4
<PAGE>
     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"),  a Delaware  corporation,  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.   Subsequent to June 30, 1996, Watermark, formerly a wholly-owned subsidiary
     of the Company, was merged into the Company.

7.   Subsequent to June 30, 1996, the  Company's  Board of  Directors authorized
     the Company to repurchase up to 200,000  shares of its common stock.  These
     shares will be purchased  from time to time at  prevailing  market  prices,
     through the open market or unsolicited negotiated  transactions,  depending
     on market conditions.  As of August 13, 1996,  the  Company  had  purchased
     100,000 shares at an aggregate cost of $2,280,625.

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  plead in the  Company's  initial
     case.  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.

                                       5
<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 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

                                       6
<PAGE>
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
integrating  these  operations 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 6% in the second quarter and 21% for the first six
months of fiscal 1996 while international  revenues increased 41% and 37% in the
second quarter and first six months of fiscal 1996, respectively,  when compared
to the corresponding periods in fiscal 1995.  International revenues constituted
approximately  34% and 28% of total  revenues  in the second  quarters of fiscal
1996 and 1995, respectively,  and 32% and 30% of total revenues in the first six
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  certain major  international
currencies.
<TABLE>
<CAPTION>
 
(In Millions)                         ---- Second Quarter ----        ------ Six Months ------
                                      1996      1995    Change        1996      1995    Change
<S>                                   <C>      <C>       <C>        <C>        <C>       <C>
Software revenue                      $33.0    $28.2     17%        $ 70.1     $51.7     36%
 ................................      .......................       ........................
     Percentage of total revenue       51%      50%                    53%       49%
 ................................      .......................       ........................
Service revenue                        20.1     17.4     16%          37.3      32.0     17%
 ................................      .......................       ........................
     Percentage of total revenue       31%      31%                    28%       31%
 ................................      .......................       ........................
Hardware revenue                       11.9     10.5     13%          24.3      20.8     17%
 ................................      .......................       ........................
     Percentage of total revenue       18%      19%                    19%       20%
 ................................      .......................       ........................
Total revenue                         $65.0    $56.1     16%        $131.7     $104.5    26%
 ................................      .......................       ........................
</TABLE>
Software  revenue  growth in the second  quarter of 1996 over the same period of
1995 was 17% and is due to an increase in the volume of product  shipments  from
the Company,  Watermark and Saros product lines,  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 16% for the quarter  ended June 30, 1996 over the
same period of 1995.  Service  revenue  consists of revenue  from  software  and
hardware  maintenance services provided to the Company's customer installed base

                                       7
<PAGE>
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 $1.0  million  of  revenue  from  the  sale of  spare  parts  in
connection with the continued transition of hardware  maintenance  activities to
Hewlett Packard Company.  The Company  anticipates  recognizing an additional $4
million this year from the sale of spare  parts.  Such sales are not expected to
continue into 1997.

Hardware  revenue  increased by 13% for the quarter ended June 30, 1996 over the
same  period of 1995  primarily  due to strong  demand  for the  Company's  OSAR
product line. However,  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 six month period ended June 30, 1996, total revenue  increased by 26% to
$131.7  million  over the same  period in 1995.  Software  and  service  revenue
increased by 36% and 17%, respectively, due to the reasons cited above. Hardware
revenue increased 17%, and as expected,  decreased as a percent of total revenue
to 19%  compared to 20% for the same  period last year due to the reasons  cited
above.

Cost of Revenue.
<TABLE>
<CAPTION>
(In Millions)                                ---- Second Quarter ----       ------ Six Months ------
                                             1996      1995    Change       1996      1995    Change
<S>                                        <C>       <C>        <C>        <C>        <C>       <C>
Cost of software revenue                   $ 4.8     $ 3.7      30%        $ 8.6      $ 7.2     19%
 ......................................     ..........................      .........................
  As a percentage of software revenue        15%       13%                   12%        14%
 ......................................     ..........................      .........................
Cost of service revenue                     12.3      12.3       0%         23.8       21.7     10%
 ......................................     ..........................      .........................
  As a percentage of service revenue         61%       71%                   64%        68%
 ......................................     ..........................      .........................
Cost of hardware revenue                     7.4       7.4       0%         15.6       13.4     16%
 ......................................     ..........................      .........................
  As a percentage of hardware revenue        62%       70%                   64%        64%
 ......................................     ..........................      .........................
Total cost of revenue                      $24.5     $23.4       5%        $48.0      $42.3     13%
 ......................................     ..........................      .........................
  As a percentage of total revenue           38%       42%                   36%        40%
 ......................................     ..........................      .........................
</TABLE>
The  cost  of  software  revenue  includes  royalties  paid  to  third  parties,
amortization of capitalized software and the cost of software distribution.  The
2% increase in the cost of software  revenue as a percentage of software revenue
for the  quarter  ended June 30,  1996 as compared to the same period of 1995 is
primarily  attributable to increased sales of higher cost Saros software product
lines.

The cost of service  revenue  includes the cost  attributable to maintenance and
professional  services.  The cost of service  revenue as a percentage of service
revenue  decreased by 10% in the second  quarter of 1996 from the same period of
1995 due to lower  professional  services costs and favorable margins related to
the sale of spare parts cited above.

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 second  quarter of 1996 decreased to 62%
from 70% in the same period of 1995  primarily  due to an increase in the number
of higher margin OSAR sales in the second quarter of 1996.

                                       8
<PAGE>
For the six  month  period  ended  June 30,  1996,  the  decline  in the cost of
software  revenue as a  percentage  of software  revenue to 12% from 14% for the
same period last year is primarily  due to a reduction in software  amortization
costs and a favorable mix of software product sales. The cost of service revenue
as a percentage of service revenue  decreased to 64% for the first six months of
1996  compared to 68% for the same period in 1995  primarily  due to the reasons
mentioned for the second quarter.  The cost of hardware  revenue as a percentage
of  hardware  revenue  remained  comparable  for the  first  six  months of 1996
compared to the same period in 1995.


Operating Expenses.
<TABLE>
<CAPTION>

(In Millions)                                ---- Second Quarter ----       ------ Six Months ------
                                             1996      1995    Change       1996      1995    Change
<S>                                        <C>       <C>        <C>        <C>        <C>       <C>
Research and development                   $ 9.1     $ 6.0      52%        $17.5      $10.7     64%
 ......................................     ..........................      .........................
     As a percentage of total revenue        14%       11%                   13%        10%
 ......................................     ..........................      .........................
Selling, general and administrative        $28.8     $24.0      20%        $58.9      $44.6     32%
 ......................................     ..........................      .........................
     As a percentage of total revenue        44%       43%                   45%        43%
 ......................................     ..........................      .........................
</TABLE>

Research and Development.  Research and development expenses increased by 52% in
the second  quarter of 1996 due to the  addition of  development  personnel  and
related  facilities,  depreciation  expenses  associated  with  new  development
activities  and 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 due to the reasons cited above and
Saros  research  and  development   expenses   growing  more  rapidly  than  its
corresponding revenue.

For the six month period ended June 30, 1996, research and development  expenses
increased by 64% over the same period of 1995 due to the reasons cited above. As
a percentage of total revenue,  research and development  costs increased to 13%
compared to 10% for the same period last year due to the reasons cited above.

Selling,  General  and  Administrative.   Selling,  general  and  administrative
expenses  increased by 20% for the second  quarter of 1996  compared to the same
period in 1995.  The increase in 1996 was due to the  addition of marketing  and
sales  support  personnel  and the  costs  associated  with  implementing  a new
corporate  business  information  system.  As a  percentage  of  total  revenue,
selling,  general and administrative  expenses increased to 44% from 43% for the
same  period  last  year  primarily  due to the  reasons  cited  above and Saros
selling,  general and  administrative  expenses  growing  more  rapidly than its
corresponding revenue.

For the first  six month  period  ended  June 30,  1996,  selling,  general  and
administrative  expenses  increased  by 32% 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 45%  compared to 43% for the same period
last year due to the reasons cited above.


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 six months ended June 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, and $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.

                                       9
<PAGE>
Interest and Other Income.  Other income,  net of other expenses,  increased for
the second  quarter  and six  months  ended  June 30,  1996 over the  comparable
periods in 1995 to $763,000  and $1.6 million  from  $698,000 and $1.3  million,
respectively.  The increase is primarily due to increased  interest  income on a
higher average balance of cash and marketable securities.

Effective Tax Rate.  Non-deductible  merger and other costs in the first quarter
of 1996  increased  the  estimated  annual  effective  tax  rate to 45% from 37%
previously estimated for 1996. The effect of the increased tax rate was recorded
in the first  quarter.  The  effective  rate for 1996 of 45% 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 second  quarter ended June 30, 1996 increased by
89% over the same period in 1995 to $2.5 million or $0.15 per share  compared to
net income of $1.3 million or $0.09 per share in 1995.  For the first six months
ended June 30, 1996,  net loss was $9.3 million or ($0.62) per share compared to
net  income  of $4.5  million  or  $0.29  per  share  in  1995.  Before  merger,
restructuring  and write-off of purchased  in-process  research and  development
costs of $16.0  million  after tax, net income for the six months ended June 30,
1996 was $6.7 million or $0.41 per share on approximately  16.5 million weighted
average common and common equivalent shares, a 41% per share increase over 1995.


Liquidity and Capital Resources

As of June 30, 1996,  combined cash,  cash  equivalents and short- and long-term
marketable  securities  decreased  by $20.6  million to $70.0  million  from the
fiscal year ended  December  31,  1995,  primarily as a result of the payment of
$11.2  million  for  IFSL  and the use of $5.2  million  in cash  for  operating
activities.

For the six months ended June 30, 1996,  cash used by operating  activities  was
$5.2 million  while cash used by investing  activities  totaled  $14.6  million,
consisting of the purchase of IFSL of $11.7  million,  capital  expenditures  of
$9.3  million,  net proceeds  from  marketable  securities in the amount of $3.6
million  and the  proceeds  from sale of  equipment  of $2.9  million.  Net cash
provided by  financing  activities  was $3.3  million  consisting  primarily  of
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 June 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 will be sufficient to meet its working capital
and capital expenditure needs throughout 1996.

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

                                       10
<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  plead  in the  Company's  initial  case.  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 4. Submission of Matters to a Vote of Security Holders.

     (a) The 1996 Annual Meeting of the  Stockholders of the Company was held at
         9:00 a.m. on May 8, 1996, in Costa Mesa, California.

     (b) At the annual meeting,  the following five  individuals were elected to
         the Company's Board of Directors, constituting all members of the Board
         of Directors:

         Nominee                 Affirmative Votes             Votes Withheld
         -------                 -----------------             --------------
 
         Theodore J. Smith          12,691,092                     159,085
 
         J. Burgess Jamieson        12,690,982                     159,195

         Frederick K. Fluegel       12,690,882                     159,295

         John C. Savage             12,689,982                     160,195

         William P. Lyons           12,689,982                     160,195


     (c) The  following  additional  proposals  were  considered  at the  Annual
         Meeting  and  were  approved  according  to  the  respective  vote  of
         the stockholders.

         1.  Proposal  to approve an amendment to the  Restated  Certificate  of
             Incorporation   increasing  the  number  of  authorized  shares  of
             Common  Stock, $.01 par value per share, from 25,000,000 shares  to
             100,000,000 shares.
 
             Votes for     Votes Against     Abstentions       Broker Non-Votes
             ---------     -------------     -----------       ----------------
             9,315,642       3,386,250         79,311               68,974
             ---------       ---------         ------               ------

                                       11
<PAGE>
         2.  Proposal  to approve  an  amendment to the 1995 Stock  Option Plan
             ( the "1995  Plan") to (i) increase the number of shares of Common
             Stock  issuable  under the  1995 Plan  by  an  additional  650,000
             shares  and  (ii) effect certain  changes  to  the incentive stock
             option provisions of the 1995 Plan.

             Votes for     Votes Against     Abstentions       Broker Non-Votes
             ---------     -------------     -----------       ----------------
             10,061,419      2,532,530        136,704              119,524
             ----------      ---------        -------              -------


Item 5. Certain Considerations.

     This report contains certain forward-looking  statements that involve risks
     and  uncertainties  including,  but not limited to, those factors discussed
     below, in Management's  Discussion and Analysis of Financial  Condition and
     Results of Operations and elsewhere in this report. 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  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.

                                       12
<PAGE>
     COMPETITION.  The imaging,  workflow and  document  management  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 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.

                                       13
<PAGE>
     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  plead  in the  Company's  initial  case.  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.

     DEPENDENCE ON CERTAIN RELATIONSHIPS.  The Company has entered into a number
     of co-marketing  relationships with other companies such as 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  for 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.  In fiscal 1995,  the Company  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  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

                                       14
<PAGE>
     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
     Back  Office  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.


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.  Reports on Form 8-K

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

                                       15
<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





                                       16
<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.

10.5**         Runtime  Sublicense  Addendum  between the Registrant and Oracle
               Corporation  dated  July 1, 1996,  as  amended  by Amendment One
               thereto.

10.6**         Full  Use  and   Deployment  Sublicense  Addendum   between  the
               Registrant and Oracle Corporation dated July 1, 1996, as amended
               by Amendment One thereto.

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; Registration No. 333-09075).

10.10*         Second  Amended  and  Restated  Stock  Option  Plan  of  FileNet
               Corporation,  together  with the forms of Incentive  Stock Option
               Agreement and  Non-Qualified  Stock Option  Agreements  (filed as
               Exhibits 4(a), 4(b) and 4(c),  respectively,  to the Registrant's
               registration  statement on Form S-8,  Registration No. 33-48499),
               and  an  Amendment   thereto   (filed  as  Exhibit  4(d)  to  the
               Registrant's registration statement on Form S-8, Registration No.
               33-69920),  and the Second Amendment thereto (filed as Appendix A
               to the  Registrant's  Proxy Statement for the  Registrant's  1994
               Annual Meeting of Stockholders, filed on April 29, 1994).
----------------------------------------
*  Incorporated herein by reference.
** Certain information in this exhibit is subject to a request for confidential
   treatment filed with the Securities and Exchange Commission.  
                                       17

<PAGE>
Exhibit No.         Description
----------      ----------------------------------------------------------------

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).

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.

----------------------------------------
*  Incorporated herein by reference.

                                       18