-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AiM3gsvU3fuBlwrBIWhuOfNc17MWyVCWeS1K0J7JsWJlm3V0WoGuo/FDcyWWPdc4 Wm3fDBW7W4p3GwEa2Hx10Q== 0000706015-96-000013.txt : 19961118 0000706015-96-000013.hdr.sgml : 19961118 ACCESSION NUMBER: 0000706015-96-000013 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FILENET CORP CENTRAL INDEX KEY: 0000706015 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 953757924 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-15997 FILM NUMBER: 96662939 BUSINESS ADDRESS: STREET 1: 3565 HARBOR BLVD CITY: COSTA MESA STATE: CA ZIP: 926261420 BUSINESS PHONE: 7149663400 MAIL ADDRESS: STREET 1: 3565 HARBOR BLVD CITY: COSTA MESA STATE: CA ZIP: 926261420 10-Q/A 1 QUARTERLY REPORT FOR FILENET CORPORATION 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 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 Part I. Financial Information Item 1. Financial Statements. FILENET CORPORATION Consolidated Balance Sheets (In thousands, except share amounts) (Unaudited)
June 30, December 31, 1996 1995 ------- ----------- ASSETS 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 ======== ========
See accompanying notes to consolidated financial statements. 1 FILENET CORPORATION Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
Fiscal Quarter Ended Six Months Ended -------------------- --------------------- June 30, July 2, June 30, July 2, 1996 1995 1996 1995 ------- ------ ------- ------- 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 ====== ====== ====== ======
See accompanying notes to consolidated financial statements. 2 FILENET CORPORATION Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Six Months Ended ----------------------------- June 30, 1996 July 2, 1995 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
See accompanying notes to consolidated financial statements. 3 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 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 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 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.
(In Millions) ---- Second Quarter ---- ------ Six Months ------ 1996 1995 Change 1996 1995 Change 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% ................................ ....................... ........................
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 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.
(In Millions) ---- Second Quarter ---- ------ Six Months ------ 1996 1995 Change 1996 1995 Change 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% ...................................... .......................... .........................
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 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.
(In Millions) ---- Second Quarter ---- ------ Six Months ------ 1996 1995 Change 1996 1995 Change 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% ...................................... .......................... .........................
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 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 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 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 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 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 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 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 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 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 EX-10.4 2 BUSINESS ALLIANCE PROGRAM AGREEMENT ORACLE BUSINESS ALLIANCE PROGRAM AGREEMENT This Business Alliance Program Agreement (the "Agreement") is between Oracle Corporation with its principal place of business at 500 Oracle Parkway, Redwood City, California 94065 ("Oracle") and FileNet Corporation (legal name) with its principal place of business at 3565 Harbor Boulevard, Costa Mesa, CA 92626 (the "Alliance Member"). The terms of this Agreement shall apply to each Program license granted and to all services provided by Oracle under this Agreement. When completed and executed by both parties, an Order Form shall evidence the Program licenses granted and the services that are to be provided. 1. DEFINITIONS 1.1 "Commencement Date" shall mean the date on which the Programs are delivered by Oracle, or if no delivery is necessary, the Effective Date set forth on the relevant Order Form. 1.2 "Designated System" shall mean the computer hardware and operating system designated on the relevant Order Form or Sublicense report for use in conjunction with a Sublicensed Program, Development License, or Marketing Support License. 1.3 "Order Form" shall mean the document by which the Alliance Member orders Program licenses, Sublicenses, and services, and which is agreed to by the parties. The Order Form shall reference the Effective Date of this Agreement. 1.4 "Price List" shall mean Oracle's standard commercial fee schedule that is in effect when a Program license, Sublicense, or services are ordered by the Alliance Member. 1.5 "Program" shall mean the computer software in object code form owned or distributed by Oracle for which the Alliance Member is granted a license or grants a Sublicense pursuant to this Agreement; the user guides and manuals for use of the software ("Documentation"); and Updates. "Limited Production Program" shall mean a Program not specified on the Price List or which is designated as Limited Production by Oracle. 1.6 "Sublicense Addenda" shall mean the addenda to this Agreement specifying additional Sublicense terms and Sublicense rates and fees for the various types of Sublicenses which may be granted by the Alliance Member. 1.7 "Sublicense" shall mean a nonexclusive, nontransferable right granted by or through the Alliance Member to an end user to use an object code copy of the Programs with the Value-Added Package under authority of a Sublicense Addendum. 'Sublicensee" shall mean a third party who is granted a Sublicense of the Programs with the Value-Added Package for such party's own internal data processing purposes and not for purposes of any further distribution. 1.8 "Supported Program License" shall mean a Development License or Marketing Support License for which the Alliance Member has ordered Technical Support for the relevant time period. "Technical Support" shall mean Program support provided under Oracle's policies in effect on the date Technical Support is ordered. 1.9 "Update" shall mean a subsequent release of a Program which is generally made available for Supported Program Licenses at no add additional charge, other than media and handling charges. Update shall not include any release, option or future product which Oracle licenses separately. 1.10 "User," unless otherwise specified in the Order Form or Sublicense report for a user type specified in the Price List in effect when the Program is Sublicensed, shall mean a specific individual employed by the Alliance Member or Sublicensee (as the case may be) who is authorized by such party to use the Programs, regardless of whether the individual is actively using the Programs at any given time. 1.11 "Value-Added Package" shall mean the hardware or software products or services having added value which are developed, sold, and/or licensed with the Programs to a Sublicensee by the Alliance Member. as provided under the applicable Sublicense Addenda. 2. LICENSES GRANTED 2.1 Development Licenses and Trial Licenses A. Oracle grants to the Alliance Member a nonexclusive license to use the Development Licenses the Alliance Member obtains under this Agreement and applicable Sublicense Addenda, as follows: 1. to develop or prototype the Value-Added Package on the Designated System or on a backup system if the Designated System is inoperative, up to any applicable maximum number of designated Users or other such limitation as may be applicable; 2. to demonstrate the Programs to potential Sublicensees solely in conjunction with the Value-Added Package; 3. to provide training and technical support to employees and to customers solely in conjunction with the Value-Added Package; 4. to use the Documentation provided with the Programs In support of the Alliance Member's authorized use of the Programs: and 5. to copy the Programs for archival or backup purposes; no other copies shall be made without Oracle's prior written consent. All titles, trademarks, and copyright and restricted rights notices shall be reproduced in such copies. All archival and backup copies of the Programs are subject to the terms of this Agreement. B. The Alliance Member may order temporary trial licenses ('Trial Licenses") for its evaluation purposes only, and not for development or prototype. purposes, for use during a period specified in the Order Form. Each Order Form for Trial Licenses shall clearly state the trial period and shall identify that the order is for a single Trial License. 2.2 Marketing Support Licenses Oracle grants to the Alliance Member a nonexclusive license to use the Marketing Support Licenses the Alliance Member obtains under this Agreement and applicable Sublicense Addenda, as follows: A. to demonstrate the Programs to potential Sublicensees solely in conjunction with the Value- Added Package, up to any applicable maximum number of designated Users or other such limitation as may be applicable; B. to develop customized prototypes of the Value- Added Package for prospective Sublicensees on the Designated System if the Alliance Member does not receive any fees related to the development of such customized prototypes; C. to use the Documentation provided with the Programs in support of the Alliance Members authorized use of the Programs; and D. to copy the Programs for archival or backup purposes; no other copies shall be made without Oracle's prior written consent. All titles, trademarks, and copyright and restricted rights notices shall be reproduced in such copies. All archival and backup copies of the Programs are subject to the terms of this Agreement. 2.3 Sublicensing A. License to Sublicense Programs As further set forth in the applicable Sublicense Addenda, Oracle hereby grants the Alliance Member a nonexclusive, nontransferable license to market and grant Sublicenses as set forth in such Sublicense Addenda and at the rates and fees set forth in such Sublicense Addenda. The Alliance Member shall only have the right to Sublicense Programs pursuant to an effective Sublicense Addendum between the parties hereto. The Alliance Member shall Sublicense the Programs solely through a written Sublicense agreement as provided under Section 2.3.B. Upon Oracle's request, the Alliance Member shall provide Oracle with a copy of the Alliance Member's standard Sublicense agreement. B. Sublicense Agreement Every Sublicense agreement shall include, at a minimum, contractual provisions which: 1. Restrict use of the Programs to object code, subject to the restrictions provided under the applicable Sublicense Addenda and consistent with the Sublicense fees payable to Oracle; 2. Prohibit (a) transfer of the Programs except for temporary transfer in the event of computer malfunction; (b) assignment, timesharing and rental of the Programs; and (c) title to the Programs from passing to the Sublicensee or any other party: 3. Prohibit the reverse engineering, disassembly or decompilation of the Programs and prohibit duplication of the Programs except for a single backup or archival copy; 4. Disclaim, to the extent permitted by applicable law, Oracle's liability for any damages, whether direct, indirect, incidental or consequential, arising from the use of the Programs; 5. Require the Sublicensee at the termination of the Sublicense, to discontinue use and destroy or return to the Alliance Member all copies of the Programs and Documentation; 6. Prohibit publication of any results of benchmark tests run on the Programs; 7. Require the Sublicensee to comply fully with all relevant export laws and regulations of the United States to assure that neither the Programs, nor any direct product thereof, are exported, directly or indirectly, in violation of United States law; and 8. Specify Oracle as a third party beneficiary of the Sublicense agreement to the extent permitted by applicable law. C. Marketing/Sublicensing Practices In marketing and Sublicensing the Programs, the Alliance Member shall: 1. Not engage in any deceptive, misleading, illegal, or unethical practices that may be detrimental to Oracle or to the Programs; 2. Not make any representations, warranties, or guarantees to Sublicensees concerning the Programs that are inconsistent with or in addition to those made in this Agreement or by Oracle; and 3. Comply with all applicable federal, state,. and: local laws and regulations in performing its duties with respect to the Programs. 2.4 Acceptance of Programs For each Program license for which delivery from Oracle is required under this Agreement, the Alliance Member shall have a 15 day Acceptance Period, beginning on the Commencement Date, in which to evaluate the Program. During the Acceptance Period, the Alliance Member may cancel the license by giving written notice to Oracle and returning the Program in accordance with Section 6.6 below. Unless such cancellation notice is given, the license will be deemed to have been accepted by the Alliance Member at the end of the Acceptance Period. 2.5 Limitations on Use The Alliance Member shall not use or duplicate the Programs (including the Documentation) for any purpose other than as specified in this. Agreement or make the Programs available to unauthorized third parties. The Alliance Member shall not (a) use the Programs for its internal data processing or for processing customer data; (b) rent, electronically distribute, or timeshare the Programs or market the Programs by interactive cable or remote processing services or otherwise distribute the Programs other than as specified in this Agreement; or .(c) cause or permit the reverse engineering, disassembly, or decompilation of the Programs. 2.6 Title Oracle shall retain all title, copyright, and other proprietary rights in the Programs and any modifications or translations thereof. The Alliance Member and its Sublicensees do not acquire any rights in the Programs other than those specified in this Agreement. 2.7 Transfer of Programs The Alliance Member may transfer a Development License or Marketing Support License within its organization upon notice to Oracle; transfers are subject to the terms and fees specified in Oracle's transfer policy in effect at the time of the transfer. 2.8 Use of Programs by Agents The Alliance Member and each Sublicensee (as the case may be) shall have the right to allow each such party's own third party agents to use each such party's licensed Programs as licensed or Sublicensed under this Agreement so long as the applicable party ensures that its agents use the Programs in accordance with the terms of this Agreement or the applicable Sublicense agreement. 2.9 Pre-Production Programs As an accommodation to the Alliance Member, Oracle may supply the Alliance Member with pre production releases of Programs (which may be labeled "Alpha" or "Beta"). These products are not suitable for production use. 3. TECHNICAL SERVICES 3.1 Technical Support Services Oracle shall provide Technical Support services ordered by the Alliance Member under Oracle's Technical Support policies in effect on the date Technical Support is ordered, subject to the payment by the Alliance Member of the applicable fees. Reinstatement of lapsed Technical Support services is subject to Oracle's Technical Support reinstatement fees in effect on the date Technical Support is reordered. The Alliance Member may obtain Technical Support services for Limited Production Programs and pre-production releases of Programs on a time and materials basis. 3.2 Training Services Oracle will provide training services agreed to by the parties under the terms of this Agreement. For any on-site services requested by the Alliance Member, the Alliance Member shall reimburse Oracle for actual, reasonable travel and out-of-pocket expenses incurred. 4. FEES AND PAYMENTS 4.1 License Fees and Sublicense Fees The Alliance Member may order Development Licenses or Marketing Support Licenses at the standard Program license fees set forth in the Price List or at the fees otherwise provided in a Sublicense Addendum. For each Sublicense granted by the Alliance Member, the Alliance Member agrees to pay Oracle a Sublicense fee as set forth in the applicable Sublicense Addenda. The Alliance Member shall not be relieved of its obligation to pay Sublicense fees owed to Oracle by the nonpayment of such fees by the Sublicensee. The Alliance Member is free to determine unilaterally its own license fees to its Sublicensees. If the Alliance Member or a Sublicensee upgrades the Programs to a larger computer, transfers the Programs outside the United States and/or to another operating system, or increases the licensed number of Users, the Alliance Member will pay additional Sublicense fees to Oracle as provided under Oracle's transfer policies and rates in effect at the time the Program is upgraded or transferred. 4.2 Technical Support Fees Technical Support services ordered by the Alliance Member for Development Licenses and Marketing Support Licenses will be provided under Oracle's Technical Support policies and rates in effect on the date Technical Support is ordered. 4.3 General Payment Terms Except as otherwise provided in a Sublicense Addendum, invoices for payment of license fees shall be payable 30 days from the Commencement Date. Technical Support fees for Sublicenses shall be payable as specified in the applicable Sublicense Addendum. Technical Support fees for Development Licenses and Marketing Support Licenses. shall be payable annually in advance, net 30 days.. from the renewal date; such fees will be those in effect at the beginning of the period for which the fees are paid. Fees due by the Alliance Member shall not be subject to set off for any claims against Oracle. All payments made shall be in United States currency and shall be made without deductions based on any taxes or withholdings, except where such deduction Is based on gross income. Any amounts payable by. the Alliance Member hereunder which remain unpaid after the due date shall be subject to a late charge equal to 1.5% per month from the due date until such amount is paid. The Alliance Member agrees to pay applicable media and shipping charges. The Alliance Member shall issue a purchase order, or alternative document acceptable to Oracle, on or before the Effective Date of the applicable Order Form. 4.4 Taxes The fees listed in this Agreement do not include taxes; if Oracle is required to pay sales, use, property, value-added, or other federal, state or local taxes based on the licenses granted under this Agreement, or the Sublicenses granted by the Alliance Member, then such taxes shall be billed to and paid by the Alliance Member. This shall not apply to taxes based on Oracle's income. 5. RECORDS 5.1 Records Inspection The Alliance Member shall maintain adequate books and records in connection with activity under this Agreement. Such records shall include, without limitation, executed Sublicense agreements, the information required in or related to the Sublicense reports required under a Sublicense Addendum, the number of copies of Programs used or Sublicensed by the Alliance Member, the computers on which the Programs are installed, and the number of Users using the Programs. Oracle may audit the relevant books and records of the Alliance Member to ensure compliance with the terms of this Agreement upon reasonable notice to the Alliance Member. Any such audit shall be conducted during regular business hours at the Alliance Members offices and shall not interfere unreasonably with the Alliance Member's business activities. If an audit reveals that the Alliance Member has underpaid fees to Oracle, the Alliance Member shall be invoiced for such underpaid fees based on the Price List in effect at the time the audit is completed If the underpaid fees exceed five percent (5%) of the applicable license fees or Sublicense fees paid, then the Alliance Member shall pay Oracle's reasonable costs of conducting the audit. Audits shall be made no more than once annually. 5.2 Notice of Claim The Alliance Member will notify the Oracle legal department promptly in writing of: (a) any claim or proceeding involving the Programs that comes to its attention; and (b) any material change in the management or control of the Alliance Member. 6. TERM AND TERMINATION 6.1 Term This Agreement shall become effective on the Effective Date and shall be valid until the expiration or termination of all Sublicense Addenda hereunder, unless terminated earlier as set forth herein. If not otherwise specified on the Order Form, each Program license granted under this Agreement shall remain in effect perpetually under the terms of this Agreement unless the license or this Agreement is terminated as provided in this Article S below. The term of each Sublicense Addendum hereunder shall be as set forth in each such Addendum. 6.2 Termination by the Alliance Member The Alliance Member may terminate any Program license, any Sublicense Addenda, or this Agreement at any time; however, termination shall not relieve the Alliance Members obligations specified in Sections 6.5 and 6.6. 6.3 Termination by Oracle Oracle may terminate any Program license, any Sublicense Addenda, or this Agreement upon written notice if the Alliance Member breaches this Agreement and fails to correct the breach within 30 days following written notice specifying the breach. 6.4 Force Majeure Neither party shall be liable to the other for failure or delay in the performance of a required obligation if such failure or delay is caused by strike, riot, fire, flood, natural disaster, or other similar cause beyond such party's control, provided that such party gives prompt written notice of such condition and resumes its performance as soon as possible, and provided further that the other party may terminate this Agreement if such condition continues for a period of one hundred eighty (180) days. 6.5 Effect of Termination Upon expiration or termination of a Sublicense Addendum or this Agreement, all the Alliance Member's rights to market and Sublicense the Programs as set forth in such Sublicense Addendum or this Agreement shall cease. The termination of this Agreement, a Sublicense Addendum, or any license shall not limit either party from pursuing any other remedies available to it, including injunctive relief, nor shall such termination relieve the Alliance Members obligation to pay all fees that have accrued or that the Alliance Member has agreed to pay under a Sublicense Addendum or any Order Form, other similar ordering document under this Agreement, or that appear in a Sublicense report. The parties' rights and obligations under Sections 2.5, 2.6, 2,7 and Articles 4, 5, 6~7, and 8 shall survive termination of this Agreement. 6.6 Handling of Programs Upon Termination If a license granted under this Agreement expires or otherwise terminates, the Alliance Member shall: (a) cease using the applicable Programs; and (b) certify to Oracle within one month after expiration or termination that the Alliance Member has destroyed or has returned to Oracle the Programs and all copies. This requirement applies to copies in all forms; partial and complete, in all types of media and computer memory, and whether or not modified or merged into other materials. Before returning Programs to Oracle, the Alliance Member shall acquire a Return Material Authorization ("RMA") number from Oracle. 7. INDEMNITY, WARRANTIES, REMEDIES 7.1 Infringement Indemnity Oracle will defend and indemnify the Alliance Member against a claim that Programs infringe a copyright or patent, provided that: (a) the Alliance Member notifies Oracle in writing within 30 days of the claim; (b) Oracle has sole control of the defense and all related settlement negotiations; and (c) the Alliance Member provides Oracle with the assistance, information and authority necessary to perform Oracle's obligations under this Section. Reasonable out-of-pocket expenses incurred by the Alliance Member in. providing such assistance will be reimbursed by Oracle. Oracle shall have no liability for any claim of infringement based on use of a superseded. or altered release of Programs if the infringement would have been avoided by the use of a current unaltered release of the Programs which Oracle provides to the Alliance Member. In the event the Programs are held or are believed by Oracle to infringe, Oracle shall have the option, at Its expense, to (a) modify the Programs to be noninfringing; (b) obtain for the Alliance Member a license to continue using the Programs; or (c) terminate the license for the infringing Programs and refund the license fees paid for those Programs, prorated over a five year term from the Commencement Date. This Section 7.1 states Oracle's entire liability and the Alliance Member's exclusive remedy for infringement. 7.2 Warranties and Disclaimers A. Program Warranty Oracle warrants for a period of one year from the Commencement Date that each unmodified Program for which the Alliance Member has a Supported Program License will perform the functions described in the Documentation provided by Oracle when operated on the Designated System. B. Media Warranty Oracle warrants the tapes, diskettes or other media to be free of defects in materials and workmanship under normal use for 90 days from the Commencement Date. C. Services Warranty Oracle warrants that its Technical Support and training services will be performed consistent with generally accepted industry standards- This warranty shall be valid for 90 days from performance of service. D. Disclaimers THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Oracle does not warrant that the Programs will run properly on all Hardware, that the Programs will meet requirements of the Alliance Member or the Sublicensees or operate in the combinations which may be selected for use by the Alliance Member or the Sublicensees, that the operation of the Programs will be uninterrupted or error free, or that all Program errors will be corrected. Limited Production Programs, Pre-Production Releases of Programs, and Computer- Based Training Products are Distributed "As Is." The Alliance Member shall not make any warranty on Oracle's behalf. 7.3 Exclusive Remedies For any breach of the warranties contained in Section 7.2 above, the Alliance Member's exclusive remedy, and Oracle's entire liability, shall be: A. For Programs The correction of Program errors that cause breach of the warranty, or if Oracle is unable to make the Program operate as warranted, the Alliance Member shall be entitled to recover the fees paid to Oracle for the Program license. B. For Media The replacement of defective media returned within 90 days of the Commencement Date. C. For Services The reperformance of the services, or if Oracle is unable to perform the services as warranted, the Alliance Member shall be entitled to recover the fees paid to Oracle for the unsatisfactory services. 7.4 Indemnification of Oracle The Alliance Member agrees to enforce the terms of its Sublicense agreements required by this Agreement and to notify Oracle of any known breach of such terms. The Alliance Member will defend and indemnify Oracle against: A. All claims and damages to Oracle arising from any use by the Alliance Member or its Sublicensees of any product not provided by Oracle but used in combination with the Programs if such claim would have been avoided by the exclusive use of the Programs; B. All claims and damages to Oracle caused by the Alliance Members failure to include the required contractual terms set forth in Section 2.3.8 hereof in each Sublicense agreement; and C. All claims and damages to Oracle caused by Sublicensees' breach of any of the applicable provisions required by Section 2.3 hereof. 7.5 Equitable Relief The Alliance Member acknowledges that any breach of its obligations with respect to proprietary rights of Oracle will cause Oracle irreparable injury for which there are inadequate remedies at law and that Oracle shall be entitled to equitable relief in addition to all other remedies available to it. 8. GENERAL TEAMS AND CONDITIONS 8.1 Nondisclosure Neither party shall, without first obtaining the written consent of the other party disclose the terms and conditions of this Agreement, except as may be required to implement and enforce the terms of this Agreement, or as may be required by legal procedures or by law. No other information exchanged between the parties shall be deemed confidential unless the parties otherwise agree in writing. The Alliance Member shall not disclose the results of benchmark tests or other evaluation of the Programs to any third party without Oracle's prior written approval. 8.2 Copyrights The Programs are copyrighted by Oracle. The Alliance Member shall retain all Oracle copyright notices on the Programs used by the Alliance Member under its Development Licenses or Marketing Support Licenses. The Alliance Member shall include the following on all copies of the Programs in software Value-Added Packages incorporating the Programs distributed by the Alliance Member: A. A reproduction of Oracle's copyright notice; or B. A copyright notice indicating that the copyright is vested in the Alliance Member containing the following 1. A "c" in a circle and the word "copyright"; 2. The Alliance Member's name; 3. The date of copyright; and 4. The words "All Rights Reserved." Such notices shall be placed on the Documentation, the sign-on screen for any software Value-Added Package incorporating the Programs, and the diskette or tape labels. Notwithstanding any copyright notice by the Alliance Member to the contrary, the copyright to the Program included in any such application package shall remain in Oracle. Other than as specified above, on any reproduction or translation of any Programs, Documentation, or promotional material, the Alliance Member agrees to reproduce Oracle's copyright notices intact. 8.3 Trademarks "Oracle" and any other trademarks and service marks adopted by Oracle to identify the Programs and other Oracle products and services belong to Oracle; the Alliance Member will have no rights in such marks except as expressly set forth herein and as specified in writing from time to time. The Alliance Member's use of Oracle's trademarks shall be under Oracle's trademark policies and procedures in effect from time-to-time. The Alliance Member agrees not to use the trademark "ORACLE," or any mark beginning with the tellers "Ora," or any other mark likely to cause confusion with the trademark "ORACLE" as any portion of the Alliance Member's tradename, trademark for the Alliance Members Value-Added Package, or trademark for any other products of the Alliance Member. The Alliance Member shall have the right to use the trademark "ORACLE" and other Oracle trademarks solely to refer to Oracle's Programs, products and services. The Alliance Member agrees with respect to each registered trademark of Oracle, to include in each advertisement, brochure, or other such use of the trademark, the trademark symbol 'circle R" and the following statement: __ is a registered trademark of Oracle Corporation, Redwood City, California Unless otherwise notified in writing by Oracle, the Alliance Member agrees, with respect to every other trademark of Oracle, to include in each advertisement, brochure, or other such use of the trademark, the symbol "TM' and the following statement: __ is a trademark of Oracle Corporation,Redwood City,California The Alliance Member shall not market the Oracle Programs in any way which implies that the Oracle Programs are the proprietary product of the Alliance Member or of any party other than Oracle. Oracle shall not have any liability to the Alliance Member for any claims made by third parties relating to the Alliance Member's use of Oracle's trademarks. 8.4 Relationships between Parties In all matters relating to this Agreement, the Alliance Member will act as an independent contractor. The relationship between Oracle and the Alliance Member is that of licensor/licensee. Neither party will represent that it has any authority to assume or create any obligation, express or implied, on behalf of the other party, nor to represent the other party as agent, employee, franchisee, or in any other capacity. Nothing in this Agreement shall be construed to limit either party's right to independently develop or distribute software which is functionally similar to the other party's product, so long as proprietary information of the other party is not included in such software. 8.5 Assignment The Alliance Member may not assign or otherwise transfer any rights under this Agreement without Oracle's prior written consent. 8.6 Notice All notices, including notices of address change, required to be sent hereunder shall be in writing and shall be deemed to have been given when. deposited in first class mail to the first address listed in the relevant Order Form (if to the Alliance Member) or to the Oracle address on the Order Form (if to Oracle). To expedite order processing, the Alliance Member agrees that Oracle may treat documents faxed by the Alliance Member to Oracle as original documents: nevertheless, either party may require the other to exchange original signed documents. 8.7 Governing Law/Jurisdiction This Agreement, and all manors arising out of or relating to this Agreement, shall be governed by the substantive and procedural laws of the State of California and shall be deemed to be executed in Redwood City, California. The parties agree that any legal action or proceeding relating to this Agreement shall be instituted in any state or federal court in. San Francisco or San Mateo County, California. Oracle and the Alliance Member agree to submit to the jurisdiction of, and agree that venue is proper in, these courts in any such legal action or proceeding. 8.8 Severability In the event any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions of this Agreement will remain in full force and effect. 8.9 Export The Alliance Member agrees to comply fully with all relevant export laws and regulations of the United States ("Export Law') to assure that neither the Programs, nor any direct product thereof, are (a) exported, directly or indirectly, in violation of Export Laws: or (b) are intended to be used for any purposes prohibited by the Export Laws, including, without limitation, nuclear, chemical, or biological weapons proliferation. 8.10 Limitation of Liability In no event shall either party be liable for any indirect, incidental, special or consequential damages, or damages for loss of profits, revenue, data or use, Incurred by either party or any third party, whether in an action in contract or tort, even if the other party or any other person has been advised of the possibility of such damages. Oracle's liability for damages hereunder shall in no event exceed the amount of fees paid by the Alliance Member under this Agreement, and If such damages result from the Alliance Member's use of the Program or services, such liability shall be limited to fees paid for the relevant Program or services giving rise to the liability, prorated over a five-year term from the Commencement Pate of the applicable license or the date of performance of the applicable services. The provisions of this Agreement allocate the risks between Oracle and the Alliance Member. Oracle's pricing reflects this allocation of risk and the limitation of liability specified herein. 8.11 Federal Government Sublicenses If the Alliance Member grants a Sublicense to the United States government, the Programs shall be provided with "Restricted Rights"and the Alliance Member will place a legend, in addition to applicable copyright notices, on the documentation, and on the tape or diskette label, substantially similar to the following: RESTRICTED RIGHTS LEGEND "Use, duplication or disclosure by the Government is subject to restrictions as set forth in subparagraph (c)(1)(ii) of the Department of Defense Regulations Supplement ("DFARS") 252.227-7013, Rights in Technical Data and Computer Software (October 1988) and Federal Acquisition Regulation ("FAR") 52.227-14, Rights in Data-General, including Alternate III (June 1987), as applicable. Oracle Corporation, 500 Oracle Parkway, Redwood City, OA 94065." 8.12 Waiver The waiver by either party of any default or breach of this Agreement shall not constitute a waiver of any other or subsequent default or breach. Except for actions for non-payment or breach of Oracle's proprietary rights in the Programs, no action, regardless of form, arising out of this Agreement may be brought by either party more than one year after the cause of action has accrued. 8.13 Entire Agreement This Agreement constitutes the complete agreement between the parties and supersedes all prior or contemporaneous agreements or representations, written or oral, concerning the subject matter of this Agreement. This: Agreement may not be modified or amended except in a writing signed by a duly authorized representative of each party; no other act, document, usage or custom shall be deemed to amend or modify this Agreement. This Agreement may be executed in any number of counterparts, each of which shall be an original. and all of which shall constitute together but one and the same document. It is expressly agreed that the terms of this Agreement and any Order Form shall supersede the terms in any Alliance Member purchase order or other ordering document. This Agreement shall also supersede the terms of any shrinkwrap or break-the-seal license agreement included in any package for Oracle-furnished software, except terms contained in such license agreement that grant specific use rights for the Programs. The Effective Date of this Agreement shall be July 1, 1996 Executed by FiIeNet Corporation: Executed by Oracle Corporation: Authorized Signature:/s/W. J. Kreidler Authorized Signature:/s/Lloyd Alexander Name: W. J. Kreidler Name: Lloyd Alexander Title: V P. Operations Title: Manager - Western Region Channels Sales Support Oracle Corporation 500 Oracle Parkway Redwood Shores, CA 94065 (415) 508-7000 Oracle is a registered trademark of Oracle Corporation. 1-95 AMENDMENT ONE to the BUSINESS ALLIANCE PROGRAM AGREEMENT between FILENET CORPORATION and ORACLE CORPORATION This document ("Amendment One") shall serve to amend the Business Alliance Program Agreement between FileNet Corporation (the "Alliance Member") and Oracle Corporation ("Oracle") dated July 1, 1996 (the "Agreement"). The Agreement is hereby amended as follows: 1. Replace Section 1.10 with the following: "1.10 "User," unless otherwise specified in the Order Form or Sublicense report for a user type specified in the Price List in effect when the Program is Sublicensed, shall mean a specific individual (i) who is employed by the Alliance Member or Sublicensee (as the case may be) and authorized by such party to use the Programs, or (ii) who is a third party agent acting on behalf of the Alliance Member or Sublicensee (as the case may be) and authorized by such party to use the Programs, regardless of whether the individual in (i) or (ii) above is actively using the Programs at any given time. In addition, the Alliance Member shall have the right to allow third parties ("Third Party Users") to use the Programs solely in furtherance of the Alliance Member's or a Sublicensee's business interests, for the purposes of facilitating such Third Party Users' usage of and access to the Alliance Member's Application Program. The Third Party Users shall only be licensed to use the Programs running with the Alliance Member's Application Program. The Alliance Member's Application Program used with the Programs shall not allow such Third Party Users to use the Programs outside of the functionality of such Application Program. All use of the Programs by Third Party Users shall be subject to the applicable User limitations for the applicable Programs. The Alliance Member shall ensure that the Users and Third Party Users authorized by this Section use the Programs in accordance with the terms of this Agreement. The Alliance Member shall indemnify Oracle for any claims, damages, costs, expenses or losses arising from the use of the Programs by any such User or Third Party User. 2. Add the following to the end of Section 1.11: "For the purposes of this Agreement, "Application Program(s)" shall mean the Alliance Member's value-added application software, as described in the Application Package Attachment to the Runtime Sublicense Addendum, with which the Runtime Programs are to be coupled. "Application Package(s)" shall mean the Runtime Programs coupled with the Application Programs. For purposes of this Agreement, the Application Program shall be regarded as the Alliance Member's Value-Added Package." 3. In line 3 of Section l.7, replace "end user" with "Sublicensee". 4. In line 6 of Section 1.7, insert the following after "third party": "or Alliance Member internal User, as further set forth in the applicable Sublicense Addenda," 5. In Section 2.3.B.2, insert the following at the beginning of such Section: "Except as other wise set forth herein," 6. In Section 2.3.B.6, insert the following after "Programs": "Publication" shall mean any release of the benchmark information into the public domain." 7. Delete Section 2.3.B.8 in its entirety. 8. Replace the second sentence of Section 2.5 with the following: "The Alliance Member shall not (a) use the Programs for its internal data processing or for processing customer data; (b) rent, electronically distribute the Programs or market the Programs by interactive cable or remote processing services or otherwise distribute the Programs other than as specified in this Agreement, except the Alliance Member shall have the right to electronically distribute Updates of the Programs; or (c) cause or permit the reverse engineering, disassembly, or decompilation of the Programs. The Alliance Member may timeshare the Programs only upon Oracle's prior written consent, which consent shall not be unreasonably withheld, and upon the negotiation of appropriate business terms by the parties. Oracle and the Alliance Member agree to negotiate in good faith any such agreement on the terms of any timesharing arrangement. For the purposes of this Section, "timesharing" shall not be deemed to include the activities of the Alliance Member or any Sublicensee under Section 1.10." 9. In line 3 of Section 4.3, replace "30 days" with "45 days". 10. Delete the sixth sentence of 4.3. 11. In Section 5.2, delete clause (b) and replace it with the following: "(b) any consolidation, merger or sale of substantially all of the assets of the Alliance Member or any dissolution or other fundamental change in business identity with respect to the Alliance Member" 12. In Section 6.3, insert the following after "any Program license": "granted to the Alliance Member by Oracle" 13. In Section 6.3, replace "30 days" with "60 days" 14. In Section 6.5, delete the first paragraph and replace it with the following: "Upon expiration or termination of a Sublicense Addendum or this Agreement, all the Alliance Member's rights to market, Sublicense, and use the Programs as set forth in such Sublicense Addendum or this Agreement shall cease; provided, however, that, notwithstanding Section 6.6 clause (a) below, unless the termination is for material default by the Alliance Member, the Alliance Member may continue using the release of the Development Licenses then in the Alliance Member's possession on the Designated System's for which Development Licenses were granted, solely for the purpose of continuing technical support for Sublicenses granted prior to termination, provided that the Alliance Member continuously maintains Technical Support services for such Development Licenses. Such continued use of the Programs shall be subject to all the provisions of this Agreement and any applicable Sublicense Addendum. Each Sublicense of the Alliance Member effective at the time of expiration or termination of this Agreement shall survive such expiration or termination and shall continue in full force and effect until each such Sublicense expires or terminates pursuant to the Sublicense agreement relating to such Sublicense; provided, however, that the Alliance Member shall immediately terminate a Sublicense upon the failure of the Sublicensee to cure a breach of or default under the Sublicense agreement within thirty (30) days after notification to the Sublicensee by the Alliance Member or Oracle of the Sublicensee's failure to comply with its duties and obligations under the applicable Sublicense agreement." 15. In clause (c) of Section 7.1, insert the following before "assistance": "reasonable" 16. The first sentence of the third paragraph of Section 7.1 of the Agreement shall be deleted and replaced with the following: "In the event the Programs are held or are believed by Oracle to infringe, Oracle shall have the option, at its expense, to: (a) modify the Programs to be noninfringing; or (b) obtain for the Alliance Member a license to continue using the Programs. If Oracle determines that it is not commercially reasonable to perform either of the above options, then Oracle may terminate the license for the infringing Programs and refund the license fees paid for those Programs." 17. Replace clause (c) of Section 7.4 with the following: "(c) All damages to Oracle caused by a Sublicensee's material breach of any of the applicable provisions required by Section 2.3 hereof, provided that such breach was caused solely by the failure of the Alliance Member to enforce known material breaches within a reasonable time after such breach becomes known to the Alliance Member. If the Alliance Member causes such Sublicensee to cure such breach within a reasonable time, then the Alliance Member shall be relieved of its indemnification obligations hereunder." 18. Replace Section 7.5 with the following: "Each party acknowledges that any breach of its obligations with respect to proprietary rights of the other party will cause such other party irreparable injury for which there are inadequate remedies at law and that such other party shall be entitled to equitable relief in addition to all other remedies available to it. 19. Section 8.1 of the Agreement shall be deleted in its entirety and replaced with the following: "By virtue of this Agreement, the parties may have access to information that is confidential to one another ("Confidential Information"). Confidential Information shall be limited to the Programs, the terms and conditions of this Agreement, and all information clearly marked as confidential. A party's Confidential Information shall not include information which: (a) is or becomes a part of the public domain through no act or omission of the other party; or (b) was in the other party's lawful possession prior to the disclosure and had not been obtained by the other party either directly or indirectly from the disclosing party; or (c) is lawfully disclosed to the other party by a third party without restriction on disclosure; (d) is independently developed by the other party; or (e) is disclosed under operation of law. The Alliance Member shall have the right to disclose the results of benchmark tests to a prospective Sublicensee which is not a competitor of Oracle for use for evaluation purposes only if the prospective Sublicensee has executed a nondisclosure agreement with the Alliance Member governing the benchmark test results under terms equivalent to those set forth in this Section. Otherwise, results of benchmark tests run by the Alliance Member may not be disclosed unless Oracle consents to such disclosure in writing. The Alliance Member shall have the right to disclose benchmark information which solely concerns its applications programs. The parties agree, both during the term of this Agreement and for a period of two (2) years after termination of this Agreement and of all licenses granted hereunder, to hold each other's Confidential Information in confidence. The parties agree not to make each other's Confidential Information available in any form to any third party or to use each other's Confidential Information for any purposes other than the implementation of this Agreement. Each party agrees to take all reasonable steps to ensure that Confidential Information is not disclosed or distributed by its employees or agents in violation of the provisions of this Agreement." 20. Replace the body of Section 8.5 with the following: "Neither party shall assign or otherwise transfer any rights under this Agreement without the other party's prior written consent." 21. Delete the second and third sentences of Section 8.7. Other than the addition of the foregoing, the Agreement remains unchanged and in full force and effect. The Effective Date of this Amendment One is July 1, 1996. FILENET CORPORATION ORACLE CORPORATION By: /s/ W. J. Kreidler By: /s/ Lloyd Alexander Name: W. J. Kreidler Name: Lloyd Alexander Title: V P. Operations Title: Manager - Western Region Channels Sales Support EXHIBIT A COMMISSION REQUEST FORM Company Name: Address: City: State: Zip: Contact Name/Title: Phone Number: Type of Business Organization: Annual Revenue $: # of Employees: Existing Software: Proposed Software Solution: Hardware Platform/Operating System: Oracle Programs: Projected Order Date: Projected Dollar amount of Order: Amount of Commission requested: Alliance Member direct marketing efforts: Additional Information: Any Commission payable under this Commission Request Form shall be specific to the license of Programs as specified above to the end user set forth above. The amount of Commission specified above shall not be applicable to any other Program licenses by Oracle. The Effective Date of this Commission Request Form shall be Executed by the Alliance Member: Executed by Oracle Corporation: Authorized Signature: Authorized Signature: Name: Name: Title: Title: EX-10.5 3 RUNTIME SUBLICENSE ADDENDUM ORACLE RUNTIME SUBLICENSE ADDENDUM This document (the "Addendum") is between Oracle Corporation ("Oracle") and FileNet Corporation (the "Alliance Member') and shall be governed by the terms of the Business Alliance Program Agreement between the Alliance Member and Oracle effective July 1, 1996 (the "Agreement") and the terms set forth below. 1.SUBLICENSES 1.1 Sublicense Programs and Terms The Alliance Member may only Sublicense Runtime Programs for which the Alliance Member has previously acquired a Supported Development License for the applicable Designated System. Notwithstanding any other provision of this Agreement, the Alliance Member shall have no right to Sublicense Programs designated as Oracle Applications Programs, Oracle Express Programs, Limited Production Programs, or other Programs specified by Oracle from time-to-time without the prior written consent of Oracle. The Alliance Member shall have the right to market and grant Sublicenses of Runtime Programs under the conditions set forth in the Agreement and under the following restrictions: A. Sublicense Runtime Programs with the Application Program in the Application Package for use on Designated Systems to Sublicensees. Each copy of the Runtime Programs distributed shall be for the Sublicensee's own internal use in the Territory only on a single Designated System limited to a maximum number of Users; and B. Make and deliver to the Sublicensee a single copy of the Runtime Programs in the Application Package for each Sublicense granted. The Alliance Member shall use all practical means available, both contractual and technical, to control the restricted use of each Runtime Program Sublicense. If a Sublicensee uses the Runtime Program beyond the limited functionality described in Section 1.2 hereof, the Alliance Member or Distributor shall immediately notify the Sublicensee of such unauthorized use and if the Sublicensee fails to discontinue such unauthorized use following notification either terminate the Sublicense or forward to Oracle one hundred percent (100%) of the applicable Full Use standard Program license fees in effect at the time the payment is made to Oracle together with a written request by the Sublicensee for a Full Use Program license from Oracle. Oracle must approve, in writing, the Sublicensee's request before continued use of the Programs by the Sublicensee shall be deemed authorized. 1.2 Runtime Programs For the purposes of this Addendum, "Runtime Program(s)" shall mean Programs which shall be limited to use solely for the purpose of running the Alliance Member's Application Program, and may not be used to create or alter tables or reports except as necessary for operating the Alliance Member's Application Program. "Full Use Programs" shall mean unaltered versions of the Programs with all functions intact. 1.3 Value-Added Package For the purposes of this Addendum, "Application Program(s)" shall mean the Alliance Members value added application software, described in the attached Application Package Attachment with which the Runtime Programs are to be coupled. "Application Package(s)" shall mean the Runtime Programs coupled with the Application Programs. For purposes of the Agreement, the Application Program shall be regarded as the Alliance Member's Value-Added Package. 1.4 Trial Sublicenses The Alliance Member and its Distributors shall be entitled to grant, at no charge, up to a maximum combined total of ten (10) temporary Trial Sublicenses of the Application Package at any one time. Such Sublicenses shall be for evaluation purposes only and shall be for a period not to exceed thirty (30) days. The Alliance Member shall pay Oracle Sublicense fees for any Trial Sublicenses in excess of thirty (30) days. Each such Trial Sublicense shall be Sublicensed under a Sublicense agreement which provides for such trial use. 1.5 Distributors Oracle grants the Alliance Member the right to appoint third parties ("Distributors") to market and Sublicense the Runtime Programs in the Territory, under the terms of the Agreement and this Addendum. However, Distributors shall have no right to make copies of the Programs for Sublicensing and shall obtain all such Programs from the Alliance Member. Each Distributor shall execute a written agreement with the Alliance Member binding the Distributor to provisions substantially similar to those contained in Sections 2.3, 2.5, 2.6, 5.1, 5.2.6.1, 6.3, 6.4, 6.5, 7.2.D, 7.5,8.1, 8.2, 8.3, &5, 8.7, 8.9, and 8.11 of the Agreement and to those contained in Sections 1 (except 1.5), 3, 4, 5, and 8 of this Addendum. Each obligation of the Alliance Member under such provisions shall also be applicable to each Distributor. Each Distributor agreement shall also contain any other provisions necessary for the Alliance Member to satisfy its commitments under the Agreement. The Alliance Member shall notify Oracle promptly in writing of the appointment of each such Distributor. In addition, the Alliance Member shall keep executed Distributor agreements and records .of the Distributor information required under the Alliance Member's Sublicense reports, and shall allow Oracle to inspect such information as specified under the Agreement. The Alliance Member will defend and indemnify Oracle against all damages to Oracle caused by (i) the Distributors' failure to include the required contractual terms set forth in Section 2.3.B of the Agreement in each Sublicense agreement, and (ii) the Distributors' breach of any of the applicable provisions required in its Distributor agreement. 1.6 Documentation The Alliance Member shall be responsible for providing documentation for Sublicensees. The Alliance Member shall have the right to incorporate portions of the Documentation into the Alliance Members documentation, subject to the provisions of Section 8.2 of the Agreement. 2. SUBLICENSE FEES 2.1 Sublicense Fees and Rate Application Package, the Alliance Member agrees to pay Oracle a Sublicense fee equal to forty percent (40%) of the applicable license fee for each such Program, as specified in the applicable Price List and Alliance Member Price List supplement to such Price List in effect at the time the applicable Programs are Sublicensed. As further specified in Section 6 of this Addendum, Sublicense fees shall be due and payable within twenty (20) days of the last day of each month. The Alliance Member shall not be relieved of its obligation to pay Sublicense fees owed to Oracle by the nonpayment of such fees by the Sublicensee. On or after each anniversary during the Term of this Addendum, Oracle may amend the Sublicense fee percentage rate set forth above based on Oracle's then-current standard Sublicense fee percentage rate schedule and the actual amount of Sublicense fees received by Oracle hereunder. 2.2 Price List for Sublicenses Notwithstanding any other provision of the Agreement, the applicable Price List for determining Sublicense fees shall be the standard Price List in effect at the time the Application Package is Sublicensed. Notwithstanding any other provision of this Agreement, if the Alliance Member issues a written Sublicense quote and such quote is accepted by the applicable Sublicensee, for a period of ninety (90) days after the date of submission of the quote to the Sublicensee, the Sublicense fee applicable to the Programs identified in the quote shall be based on the Price List in effect on such date. 2.3 Users The Sublicense fees for a Program shall be based and priced on the applicable User Level for the maximum number of Users for such Program, as specified in the Price List. The Alliance Member shall have the right to Sublicense Programs on any User basis specified in the Price List in effect at the time the applicable Program is Sublicensed. 3. TERM This Addendum shall become effective on the Effective Date of this Addendum and shall be valid for three (3) years (the "Term") from the Effective Date, unless terminated as provided in the Agreement. Any renewal of this Addendum shall be subject to renegotiation of terms and fees. Unless the expiration or termination is for default by the Alliance Member, the Alliance Member may continue using the release of the Programs then in the Alliance Member's possession on the Designated Systems for which Development Licenses were granted, solely for the purpose of continuing technical support for Sublicense granted prior to termination. Such continued use of the Programs shall be subject to all the provisions of this Agreement, including, without limitation, payment of the Technical Support Fees specified herein. 4. TERRITORY The Alliance Member shall have the right to market and grant Sublicenses of Programs in the United States only (the 'Territory"). 5. TECHNICAL SUPPORT 5.1 Technical Support for Sublicensees A. Installation The Alliance Member or its Distributors will be responsible for any assistance needed to install the Application Package at Sublicensee sites. B. Sublicensing Support The Alliance Member is responsible for providing all technical support, training and consultations to its Sub licensees and Distributors. In consideration of the payments specified in Section 5.2, the Alliance Member shall have the right to use the Oracle Technical Support services acquired for its Supported Development Licenses to provide technical support services to its Sublicensees as further set forth in the Agreement. The Alliance Member shall continuously maintain Oracle Technical Support services for the Development Licenses during the period during which the Alliance Member provides technical support services to any Sublicensees. Any questions from the Alliance Members Sublicensees or Distributors will be referred by Oracle to the Alliance Member, 5.2 Technical Support Fees For Technical Support services for Sublicensees, each year the Alliance Member agrees to pay Oracle annual Technical Support Fees for each Runtime Program Sublicensed under this Addendum, a previous Alliance Member Addendum, or previous distribution agreement between the parties hereto where the Sublicensee received technical support services for such Runtime Program during the applicable support period. Annual Technical Support Fees for a Program shall be equal to the applicable Technical Support percentage rate for the highest Technical Support services level selected by the Alliance Member for Technical Support services for any Development License used under this Addendum of the cumulative Sublicense fees accrued to Oracle for such supported Program. Upon December 31 of each year, the Alliance Member shall provide Oracle a report setting forth all of the Alliance Members' Sublicenses and those Sublicensed Programs which were supported by the Alliance Member during the calendar year. The report shall also include the applicable Technical Support Fees due and payable to Oracle for such calendar year. The Alliance Member shall provide Oracle with payment of all Technical Support Fees for such calendar year required under the applicable December 31 report with such report in the form of a check made out in the amount of such fees. All Technical Support Fees paid to Oracle are noncancelable and nonrefundable. 6. SUBLICENSE REPORTS Within twenty (20) days of the last day of each month, the Alliance Member shall send Oracle a report detailing for that month: A. For each Sublicensed Application Package shipped during the prior month, Sublicensee name, address, make/model and operating system of the Designated System, date of shipment, Runtime Programs shipped, maximum number of licensed Users, whether the Sublicense is a Trial Sublicense, and total Sublicense fees and Technical Support Fees due to Oracle; B. For each Application Program licensed to end-users to be used with previously installed software licensed by Oracle in conjunction with the Application Program, Sublicensee name, address, make/model and operating system of the computer, and date of installation; and C.The Distributor agreements executed during the prior month, including names and addresses of the Distributors. The Alliance Member shall require its Distributors to report this information to the Alliance Member on a monthly basis and will include it in the report for the month in which the Alliance Member received the information. The Alliance Member shall provide Oracle with payment of all fees required under the monthly report with such report in the form of a check made out in the amount of such fees. 7. ADDITIONAL LICENSES During the Term, the Alliance Member may order production release versions of Oracle off-the-shelf Programs available as production release as of the Effective Date of this Addendum and listed on the Price List in effect as of such date. The license fee for Development Licenses shall be equal to Oracle's standard list license fees in effect when an order is placed. The Alliance Member shall have the right to order Programs for use as Marketing Support Licenses at no further charge to the Alliance Member. The Alliance Member may obtain Technical Support services from Oracle for such Programs under Oracle's applicable Technical Support fees and policies in effect when such services are ordered. The Effective Date of this Addendum shall be July 1, 1996. Executed by FileNet Corporation: Executed by Oracle Corporation: Authorized Signature:/s/W. J. Kreidler Authorized Signature:/s/Lloyd Alexander Name: W. J. Kreidler Name: Lloyd Alexander Title: V P. Operations Title: Manager - Western Region Channels Sales Support ORACLE Oracle Corporation 500 Oracle Parkway Redwood Shores, CA 94065 (415) 506-7000 Oracle is a registered trademark of Oracle Corporation. 8-95 APPLICATION PACKAGE ATTACHMENT Name of Application Program and Application Package which the Alliance Member will be Sublicensing under the Agreement (may not contain the trademarks "Oracle" or "Ora" or any portion thereof): Description of Application Package: Modules: Functions and Objectives: AMENDMENT ONE to the RUNTIME SUBLICENSE ADDENDUM to the BUSINESS ALLIANCE PROGRAM AGREEMENT between FILENET CORPORATION and ORACLE CORPORATION This Amendment One shall serve to amend the Runtime Sublicense Addendum dated July 1' 1996 (the "Addendum") to the Business Alliance Program Agreement between FileNet Corporation (the "Alliance Member") and Oracle Corporation ("Oracle") dated July 1, 1996 (the "Agreement"). The Addendum is amended as follows: 1. Insert the following at the end of the first paragraph of Section 1.1: "Notwithstanding any provision to the contrary in the Agreement, during the Term of this Addendum, provided the annual revenue received by the Alliance Member for Sublicenses to the Alliance Member constitutes less than fifty percent (50%) of the Alliance Member's total annual revenue for Runtime Sublicenses, the Alliance Member may acquire Runtime Programs for its own internal use as a Sublicensee under all terms and discount rates of this Agreement. 2. Delete Section 1.4 and replace it with the following: "1.4 Trial Sublicenses The Alliance Member shall be entitled to grant, at no charge, up to ____*______ temporary Trial Sublicenses of the Programs at any one time. Such Sublicenses shall be for evaluation purposes only and shall be for a period not to exceed ____*_____ days. The Alliance Member shall pay Oracle Sublicense fees for any Trial Sublicenses in excess of ____*_____ days or for any Trial Sublicenses for which the Alliance Member is compensated. Each such Trial Sublicense shall be Sublicensed under a Sublicense agreement which provides for such trial use or under an Oracle Trial License Agreement, as the applicable Oracle Agreement." 3. In Section 2.1, delete the first sentence and replace it with the following: "For each copy of the Programs Sublicensed by the Alliance Member or its Distributor in the Application Package, the Alliance Member agrees to pay Oracle a Sublicense fee equal to _______*________ percent __*__ of the applicable license fee for each RDBMS Program and ____*____ percent __*__ of the applicable license fee for any other Program, as specified in the applicable Price List and Alliance Member * Confidential portion has been filed separately with the Securities and Exchange Commission. Price List supplement to such Price List in effect at the time the applicable Programs are Sublicensed." 4. In line 5 of Section 2.2, insert the following after "Sublicensed": ", except that, until January 1, 1997, the applicable Price List for determining shall be the standard Sublicense fees of only the Oracle7 RDBMS Program only Oracle Reseller U.S. Price List in effect as of July 1, 1995." 5. After the first paragraph of Section 2.2 insert the following new paragraph: "All Sublicense fees for Sublicenses installed outside the United States shall be based on the license fees for the Programs as set forth on the applicable Global Price List." 6. Insert the following at the end of Section 2.3: "Unless otherwise agreed to by the parties in writing, the term "User" shall include "Named Users" and/or "Concurrent Devices/Concurrent Accesses". Unless otherwise agreed to by the parties in writing, a "Named User" is defined as an individual authorized by Sublicensee to use the Programs, regardless of whether the individual is actively using the Programs at any given time and "Concurrent Devices/Concurrent Accesses" are defined as the maximum number of input devices accessing the Programs at any given point in time. (If multiplexing software or hardware (e.g., a TP monitor) is used, this number must be measured at the multiplexing front end.) "Multiplexing" includes but is not limited to any utility of function which allows Users to access the database in a sequential fashion." 7. In Section 3, replace "three (3) years" with "four (4) years". 8. Delete the body of Section 4 in its entirety and insert the following: "4. TERRITORY The Alliance Member shall have the right to market and grant Sublicenses of Programs in the Application Package in all countries worldwide (the "Territory"), subject to the terms of this Section. Oracle may from time to time deny the Alliance Member the right to Sublicense in certain countries in the Territory in order to protect Oracle's interests if, in the reasonable opinion of Oracle's counsel, such countries (i) do not provide adequate protection for Oracle's proprietary rights through copyright, trade secret, patent, or other laws; or (ii) have laws or regulations or the government has committed acts which in the opinion of Oracle's counsel, are injurious to Oracle's interests in the Programs. The Alliance Member acknowledges that the Programs are subject to export controls imposed on Oracle and the Alliance Member by the U.S. Export Administration Act, United States Departments of Commerce, Treasury, and State regulations and directives, and other United States law ("Export laws"). The Alliance Member certifies that neither the Programs nor any direct product thereof are (i) exported, directly or indirectly, in violation of Export laws; or (ii) are intended to be used for any purposes prohibited by the Export laws, including, without limitation, nuclear, chemical, or biological weapons proliferation. Furthermore, the Alliance Member shall not transfer the Programs outside of the territory for which the Alliance Member has Sublicense fights under this Agreement. The Alliance Member warrants that neither it nor its Distributors will grant Sublicenses in or ship any Programs to a country until it (or the Distributor) has completed all necessary government formalities in such country and upon reasonable request by Oracle, the Alliance Member (or its Distributor) provides evidence of completion of such formalities to Oracle. The Alliance Member will indemnify Oracle for any losses, costs, liability, and damages incurred by Oracle as a result of a failure by the Alliance Member or its Distributors to comply with the necessary government requirements in any country. The obligations under this Section shall survive the expiration or termination of this Addendum. Upon Oracle's reasonable request, the Alliance Member shall make records available to Oracle to allow to confirm the Alliance Member's compliance with this Section." 8. Replace the last sentence of the first paragraph of Section 5.2 with the following: "For supported Programs Sublicensed on or prior to ____*_____ days from the Effective Date of the Agreement, annual Technical Support Fees shall be equal to ________*________ percent __*__of the cumulative Sublicense fees accrued to Oracle for such supported Program. For supported Programs Sublicensed after ____*_____ days from the Effective Date of the Agreement, annual Technical Support Fees shall be equal to ____*_____ percent __*__ of the cumulative Sublicense fees accrued to Oracle for such supported Program." 9. Delete the first sentence of Section 6 and insert the following: "Within forty-five (45) days of the last day of each quarterly period ending March 31, June 30, September 30, December 31 (each such period, a "Quarter"), the Alliance Member shall send to Oracle payment and a report detailing for that Quarter:" Also, in Sections 2.1, 5, and 6, delete the word "month" and insert the word "Quarter" and delete the word "monthly" and insert the word "Quarterly" in each instance in which such words occur. 10. Delete the second sentence of Section 7 and insert the following: "The license fee for Development Licenses shall be equal to Oracle's standard list license fee in effect when an order is placed. Notwithstanding the above, the Alliance Member shall be granted a discount on each Development License ordered of ______*______ percent * Confidential portion has been filed separately with the Securities and Exchange Commission. __*__off Oracle's standard list license fees in effect when an order is placed." 11. Add the following new Section after Section 7: "9. COMMISSIONS During the Term of this Addendum, Oracle agrees to pay the Alliance Member a fee ("Commission")equal to no more than __*__ percent __*__of the net license fees Oracle receives from Programs licensed by Oracle to end-users in the United States, as a direct result of the Alliance Member's marketing efforts. Unless otherwise mutually agreed to in writing by the Alliance Member and Oracle, Commissions shall only be paid provided that: A. Oracle obtains from the end-user an Oracle Software License and Services Agreement, or other terms to govern the applicable software license as agreed to in writing by Oracle and the end-user; B. The Alliance Member provides to Oracle a completed Commission Request Form which is accepted in writing by Oracle at least five (5) days prior to the date of license of the applicable Programs, and the end-user pays Oracle all required license fees; C. The Alliance Member's marketing efforts precede the license grant from Oracle; and D. The net license fees represent new revenue to Oracle. The Alliance Member's Commission shall be calculated on fees for perpetual software licenses only. The Alliance Member shall not earn a Commission based on Technical Support fees or fees for other services or products provided to the end-user by Oracle. Oracle reserves the fight to withhold payment of the Commissions due to non-collectability of revenues from the end-user or if the Alliance Member employs marketing practices not approved by Oracle. Commissions shall be paid for Program licenses installed in the United States only. If one or more other Alliance Members seek to obtain Commission for a Program license for which the Alliance Member is seeking Commission, Oracle shall reasonably reduce or adjust the Commission rate specified above to apportion payment of commissions between all Alliance Members which in Oracle's reasonable judgment are entitled to payment of commissions. A copy of the Commission Request Form is attached hereto as Exhibit A." Other than the modifications set forth above, the terms and conditions of the Addendum and the Agreement remain unchanged, and in full force and effect. * Confidential portion has been filed separately with the Securities and Exchange Commission. The Effective Date of this Amendment One is July 1, 1996. FILENET CORPORATION ORACLE CORPORATION By: /s/ W. J. Kreidler By: /s/ Lloyd Alexander Name: W. J. Kreidler Name: Lloyd Alexander Title:V P. Operations Title: Manager - Western Region Channels Sales Support EXHIBIT A CONIMISSION REQUEST FORM Company Name: Address: City: State: Zip: Contact Name/Title: Phone Number: Type of Business Organization: Annual Revenue $: # of Employees: Existing Software: Proposed Software Solution: Hardware Platform/Operating System: Oracle Programs: Projected Order Date: Projected Dollar amount of Order: Amount of Commission requested: Alliance Member direct marketing efforts: Additional Information: Any Commission payable under this Commission Request Form shall be specific to the license of Programs as specified above to the end user set forth above. The amount of Commission specified above shall not be applicable to any other Program licenses by Oracle. The Effective Date of this Commission Request Form shall be Executed by the Alliance Member: Executed by Oracle Corporation: Authorized Signature: Authorized Signature: Name: Name: Title: Title: EX-10.6 4 FULL USE AND DEPLOYMENT SUBLICENSE ADDENDUM ORACLE FULL USE AND DEPLOYMENT SUBLICENSE ADDENDUM This document (the "Addendum") is between Oracle Corporation ("Oracle") and FileNet Corporation (the "Alliance Member") and shall be governed by the terms of the Business Alliance Program Agreement between the Alliance Member and Oracle effective July 1, 1996 (the "Agreement") and the terms set forth below. 1. PROGRAM DISTRIBUTION 1.1 Sublicense of Programs and Terms The Alliance Member shall have the right to market and grant Sublicenses of Full Use Programs or Deployment Programs which are available in production release and listed on Oracle's Price List in effect at the time the Programs are ordered from Oracle to Sublicense to a Sublicensee; provided, however, the Alliance Member shall have no right to Sublicense any Programs designated as Oracle Applications Programs, Oracle Express Programs, Limited Production Programs, or other Programs specified by Oracle from time-to-time without the prior written consent of Oracle. The Alliance Member shall have the right to market and grant Sublicenses of Full Use or Deployment Programs for use on Designated Systems in conjunction with the Integrated System to Sublicensees. Each copy of the Full Use or Deployment Programs distributed shall be for the Sublicensee's own internal use in the Territory only on a single Designated System limited to a maximum number of Users. To acquire Programs for Sublicensing to Sublicensees, the Alliance Member shall order such Programs from Oracle. Each order shall specify the applicable Programs, maximum number of Users, computer/operating system configuration, fees, shipping location, and any other information required by Oracle for processing the order. Orders for Trial Sublicenses shall be clearly marked on the face of the Order Form. 1.2 Distribution under Oracle Agreement In addition to the Sublicense rights specified in Section 2.3.A of the Agreement and notwithstanding the terms of such Section and Section 3.2.B of the Agreement, the Alliance Member shall have the right to market and grant Sublicenses of Full Use Programs and Deployment Programs in conjunction with the Integrated System to Sublicensees under a standard Oracle Software License and Services Agreement in lieu of Sublicensing the Programs under a written Sublicense agreement. The Alliance Member may submit orders for Sublicenses to Oracle for its acceptance. With each such order, the Alliance Member shall submit a standard Oracle Software License and Services Agreement executed by the applicable Sublicensee, or shall reference on such order that the Programs will be licensed to the Sublicensee subject to an existing license agreement effective between the Sublicensee and Oracle (the "Oracle Agreement"). In addition, as part of the Oracle Agreement, the Alliance Member shall obtain the Sublicensee's written agreement that the ordered Programs and services are subject to the terms and conditions of the Oracle Agreement. If the Sublicensee is a federal agency, the Alliance Member shall submit with each such order a written document executed by an authorized Sublicensee contracting officer which contains the following provision: "This is an open market order placed pursuant to terms identical to the terms and conditions of Oracle's General Services Administration (GSA) Schedule A Contract for Oracle Programs current as of the order date, with the exception of the maximum order limitations, discounts, maintenance, training units and other discounts specific to the applicable Oracle GSA Schedule. No other pre-printed or reference terms and conditions shall apply." This written document shall be deemed the applicable Oracle Agreement. For orders which include only shrinkwrapped Oracle Programs, the Oracle Agreement may consist of a written obligation by the Sublicensee to use the Programs under the terms of the shrinkwrap license agreement. The Alliance Member shall indemnify Oracle for any claims, damages, or losses arising from failure to obtain any Oracle Agreement. If the order specifies that the Programs are to be delivered to the Alliance Member, the Alliance Member shall have the right to re-deliver the Programs with their original packaging to the applicable Sublicensee. 1.3 Full Use and Deployment Programs For the purposes of this Addendum, "Full Use Programs" shall mean unaltered versions of the Programs with all functions intact. "Deployment Programs" shall mean Programs which are limited to use solely for the purpose of running applications, and may not be used to create or alter tables or reports except as necessary for operating the applications. 1.4 Value-Added Package For the purposes of this Addendum, "Integrated System" shall mean the hardware and software products having Value-Added which are developed, sold, and/or licensed with the Programs to a Sublicensee by the Alliance Member to satisfy such Sublicensee's internal business requirements and objectives. For purposes of the Agreement, the Integrated System will be regarded as the Alliance Member's Value-Added Package which is described in the attached Value-Added Attachment. The Integrated System shall be regarded as "Value-Added" if the following materials are provided as part of the Integrated System by the Alliance Member: (a) non-Oracle developed software; (b) customized programming or customized consulting; and (c) other computer products or components. 1.5 Trial Sublicenses The Alliance Member shall be entitled to grant, at no charge, up to ten (10) temporary Trial Sublicenses of the Programs at any one time. Such Sublicenses shall be for evaluation purposes only and shall be for a period not to exceed thirty (30) days. The Alliance Member shall pay Oracle Sublicense fees for any Trial Sublicenses in excess of thirty (30) days. Each such Trial Sublicense shall be Sublicensed under a Sublicense agreement which provides for such trial use or under an Oracle Trial License Agreement, as the applicable Oracle Agreement. 1.6 No Distributors The Alliance Member's right to market and grant Sublicenses of Full Use Programs or Deployment Programs hereunder shall be limited to the Alliance Member only. The Alliance Member shall not appoint any third party to distribute the Programs without Oracle's prior written consent. 1.7 Documentation Oracle shall deliver one copy of the applicable Documentation with each order of Programs for Sublicensing to Sublicensees. 2. SUBLICENSE FEES 2.1 Sublicense Fees and Rate For each copy of the Programs Sublicensed by the Alliance Member, the Alliance Member agrees to pay Oracle a Sublicense fee equal to sixty percent (60%) of the applicable license fee for each such Program, as specified in the applicable Price List and Alliance Member Price List supplement to such Price List in effect at the time the applicable Programs are Sublicensed to a Sublicensee. The Sublicense fee shall be calculated effective on the date of the Sublicense, which shall be the date the Programs are shipped by Oracle or the effective date of the order to Oracle for such Programs, if no shipment is required. Fees for Sublicense of Programs shall be due and payable on the date that Oracle ships the applicable Programs and shall be deemed overdue if not paid within thirty-one (31) days of the due date. The Alliance Member shall not be relieved of its obligation to pay Sublicense fees owed to Oracle by the nonpayment of such fees by the Sublicensee. 2.2 Price List As set forth in the Agreement, the applicable Price List for determining Sublicense fees shall be the standard Price List in effect at the time the Program is Sublicensed to a Sublicensee. However, pricing for any federal agency, pursuant to terms and conditions identical to the terms and conditions of Oracle's GSA Schedule A Contract for Oracle Programs current as of the order date, shall be based on Oracle's published GSA Price List. Notwithstanding any other provision of this Agreement, if the Alliance Member issues a written Sublicense quote and such quote is accepted by the applicable Sublicensee, for a period of ninety (90) days after the date of submission of the quote to the Sublicensee, the fee applicable to the Programs identified in the quote shall be based on the Price List in effect on such date. 2.3 Users The fees for Sublicense of a Program shall be based and priced on the applicable User Level for the maximum number of Users for such Program, as specified in the Price List. The Alliance Member shall have the right to Sublicense on any User basis specified in the Price List in effect at the time the applicable Program is Sublicensed to a Sublicensee. 3. TERM This Addendum shall become effective on the Effective Date of this Addendum and shall be valid for one (1) year (the "Term'), unless terminated as provided in the Agreement. Any renewal of this Addendum shall be subject to renegotiation of terms and fees. 4. TERRITORY The Alliance Member shall have the right to market and grant Sublicenses of Full Use Programs or Deployment Programs in the United States only (the "Territory"). 5. TECHNICAL SUPPORT 5.1 Technical Support for Sublicensees A Sublicensee may acquire Technical Support services for Full Use Programs or Deployment Programs Sublicensed under this Addendum from Oracle at Oracle's standard rates and fee in effect at the time such Technical Support services are ordered under an Oracle Technical Support Services Agreement or Oracle Agreement, as applicable. 5.2 Technical Support Fee Oracle agrees that the Alliance Member shall have the right to offer Oracle annual Technical Support services to Sublicensees in the United States that are currently acquiring Full Use Programs or Deployment Programs. The Alliance Member shall only offer Oracle Technical Support services with respect to the initial first year of Technical Support for a Sublicensed Program. The Alliance Member shall only offer Oracle annual Technical Support services to a Sublicensee provided that: A. Oracle receives from the Sublicensee an executed, standard Oracle Technical Support Services Agreement, Oracle Agreement, or other terms to govern the Technical Support services as agreed to in writing by Oracle and the Sublicensee; B.The Full-Use or Deployment Programs are currently Sublicensed by the Alliance Member; C. The Alliance Member pays Oracle its required Sublicense fee for the applicable Sublicensed Programs as provided under the Agreement, and the Alliance Member pays Oracle the applicable Technical Support services fees as set forth herein in advance; D.The Alliance Members Sublicense of the Full Use Programs or Deployment Programs coincides with the agreement to provide Technical Support Services for such Programs; and E. The net Technical Support services fees represent new Technical Support revenue to Oracle. The Technical Support services fees payable by Alliance Member as provided above shall be Oracle's standard rates for such services as provided under the Price List in effect at the time the Technical Support services are ordered, discounted by ten percent (10%). 6. SUBLICENSE REPORTS With each order for Programs for Sublicense to a Sublicensee, the Alliance Member shall send Oracle a report detailing for each Sublicensed Full Use Program or Deployment Program: Sublicensee name, address, make/model and operating system of the Designated System, Full Use or Deployment Programs, maximum number of licensed Users, whether the Sublicense is a Trial Sublicense, total Program fees and Technical Support Fees due to Oracle, and specific descriptions of the Integrated System and Value-Added. 7. ADDITIONAL LICENSES During the Term, the Alliance Member may order production release versions of Oracle off-the-shelf Programs available as production release as of the Effective Date of this Addendum and listed on the Price List in effect as of such date. The license fee for Development Licenses shall be equal to Oracle's standard list license fees in effect when an order is placed. The Alliance Member shall have the right to order Programs for use as Marketing Support Licenses at no further charge to the Alliance Member. The Alliance Member may obtain Technical Support services from Oracle for such Programs under Oracle's applicable Technical Support fees and policies in effect when such services are ordered. The Effective Date of this Addendum shall be July 1, 1996. Executed by the FileNet Corporation: Executed by Oracle Corporation Authorized Signature:/s/ W. J. Kreidler Authorized Signature:/s/ Lloyd Alexander Name: Name: Title: Title: Oracle Corporation 500 Oracle Parkway Redwood Shores, CA 94065 (415) 506-7000 Oracle is a registered trademark of Oracle Corporation. 8-95 VALUE-ADDED ATTACHMENT Description of Integrated System: Hardware components: Software products other than Programs: Services to be provided by the Alliance Member: AMENDMENT ONE to the FULL USE AND DEPLOYMENT SUBLICENSE ADDENDUM BUSINESS to the ALLIANCE PROGRAM AGREEMENT between FILENET CORPORATION and ORACLE CORPORATION This Amendment One shall serve to amend the Full Use Sublicense and Deployment Sublicense Addendum dated July 1, 1996 (the "Addendum") to the Business Alliance Program Agreement between FileNet Corporation (the "Alliance Member") and Oracle Corporation ("Oracle") dated July 1 , 1996 (the "Agreement"). The Addendum is amended as follows: 1. Insert the following at the end of the first paragraph of Section 1.1: "Notwithstanding any provision to the contrary in the Agreement, during the Term of this Addendum, provided the annual revenue received by the Alliance Member for Sublicenses to the Alliance Member constitutes less than __*___ percent of the Alliance Member's total annual revenue for Full Use and Deployment Program Sublicenses, the Alliance Member may acquire Full Use and Deployment Programs for its own internal use as a Sublicensee under all terms and discount rates of this Agreement. 2. Delete Section 1.5 and replace it with the following: "1.5 Trial Sublicenses The Alliance Member shall be entitled to grant, at no charge, up to ______*_________ temporary Trial Sublicenses of the Programs at any one time. Such Sublicenses shall be for evaluation purposes only and shall be for a period not to exceed ______*_______ days. The Alliance Member shall pay Oracle Sublicense fees for any Trial Sublicenses in excess of ______*______ days or for any Trial Sublicenses for which the Alliance Member is compensated. Each such Trial Sublicense shall be Sublicensed under a Sublicense agreement which provides for such trial use or under an Oracle Trial License Agreement, as the applicable Oracle Agreement." 3. Delete the body of Section 1.6 in its entirety and insert the following: "1.6 Distributors Oracle grants the Alliance Member the right to appoint third panics ("Distributors") to market and Sublicense the Full Use or Deployment Programs in the Territory, under the terms of the Agreement and this Addendum. However, Distributors shall have no right to make copies of * Confidential portion has been filed separately with the Securities and Exchange Commission. the Programs for Sublicensing and shall obtain all such Programs from the Alliance Member. Each Distributor shall execute a written agreement with the Alliance Member binding the Distributor to provisions substantially similar to those contained in Sections 2.3, 2.5, 2.6, 5.1, 5.2, 6.1, 6.3, 6.4, 6.5, 7.2.A.1, 7.5, 8.1, 8.2, 8.3, 8.5, 8.7, 8.9, and 8.11 of the Agreement and to those contained in Sections 1 (except 1.6), 3, 4, 5, and 6 of this Addendum. Each obligation of the Alliance Member under such provisions shall also be applicable to each Distributor. Each Distributor agreement shall also contain any other provisions necessary for the Alliance Member to satisfy its commitments under the Agreement. The Alliance Member shall notify Oracle promptly in writing of the appointment of each such Distributor. In addition, the Alliance Member shall keep executed Distributor agreements and records of the Distributor information required under the Alliance Member's Sublicense reports, and shall allow Oracle to inspect such information as specified under the Agreement. The Alliance Member will defend and indemnify Oracle against all damages to Oracle caused by (i) the Distributors' failure to include the required contractual terms set forth in Section 2.3.B of the Agreement in each Sublicense agreement, and (ii) the Distributors' breach of any of the applicable provisions required by in its Distributor agreement." 4. Add the following new paragraphs to the end of Section 1.7: "During the Term of this Addendum, the Alliance Member may order Oracle documentation for the Programs for resale to its Sublicensees at Oracle's standard fees in effect when each order is placed less the Discount Percentage corresponding to the List Price of Documentation for a single order. List Price of Documentation Discount Percentage (Single Order) $0 $499 10% $500 - $1,499 20% $1,500- and over 30% 5. At the end of Section 2.1, insert the following: "Within thirty (30) days after the second and each further anniversary during the Term of this Addendum, Oracle and the Alliance Member shall re-negotiate the Sublicense fee percentage rate set forth above based on the actual amount of cumulative Sublicense fees received by Oracle hereunder. If the parties have not agreed in writing on the Sublicense fee percentage rate for the next annual period, the Alliance Member's right to Sublicense Programs shall cease until the parties hereto mutually agree in writing on a new Sublicense fee rate percentage for Sublicenses of Programs. 6. At the end of the first paragraph of Section 2.2 insert the following: "All Sublicense fees for Sublicenses installed outside the United States shall be based on the license fees for the Programs as set forth on the applicable Oracle Global Price List in effect at the time such Programs are Sublicensed." 7. Insert the following at the end of Section 2.3: "Unless otherwise agreed to by the parties in writing, the term "User" shall include "Named Users" and/or "Concurrent Devices/Concurrent Accesses". Unless otherwise agreed to by the parties in writing, a "Named User" is defined as an individual authorized by Sublicensee to use the Programs, regardless of whether the individual is actively using the Programs at any given time and "Concurrent Devices/Concurrent Accesses" are defined as the maximum number of input devices accessing the Programs at any given point in time. (If multiplexing software or hardware (e.g., a TP monitor) is used, this number must be measured at the multiplexing front end.) "Multiplexing" includes but is not limited to any utility of function which allows Users to access the database in a sequential fashion." 8. Delete the first sentence of Section 3 and insert the following: "This Addendum shall become effective on the Effective Date of this Addendum. and shall be valid for four (4) years from such Effective Date (the "Term"), unless earlier terminated as provided in the Agreement." 9. Delete the body of Section 4 in its entirety and insert the following: "4. TERRITORY The Alliance Member shall have the right to market and grant Sublicenses of Programs in the Application Package in all countries worldwide, (the "Territory"), subject to the terms of this Section. Oracle may from time to time deny the Alliance Member the right to Sublicense in certain countries in the Territory in order to protect Oracle's interests if, in the reasonable opinion of Oracle's counsel, such countries (i) do not provide adequate protection for Oracle's proprietary rights through copyright, trade secret, patent, or other laws; or (ii) have laws or regulations or the government has committed acts which in the opinion of Oracle's counsel, are injurious to Oracle's interests in the Programs. The Alliance Member acknowledges that the Programs are subject to export controls imposed on Oracle and the Alliance Member by the U.S. Export Administration Act, United States Departments of Commerce, Treasury, and State regulations and directives, and other United States law ("Export laws"). The Alliance Member certifies that neither the Programs nor any direct product thereof are (i) exported, directly or indirectly, in violation of Export laws; or (ii) are intended to be used for any purposes prohibited by the Export laws, including, without limitation, nuclear, chemical, or biological weapons proliferation. Furthermore, the Alliance Member shall not transfer the Programs outside of the territory for which the Alliance Member has Sublicense rights under this Agreement. The Alliance Member warrants that neither it nor its Distributors will grant Sublicenses in or ship any Programs to a country until it (or the Distributor) has completed all necessary government formalities in such country and upon reasonable request by Oracle, the Alliance Member (or its Distributor) provides evidence of completion of such formalities to Oracle. The Alliance Member will indemnify Oracle for any losses, costs, liability, and damages incurred by Oracle as a result of a failure by the Alliance Member or its Distributors to comply with the necessary government requirements in any country. The obligations under this Section shall survive the expiration or termination of this Addendum. Upon Oracle's reasonable request, the Alliance Member shall make records available to Oracle to allow to confirm the Alliance Member's compliance with this Section." 10. Insert the following at the end of Section 5.1: "The Alliance Member may order local country Technical Support services for Programs licensed outside of the United 5tates from Oracle's local country subsidiary under such subsidiary's local Technical Support fees and policies in effect at the time such services are ordered." 11. Delete the second sentence of Section 7 and insert the following: "The license fee for Development Licenses shall be equal to Oracle's standard list license fee in effect when an order is placed. Notwithstanding the above, the Alliance Member shall be granted a discount on each Development License ordered of ______*_______ percent __*__off Oracle's standard list license fees in effect when an order is placed." Other than the modifications set forth above, the and the Agreement remain unchanged, and in full terms and conditions of the Addendum force and effect. The Effective Date of this Amendment One is July 1, 1996 FILENET CORPORATION ORACLE CORPORATION By: /s/ W. J. Kreidler By: /s/ Lloyd Alexander Name: W. J. Kreidler Name: Lloyd Alexander Title: V P. Operations Title: Manager - Western Region Channels Sales Support * Confidential portion has been filed separately with the Securities and Exchange Commission. EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS Dec-31-1996 Jun-30-1996 26,860 26,129 65,385 0 7,426 139,419 74,892 48,228 185,904 58,590 0 0 0 123,883 (126) 124,968 131,741 131,741 24,241 48,035 92,366 0 0 (7,066) (2,241) (9,307) 0 0 0 (9,307) (0.62) (0.62)
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