10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2006

OR

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 000-27389

INTERWOVEN, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 77-0523543
(I.R.S. Employer
Identification No.)

803 11^TH Avenue
Sunnyvale, California 94089
(Address of principal executive offices and zip code)

(408) 774-2000
(Registrant’s telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o     Accelerated filer þ    Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 31, 2006
Common Stock, $0.001 par value per share	42,813,000 shares

INTERWOVEN, INC.

Table of Contents

		Page No.
PART I.	FINANCIAL STATEMENTS
Item 1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets June 30, 2006 and December 31, 2005		2
	Condensed Consolidated Statements of Operations Three and six months ended June 30, 2006 and 2005		3
	Condensed Consolidated Statements of Cash Flows Three and six months ended June 30, 2006 and 2005		4
	Notes to Condensed Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33
Item 4.	Controls and Procedures		34
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		35
Item 1A.	Risk Factors		35
Item 6.	Exhibits		47
	Signatures		48
	Exhibit Index		49
EXHIBIT 3.01
EXHIBIT 10.01
EXHIBIT 10.02
EXHIBIT 10.03
EXHIBIT 10.04
EXHIBIT 10.05
EXHIBIT 31.01
EXHIBIT 31.02
EXHIBIT 32.01
EXHIBIT 32.02

1

PART I: FINANCIAL STATEMENTS

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

INTERWOVEN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	June 30,			December 31,
	2006			2005
	(Unaudited)			(1)
Assets
Current assets:
Cash and cash equivalents	$	60,312		$	73,618
Short-term investments		86,231			63,581
Accounts receivable, net		33,466			31,542
Prepaid expenses and other current assets		5,870			5,193
Total current assets		185,879			173,934
Property and equipment, net		5,163			5,044
Goodwill		191,595			191,595
Other intangible assets, net		18,474			25,527
Other assets		2,668			2,506
Total assets	$	403,779		$	398,606
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,870		$	4,491
Accrued liabilities		25,745			22,198
Restructuring and excess facilities accrual		7,214			7,266
Deferred revenues		56,308			54,010
Total current liabilities		94,137			87,965
Accrued liabilities		2,290			2,761
Restructuring and excess facilities accrual, less current portion		5,140			9,681
Total liabilities		101,567			100,407
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value, 125,000 shares authorized; 42,794 and 42,386 shares issued and outstanding, respectively		43			42
Additional paid-in capital		708,519			705,908
Deferred stock-based compensation		—			(1,002	)
Accumulated other comprehensive loss		(294	)		(359	)
Accumulated deficit		(406,056	)		(406,390	)
Total stockholders’ equity		302,212			298,199
Total liabilities and stockholders’ equity	$	403,779		$	398,606

(1) Derived from audited consolidated financial statements

See accompanying notes to condensed consolidated financial statements.

2

INTERWOVEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Revenues:
License	$	18,508		$	14,666		$	36,077		$	31,083
Support and service		30,521			26,368			59,410			52,436
Total revenues		49,029			41,034			95,487			83,519
Cost of revenues:
License		4,417			3,342			8,589			6,830
Support and service		12,327			10,227			24,184			20,256
Total cost of revenues		16,744			13,569			32,773			27,086
Gross profit		32,285			27,465			62,714			56,433
Operating expenses:
Sales and marketing		19,168			16,671			37,569			33,999
Research and development		8,528			7,842			17,082			16,010
General and administrative		3,791			3,122			9,051			6,730
Amortization of intangible assets		828			782			1,656			1,638
Restructuring and excess facilities recoveries		(591	)		(303	)		(928	)		(633	)
Total operating expenses		31,724			28,114			64,430			57,744
Income (loss) from operations		561			(649	)		(1,716	)		(1,311	)
Interest income and other, net		1,531			908			2,805			1,621
Income before provision for income taxes		2,092			259			1,089			310
Provision for income taxes		315			325			755			625
Net income (loss)	$	1,777		$	(66	)	$	334		$	(315	)
Basic net income (loss) per common share	$	0.04		$	(0.00	)	$	0.01		$	(0.01	)
Shares used in computing basic net income (loss) per common share		42,629			41,635			42,529			41,386
Diluted net income (loss) per common share	$	0.04		$	(0.00	)	$	0.01		$	(0.01	)
Shares used in computing diluted net income (loss) per common share		43,350			41,635			43,210			41,386

See accompanying notes to condensed consolidated financial statements.

3

INTERWOVEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

	Six Months Ended
	June 30,
	2006			2005
Cash flows from operating activities:
Net income (loss)	$	334		$	(315	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,859			1,828
Stock-based compensation expense		1,419			793
Amortization of intangible assets and purchased technology		8,775			7,088
Change in allowances for doubtful accounts and sales returns		(157	)		(175	)
Changes in operating assets and liabilities:
Accounts receivable		(1,767	)		3,273
Prepaid expenses and other		(1,073	)		1,792
Accounts payable and accrued liabilities		3,323			(2,705	)
Restructuring and excess facilities accrual		(4,593	)		(4,718	)
Deferred revenues		2,298			710
Net cash provided by operating activities		10,418			7,571
Cash flows from investing activities:
Purchases of property and equipment		(1,978	)		(1,779	)
Purchases of investments		(81,388	)		(67,295	)
Maturities and sales of investments		59,030			91,842
Acquisition of technology		(1,590	)		—
Net cash provided by (used in) investing activities		(25,926	)		22,768
Cash flows from financing activities:
Net proceeds from issuance of common stock		2,195			4,386
Net cash provided by financing activities		2,195			4,386
Effect of exchange rates		7			58
Net increase (decrease) in cash and cash equivalents		(13,306	)		34,783
Cash and cash equivalents at beginning of period		73,618			22,466
Cash and cash equivalents at end of period	$	60,312		$	57,249

See accompanying notes to condensed consolidated financial statements.

4

INTERWOVEN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

     Basis of Presentation

     The condensed consolidated financial statements included herein are unaudited and reflect all adjustments (consisting only of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Interwoven, Inc. (“Interwoven” or “Company”) Annual Report on Form 10-K for the year ended December 31, 2005. The results of operations for the three and six months ended June 30, 2006 are not necessarily indicative of the results for the entire year or for any other period.

     As discussed later in this Note 1, the Company adopted the Statement of Financial Accounting Standards (“SFAS”) No. 123R, Share-Based Payment, on January 1, 2006 using the modified prospective transition method. The Company’s income from operations for the three and six months ended June 30, 2006 includes $565,000 and $1.4 million, respectively, in stock-based compensation expense from stock options and the Company’s Employee Stock Purchase Plan (“ESPP”). Since the Company elected to use the modified prospective transition method, the consolidated results of operations have not been restated for prior periods. In accordance with Staff Accounting Bulletin No. 107, the Company reclassified expenses associated with the amortization of stock-based compensation which had previously been recorded in a single line item in operating expenses in the Company’s consolidated statement of operations into their functional categories.

     The condensed consolidated balance sheet as of December 31, 2005 has been derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. Such disclosures are contained in the Company’s Annual Report on Form 10-K.

     The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

     Certain reclassifications have been made to the prior year’s condensed consolidated financial statements to conform to the current period presentation.

     All assets and liabilities of the Company’s foreign subsidiaries, whose functional currency is the local currency, are translated using current rates of exchange at the balance sheet date, while revenues and expenses are translated using weighted-average exchange rates prevailing during the period. The resulting gains or losses from translation are charged or credited to other comprehensive income (loss) and are accumulated and reported in the stockholders’ equity section of the Company’s consolidated balance sheets. In accordance with SFAS No. 52, Foreign Currency Translation, the Company recorded an unrealized gain (loss) due to foreign currency translation of $164,000 and ($141,000) for the three months ended June 30, 2006 and 2005, respectively, and $7,000 and $58,000 for the six months ended June 30, 2006 and 2005, respectively.

     Use of Estimates

     The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

5

     Revenue Recognition

     Revenue consists principally of perpetual software licenses, support, consulting and training fees. The Company recognizes revenue using the residual method in accordance with Statement of Position (“SOP”) 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions. Under the residual method, revenue is recognized for the delivered elements in a multiple element arrangement provided vendor-specific objective evidence (“VSOE”) of fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more of the delivered elements in the arrangement. VSOE of fair value of support and other services is based on the Company’s customary pricing for such support and services when sold separately. At the outset of a customer arrangement, the Company defers revenue for the fair value of its undelivered elements (e.g., support, consulting and training) and recognizes revenue for the residual fee attributable to the elements initially delivered (i.e., software product) when the basic criteria in SOP 97-2 have been met. The Company has analyzed all of the elements included in its multiple-element arrangements and determined that it has sufficient VSOE to allocate revenue to the support and professional services components including consulting and training services of its perpetual license arrangements. The Company sells its professional services separately and has established VSOE on this basis. VSOE for support is determined based upon the customer’s annual renewal rates for this element. Accordingly, assuming all other revenue recognition criteria are met, revenue from licenses is recognized upon delivery using the residual method in accordance with SOP 98-9, and revenue from support services is recognized ratably over its respective support period. If such evidence of fair value for each undelivered element does not exist, all revenue is deferred until such time that evidence of fair value does exist or until all elements of the arrangement are delivered.

     Under SOP 97-2, revenue attributable to an element in a customer arrangement is recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, (iv) collectibility is probable and (v) the arrangement does not require services that are essential to the functionality of the software.

     Persuasive evidence of an arrangement exists. The Company determines that persuasive evidence of an arrangement exists with respect to a customer when it has a written contract, which is signed by both the customer and the Company, or a valid purchase order from the customer and the customer agrees or has previously agreed to a license arrangement with the Company.

     Delivery has occurred. The Company’s software may be delivered either physically or electronically to the customer. The Company determines that delivery has occurred upon shipment of the software pursuant to the terms of the agreement or when the software is made available to the customer through electronic delivery.

     The fee is fixed or determinable. If at the outset of the customer arrangement, the Company determines that the arrangement fee is not fixed or determinable, revenue is recognized when the fee becomes due and payable assuming all other criteria for revenue recognition have been met. Fees due under an arrangement are deemed not to be fixed or determinable if a portion of the license fee is due beyond the Company’s normal payment terms, which are no greater than 185 days from the date of invoice.

     Collectibility is probable. The Company determines whether collectibility is probable on a case-by-case basis. When assessing probability of collection, the Company considers the number of years the customer has been in business, history of collection for each customer and market acceptance of its products within each geographic sales region. The Company typically sells to customers with whom there is a history of successful collection. New customers are subject to a credit review process, which evaluates the customer’s financial position and, ultimately, its ability to pay. If the Company determines from the outset of an arrangement or based on historical experience in a specific geographic region that collectibility is not probable based upon its review process, revenue is recognized as payments are received and all other criteria for revenue recognition have been met. The Company periodically reviews collection patterns from its geographic locations to ensure that its historical collection results provide a reasonable basis for revenue recognition upon entering into an arrangement.

     Certain software orders are placed by resellers on behalf of end users. Interwoven recognizes revenue on these orders when end users have been identified, persuasive evidence of arrangements with end users exist and all other revenue recognition criteria are met.

6

     Support and service revenues consist of professional services and support fees. The Company’s professional services, which are comprised of software installation and integration, business process consulting and training, are, in almost all cases, not essential to the functionality of its software products. The Company’s products are fully functional upon delivery and do not require any significant modification or alteration for customer use. Customers purchase professional services to facilitate the adoption of the Company’s technology and dedicate personnel to participate in the services being performed, but they may also decide to use their own resources or appoint other professional service organizations to provide these services. Software products are billed separately from professional services, which are generally billed on a time-and-materials basis. The Company recognizes revenue from professional services as services are performed.

     Services provided to customers under support contracts include technical support and unspecified product upgrades. Support contracts are typically priced based on a percentage of license fees and have a one-year term. Revenues from support contracts are recognized ratably over the term of the agreement.

     In 2005, the Company applied SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, to account for a software arrangement which included services that constituted significant production, modification or customization of the software. As the Company was not in a position to make dependable estimates as to completion, the completed contract method of accounting was applied and revenues were recognized upon contract completion. For classification purposes in the consolidated statement of operations, the Company included the amount representing VSOE of fair value of the service revenues as service revenues and the residual portion of the total fee as license revenue.

     The Company expenses all manufacturing, packaging and distribution costs associated with its software as cost of license revenues.

     Cash, Cash Equivalents and Short-Term Investments

     The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include money market funds, commercial paper, government agency securities and various deposit accounts. Cash equivalents are recorded at fair value, which approximates cost.

     The Company’s short-term investments are classified as “available for sale” and are carried at fair value based on quoted market prices. These investments consist of corporate obligations that include commercial paper, corporate bonds and notes, market auction rate preferred and United States government agency securities. Realized gains and losses are calculated using the specific identification method. There were no realized gains (losses) for the three and six months ended June 30, 2006 and 2005, respectively. For the three months ended June 30, 2006 and 2005, unrealized gains totaled $43,000 and $126,000, respectively, and for the six months ended June 30, 2006 and 2005, unrealized gains (losses) totaled $58,000 and ($102,000). Unrealized gains and losses are included as a separate component of accumulated comprehensive income (loss) in stockholders’ equity.

     Allowance for Doubtful Accounts

     The Company makes estimates as to the overall collectibility of accounts receivable and provides an allowance for accounts receivable considered uncollectible. The Company specifically analyzes its accounts receivable and historical bad debt experience, customer concentrations, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. At June 30, 2006 and December 31, 2005, the Company’s allowance for doubtful accounts was $574,000 and $779,000, respectively.

     Allowance for Sales Returns

     The Company makes an estimate of its expected product returns and provides an allowance for sales returns. The accumulated allowance for sales returns is reflected as a reduction from accounts receivable. The Company analyzes its revenue transactions, customer software installation patterns, historical return patterns, current economic trends and changes in its customer payment terms when evaluating the adequacy of the allowance for sales returns.

7

At June 30, 2006 and December 31, 2005, the Company’s allowance for sales returns was $368,000 and $321,000, respectively.

     Risks and Concentrations

     Financial instruments that subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments and accounts receivable. The Company maintains the majority of its cash, cash equivalents and short-term investments with three financial institutions domiciled in the United States and one financial institution in the United Kingdom. The Company performs ongoing evaluations of its customers’ financial condition and generally requires no collateral from its customers on accounts receivable.

     The Company derived a significant portion of total revenue in the three and six months ended June 30, 2006 and 2005 from its Web content management and collaborative document management products and services. The Company expects that these products will continue to account for a significant portion of its revenues in future periods.

     Interwoven relies on software licensed from third parties, including software that is integrated with internally developed software. These software license agreements expire on various dates from 2006 to 2010 and the majority of these agreements are renewable with written consent of the parties. Either party may terminate the agreement for cause before the expiration date with written notice. If the Company cannot renew these licenses, shipments of its products could be delayed until equivalent software could be developed or licensed and integrated into its products. These types of delays could seriously harm the Company’s business. In addition, the Company would be seriously harmed if the providers from whom the Company licenses its software ceased to deliver and support reliable products, enhance their current products or respond to emerging industry standards. Moreover, the third-party software may not continue to be available to the Company on commercially reasonable terms or at all.

     Financial Instruments

     The Company enters into forward foreign exchange contracts where the counterparty is a bank. The Company purchases forward foreign exchange contracts to mitigate the risk of changes in foreign exchange rates on accounts receivable. Although these contracts are or can be effective as hedges from an economic perspective, they do not qualify for hedge accounting under SFAS No. 133, Derivative Instruments and Hedging Activities, as amended, and therefore are marked to market each period with the change in fair value recognized in results of operations and classified as either other current assets or other current liabilities in the consolidated balance sheet.

     At June 30, 2006 and December 31, 2005, the notional equivalent of forward foreign currency contracts aggregated $9.0 million and $5.8 million, respectively. The unrealized losses associated with forward foreign currency contracts recognized in the consolidated financial statements as of June 30, 2006 and 2005 were ($25,000) and ($17,000), respectively. The forward contracts outstanding as of June 30, 2006 are scheduled to expire in September 2006.

     Income Taxes

     The Company accounts for income taxes under the provisions of SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and carryforwards of net operating losses and tax credits. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

     Determining the consolidated provision for income tax expense, income tax liabilities and deferred tax assets and liabilities involves judgment. The Company calculates and provides for income taxes in each of the tax jurisdictions in which it operates. This involves estimating current tax exposures in each jurisdiction as well as making judgments regarding the recoverability of deferred tax assets. The estimates could differ from actual results and impact the future results of its operations.

     The effective tax rate for the six months ended June 30, 2006 was calculated based on the results of operations for the six months ended June 30, 2006, and does not reflect an annual effective tax rate. Since the Company cannot consistently predict the future operating income, or in which jurisdiction it will be located, the Company is not using an annual effective tax rate to apply to the operating income for the six-month period ended June 30, 2006.

8

     Stock-based Compensation

     At June 30, 2006, the Company had five stock-based compensation plans. Effective January 1, 2006, the Company adopted SFAS No. 123R, using the modified prospective transition method. As a result, the Company began to include stock-based compensation in its consolidated statements of operations starting with the quarter ended March 31, 2006.

Note 2. Net Income (Loss) Per Common Share

     Basic net income (loss) per common share is computed using the weighted average number of outstanding shares of common stock during the period. Dilutive net income (loss) per common share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common shares from options to purchase common stock using the treasury stock method.

Note 3. Comprehensive Income (Loss)

     For the three and six months ended June 30, 2006 and 2005, the components of comprehensive income (loss) consisted of the following (in thousands):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2006		2005			2006		2005
Net income (loss)	$	1,777	$	(66	)	$	334	$	(315	)
Other comprehensive income (loss):
Translation adjustment*		164		(141	)		7		58
Unrealized gain (loss) on available-for-sale investments*		43		126			58		(102	)
Comprehensive income (loss)	$	1,984	$	(81	)	$	399	$	(359	)

     Accumulated other comprehensive loss as of June 30, 2006 and December 31, 2005 consisted of the following (in thousands):

	June 30,			December 31,
	2006			2005
Unrealized loss on available-for-sale investments *	$	(310	)	$	(368	)
Cumulative translation adjustment *		16			9
	$	(294	)	$	(359	)

* The tax effect on translation adjustments and unrealized gain (loss) has not been significant.

Note 4. Mergers and Acquisitions

     In August 2005, the Company acquired Scrittura, Inc. (“Scrittura”), a provider of document automation software for the non-exchange based trading operations of financial services companies. The aggregate purchase price of this acquisition was $18.1 million, which included cash payments of $16.3 million, the assumption of Scrittura stock options of $1.4 million and transaction costs of $440,000. The terms of the acquisition agreement provided for an additional payment of up to $2.0 million provided certain revenue and operating margin goals were achieved during the period beginning on the acquisition date and ending on December 31, 2005. As the earn-out related targets were not achieved as of December 31, 2005, no adjustments were recorded to the purchase price. The allocation of the purchase price for this acquisition included purchased technology of $7.4 million, non-competition covenants of $2.1 million, customer list of $1.3 million, customer backlog of $251,000, goodwill of $6.1 million and unamortized stock compensation of $1.2 million less the fair value of net liabilities of $226,000. The results of operations of Scrittura have been included in the consolidated results of operations of the Company since August 16, 2005. Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Company.

9

Note 5. Stock-Based Compensation

     SFAS No. 123R requires the measurement of all share-based payments to employees, including grants of employee stock options and restricted stock units, using a fair value-based method, and requires the recording of such expense in the Company’s consolidated statements of operations. The pro forma disclosures previously permitted under SFAS No. 123, Accounting for Stock-Based Compensation, are no longer an alternative to financial statement recognition. The Company elected to use the modified prospective transition method as permitted by SFAS No. 123R, in which compensation cost was recognized for three and six months ended June 30, 2006 (a) based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R for all share-based payments granted on or after January 1, 2006 and (b) based on the grant date fair value estimated in accordance with original provisions of SFAS No. 123, adjusted for estimated pre-vesting forfeitures, for all awards granted to employees prior to but remaining unvested as of January 1, 2006.

     The 1999 Equity Incentive Plan (the “1999 Plan”) permits the award of options, restricted stock and stock bonuses. There were a total of 1.4 million shares authorized and available for new grants under the 1999 Plan at June 30, 2006. Options granted under this plan may be either incentive stock options or nonqualified stock options. Incentive stock options may be granted only to Company employees (including officers and directors who are also employees). Non-qualified stock options may be granted to employees, officers, directors, consultants, independent contractors and advisors of the Company.

     Options under the 1999 Plan may be granted for periods of up to ten years and at prices no less than 85% of the estimated fair value of the shares on the date of grant as determined by the Company’s Board of Directors, provided, however, that (i) the exercise price of an incentive stock option may not be less than 100% of the estimated fair value of the shares on the date of grant, and (ii) the exercise price of an incentive stock option granted to a 10% stockholder may not be less than 110% of the estimated fair value of the shares on the date of grant. Options granted under the 1999 Plan typically vest over four years based on continued service.

     The 2000 Stock Incentive Plan (the “2000” Plan) permits the award of options and restricted stock. There were a total of 1.3 million shares authorized and available for new grants under the 2000 Plan at June 30, 2006. Options granted under this plan may only be nonqualified stock options. Nonqualified stock options may be granted to employees, officers, directors, consultants, independent contractors and advisors of the Company.

     Options under the 2000 Plan may be granted for periods of up to ten years and at prices no less than par value of the shares on the date of grant. Options granted under the 2000 Plan typically vest over four years based on continued service. Restricted stock under the 2000 Plan may be granted with purchase prices no less than par value of the shares on the date of grant.

     On June 8, 2006, the Board of Directors approved an amendment to the 1999 Plan and the 2000 Plan to provide for the grant of restricted stock units. Restricted stock units are securities that represent the right to receive shares of the common stock of the Company on a one share for one unit basis on the settlement date, which will be the applicable vesting date for each restricted stock unit. Restricted stock units granted under the 1999 Plan and the 2000 Plan typically vest over four years based on continued service.

     Outstanding awards that were originally granted under several predecessor plans also remain in effect in accordance with their terms. In addition, the Company maintains the 1999 Employee Stock Purchase Plan under which 766,000 shares were authorized and available for purchase at June 30, 2006. The 1999 Equity Incentive Plan, the 2000 Stock Incentive Plan, the predecessor plans and the ESPP are described more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

10

     The following table summarizes the stock-based compensation expense for stock options and purchases under the ESPP that the Company recorded in accordance with SFAS No. 123R for the three months and six months ended June 30, 2006:

	Three Months Ended		Six Months Ended
	June 30, 2006		June 30, 2006
Cost of revenues	$	137	$	337
Sales and marketing		237		615
Research and development		158		360
General and administrative		33		107
	$	565	$	1,419

     Prior to the adoption of SFAS No. 123R, the Company presented deferred stock-based compensation as a separate component of stockholders’ equity. In accordance with the provisions of SFAS No. 123R, on January 1, 2006, the Company reclassified the remaining unamortized balance in deferred stock-based compensation to additional paid-in capital on the balance sheet.

     With the adoption of SFAS No. 123R, the Company elected to amortize stock-based compensation for stock options granted on or after the adoption of SFAS No. 123R on January 1, 2006 on a straight-line basis over the requisite service (vesting) period for the entire stock option. For stock options granted prior to January 1, 2006, stock-based compensation is amortized on an accelerated basis, which is consistent with Financial Accounting Standards Board Interpretation (“FIN”) No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plan.

     Valuation and Amortization Method. Option-pricing models require the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. For options granted prior to January 1, 2006, the Company estimated the fair value of options granted using the Black-Scholes option valuation model and a multiple option award approach. The fair value for these options is amortized on an accelerated basis. For options granted on or after January 1, 2006, the Company estimated the fair value using the Black-Scholes option valuation model and a single option award approach. The fair value for these options is amortized on a straight-line basis. All options are amortized over the requisite service periods of the awards, which are generally the vesting periods.

     Expected Life. The expected life of options granted represents the period of time that they are expected to be outstanding. The Company estimated the expected life of options granted based on the Company’s history of option exercise activity. For options granted prior to January 1, 2006, the Company used tranche-specific assumptions with estimated expected lives for each of the four separate tranches. For options granted on or after January 1, 2006, the Company derived a single expected life from the average midpoint among the four tranches.

     Expected Volatility. The Company estimated the volatility based on historical prices of the Company’s common stock over the expected life of each option. For options granted prior to January 1, 2006, the Company used different volatility for each of the four separate tranches based on the expected life for each tranche. For options granted on or after January 1, 2006, the Company calculated the historical volatility over the expected life of each option.

     Risk-Free Interest Rate. The risk-free interest rates are based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the options.

     Dividends. The Company has never paid cash dividends on its common stock and the Company does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero in the Black-Scholes option valuation model.

     Forfeitures. The Company used historical data to estimate pre-vesting option forfeitures. As required by SFAS No. 123R, the Company recorded stock-based compensation only for those options that are expected to vest. For

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purposes of calculating pro forma information under SFAS No. 123 for periods prior to January 1, 2006, the Company accounted for forfeitures as they occurred.

     The fair value of each option is estimated on the date of grant using the Black-Scholes option valuation method, with the following assumptions:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Expected life from grant date of option (in years)		3.3			1.8-5.0			3.3			1.8-5.0
Risk-free interest rate		4.9%-5.1	%		3.6%-4.0	%		4.4%-5.1	%		3.2%-4.2	%
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Expected volatility		48.0%-48.7	%		46.1%-69.0	%		48.0%-59.5	%		46.1%-70.9	%
Weighted average expected volatility		48.3	%		58.3	%		48.7	%		62.0	%
The fair value of each stock purchase right granted under the ESPP is estimated using the Black-Scholes option valuation method, using the following assumptions:
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Expected life from grant date of ESPP (in years)		0.5			0.5–2.0			0.5			0.5- 2.0
Risk-free interest rate		4.9%-5.2	%		1.0%-2.6	%		4.8%-5.2	%		1.0%-2.6	%
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Expected volatility		32.3	%		45.0%-83.2	%		32.3	%		45.0%-83.2	%
Weighted average expected volatility		32.3	%		52.6	%		32.3	%		52.6	%

     Stock Option Activity

     A summary of stock option activity under all stock-based compensation plans during the six months ended June 30, 2006 is presented below (in thousands except per share amounts and remaining contractual term):

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual-		Intrinsic
	Shares			Price		Term		Value
Outstanding at January 1, 2006		10,045		$	18.36
Granted		443			9.33
Exercised		(227	)		6.14
Forfeited or expired		(2,338	)		25.77
Outstanding at June 30, 2006		7,923		$	16.02		7.04	$	5,045
Exercisable at June 30, 2006		6,595		$	17.60		6.73	$	4,129

     The estimated weighted average fair value of options granted under the stock option plans during the six months ended June 30, 2006 was $3.63. The total intrinsic value of options exercised during the six months ended June 30, 2006 and 2005 was $744,000 and $2.4 million, respectively.

     During the three months ended June 30, 2006, the Company granted 698,500 restricted stock units, all of which were unvested as of June 30, 2006. The weighted average grant date fair value of the restricted stock units was $8.59 per share.

     The Company recorded $565,000 and $1.4 million in stock-based compensation expense for stock options, restricted stock units and purchases under the ESPP for the three and six months ended June 30, 2006, respectively. As of June 30, 2006, there was $6.6 million of total unrecognized compensation cost related to non-vested stock-

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based compensation arrangements granted under all equity compensation plans. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize that cost over a weighted average period of 2.6 years.

     The Company received $1.7 million and $2.2 million in cash from option exercises under all stock-based payment arrangements and employee stock purchase plan for the three and six months ended June 30, 2006 respectively.

     Comparable Disclosures

     Prior to January 1, 2006, the Company accounted for stock-based compensation using the intrinsic value method prescribed by APB Opinion No. 25 and elected to adopt the disclosure-only provisions of SFAS No. 123. Accordingly, compensation cost for stock options was measured as the difference, if any, between the market price on the date of grant and the exercise price of the option. The resulting stock-based compensation was amortized over the estimated term of the stock option, generally four years, using an accelerated approach. This accelerated approach was consistent with the method described in FIN No. 28.

     For the three and six months ended June 30, 2005, had the Company accounted for stock-based compensation cost based on the fair value at the grant date, the Company’s net loss and basic and diluted net loss per common share would have been as follows (in thousands, except per share amounts):

	Three Months Ended			Six Months Ended
	June 30, 2005			June 30, 2005
Net loss:
As reported	$	(66	)	$	(315	)
Stock-based employee compensation included in net loss as reported, net of related tax *		283			793
Stock-based employee compensation using the fair value method, net of related tax *		(3,147	)		(6,786	)
Pro forma net loss	$	(2,930	)	$	(6,308	)
Basic and diluted net loss per common share:
As reported	$	(0.00	)	$	(0.01	)
Pro forma	$	(0.07	)	$	(0.15	)

* The tax effects on stock-based compensation have been fully reserved by way of a valuation allowance.

Note 6. Goodwill and Intangible Assets

     The carrying amounts of the goodwill and other intangible assets as of June 30, 2006 and December 31, 2005 are as follows (in thousands):

	June 30, 2006							December 31, 2005
	Gross Carrying		Accumulated			Net		Gross Carrying		Accumulated			Net
	Amount		Amortization			Amount		Amount		Amortization			Amount
Purchased technology	$	44,103	$	(32,904	)	$	11,199	$	42,381	$	(26,783	)	$	15,598
Patents and patent applications		4,506		(3,883	)		623		4,506		(3,152	)		1,354
Customer list		12,831		(7,929	)		4,902		12,831		(6,272	)		6,559
Existing contract		251		(126	)		125		251		(120	)		131
Non-compete agreements		9,009		(7,384	)		1,625		9,009		(7,124	)		1,885
Other intangible assets	$	70,700	$	(52,226	)		18,474	$	68,978	$	(43,451	)		25,527
Goodwill							191,595							191,595
						$	210,069						$	217,122

     Intangible assets, other than goodwill, are amortized over estimated useful lives of between 12 and 48 months. The aggregate amortization expense of intangible assets was $4.4 million and $3.5 million for three months ended

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June 30, 2006 and 2005, respectively, and $8.8 million and $7.1 million for six months ended June 30, 2006 and 2005, respectively. Of the $4.4 million in amortization of intangible assets recorded in the three months ended June 30, 2006, $3.6 million was recorded in cost of license revenues and $828,000 was recorded in operating expenses. Of the $3.5 million in amortization of intangible assets recorded in the three months ended June 30, 2005, $2.7 million was recorded in cost of license revenues and $782,000 was recorded in operating expenses. Of the $8.8 million in amortization of intangible assets for the six months ended June 30, 2006, $7.1 million was recorded in cost of license revenues and $1.7 million was recorded as operating expenses. Of the $7.1 million in amortization of intangible assets for the six months ended June 30, 2005, $5.5 million was recorded in cost of license revenues and $1.6 million was recorded as operating expenses. The estimated aggregate amortization expense of acquired intangible assets is expected to be $7.8 million in the remaining six months of 2006, $7.3 million in 2007, $2.9 million in 2008 and $445,000 in 2009.

Note 7. Restructuring and Excess Facilities

     The Company implemented a series of restructuring and facility consolidation plans to improve operating performance. Restructuring and facilities consolidation costs consist of workforce reductions, the consolidation of excess facilities and the impairment of leasehold improvements and other equipment associated with abandoned facilities.

     Workforce Reductions

     In the three months ended June 30, 2006, the Company resolved the remaining outstanding matter relating to a prior workforce reduction, paying $12,500 in the final settlement. In the three months ended March 31, 2006, certain outstanding matters associated with an employee termination were resolved and, accordingly, the Company reversed $15,000 of the previously recorded restructuring accrual related to litigation exposure and expected legal costs.

     Excess Facilities

     During the three months ended June 30, 2006, the Company entered into an extension of an existing sublease agreement for one of its excess facilities located in the San Francisco Bay Area, resulting in a change in the Company’s estimate of expected sublease income. Accordingly, the Company reversed $630,000 of the previously recorded restructuring accrual. In addition, the Company recorded $39,000 of additional restructuring expense to accrete the remaining excess facilities obligations to their present values in accordance with SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. During the three months ended March 31, 2006, the Company reversed $377,000 of the previously recorded restructuring accrual as a result of revisions to estimated operating expenses for certain of its previously abandoned facilities. The Company recorded $55,000 in the three months ended March 31, 2006 associated with the accretion of discounted future lease payments associated with facilities leases.

     At June 30, 2006, the Company had $12.4 million accrued for excess facilities, which is payable through 2010. This accrual includes minimum lease payments of $13.4 million and estimated operating expenses of $2.2 million offset by estimated sublease income of $3.2 million and the present value discount of $89,000 recorded in accordance with SFAS No. 146. The facilities costs were estimated as of June 30, 2006. The Company reassesses this estimated liability each period based on current real estate market conditions. Most of the Company’s excess facilities have been subleased at rates below those the Company is required to pay under its lease agreements. Those facilities that are not subleased are being marketed for sublease and are currently unoccupied. Accordingly, the estimate of excess facilities costs could differ from actual results and such differences could result in additional charges or credits that could materially affect the Company’s consolidated financial condition and results of operations.

     The restructuring costs and excess facilities charges have had a material impact on the Company’s consolidated results of operations and will require additional cash payments in future periods. The following table summarizes the estimated payments, net of estimated sublease income and the impact of discounting, associated with these charges (in thousands):

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	Excess
Years Ending December 31,	Facilities
2006 (remaining six months)	$	3,566
2007		5,398
2008		1,503
2009		1,080
2010		896
		12,443
Present value discount of future lease payments		(89	)
	$	12,354

     The following table summarizes the activity in the related restructuring and excess facilities accrual (in thousands):

				Non-Cancelable
				Lease
	Workforce			Commitments
	Cost			and Other			Total
Balance at December 31, 2005	$	34		$	16,913		$	16,947
Restructuring and excess facilities recoveries		(15	)		(1,007	)		(1,022	)
Accretion of restructuring obligations to present value		—			94			94
Cash payments		(19	)		(3,646	)		(3,665	)
Balance at June 30, 2006	$	—		$	12,354		$	12,354

Note 8. Borrowings

     The Company entered into a line of credit agreement in August 2001 with a financial institution, which was subsequently amended in July 2005. The amended line of credit provides for borrowings up to $16.0 million. Borrowings under the line of credit agreement are secured by cash, cash equivalents and short-term investments. The line of credit bears interest at the lower of 1% below the bank’s prime rate, which was 8.25% at June 30, 2006, or 1.5% above LIBOR in effect on the first day of the term. The line of credit is primarily used as collateral for letters of credit required by facilities leases. There are no financial covenant requirements associated with the line of credit. At June 30, 2006 and December 31, 2005, there were no borrowings under this line of credit agreement. This line of credit agreement expired in July 2006 and the Company entered into a new line of credit with the same financial institution that provided the previous line of credit. The new line of credit provides for borrowings of up to $13.0 million on terms similar to the previous line of credit and expires in July 2007.

Note 9. Guarantees

     The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party – generally, the Company’s business partners, subsidiaries and/or customers, in connection with any United States patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products or services. The term of these indemnification agreements is generally perpetual commencing after execution of the agreement. The potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements and does not expect the liability to be material.

     The Company generally warrants that its software products will perform in all material respects in accordance with the Company’s standard published specifications in effect at the time of delivery of the licensed products to the customer. Additionally, the Company warrants that its support and services will be performed consistent with generally accepted industry standards. If necessary, the Company would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history. The Company has not incurred

15

significant expense under its product or services warranties. As of June 30, 2006 and December 31, 2005, the Company does not have or require an accrual for product or service warranties.

     The Company may, at its discretion and in the ordinary course of business, subcontract the performance of any of its services. Accordingly, the Company enters into standard indemnification agreements with its customers, whereby customers are indemnified for acts of the Company’s subcontractors. The potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. However, the Company has general and umbrella insurance policies that enable it to recover a portion of any amounts paid. The Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is not significant. Accordingly, the Company has no liabilities recorded for these agreements at June 30, 2006 and December 31, 2005.

Note 10. Interest Income and Other, Net

     Interest income and other, net consisted of the following (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2006			2005			2006			2005
Interest income	$	1,471		$	908		$	2,806		$	1,662
Foreign currency gain		105			50			91			29
Other		(45	)		(50	)		(92	)		(70	)
	$	1,531		$	908		$	2,805		$	1,621

Note 11. Recent Accounting Pronouncements

     In June 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income taxes – an interpretation of FAS Statement No. 109. This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FAS Statement No. 109, Accounting for Income Taxes. The Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Interpretation is effective for years beginning after December 15, 2006. The Company is assessing the impact, if any, on its consolidated results of operations, financial position and cash flows.

     In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle. APB Opinion No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of change a cumulative effect of changing to the new accounting principle whereas SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle, unless it is impracticable. SFAS No. 154 enhances the consistency of financial information between periods. SFAS No. 154 is effective beginning with the Company’s first quarter of 2006. The Company does not expect the adoption of SFAS No. 154 will have a material impact on its consolidated results of operations or financial position.

Note 12. Contingencies

     The Company leases its main office facilities in Sunnyvale, California and various sales offices in North America, Europe and Asia Pacific under non-cancelable operating leases, which expire at various times through July 2016. Future minimum lease payments under non-cancelable operating leases, as of June 30, 2006, are as follows (in thousands):

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					Future
	Occupied		Excess		Lease
Years Ending December 31,	Facilities		Facilities		Payments
2006 (remaining six months)	$	5,217	$	3,670	$	8,887
2007		7,122		5,498		12,620
2008		2,339		1,973		4,312
2009		1,083		1,258		2,341
2010		952		1,049		2,001
After 2010		5,645		—		5,645
	$	22,358	$	13,448	$	35,806

     Of these future minimum lease payments, the Company has accrued $12.4 million in the restructuring and excess facilities accrual at June 30, 2006. This accrual also included estimated operating expenses and sublease commencement costs of $2.2 million and was net of estimated sublease income of $3.2 million and a present value discount of $89,000.

     At June 30, 2006, the Company had $12.1 million outstanding under standby letters of credit with financial institutions, which are secured by cash, cash equivalents and short-term investments. These letter of credit agreements are associated with the Company’s operating lease commitments for its facilities and expire at various times through 2016.

     In 2001, Interwoven and certain of its officers and directors and certain investment banking firms were separately named as defendants in a securities class-action lawsuit filed in the United States District Court Southern District of New York, which was subsequently consolidated with more than 300 substantially identical proceedings against other companies. Similar suits were named against iManage, Inc. (“iManage”) its directors and certain of its officers. The consolidated complaint asserts that the prospectuses for the Company’s October 8, 1999 initial public offering and January 26, 2000 follow-on public offering and iManage’s November 17, 1999 initial public offering failed to disclose certain alleged actions by the underwriters for the offerings. In addition, the consolidated complaint alleges claims under Section 11 and 15 of the Securities Act of 1933 against Interwoven and iManage and certain officers and directors of Interwoven and iManage. The plaintiff seeks damages in an unspecified amount. In June 2003, following the dismissal of Interwoven’s and iManage’s respective officers and directors from the litigation without prejudice and after several months of negotiation, the plaintiffs named in the consolidated complaint and Interwoven and iManage, together with the other issuers named there under and their respective insurance carriers, agreed to settle the litigation and dispose of any remaining claims against the issuers named in the consolidated complaint, in each case without admitting any wrongdoing. As part of this settlement, the respective insurance carriers of Interwoven and iManage have agreed to assume Interwoven’s and iManage’s entire payment obligation under the terms of the settlement. The court has preliminarily approved the proposed settlement and is currently considering whether the settlement should be given final approval. The Company cannot be reasonably assured, however, that the settlement will be approved by the putative plaintiff classes or finally approved by the District Court.

     In addition to the matters mentioned above, the Company is a party to a variety of legal proceedings and claims that arose in the normal course of business activities, including employment-related lawsuits. While the results of proceedings cannot be predicted with certainty, in the opinion of management, the resolution of these matters is not expected to have a material adverse impact on the Company’s consolidated results of operations, cash flows or financial condition. However, depending on the amount and timing, an unfavorable resolution of a matter could materially affect the Company’s results of operations, cash flows or financial condition in a particular period.

Note 13. Significant Customer Information and Segment Reporting

     The Company’s chief operating decision-maker is considered to be Interwoven’s President. The President reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenues by geographic region for purposes of making operating decisions and assessing financial performance. On this basis, the Company is organized and operates in a single segment: the design, development and marketing of software solutions.

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     The following table presents geographic information (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2006		2005		2006		2005
Revenues:
United States of America	$	29,499	$	28,238	$	59,744	$	55,528
United Kingdom		10,045		3,988		15,318		9,906
Other Geographies		9,485		8,808		20,425		18,085
	$	49,029	$	41,034	$	95,487	$	83,519
					June 30,		December 31,
					2006		2005
Long-lived assets (excluding goodwill):
United States of America					$	22,260	$	29,822
International						1,377		749
					$	23,637	$	30,571
The Company’s revenues are derived from software licenses, consulting and training services and customer support. Although management believes that a significant portion of the Company’s revenue is derived from WorkSite and TeamSite products and related services, the Company does not specifically track revenues by individual products. It is also impracticable to disaggregate software license revenue by product. The Company’s disaggregated revenue information is as follows (in thousands):
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2006		2005		2006		2005
License	$	18,508	$	14,666	$	36,077	$	31,083
Customer support		21,154		18,997		42,080		37,317
Consulting		8,032		6,190		14,775		12,762
Training		1,335		1,181		2,555		2,357
	$	49,029	$	41,034	$	95,487	$	83,519

     No customer accounted for more than 10% of the total revenues for the three and six months ended June 30, 2006 and 2005. At June 30, 2006 and December 31, 2005, no single customer accounted for more than 10% of the outstanding accounts receivable balance.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     The following contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as “anticipates,” “expects,” “believes,” “seeks,” “estimates” and similar expressions identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, expectations regarding customer spending patterns, trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Factors that could cause actual results to differ materially from expectations include those set forth in the following discussion, and, in particular, the risks discussed below under Part II, Item 1A, Risk Factors, and under Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K and in our subsequent filings with the Securities and Exchange Commission. Unless required by law, we do not undertake any obligation to update any forward-looking statements.

Overview

     Incorporated in March 1995, we are an enterprise software company that serves the enterprise content management (“ECM”) market by providing software and services that enable businesses to create, review, manage, distribute and archive critical business content, such as documents, spreadsheets, e-mails and presentations, as well as Web images, graphics, content and applications code across the enterprise and its value chain of customers, partners and suppliers. Our industry-specific solutions enable organizations to unify people, content and processes to minimize business risk, accelerate time-to-value and sustain lower total cost of ownership. Interwoven’s customers have deployed our products for business initiatives such as improving customer experience, streamlining information technology processes, enabling greater compliance and more. To date, more than 3,600 enterprises and professional services organizations worldwide have licensed our software solutions and products. We had 768 employees as of June 30, 2006.

     We operate in a single segment: the design, development and marketing of enterprise content management software solutions. Our goal is to be the leading provider of ECM software solutions. We are focused on generating profitable and sustainable growth through internal research and development, licensing from third parties, and acquisitions of companies with complementary products and technologies.

     Our revenues are derived from software licenses, customer support and professional services. We license our software to businesses, professional services organizations and government agencies generally on a non-exclusive and perpetual basis. The growth in our software license revenues is affected by the strength of general economic and business conditions, customer budgetary constraints and the competitive position of our software solutions. Software licenses revenues are also affected by long, unpredictable sales cycles and, therefore, are very difficult to forecast from period to period. Our consolidated results of operations have been impacted in recent periods by long product evaluation periods, protracted contract negotiations and multiple authorization requirements of our customers, which we believe are experiences that reflect the general trend in the highly fragmented and intensely competitive ECM market. While we have taken steps to mitigate the effects of these forces, we expect that our consolidated results of operations will continue to be affected by these factors for the foreseeable future.

     Customer support revenues are primarily influenced by the amount of new support contracts sold in connection with the sale of new software licenses and the renewal rate of existing support contracts. Customers that purchase new software licenses usually purchase support contracts and renew their support contracts annually. We believe that support contract purchase and renewal rates may be affected by the fact that our support contracts entitled customers to unspecified product upgrades and technical support during the support period. Professional services consist of software installation and integration, training and business process consulting. Professional services are predominately billed on a time-and-materials basis and we recognize revenues when the services are performed. Professional services revenues are influenced primarily by the number of professional services engagements sold in connection with software license sales and the customers use of third party services providers.

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     Because our products are complex and involve a consultative sales model, our strategy is to market and sell our products and services primarily through a direct sales force located within and outside of the United States of America. We look to augment those efforts through relationships with technology vendors, professional services firms, systems integrators and other strategic partners. Our sales efforts are targeted to senior executives and personnel who are responsible for managing an enterprise’s information technology initiatives. Our primary method of demand generation is through our direct sales force and strategic relationships. Our direct sales force is responsible for managing customer relationships and opportunities and is supported by product, marketing and service specialists.

     In the ever-changing and increasingly complex and competitive information technology environment, we believe product differentiation will be a key to market leadership. Thus, our strategy is to continually work to enhance and extend the features and functionality of our existing products and develop new and innovative solutions for our domestic and international customers. We expect to continue to devote substantial resources to our research and development activities.

     We are focused on improving our operating margins by increasing our revenues and actively managing our expenses through improved productivity and utilization of economies of scale in our business. As a significant portion of our expenses are employee-related, we carefully manage our headcount from period to period. We also look to improve our cost structure by hiring personnel in countries where advanced technical expertise is available at lower costs. Additionally, we pay close attention to other costs, including facilities and related expense, professional fees and promotional expenses, which are each significant components of our expense structure.

     Our acquisition or external growth strategy is an important element of our overall strategy. We seek to identify acquisition opportunities that will enhance the features and functionality of our existing products, provide new products and technologies to sell to our installed base of customers or enter adjacent markets. In evaluating these opportunities, we consider both time to market and potential market share gains. We have completed a number of acquisitions in the past, and we may acquire other technologies, products and companies in the future.

Results of Operations

     Over the past several years, we have focused on expanding our product offerings into the enterprise content management (“ECM”) market, adding through acquisitions products and solutions with digital asset management, collaborative document management, records management, content publishing and financial services vertical market capabilities.

     The ECM market is fragmented and intensely competitive and growth in the ECM market has been sporadic as customers tightly manage their information technology budgets and priorities. Our consolidated results of operations have been impacted in recent periods by long product evaluation periods, protracted contract negotiations and multiple authorization requirements of our customers. While we have taken steps to mitigate the effects of these forces, we expect that our consolidated results of operations will continue to be affected by these factors for the foreseeable future.

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Revenues

     The following sets forth, for the periods indicated, our revenues (in thousands, except percentages):

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2006			2005			Change		2006			2005			Change
License	$	18,508		$	14,666			26%	$	36,077		$	31,083			16%
Percentage of total revenues		38	%		36	%				38	%		37	%
Support and service		30,521			26,368			16%		59,410			52,436			13%
Percentage of total revenues		62	%		64	%				62	%		63	%
	$	49,029		$	41,034			19%	$	95,487		$	83,519			14%

     Total revenues increased 19% to $49.0 million for the three months ended June 30, 2006 from $41.0 million for the three months ended June 30, 2005. Sales outside of the United States of America represented 40% and 31% of our total revenues for the three months ended June 30, 2006 and 2005, respectively. We believe the increase as a percentage of total revenue was primarily the result of increased sales to customers in Europe and Asia. Total revenues increased 14% to $95.5 million for the six months ended June 30, 2006 from $83.5 million for the six months ended June 30, 2005. We believe that the increase in revenues in three and six months ended June 30, 2006 was attributable to higher customer spending in Europe and to a lesser degree Asia and the United States of America. We expect that many of our prospects and customers will remain cautious in their information technology spending initiatives during the remainder of 2006 and that our sales cycles and revenues will continue to be affected by this behavior. In addition, we believe that a decrease in spending on information technology initiatives and the effect of longer sales cycles could adversely affect our business for the foreseeable future and, to the extent that any improvement has occurred or occurs in either the information technology spending environment or sales cycles, such improvements may not be sustained in future periods.

     License. License revenues increased 26% to $18.5 million for the three months ended June 30, 2006 from $14.7 million for the three months ended June 30, 2005. License revenues represented 38% and 36% of total revenues for the three months ended June 30, 2006 and 2005, respectively. We believe that the increase in license revenues for the three months ended June 30, 2006 over the same period in 2005 was primarily due to higher license revenues in all of our geographic regions. We had one license transaction exceeding $1.0 million in the three months ended June 30, 2006, and no license transaction of $1.0 million or greater in the same period of 2005. Our average selling prices were $189,000 and $142,000 for the three months ended June 30, 2006 and 2005, respectively, for transactions in excess of $50,000 in aggregate license revenues. License revenues increased 16% to $36.1 million for the six months ended June 30, 2006 from $31.1 million in the same period in 2005. We believe that the increase in license revenues for the six months ended June 30, 2006 over the prior year was attributable to higher customer spending in all of our geographic regions. License revenues represented 38% and 37% of total revenues for the six months ended June 30, 2006 and 2005, respectively.

     Support and Service. Support and service revenues increased 16% to $30.5 million for the three months ended June 30, 2006 from $26.4 million for the three months ended June 30, 2005. The increase in support and service revenues was primarily the result of a $2.2 million increase in customer support revenues from a larger installed base of customers and customer follow-on orders and a $1.8 million increase in consulting services revenues. Support and service revenues accounted for 62% and 64% of total revenues for the three months ended June 30, 2006 and 2005, respectively. Support and service revenues increased 13% to $59.4 million for the six months ended June 30, 2006 from $52.4 million for the six months ended June 30, 2005. The increase in support and service revenues was primarily the result of a $4.8 million increase in customer support revenues from a larger installed base of customers and customer follow-on orders and a $2.0 million increase in consulting services revenues. Support and service revenues accounted for 62% and 63% of total revenues for the six months ended June 30, 2006 and 2005, respectively.

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Cost of Revenues

     The following sets forth, for the periods indicated, our cost of revenues (in thousands, except percentages):

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2006			2005			Change		2006			2005			Change
License	$	4,417		$	3,342			32%	$	8,589		$	6,830			26%
Percentage of total revenues		9	%		8	%				9	%		8	%
Percentage of license revenues		24	%		23	%				24	%		22	%
Support and service		12,327			10,227			21%		24,184			20,256			19%
Percentage of total revenues		25	%		25	%				25	%		24	%
Percentage of support and service revenues		40	%		39	%				41	%		39	%
	$	16,744		$	13,569			23%	$	32,773		$	27,086			21%

     License. Cost of license revenues includes expenses incurred to manufacture, package and distribute our software products and documentation, as well as costs of licensing third-party software embedded in or sold with our software products and amortization of purchased technology associated with business combinations. Cost of license revenues represented 9% and 8% of total revenues for the three months ended June 30, 2006 and 2005, respectively. The increase in cost of license revenues in absolute dollars and as a percentage of revenues for the three months ended June 30, 2006 from the same period in 2005 was attributable primarily to a $897,000 increase in amortization of purchased technology and a $135,000 increase in royalties due to third parties. The increase in amortization of purchased technology is attributable to the intangible assets acquired in the acquisition of Scrittura, Inc. in August 2005. Cost of license revenues represented 9% and 8% of total revenues for the six months ended June 30, 2006 and 2005, respectively. The increase in cost of license revenues in absolute dollars and as a percentage for the six months ended June 30, 2006 from the same period in 2005 was primarily attributable to a $1.7 million increase in amortization of purchased technology.

     Based solely on acquisitions completed through the six months ended June 30, 2006 and assuming no impairments, we expect the amortization of purchased technology classified as a cost of license revenues to be $6.2 million for the remaining six months of 2006, $4.3 million in 2007, $2.6 million in 2008 and $445,000 for 2009. We expect cost of license revenues as a percentage of license revenues to vary from period to period depending on the mix of software products sold, the extent to which third-party software products are bundled with our products and the amount of overall license revenues, as many of the third-party software products embedded in our software are under fixed-fee arrangements.

     Support and Service. Cost of support and service revenues consists of salary and personnel-related expenses for our consulting, training and support personnel, costs associated with furnishing product updates to customers under active support contracts, subcontractor expenses and depreciation of equipment used in our services and customer support operation. Cost of support and service revenues increased 21% from $10.2 million to $12.3 million in the three months ended June 30, 2006 from the same period in 2005. The increase in cost of support and service revenues in the three months ended June 30, 2006 from the same period in 2005 was due primarily to a $1.1 million increase in personnel related costs, resulting primarily from additional headcount, and higher subcontractor fees of $691,000 as a result of the increased usage of outside consulting firms to supplement our current services capacity. Cost of support and service revenues represented 40% and 39% of support and service revenues for the three months ended June 30, 2006 and 2005, respectively. The increase in cost of support and service revenues as a percentage of its related revenues was primarily attributable to an increase in consulting services and training revenues as a percentage of total support and service revenues, as consulting services and training revenues generally have lower gross margins than support revenues. Cost of support and service revenues increased 19% to $24.2 million for the six months ended June 30, 2006 from $20.2 million for the same period in 2005. The increase in cost of support and service revenues in the six months ended June 30, 2006 from the same period in 2005 was due primarily to a $2.2 million increase in personnel related costs, resulting primarily from additional headcount, higher subcontractor fees of $678,000 as a result of the increased usage of outside consulting firms to supplement our current services capacity and a $350,000 increase in travel expenses attributable to higher levels of activity in our

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consulting services engagements. Cost of support and service revenues represented 41% and 39% of support and service revenues in the six months ended June 30, 2006 and 2005, respectively. The increase in cost of support and service revenues as a percentage of its related revenues was primarily attributable to an increase in consulting services and training revenues as a percentage of total support and service revenues, as consulting services and training revenues generally have lower gross margins than support revenues. Support and service headcount was 215 and 195 at June 30, 2006 and 2005, respectively.

     We realize lower gross profits on support and service revenues than on license revenues. In addition, we may contract with outside consultants and system integrators to supplement the services we provide to customers, which increases our costs and further reduces gross profits. As a result, if support and service revenues increase as a percentage of total revenues or if we increase our use of third parties to provide such services, our gross profits will be lower and our operating results may be adversely affected.

Operating Expenses

     Sales and Marketing

     The following sets forth, for the periods indicated, our sales and marketing expenses (in thousands, except percentages):

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2006			2005			Change			2006			2005			Change
Sales and marketing	$	19,168		$	16,671			15	%	$	37,569		$	33,999			10	%
Percentage of total revenues		39	%		41	%					39	%		41	%

     Sales and marketing expenses consist of salaries, commissions, benefits and related costs for sales and marketing personnel, travel and marketing programs, including customer conferences, promotional materials, trade shows and advertising. Sales and marketing expenses increased 15% to $19.2 million for the three months ended June 30, 2006 from $16.7 million for the three months ended June 30, 2005. The increase in sales and marketing expenses in the three months ended June 30, 2006 from the same period in 2005 was due primarily to a $1.8 million increase in commissions as a result of higher license revenue and a $476,000 increase in personnel costs. Sales and marketing expenses increased 10% to $37.6 million for the six months ended June 30, 2006 from $34.0 million for the same period in 2005. The increase in sales and marketing expenses in the six months ended June 30, 2006 from the same period in 2005 was due primarily to a $1.9 million increase in commissions as a result of higher license revenue, a $678,000 increase in personnel costs and a $380,000 increase in travel expenses. Sales and marketing expenses represented 39% as a percentage of total revenues in the three and six months ended June 30, 2006 and 2005, and represented 41% as a percentage of total revenues in the three and six months ended June 30, 2005. The decrease in sales and marketing expenses as a percentage of total revenues is due to higher total revenues. Sales and marketing headcount was 239 and 235 at June 30, 2006 and 2005, respectively.

     We expect that the percentage of total revenues represented by sales and marketing expenses will fluctuate from period to period due to the timing of hiring of new sales and marketing personnel, our spending on marketing programs and the level of revenues, in particular license revenues, in each period.

     Research and Development

     The following sets forth, for the periods indicated, our research and development expenses (in thousands, except percentages):

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2006			2005			Change			2006			2005			Change
Research and development	$	8,528		$	7,842			9	%	$	17,082		$	16,010			7	%
Percentage of total revenues		17	%		19	%					18	%		19	%

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     Research and development expenses consist of salaries and benefits, third-party contractors, facilities and related overhead costs associated with our product development and quality assurance activities. Research and development expenses increased 9% to $8.5 million for the three months ended June 30, 2006 from $7.8 million for the three months ended June 30, 2005. The increase was primarily due to higher personnel related costs of $277,000 and a $97,000 increase in stock-based compensation related to the adoption of SFAS No. 123R. Research and development expenses represented 17% and 19% of total revenues for the three months ended June 30, 2006 and 2005, respectively. Research and development expenses increased 7% to $17.1 million for the six months ended June 30, 2006 from $16.0 million for the same period in 2005. The increase in the six months ended June 30, 2006 from the same period in 2005 was primarily due to higher personnel related costs of $567,000 and a $218,000 increase in stock-based compensation related to the adoption of SFAS No. 123R. Research and development expenses represented 18% and 19% of total revenues for the six months ended June 30, 2006 and 2005, respectively. Research and development headcount was 226 and 207 at June 30, 2006 and 2005, respectively. The increase in headcount was due to staffing of our development operation in Bangalore, India. We expect research and development expenses in 2006 will decline slightly as a percentage of total revenues when compared to 2005 as we continue to manage our expenses and realize greater cost efficiencies in our product development activities.

General and Administrative

     The following sets forth, for the periods indicated, our general and administrative expenses (in thousands, except percentages):

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2006			2005			Change			2006			2005			Change
General and administrative	$	3,791		$	3,122			21	%	$	9,051		$	6,730			34	%
Percentage of total revenues		8	%		8	%					9	%		8	%

     General and administrative expenses consist of salaries and related costs for general corporate functions including finance, accounting, human resources, legal and information technology. General and administrative expenses increased 21% for the three months ended June 30, 2006 when compared to the three months ended June 30, 2005. The increase was primarily due to a $456,000 increase in legal and accounting fees and a $93,000 increase in personnel related costs. General and administrative expenses increased 34% to $9.1 million for the six months ended June 30, 2005 from $6.7 million for the same period in 2005. The increase was primarily due to $1.6 million in charges relating to the retirement of our former Chief Executive Officer, a $462,000 increase in professional fees, a $403,000 increase in personnel related costs offset by a $203,000 decrease in rent expense. General and administrative expenses represented 8% of total revenues in the three months ended June 30, 2006 and 2005, and 9% and 8% of total revenues for the six months ended June 30, 2006 and 2005, respectively. General and administrative headcount was 88 and 84 at June 30, 2006 and 2005, respectively. We expect general and administrative expenses to remain consistent as a percentage of total revenues in 2006 when compared to 2005 due to continued cost control efforts and economies of scale offset by charges relating to the retirement of our former Chief Executive Officer and expected costs associated with hiring a new Chief Executive Officer.

     Amortization of Intangible Assets

     The following sets forth, for the periods indicated, our amortization of intangible assets (in thousands, except percentages):

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2006			2005			Change			2006			2005			Change
Amortization of intangible assets	$	828		$	782			6	%	$	1,656		$	1,638			1	%
Percentage of total revenues		2	%		2	%					2	%		2	%

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     Amortization of intangible assets was $828,000 and $782,000 for the three months ended June 30, 2006 and 2005, respectively, and $1.7 million and $1.6 million for the six months ended June 30, 2006 and 2005, respectively. The increase in amortization of intangible assets was due to the acquisition of Scrittura in 2005. Based on the intangible assets balance as of June 30, 2006, we expect amortization of intangible assets classified as operating expenses to be $1.7 million in the remaining six months of 2006, $2.9 million in 2007 and $308,000 in 2008. We may incur additional amortization expense beyond these expected future levels to the extent we complete acquisitions in the future.

Restructuring and Excess Facilities Recoveries

     The following sets forth, for the periods indicated, our restructuring and excess facilities charges (recoveries) (in thousands, except percentages):

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2006			2005			Change		2006			2005			Change
Restructuring and excess
facilities recoveries	$	(591	)	$	(303	)		*	$	(928	)	$	(633	)		*
Percentage of total revenues		(1	)%		(1	)%				(1	)%		(1	)%

* percentage not meaningful

     During the three months ended June 30, 2006, we reversed $630,000 of the previously recorded restructuring accrual as a result of an extension to an existing sublease agreement for one of our excess facilities located in the San Francisco Bay Area, resulting in a change in the our estimate of expected sublease income. We also recorded $39,000 in the three months ended June 30, 2006 associated with the accretion of discounted future lease payments associated with facilities leases recorded under SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.

     During the three months ended June 30, 2005, we entered into an agreement, which was not previously anticipated or considered probable, to sublease an excess facility in Mountain View, California and, accordingly, we reversed $462,000 of the previously recorded restructuring accrual. We also recorded $159,000 in the three months ended June 30, 2005 associated with the accretion of discounted future lease payments related to excess facilities.

     The charges recorded for excess facilities were based on payments due over the remainder of the lease term and estimated operating costs offset by our estimate of future sublease income. Accordingly, our estimate of excess facilities costs may differ from actual results and such differences may result in additional charges that could materially affect our consolidated financial condition and results of operations.

Interest Income and Other, Net

     The following sets forth, for the periods indicated, our interest income and other (in thousands, except percentages):

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2006			2005			Change			2006			2005			Change
Interest income and other, net	$	1,531		$	908			69	%	$	2,805		$	1,621			73	%
Percentage of total revenues		3	%		2	%					3	%		2	%

     Interest income and other is composed of interest earned on our cash, cash equivalents and investments and foreign exchange transaction gains and losses. Interest income and other increased 69% to $1.5 million for the three months ended June 30, 2006 from $908,000 for the three months ended June 30, 2005. For the six months ended June 30, 2006, interest and other income increased to $2.8 million, or 73%, from $1.6 million in the same period in 2005. The increases were primarily due to higher average interest rates on our cash and investments.

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Provision for Income Taxes

     The following sets forth, for the periods indicated, our provision for income taxes (in thousands, except percentages):

	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2006			2005			Change			2006			2005			Change
Provision for income taxes	$	315		$	325			(3	)%	$	755		$	625			21	%
Percentage of total revenues		1	%		1	%					1	%		1	%

     We recorded an income tax provision of $315,000 and $755,000 for the three and six months ended June 30, 2006, respectively, as compared to a provision of $325,000 and $625,000 for the same periods ended June 30, 2005, respectively. The income tax provisions for the three and six months ended June 30, 2006 and the same periods ended June 30, 2005 were comprised primarily of foreign income taxes and foreign withholding taxes, and also included a provision for federal alternative minimum tax and state income taxes.

     The effective tax rate for the six months ended June 30, 2006 was calculated based on the results of operations for the six months ended June 30, 2006, and does not reflect an annual effective tax rate. Since we cannot consistently predict our future operating income, or in which jurisdiction it will be located, we are not using an annual effective tax rate to apply to the operating income for the six-month period ended June 30, 2006.

     The effective tax rate for the six months ended June 30, 2006 was 69% compared with 202% for the comparable period ended June 30, 2005. This change in the effective rate was primarily due to the effect of withholding taxes on increased pre-tax income for six months ended June 30, 2006 as compared to the comparable period ended June 30, 2005.

     At the close of the most recent year-end, our management determined that based upon its assessment of positive and negative evidence available it was appropriate to continue to provide a full valuation allowance against its net deferred tax assets. As of June 30, 2006, it continues to be the assessment of management that a full valuation allowance against its net deferred tax assets is appropriate.

Liquidity and Capital Resources

	June 30,		December 31,
	2006		2005
	(in thousands)
Cash, cash equivalents and short-term investments	$	146,543	$	137,199
Working capital	$	91,742	$	85,969
Stockholders’ equity	$	302,212	$	298,199

     Our primary sources of cash are the collection of accounts receivable from our customers, proceeds from the exercise of stock options and stock purchased under our employee stock purchase plan. Our uses of cash include payroll and payroll-related expenses and operating expenses such as marketing programs, travel, professional services and facilities and related costs. We also use cash to purchase property and equipment, pay liabilities for excess facilities and to acquire businesses and technologies to expand our product offerings.

     A number of non-cash items were charged to expense and increased our net loss or decreased our net income for the three and six months ended June 30, 2006 and 2005. These items include depreciation and amortization of property and equipment, intangible assets and stock-based compensation. Although these non-cash items may increase or decrease in amount and therefore cause an associated increase or decrease in our future operating results, these items will have no corresponding impact on our operating cash flows.

     Cash provided by operating activities for the six months ended June 30, 2006 was $10.4 million, representing an increase of $2.8 million from the same period in 2005. This increase primarily resulted from our net income, after

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adjusting for non-cash items, and increases in accounts payable, accrued liabilities and deferred revenues, offset by payments to reduce our restructuring and excess facilities accrual and increases in accounts receivable. Payments made to reduce our restructuring and excess facilities obligations totaled $3.6 million in the six months ended June 30, 2006. Our days sales outstanding in accounts receivable (“days outstanding”) were 62 days and 60 days at June 30, 2006 and December 31, 2005, respectively.

     Cash provided by operating activities for the six months ended June 30, 2005 was $7.6 million and primarily resulted from our net loss, after adjustments for non-cash expenses, cash collection against accounts receivable and decreases in prepaid expenses and deferred revenues offset by payments to reduce accounts payable and accrued liabilities and our restructuring and excess facilities accrual. Payments made to reduce our restructuring and excess facilities obligations totaled $3.8 million. Our days outstanding in accounts receivable were 56 days at June 30, 2005.

     Cash used in investing activities was $25.9 million for the six months ended June 30, 2006. This resulted from net payments for short-term investments of $22.4 million, comprised of $81.3 million to purchase investment securities offset by $59.0 million of proceeds from the maturity and sale of investments; $1.6 million in purchased technology and $2.0 million to purchase property and equipment.

     Cash provided by investing activities was $22.8 million for the six months ended June 30, 2005. This primarily resulted from net proceeds for short-term investments of $24.5 million, comprised of $91.8 million of proceeds from the maturity and sale of investments partially offset by $67.3 million to purchase investment securities; and $1.8 million to purchase property and equipment.

     Cash provided by financing activities was $2.2 million and $4.4 million for the six months ended June 30, 2006 and 2005, respectively, and consists primarily of cash received from the exercise of common stock options and shares issued under our employee stock purchase plan.

     We have classified our investment portfolio as “available for sale,” and our investment objectives are to preserve principal and provide liquidity while at the same time maximizing yields without significantly increasing risk. We may sell an investment at any time if the quality rating of the investment declines, the yield on the investment is no longer attractive or we are in need of cash. Because we invest only in investment securities that are highly liquid with a ready market, we believe that the purchase, maturity or sale of our investments has no material impact on our overall liquidity.

     We anticipate that we will continue to purchase property and equipment as necessary in the normal course of our business. The amount and timing of these purchases and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including the hiring of employees, the rate of change of computer hardware and software used in our business and our business outlook.

     We have used cash to acquire businesses and technologies that enhance and expand our product offerings and we anticipate that we will continue to do so in the future. The nature of these transactions makes it difficult to predict the amount and timing of such cash requirements. We may also be required to raise additional financing to complete future acquisitions.

     We receive cash from the exercise of common stock options and the sale of common stock under our employee stock purchase plan. While we expect to continue to receive these proceeds in future periods, the timing and amount of such proceeds is difficult to predict and is contingent on a number of factors including the price of our common stock, the number of employees participating in our stock option plans and our employee stock purchase plan and general market conditions.

     Bank Borrowings. We have a $16.0 million line of credit available to us at June 30, 2006, which is secured by cash, cash equivalents and investments. The line of credit bears interest at the lower of 1% below the bank’s prime rate adjusted from time to time or a fixed rate of 1.5% above the LIBOR in effect on the first day of the term. There are no financial covenant requirements under our line of credit. This line of credit agreement is primarily used as collateral for letters of credit required by our facilities leases. There were no outstanding borrowings under this line of credit as of June 30, 2006. This line of credit agreement expired in July 2006 and we have entered into a new line

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of credit with the same financial institution that provided the previous line of credit. The new line of credit provides for borrowings of up to $13.0 million on terms similar to the previous line of credit and expires in July 2007.

     Facilities. We lease our facilities under operating lease agreements that expire at various dates through 2016. As of June 30, 2006, minimum cash payments due under our operating lease obligations totaled $35.8 million. The following presents our prospective future lease payments under these agreements as of June 30, 2006, which is net of our estimate of potential sublease income (in thousands):

			Excess Facilities
	Occupied		Minimum Lease		Estimated Sub-		Estimated		Net			Net Future
Years Ending December 31,	Facilities		Commitments		Lease Income		Costs		Outflows			Outflows
2006 (remaining six months)	$	5,217	$	3,670	$	470	$	366	$	3,566		$	8,783
2007		7,122		5,498		984		884		5,398			12,520
2008		2,339		1,973		802		332		1,503			3,842
2009		1,083		1,258		523		345		1,080			2,163
2010		952		1,049		452		299		896			1,848
Thereafter		5,645		—		—		—		—			5,645
	$	22,358	$	13,448	$	3,231	$	2,226	$	12,443		$	34,801
Less: Present value discount of future lease payments										(89	)
Obligations for excess facilities recognized as of June 30, 2006									$	12,354

     The restructuring and excess facilities accrual at June 30, 2006 includes minimum lease payments of $13.4 million and estimated operating expenses of $2.2 million offset by estimated sublease income of $3.2 million and the present value discount of $89,000 recorded in accordance with SFAS No. 146. We estimated sublease income and the related timing thereof based on existing sublease agreements or with the input of third party real estate consultants and current market conditions, among other factors. Our estimates of sublease income may vary significantly from actual amounts realized depending, in part, on factors that may be beyond our control, such as the time periods required to locate and contract suitable subleases and the market rates at the time of such subleases.

     In relation to our excess facilities, we may decide to negotiate and enter into lease termination agreements, if and when the circumstances are appropriate. These lease termination agreements would likely require that a significant amount of the remaining future lease payments be paid at the time of execution of the agreement, but would release us from future lease payment obligations for the abandoned facility. The timing of a lease termination agreement and the corresponding payment could materially affect our cash flows in the period of payment.

     We have entered into various standby letter of credit agreements associated with our facilities leases, which serve as required security deposits for such facilities. These letters of credit expire at various times through 2016. At June 30, 2006, we had $12.1 million outstanding under standby letters of credit, which are secured by cash, cash equivalents and investments.

     We currently anticipate that our current cash, cash equivalents and short-term investments, together with our new line of credit, will be sufficient to meet our anticipated needs for working capital and capital expenditures for at least the next 12 months. However, we may be required, or could elect, to seek additional funding at any time. We cannot assure you that additional equity or debt financing, if required, will be available on acceptable terms, if at all.

Financial Risk Management

     As we operate in a number of countries around the world, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and may have a material adverse impact on our consolidated financial results. Our primary exposures relate to non-United States Dollar-denominated revenues and operating expenses in Europe, Asia Pacific, Australia and Canada.

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     We use foreign currency forward contracts as risk management tools and not for speculative or trading purposes. Gains and losses on the changes in the fair values of the forward contracts are included in interest income and other, net in our Consolidated Statements of Operations. We do not anticipate significant currency gains or losses in the near term.

     We maintain investment portfolio holdings of various issuers, types and maturities. These securities are classified as available-for-sale and, consequently, are recorded on the consolidated balance sheet at fair value with unrealized gains and losses reported in accumulated other comprehensive loss on our consolidated balance sheets. These securities are not leveraged and are held for purposes other than trading.

Off-Balance-Sheet Arrangements

     We do not use off-balance-sheet arrangements with unconsolidated entities or related parties, nor do we use other forms of off-balance-sheet arrangements such as research and development arrangements. Accordingly, our liquidity and capital resources are not subject to off-balance-sheet risks from unconsolidated entities. As of June 30, 2006, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of Securities and Exchange Commission Regulation S-K.

     We have entered into operating leases for most United States and international offices in the normal course of business. These arrangements are often referred to as a form of off-balance-sheet financing. As of June 30, 2006, we leased facilities and certain equipment under non-cancelable operating leases expiring between 2006 and 2016. Rent expenses under operating leases were $2.5 million for the three months ended June 30, 2006 and 2005, $5.1 million and $5.0 million for the six months ended June 30, 2006 and 2005, respectively. Future minimum lease payments under our operating leases as of June 30, 2006 are detailed previously in “Liquidity and Capital Resources.”

     In the normal course of business, we provide indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our products. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future consolidated results of operations.

Critical Accounting Policies

     In preparing our consolidated financial statements, we make estimates, assumptions and judgments that can have a significant impact on our revenues, income (loss) from operations and net income (loss), as well as on the value of certain assets and liabilities on our consolidated balance sheet. We base our estimates, assumptions and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our estimates, assumptions and judgments and make changes accordingly. We also discuss our critical accounting estimates with the Audit Committee of the Board of Directors. We believe that there are several accounting policies that are critical to an understanding of our historical and future performance, as these policies affect the reported amounts of revenues, expenses and significant estimates and judgments applied by management in the preparation of our consolidated financial statements. While there are a number of accounting policies, methods and estimates affecting our consolidated financial statements, areas that are particularly significant include:

• revenue recognition;

• estimating the allowance for doubtful accounts and sales returns;

• estimating the accrual for restructuring and excess facilities costs;

• accounting for stock-based compensation;

• accounting for income taxes; and

• valuation of long-lived assets, intangible assets and goodwill.

     Revenue Recognition. We derive revenues from the license of our software products and from support, consulting and training services that we provide to our customers.

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     We recognize revenue using the “residual method” in accordance with Statement of Position (“SOP”) 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions. Under the residual method, for agreements that have multiple deliverables or “multiple element arrangements” (e.g., software products, services, support, etc), revenue is recognized for delivered elements only where vendor specific objective evidence of fair value exists for all of the undelivered elements. Our specific objective evidence of fair value is based on the price of the element when sold separately. Once we have established the fair value of each of the undelivered elements, the dollar value of the arrangement is allocated to the undelivered elements first and the residual of the dollar value of the arrangement is then allocated to the delivered elements. At the outset of the arrangement with the customer, we defer revenue for the fair value of undelivered elements (e.g., support, consulting and training) and recognize revenue for the remainder of the arrangement fee attributable to the elements initially delivered in the arrangement (i.e., software product) when the basic criteria in SOP 97-2 have been met. If such evidence of fair value for each undelivered element of the arrangement does not exist, all revenue from the arrangement is deferred until such time that evidence of fair value does exist or until all elements of the arrangement are delivered.

     Under SOP 97-2, revenue attributable to an element in a customer arrangement is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, collectibility is probable and the arrangement does not require additional services that are essential to the functionality of the software.

     At the outset of our customer arrangements, if we determine that the arrangement fee is not fixed or determinable, we recognize revenue when the arrangement fee becomes due and payable. We assess whether the fee is fixed or determinable based on the payment terms associated with each transaction. If a portion of the license fee is due beyond our normal payments terms, which generally does not exceed 185 days from the invoice date, we do not consider the fee to be fixed or determinable. In these cases, we recognize revenue as the fees become due. We determine collectibility on a case-by-case basis, following analysis of the general payment history within the geographic sales region and a customer’s years of operation, payment history and credit profile. If we determine from the outset of an arrangement that collectibility is not probable based upon our review process, we recognize revenue as payments are received. We periodically review collection patterns from our geographic locations to ensure historical collection results provide a reasonable basis for revenue recognition upon signing of an arrangement.

     Support and service revenues consist of professional services and support fees. Professional services consist of software installation and integration, training and business process consulting. Professional services are predominantly billed on a time-and-materials basis and we recognize revenues as the services are performed.

     Support contracts are typically priced as a percentage of the product license fee and generally have a one-year term. Services provided to customers under support contracts include technical product support and unspecified product upgrades. Revenues from advanced payments for support contracts are recognized ratably over the term of the agreement, which is typically one year.

     In 2005, we applied SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, to account for a software arrangement which included services that constitute significant production, modification or customization of our software. As we were not in a position to make dependable cost estimates as to completion, the completed contract method of accounting was applied and revenues were recognized upon contract completion. For classification purposes in our consolidated statement of operations, we include the amount representing vendor specific objective evidence of fair value of the service revenues as service revenues and the residual portion of the total fee as license revenue.

     Allowance for Doubtful Accounts. We make estimates as to the overall collectibility of accounts receivable and provide an allowance for accounts receivable considered uncollectible. Management specifically analyzes its accounts receivable and historical bad debt experience, customer concentrations, customer credit-worthiness, current economic trends and changes in its customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In general, our allowance for doubtful accounts consists of specific accounts where we believe collection is not probable and a rate, based on our historical experience, which is applied to accounts receivable not specifically reserved.

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     Allowance for Sales Returns. From time to time, a customer may return to us some or all of the software purchased. While our software and reseller agreements generally do not provide for a specific right of return, we may accept product returns in certain circumstances. To date, sales returns have been infrequent and not significant in relation to our total revenues. We make an estimate of our expected returns and provide an allowance for sales returns in accordance with SFAS No. 48, Revenue Recognition When Right of Return Exists. Management specifically analyzes our revenue transactions, customer software installation patterns, historical return pattern, current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowance for sales returns.

     Restructuring and Excess Facilities Accrual. In connection with our restructuring and facility consolidation plans, we perform evaluations of our then-current facilities requirements and identify facilities that are in excess of our current and estimated future needs. When a facility is identified as excess and we have ceased use of the facility, we accrue the fair value of the lease obligations. In determining fair value of expected sublease income over the remainder of the lease term and of related exit costs, if any, we receive appraisals from real estate brokers to aid in our estimate. In addition, during the evaluation of our facilities requirements, we also identify operating equipment and leasehold improvements that may be impaired. Excluding the facilities that are currently subleased, our excess facilities are being marketed for sublease and are currently unoccupied. Accordingly, our estimate of sublease income from our vacant excess facilities could differ from actual results and such differences could require additional charges or credits that could materially affect our consolidated financial condition and results of operations. We reassess our excess facilities liability each period based on current real estate market conditions.

     Accounting for Stock-Based Compensation. Effective January 1, 2006, we adopted SFAS No. 123R, Share-Based Payment, using the modified prospective transition method, in which compensation expense is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted after the effective date and (b) based on the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, for all stock options granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date. Since we elected to use the modified prospective transition method, the consolidated results of operations have not been restated for prior periods. At June 30, 2006, there was $10.0 million of total unrecognized compensation cost related to unvested stock-based compensation arrangements granted under all equity compensation plans. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. We expect to recognize that cost over a weighted average period of 2.6 years.

     Determining the appropriate fair value model and calculating the fair value of stock-based awards requires judgment, including estimating expected life, stock price volatility and forfeiture rates. We estimate the fair value of options granted using the Black-Scholes option valuation model and the assumptions are shown in Note 5, Stock-Based Compensation, to the Condensed Consolidated Financial Statements under Part I, Item. 1. We estimate the expected life of options granted based on the history of grants and exercises in our option database. We also estimate the volatility based upon the historical volatility experienced in our stock price. To the extent volatility of our stock price changes in the future, our estimates of the fair value of options granted in the future would change, thereby increasing or decreasing stock-based compensation expense in future periods. The risk free interest rates are based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the options. We have never paid any cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero in the Black-Scholes option valuation model. In addition, we apply an expected forfeiture rate when amortizing our expense. Our estimate of the forfeiture rate was based primarily upon historical experience of employee turnover. To the extent we revise our estimates in the future, our stock-based compensation expense could be materially impacted in the quarter of revision, as well as in following quarters. In the future, as empirical evidence regarding these input estimates is able to provide more directionally predictive results, we may change or refine our approach of deriving these input estimates. These changes could impact our fair value of options granted in the future.

     Accounting for Income Taxes. We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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     Determining the consolidated provision for income tax expense, income tax liabilities and deferred tax assets and liabilities involves judgment. We calculate and provide for income taxes in each of the tax jurisdictions in which we operate. This involves estimating current tax exposures in each jurisdiction as well as making judgments regarding the recoverability of deferred tax assets. Our estimates could differ from actual results and impact the future results of our operations.

     Impairment of Goodwill and Long-Lived Assets. We account for goodwill under SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, we are required to perform an impairment review of goodwill on at least an annual basis. This impairment review involves a two-step process as follows:

• Step 1 — We compare the fair value of our reporting unit to its carrying value, including goodwill. If the reporting unit’s carrying value, including goodwill, exceeds the unit’s fair value, we move on to Step 2. If the unit’s fair value exceeds the carrying value, no further work is performed and no impairment charge is necessary.

• Step 2 — We perform an allocation of the fair value of the reporting unit to its identifiable tangible and non-goodwill intangible assets and liabilities. This allocation derives an implied fair value for the reporting unit’s goodwill. We then compare the implied fair value of the reporting unit’s goodwill with the carrying amount of the reporting unit’s goodwill. If the carrying amount of the reporting unit’s goodwill is greater than the implied fair value of its goodwill, an impairment charge would be recognized for the excess.

     We have determined that we have one reporting unit. We performed and completed our required annual impairment testing in the third quarter of 2005. Upon completing our review, we determined that the carrying value of our recorded goodwill had not been impaired and no impairment charge was recorded. Although we determined in 2005 that our recorded goodwill had not been impaired, changes in the economy, the business in which we operate and our own relative performance may result in goodwill impairment in future periods.

     We are also required to assess goodwill for impairment on an interim basis when indicators exist that goodwill may be impaired based on the factors mentioned above. For example, if our market capitalization declines below our net book value or we suffer a sustained decline in our stock price, we will assess whether our goodwill has been impaired. A significant impairment could result in additional charges and have a material adverse impact on our consolidated financial condition and operating results.

     We account for the impairment and disposal of long-lived assets utilizing SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 requires that long-lived assets, such as property and equipment, and purchased intangible assets subject to amortization, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of an asset is measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. We do not believe there were any circumstances which indicated that the carrying value of an asset may not be recoverable.

     Intangible assets, other than goodwill, are amortized over estimated useful lives of between 12 and 48 months. The amortization expense related to the intangible assets may be accelerated in the future if we reduce the estimated useful life of the intangible assets to determine that an impairment has occurred.

Recent Accounting Pronouncements

     For recent accounting pronouncements see Note 11. Recent Accounting Pronouncements to the Condensed Consolidated Financial Statements under Part I, Item. 1.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     All market risk sensitive instruments were entered into for non-trading purposes. We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that entirely offsets the effects of changes in foreign exchange rates.

Interest Rate Risk

     The primary objectives of our investment activities are to preserve principal and provide liquidity while at the same time maximizing yields without significantly increasing risk. To achieve these objectives, we maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including government and corporate obligations, certificates of deposit and money market funds.

     We invest in high quality credit issuers and limit the amount of credit exposure with any one issuer. We seek to preserve our invested funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in only high quality credit securities that we believe to have low credit risk and by positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The short-term interest-bearing portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity.

     All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. Investments with maturities greater than three months are “available for sale” and are considered to be short-term investments. The following table presents the carrying value, which approximates fair value, and related weighted average interest rates for cash equivalents and short-term investments at June 30, 2006 (in thousands):

			Average
	Carrying		Interest
	Value		Rate
Cash equivalents	$	33,487		4.60	%
Short-term investments		86,231		4.10	%
	$	119,717		4.27	%

     At June 30, 2006, we had no outstanding borrowings.

Foreign Currency Risk

     We develop our software products in the United States for sale in the Americas, Europe and Asia Pacific. Our financial results could be affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. A majority of our revenues are denominated in United States Dollars; however, a strengthening of the United States Dollar could make our software products less competitive in foreign markets. We enter into forward foreign currency contracts to manage the exposure related to accounts receivable denominated in foreign currencies. We do not enter into derivative financial instruments for trading purposes. We had outstanding forward foreign currency contracts with notional amounts totaling approximately $9.0 million at June 30, 2006. The forward foreign currency contracts expire in September 2006 and offset certain foreign currency exposures in the Euro, British Pound, Japanese Yen and Australian Dollar. These forward foreign exchange contracts do not qualify for hedge accounting under SFAS No. 133, Derivative Instruments and Hedging Activities, as amended, and accordingly, are marked to market and recognized in the consolidated results of operations. The fair value of the liability associated with forward foreign currency contracts recognized in the consolidated financial statements as of June 30, 2006 was $25,000.

     The table below provides information about our forward foreign currency contracts at June 30, 2006. The information is provided in United States Dollar equivalent amounts. The following table presents the notional amounts, at contract exchange rates, and the contractual foreign currency exchange rates expressed as units of the foreign currency per United States Dollar, which in some cases may not be the market convention for quoting a particular currency (in thousands):

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			Contract
	Notional		Exchange
	Principal		Rate
Australian Dollars	$	1,691		0.74
Euros		2,514		1.28
British Pounds		3,978		1.85
Japanese Yen		828		0.01
	$	9,011
Estimated fair value of liability	$	25

     While we actively monitor our foreign currency risks, there can be no assurance that our foreign currency hedging activities will substantially offset the impact of fluctuations in currency exchange rates in our consolidated results of operations, cash flows and financial position.

     We regularly review our foreign currency strategy and may as part of this review determine at any time to change our strategy.

Commodity Price Risk

     We did not hold commodity instruments as of June 30, 2006 and have never had such instruments in the past.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

     We carried out an evaluation required by Rule 13a-15 of the Exchange Act under the supervision and with the participation of our management, including the Interim President and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Current Report on Form 10-Q.

     The evaluation of our disclosure controls and procedures included a review of our processes and implementation and the effect on the information generated for use in this Current Report on Form 10-Q. In the course of this evaluation, we sought to identify any significant deficiencies or material weaknesses in our disclosure controls and procedures, to determine whether we had identified any acts of fraud involving personnel who have a significant role in our disclosure controls and procedures, and to confirm that any necessary corrective action, including process improvements, was taken. This type of evaluation is done every quarter so that our conclusions concerning the effectiveness of these controls can be reported in the reports we file or submit under the Exchange Act. The overall goals of these evaluation activities are to monitor our disclosure controls and procedures and to make modifications as necessary. We intend to maintain these disclosure controls and procedures, modifying them as circumstances warrant.

     Based on their evaluation as of June 30, 2006, our Interim President and Chief Financial Officer have concluded that our disclosure controls and procedures were sufficiently effective to ensure that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to our management, including our Interim President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

     There was no change in our internal control over financial reporting during the three months ended June 30, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitations on Effectiveness of Controls

     Our management, including our Interim President and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors or fraud. An internal control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all internal control systems, no evaluation of controls can provide absolute assurance that all control issues, errors and instances of fraud, if any, within Interwoven, Inc. have been detected.

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     Beginning in 2001, Interwoven, Inc. and certain of our officers and directors and certain investment banking firms, were separately named as defendants in a securities class-action lawsuit filed in the United States District Court Southern District of New York, which was subsequently consolidated with more than 300 substantially identical proceedings against other companies. Similar suits were filed against iManage, Inc., its directors and certain of its officers. The consolidated complaint asserts that the prospectuses for our October 8, 1999 initial public offering, our January 26, 2000 follow-on public offering and iManage’s November 17, 1999 initial public offering, failed to disclose certain alleged actions by the underwriters for the offerings. In addition, the consolidated complaint alleges claims under Section 11 and 15 of the Securities Act of 1933 against iManage and us and certain of iManage’s and our officers and directors. The plaintiff seeks damages in an unspecified amount. In June 2003, following the dismissal of iManage’s and our respective officers and directors from the litigation without prejudice and after several months of negotiation, the plaintiffs named in the consolidated complaint and iManage and Interwoven, together with the other issuers named in those complaints and their respective insurance carriers, agreed to settle the litigation and dispose of any remaining claims against the issuers named in the consolidated complaint, in each case without admitting any wrongdoing. As part of this settlement, iManage’s and our respective insurance carriers have agreed to assume iManage’s and our entire payment obligation under the terms of the settlement. The court has preliminarily approved the proposed settlement and is currently considering whether the settlement should be given final approval. We cannot be reasonably assured, however, that the settlement will be approved by the putative plaintiff classes or finally approved by the District Court.

     We are a party to a variety of legal proceedings and claims arising in the normal course of business activities, including employment-related lawsuits. While the results of proceedings cannot be predicted with certainty, in our opinion, resolution of these matters is not expected to have a material adverse impact on our consolidated results of operations, cash flows or financial condition. However, an unfavorable resolution of a matter could materially affect our consolidated results of operations or financial condition in a particular period.

ITEM 1A. RISK FACTORS.

Factors That May Impact Our Business

     We operate in a dynamic and rapidly changing business environment that involves many risks and uncertainties. In Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2005, we discussed the factors that could cause, or contribute to causing, actual results to differ materially from what we expect or from any historical patterns or trends. These risks include those that we consider to be significant to your decision whether to invest in our common stock at this time. There may be risks that you view differently than we do, and there are other risks and uncertainties that we do not presently know of or that we currently deem immaterial, but that may, in fact, harm our business in the future. If any of these events occur, our business, results of operations and financial condition could be seriously harmed, the trading price of our common stock could decline and you may lose part or all of your investment. While there have been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005, we have updated such risk factors to the

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present and provided the revised version of them below. You should consider carefully the following factors, in addition to other information in this Quarterly Report on Form 10-Q, in evaluating our business.

We have only recently begun to report net income and may not be able to sustain profitability.

     We have incurred operating losses for most of our history. Although we have recently begun reporting net income, we had an accumulated deficit of $406.1 million as of June 30, 2006. We must increase both our license and support and service revenues to achieve and sustain profitable operations and positive cash flows. If we are able to maintain profitability and positive cash flows, we cannot assure you that we can sustain or increase profitability or cash flows on a quarterly or annual basis in the future. Failure to achieve such financial performance would likely cause the price of our common stock to decline. In addition, if revenues decline, resulting in greater operating losses and significant negative cash flows, our business could fail and the price of our common stock would decline.

Many factors can cause our operating results to fluctuate and if we fail to satisfy the expectations of investors or securities analysts, our stock price may decline.

     Our quarterly and annual operating results have fluctuated significantly in the past and we expect unpredictable fluctuations in the future. The main factors impacting these fluctuations are likely to be:

• the discretionary nature of our customers’ purchases and their budget cycles;

• the inherent complexity, length and associated unpredictability of our sales cycle;

• the success or failure of any of our product offerings to meet with customer acceptance;

• delays in recognizing revenue from license transactions;

• timing of new product releases;

• timing of large customer orders;

• changes in competitors’ product offerings;

• sales force capacity and the influence of resellers and systems integrator partners;

• our ability to integrate newly acquired products with our existing products and effectively sell newly acquired products; and

• the level of our sales incentive and commission related expenses.

     Many of these factors are beyond of our control. Further, because we experience seasonal variations in our operating results as part of our normal business cycle, we believe that quarterly comparisons of our operating results are not necessarily meaningful and that you should not rely on the results of one quarter as an indication of our future performance. For example, we experienced several delayed software license orders at the end of the second quarter of 2005 resulting in lower license revenue in that quarter as compared to other recent quarters, including the second quarter of 2006. If our results of operations do not meet our public forecasts or the expectations of securities analysts and investors, the price of our common stock is likely to decline.

Sales cycles for our products are generally long and unpredictable, so it is difficult to forecast our future results.

     The length of our sales cycle – the period between initial contact with a prospective customer and the licensing of our software applications – typically ranges from six to twelve months and can be more than twelve months. In recent quarters, we have experienced a lengthening of our sales cycle partly because we have been successful at selling multiple products to customers that were initially interested in a single product. These kinds of orders are complex and difficult to complete because prospective customers generally consider a number of factors before committing to purchase a suite of products or applications. Prospective customers consider many factors in evaluating our software, and the length of time a customer devotes to evaluation, purchasing and budgeting processes vary significantly from company to company. As a result, we spend a great deal of time and resources informing prospective customers about our solutions and services, incurring expenses that will lower our operating margins if no sale occurs. Even if a customer chooses to buy our software products or services, many factors affect the timing of completion of the transaction as defined under accounting principles generally accepted in the United States of America, which makes our revenues difficult to forecast. These factors include the following:

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• Licensing of our software products is often an enterprise-wide decision by our customers that involves many customer-specific factors, so our ability to make a sale may be affected by changes in the strategic importance of a particular project to a customer, its budgetary constraints or changes in customer personnel.

• Customer approval and expenditure authorization processes can be difficult and time consuming, and delays in the process could impact the timing and amount of revenues recognized in a quarter.

• Changes in our sales incentive plans may have unexpected effects on our sales cycle and contracting activities.

• The significance and timing of our software enhancements, and the introduction of new software by our competitors, may affect customer purchases.

     Over the last several years, our sales cycles have been affected by increased customer scrutiny of software purchases regardless of transaction size. Specifically, we experienced several delayed software license orders at the end of the second quarter of 2005, representing a larger cumulative value of delayed transactions than experienced in recent quarters. A continued lengthening of our sales cycles or our inability to predict these trends could result in lower than expected future revenue, which would have an adverse impact on our consolidated operating results and could cause our stock price to decline.

     Our sales incentive plans are primarily based on quarterly and annual quotas for sales representatives and some sales support personnel, and include accelerated commission rates if a representative exceeds the sales quota. The concentration of sales orders with a small number of sales representatives has resulted, and in the future may result, in commission expense exceeding forecasted levels which would result in higher sales and marketing expenses.

Our revenues depend on a small number of products and markets, so our results are vulnerable to unexpected shifts in demand.

     For the three and six months ended June 30, 2006 and 2005, we believe that a significant portion of our total revenue was derived from our WorkSite and TeamSite products and related services, and we expect this to be the case in future periods. Accordingly, any decline in the demand for these products or services will have a material and adverse effect on our consolidated financial results.

     We also derive a significant portion of our revenues from a few vertical markets. In particular, our WorkSite product is primarily sold to professional service organizations, such as law firms, accounting firms and corporate legal departments. In order to sustain and grow our business, we must continue to sell our software products and services into these vertical markets. Shifts in the dynamics of these vertical markets, such as new product introductions by our competitors, could seriously harm our prospects.

     To increase our sales outside our core vertical markets, for example to large multi-national corporations in manufacturing, telecommunications and governmental entities, requires us to devote time and resources to hire and train sales employees familiar with those industries. Even if we are successful in hiring and training sales teams, customers in other industries may not need or sufficiently value our products.

The timing of large customer orders may have a significant impact on our consolidated financial results from period to period.

     Our ability to achieve our forecasted quarterly earnings is dependent on receiving a significant number of license transactions in the mid to high six-figure range or possibly even larger orders. From time to time, we receive large customer orders that have a significant impact on our consolidated financial results in the period in which the order is recognized as revenue, such as the license transaction in excess of $1.0 million we had in the second quarter of 2006. Because it is difficult for us to accurately predict the timing of large customer orders, our consolidated financial results are likely to vary materially from quarter to quarter based on the receipt of such orders and their ultimate recognition as revenue. Additionally, the loss or delay of an anticipated large order in a given quarterly period could result in a shortfall of revenues from anticipated levels. Any shortfall in revenues from levels anticipated by our stockholders and securities analysts could have a material and adverse impact on the trading price of our common stock.

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Contractual issues may arise during the negotiation process that may delay anticipated transactions and revenue.

     Because our software and solutions are often a critical element to the information technology systems of our customers, the process of contractual negotiation is often protracted. The additional time needed to negotiate mutually acceptable terms that culminate in an agreement to license our products can extend the sales cycle.

     Several factors may also require us to defer recognition of license revenue for a significant period of time after entering into a license agreement, including instances in which we are required to deliver either specified additional products or product upgrades for which we do not have vendor-specific objective evidence of fair value. We have a standard software license agreement that provides for revenue recognition provided that, among other factors, delivery has taken place, collectibility from the customer is probable and no significant future obligations or customer acceptance rights exist. However, customer negotiations and revisions to these terms could have an impact on our ability to recognize revenue at the time of delivery.

     In addition, slowdowns or variances from our expectations of our quarterly licensing activities may result in fewer customers, which could impact our service offerings, resulting in lower revenues from our customer training, consulting services and customer support organizations. Our ability to maintain or increase support and service revenues is highly dependent on our ability to increase the number of enterprises that license our software products and the number of seats licensed by those enterprises.

Support and service revenues have represented a large percentage of our total revenues. Our support and service revenues are vulnerable to reduced demand and increased competition.

     Our support and service revenues represented approximately 62% and 64% of total revenues for the three months ended June 30, 2006 and 2005, respectively. Support and service revenues depend, in part, on our ability to license software products to new and existing customers that generate follow-on consulting, training and support revenues. Thus, reduced license revenue is likely to result in lower support and services revenue in the future. Our support agreements generally have a term of one year and are renewable thereafter, generally for one year. Customers may elect not to renew their support agreements or may reduce the license software quantity under their support agreements, in either event reducing our future support revenue. Additionally, demand for these services is affected by competition from independent service providers and systems integrators with knowledge of our software products. Since mid-2000, we have experienced increased competition for professional services engagements, which has resulted in an overall decrease in average billing rates for our consultants and price pressure on our software support products. If our business continues to be affected this way, our support and service revenues may decline.

     For the three months ended June 30, 2006 and 2005, we recognized support revenues of $21.2 million and $19.0 million, respectively. Our support agreements typically have a term of one year and are renewable thereafter for periods generally of one year. Customers may elect not to renew their support agreements, renew their support contracts at lower prices or may reduce the license software quantity under their support agreements, thereby reducing our future support revenue.

Economic conditions and significant world events have harmed and could continue to negatively affect our revenues and results of operations.

     Our revenue growth and profitability depend on the overall demand for our enterprise content management software platforms and applications. The decline in customer spending on many kinds of information technology initiatives worldwide, particularly spending on public-facing Web applications, has resulted in lower revenues, longer sales cycles, lower average selling prices and customer deferral or cancellation of orders. To the extent that information technology spending, particularly spending on public-facing Web applications, does not improve or even declines, the demand for our products and services, and therefore our future revenues, will be negatively affected. In addition, many of our customers have also been affected adversely by the same economic conditions that Interwoven has experienced and, as a result, we may find that collecting on accounts receivable may take longer than we expect or that some accounts receivable will become uncollectible. If the economic conditions in the United States and globally do not improve, or if they deteriorate, our consolidated financial results could be significantly and adversely affected.

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     Our consolidated financial results could also be significantly and adversely affected by geopolitical concerns and world events, such as wars and terrorist attacks. Our revenues and financial results have been and could be negatively affected to the extent geopolitical concerns continue and similar events occur or are anticipated to occur.

We may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt our business and management.

     In the past, we have acquired companies, products or technologies, and we are likely to do so in the future. We may not realize the anticipated benefits of this or any other acquisition and each acquisition has numerous risks. These risks include:

• difficulty in assimilating the operations and personnel of the acquired company;

• difficulty in effectively integrating the acquired technologies or products with our current products and technologies;

• difficulty in maintaining controls, procedures and policies during the transition and integration;

• disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges due to integration issues;

• difficulty integrating the acquired company’s accounting, management information, human resources and other administrative systems;

• inability to retain key technical and managerial personnel of the acquired business;

• inability to retain key customers, distributors, vendors and other business partners of the acquired business;

• inability to achieve the financial and strategic goals for the acquired and combined businesses;

• incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;

• potential impairment of our relationships with employees, customers, partners, distributors or third-party providers of technology or products;

• potential failure of the due diligence processes to identify significant issues with product quality, architecture and development, integration obstacles or legal and financial contingencies, among other things;

• incurring significant exit charges if products acquired in business combinations are unsuccessful;

• incurring additional expenses if disputes arise in connection with any acquisition;

• potential inability to assert that internal controls over financial reporting are effective;

• potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions; and

• potential delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product offerings.

     Mergers and acquisitions of high technology companies are inherently risky and ultimately, if we do not complete the integration of acquired businesses successfully and in a timely manner, we may not realize the benefits of the acquisitions to the extent anticipated, which could adversely affect our business, financial condition or results of operations.

     In addition, the terms of our acquisitions may provide for future obligations, such as our payment of additional consideration upon the occurrence of specified future events or the achievement of future revenues or other financial milestones. To the extent these events or achievements involve subjective determinations, disputes may arise that require a third party to assess, resolve and/or make such determinations, or involve arbitration or litigation. For example, several of our recent acquisitions have included earn-out arrangements that contain audit rights. Should a dispute arise over determinations made under those arrangements, we may be forced to incur additional costs and spend time defending our position, and may ultimately lose the dispute, any of these outcomes would cause us not to realize all the anticipated benefits of the related acquisition and could impact our consolidated results of operations.

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Increasing competition could cause us to reduce our prices and result in lower gross margins or loss of market share.

     The enterprise content management market is fragmented, rapidly changing and highly competitive. Our current competitors include:

• companies addressing needs of the market in which we compete such as EMC Corporation, FileNet Corporation, Hummingbird Ltd., IBM, Microsoft Corporation, Open Text Corporation, Oracle Corporation, Stellent, Inc., Vignette Corporation and Xerox Corporation;

• intranet and groupware companies, such as IBM, Microsoft Corporation and Novell, Inc.;

• open source vendors, such as OpenCms, Mambo and RedHat, Inc.; and

• in-house development efforts by our customers and partners.

     We also face potential competition from our strategic partners, such as Microsoft Corporation, or from other companies that may in the future decide to compete in our market. Many existing and potential competitors have longer operating histories, greater name recognition and greater financial, technical and marketing resources than we do. Many of these companies can also take advantage of extensive customer bases and adopt aggressive pricing policies to gain market share. Potential competitors may bundle their products in a manner that discourages users from purchasing our products or makes their products more appealing. Barriers to entering the content management software market are relatively low. Competitive pressures may also increase with the consolidation of competitors within our market and partners in our distribution channel, such as the acquisition of Captiva Software Corporation, Documentum, Inc. and RSA Security Inc. by EMC Corporation, Presence Online Pty Ltd. by IBM, Optika, Inc. by Stellent, Inc., Artesia Technologies, Inc. by Open Text Corporation and TOWER Technology Pty Ltd. and Epicentric, Inc. by Vignette Corporation and the proposed acquisition of Hummingbird Ltd by Open Text Corporation.

     With the intense competition in Enterprise Content Management, some of our competitors, from time to time, have reduced their price proposals in an effort to strengthen their bids and expand their customer bases at our expense. Even if these tactics are unsuccessful, they could delay decisions by some customers who would otherwise purchase our software products and may reduce the ultimate selling price of our software and services, reducing our gross margins.

Our future revenues depend in part on our installed customer base continuing to license additional products, renew customer support agreements and purchase additional services.

     Our installed customer base has traditionally generated additional license and support and service revenues. In addition, the success of our strategic plan depends on our ability to cross-sell products to our installed base of customers, such as the products acquired in our recent acquisitions. Our ability to cross-sell new products may depend in part on the degree to which new products have been integrated with our existing application suite, which may vary with the timing of new product acquisitions or releases. In future periods, customers may not necessarily license additional products or contract for additional support or other services. Customer support agreements are generally renewable annually at a customer’s option, and there are no mandatory payment obligations or obligations to license additional software. If our customers decide to cancel their support agreements or fail to license additional products or contract for additional services, or if they reduce the scope of their support agreements, revenues could decrease and our operating results could be adversely affected.

Our revenues from international operations are a significant part of our overall operating results.

     We have established offices in various international locations in Europe and Asia Pacific and we derive a significant portion of our revenues from these international locations. For the three months ended June 30, 2006 and 2005, revenues from these international operations constituted approximately 40% and 31% of our total revenues, respectively. We anticipate devoting significant resources and management attention to international opportunities, which subjects us to a number of risks including:

• difficulties in attracting and retaining staff (particularly sales personnel) and managing foreign operations;

• the expense of foreign operations and compliance with applicable laws;

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• political and economic instability;

• the expense of localizing our products for sale in various international markets;

• reduced protection for intellectual property rights in some countries;

• protectionist laws and business practices that favor local competitors;

• difficulties in the handling of transactions denominated in foreign currency and the risks associated with foreign currency fluctuations;

• changes in multiple tax and regulatory requirements;

• the effect of longer sales cycles and collection periods or seasonal reductions in business activity; and

• economic conditions in international markets.

     Any of these risks could reduce revenues from international locations or increase our cost of doing business outside of the United States. For example, beginning January 1, 2005, our Vice President of Enterprise Sales in Europe moved to Singapore to assume the role of our Vice President of Enterprise Sales in the Asia Pacific region. We believe the delay in replacing this position caused our revenues from customers in Europe to suffer in the first and second quarters of 2005.

Fluctuations in the exchange rates of foreign currency, particularly in Euro, British Pound and Australian Dollar and the various other local currencies of Europe and Asia, may harm our business.

     We are exposed to movements in foreign currency exchange rates because we translate foreign currencies into United States Dollars for reporting purposes. Our primary exposures have related to operating expenses and sales in Europe and Asia that were not United States Dollar-denominated. Historically, these risks have been minimal for us, but as our international revenues and operations grow, currency fluctuations could have a material adverse impact on our consolidated financial condition and results of operations.

Charges to earnings resulting from the application of the purchase method of accounting and asset impairments may adversely affect the market value of our common stock.

     In accordance with accounting principles generally accepted in the United States of America, we accounted for our acquisitions using the purchase method of accounting, which resulted in significant charges to earnings in prior periods and, through ongoing amortization, will continue to generate charges that could have a material adverse effect on our consolidated financial statements. Under the purchase method of accounting, we allocated the total estimated purchase price of these acquisitions to their net tangible assets, amortizable intangible assets, intangible assets with indefinite lives based on their fair values as of the closing date of these transactions and recorded the excess of the purchase price over those fair values as goodwill. In some cases, a portion of the estimated purchase price may also be allocated to in-process technology and expensed in the quarter in which the acquisition was completed. We will incur additional depreciation and amortization expense over the useful lives of certain net tangible and intangible assets acquired and significant stock-based compensation expense in connection with our acquisitions. These depreciation and amortization charges could have a material impact on our consolidated results of operations.

     At June 30, 2006, we had $191.6 million in net goodwill and $18.5 million in net other intangible assets, which we believe are recoverable. Generally accepted accounting principles in the United States of America require that we review the value of these acquired assets from time to time to determine whether the recorded values have been impaired and should be reduced. In connection with our 2002 review, we reduced recorded goodwill by $76.4 million. We will continue to perform impairment assessments on an interim basis when indicators exist that suggest that our goodwill or intangible assets may be impaired. These indicators include our market capitalization declining below our net book value or if we suffer a sustained decline in our stock price. Changes in the economy, the business in which we operate and our own relative performance may result in indicators that our recorded asset values may be impaired. If we determine there has been an impairment of goodwill and other intangible assets, the carrying value of those assets will be written down to fair value, and a charge against operating results will be recorded in the period that the determination is made. Any impairment could have a material impact on our consolidated operating results and financial position, and could harm the trading price of our common stock.

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We must attract and retain qualified personnel to be successful and competition for qualified personnel is increasing in our market.

     Our success depends to a significant extent upon the continued contributions of our key management, technical, sales, marketing and consulting personnel, many of whom would be difficult to replace. The loss of one or more of these employees could harm our business. We do not have key person life insurance for any of our key personnel. Our success also depends on our ability to identify, attract and retain qualified technical, sales, marketing, consulting and managerial personnel. Competition for qualified personnel is particularly intense in our industry and in our area. This makes it difficult to retain our key personnel and to recruit highly qualified personnel. We have experienced, and may continue to experience, difficulty in hiring and retaining candidates with appropriate qualifications. To be successful, we need to hire candidates with appropriate qualifications and retain our key executives and employees. Replacing departing executive officers and key employees can involve organizational disruption and uncertain timing. We are currently searching for a Chief Executive Officer to replace our former Chief Executive Officer who retired effective March 31, 2006.

     The volatility of our stock price has had an impact on our ability to offer competitive equity-based incentives to current and prospective employees, thereby affecting our ability to attract and retain highly qualified technical personnel. If these adverse conditions continue, we may not be able to hire or retain highly qualified employees in the future and this could harm our business. In addition, regulations adopted by The NASDAQ National Market requiring shareholder approval for all stock option plans, as well as regulations adopted by the New York Stock Exchange prohibiting NYSE member organizations from giving a proxy to vote on equity compensation plans unless the beneficial owner of the shares has given voting instructions, could make it more difficult for us to grant options to employees in the future. In addition, SFAS No. 123R which came into effect on January 1, 2006 requires us to record compensation expense for the fair value of options granted to employees. To the extent that new regulations make it more difficult or expensive to grant options to employees, we may incur increased cash compensation costs or find it difficult to attract, retain and motivate employees, either of which could harm our business.

We have experienced transitions in our management team and our Board of Directors in the past and may continue to do so in the future.

     We have experienced transitions on our Board of Directors and among our executive officers, including the retirement of Martin W. Brauns as Chairman of the Board of Directors effective January 25, 2006 and as our President and Chief Executive Officer effective March 31, 2006. We cannot assure you that we will be able to identify and hire such a Chief Executive Officer. Even if we are successful at finding and hiring a suitable Chief Executive Officer, leadership transitions can be inherently difficult to manage and may cause some disruption in our business and/or turnover in our workforce or executive team.

Our stock price may be volatile, and your investment in our common stock could suffer a decline in value.

     The market prices of the securities of software companies, including our own, have been extremely volatile and often unrelated to their operating performance. Broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual operating performance. Factors that could cause fluctuations in the price of our stock may include, among other things:

• actual or anticipated variations in quarterly operating results;

• changes in financial estimates by us or in financial estimates or recommendations by any securities analysts who cover our stock;

• operating performance and stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are Internet-related or otherwise deemed comparable to us;

• announcements by us or our competitors of new products or services, technological innovations, significant acquisitions, strategic relationships or divestitures;

• announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;

• announcements of negative conclusions about our internal controls;

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• articles in periodicals covering us, our competitors or our markets;

• reports issued by market research and financial analysts;

• capital outlays or commitments;

• additions or departures of key personnel;

• sector factors including conditions or trends in our industry and the technology arena; and

• overall stock market factors, such as the price of oil futures, interest rates and the performance of the economy.

     These fluctuations may make it more difficult to use our stock as currency to make acquisitions that might otherwise be advantageous, or to use stock compensation equity instruments as a means to attract and retain employees. Any shortfall in revenue or operating results compared to expectations, as we experienced in the second quarter of 2005, could cause an immediate and significant decline in the trading price of our common stock. In addition, we may not learn of such shortfalls until late in the quarter and may not be able to adjust successfully to these shortfalls, which could result in an even more immediate and greater decline in the trading price of our common stock. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. If we become subject to any litigation of this type, we could incur substantial costs and our management’s attention and resources could be diverted while the litigation is ongoing.

Our failure to deliver defect-free software could result in losses and harmful publicity.

     Our software products are complex and have in the past and may in the future contain defects or failures that may be detected at any point in the product’s life. We have discovered software defects in the past in some of our products after their release. Although past defects have not had a material effect on our results of operations, in the future we may experience delays or lost revenues caused by new defects. Despite our testing, defects and errors may still be found in new or existing products, and may result in delayed or lost revenues, loss of market share, failure to achieve market acceptance, reduced customer satisfaction, diversion of development resources and damage to our reputation. As has occurred in the past, new releases of products or product enhancements may require us to provide additional services under our support contracts to ensure proper installation and implementation.

     Errors in our application suite may be caused by defects in third-party software incorporated into our applications. If so, we may not be able to fix these defects without the cooperation of these software providers. Since these defects may not be as significant to our software providers as they are to us, we may not receive the rapid cooperation that we may require. We may not have the contractual right to access the source code of third-party software and, even if we access the source code, we may not be able to fix the defect.

     As customers rely on our products for critical business applications, errors, defects or other performance problems of our products or services might result in damage to the businesses of our customers. Consequently, these customers could delay or withhold payment to us for our software and services, which could result in an increase in our provision for doubtful accounts or an increase in collection cycles for accounts receivable, both of which could disappoint investors and result in a significant decline in our stock price. In addition, these customers could seek significant compensation from us for their losses. Even if unsuccessful, a product liability claim brought against us would likely be time consuming and costly and harm our reputation, and thus our ability to license products to new customers. Even if a suit is not brought, correcting errors in our application suite could increase our expenses.

Because a significant portion of our revenues are influenced by referrals from strategic partners and, in some cases, sold through resellers, our future success depends in part on those partners, but their interests may differ from ours.

     Our direct sales force depends, in part, on strategic partnerships, marketing alliances and resellers to obtain customer leads, referrals and distribution. Approximately 70% of our new license orders from customers for the three months ended June 30, 2006 were influenced by or co-sold with our strategic partners and resellers. If we are unable to maintain our existing strategic relationships or fail to enter into additional strategic relationships, our ability to increase revenues will be harmed, and we could also lose anticipated customer introductions and co-

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marketing benefits and lose our investments in those relationships. In addition, revenues from any strategic partnership, no matter how significant we expect it to be, depend on a number of factors outside our control, are highly uncertain and may vary from period to period. Our success depends in part on the success of our strategic partners and their ability and willingness to market our products and services successfully. Losing the support of these third parties may limit our ability to compete in existing and potential markets. These third parties are under no obligation to recommend or support our software products and could recommend or give higher priority to the products and services of other companies, including those of one or more of our competitors, or to their own products. Our inability to gain the support of resellers, consulting and systems integrator firms or a shift by these companies toward favoring competing products could negatively affect our software license and support and service revenues.

     Some systems integrators also engage in joint marketing and sales efforts with us. If our relationships with these parties fail, we will have to devote substantially more resources to the sale and marketing of our software products. In many cases, these parties have extensive relationships with our existing and potential customers and influence the decisions of these customers. A number of our competitors have longer and more established relationships with these systems integrators than we do and, as a result, these systems integrators may be more inclined to recommend competitors’ products and services.

     We may also be unable to grow our revenues if we do not successfully obtain leads and referrals from our customers. If we are unable to maintain these existing customer relationships or fail to establish additional relationships of this kind, we will be required to devote substantially more resources to the sales and marketing of our products. As a result, we depend on the willingness of our customers to provide us with introductions, referrals and leads. Our current customer relationships do not afford us any exclusive marketing and distribution rights. In addition, our customers may terminate their relationship with us at any time, pursue relationships with our competitors or develop or acquire products that compete with our products. Even if our customers act as references and provide us with leads and introductions, we may not grow our revenues or be able to maintain or reduce sales and marketing expenses.

     We also rely on our strategic relationships to aid in the development of our products. Should our strategic partners not regard us as significant to their own businesses, they could reduce their commitment to us or terminate their relationship with us, pursue competing relationships or attempt to develop or acquire products or services that compete with our products and services.

If our products cannot scale to meet the demands of thousands of concurrent users, our targeted customers may not license our software, which will cause our revenues to decline.

     Our strategy includes targeting large organizations that require our enterprise content management software because of the significant amounts of content that these companies generate and use. For this strategy to succeed, our software products must be highly scalable and accommodate thousands of concurrent users. If our products cannot scale to accommodate a large number of concurrent users, our target markets will not accept our products and our business and operating results will suffer.

     If our customers cannot successfully implement large-scale deployments of our software or if they determine that our products cannot accommodate large-scale deployments, our customers will not license our solutions and this will materially adversely affect our consolidated financial condition and operating results.

If our products do not operate with a wide variety of hardware, software and operating systems used by our customers, our revenues would be harmed.

     We currently serve a customer base that uses a wide variety of constantly changing hardware, software applications and operating systems. For example, we have designed our products to work with databases and servers developed by Microsoft Corporation, Sun Microsystems, Inc., Oracle Corporation and IBM and with software applications including Microsoft Office, WordPerfect, Lotus Notes and Novell GroupWise. We must continually modify and enhance our software products to keep pace with changes in computer hardware and software and database technology as well as emerging technical standards in the software industry. We further believe that our application suite will gain broad market acceptance only if it can support a wide variety of

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hardware, software applications and systems. If our products were unable to support a variety of these products, our business would be harmed. Additionally, customers could delay purchases of our software until they determine how our products will operate with these updated platforms or applications.

     Our products currently operate on the Microsoft Windows XP, Microsoft Windows NT, Microsoft Windows 2000, Linux, IBM AIX, Hewlett Packard UX and Sun Solaris operating environments. If other platforms become more widely used, we could be required to convert our server application products to additional platforms. We may not succeed in these efforts, and even if we do, potential customers may not choose to license our products. In addition, our products are required to interoperate with leading content authoring tools and application servers. We must continually modify and enhance our products to keep pace with changes in these applications and operating systems. If our products were to be incompatible with a popular new operating system or business application, our business could be harmed. Also, uncertainties related to the timing and nature of new product announcements, introductions or modifications by vendors of operating systems, browsers, back-office applications and other technology-related applications, could harm our business.

Workforce reductions may require us to incur severance costs and reduce our facilities commitments, which may cause us to incur expenses or recognize additional financial statement charges.

     At various times since 2001, we have reduced our worldwide workforce in response to declining demand for our products and to integrate businesses acquired. In connection with these activities, we relocated offices and abandoned facilities in the San Francisco Bay Area; Chicago, Illinois; New York, New York; Boston, Massachusetts; Austin, Texas and several locations internationally. As a result, we are continuing to pay for facilities that we are not using and have no future plans to use. At June 30, 2006, we have an accrual for excess facilities of $12.4 million, which is net of anticipated sublease income of $3.2 million and a present value discount of $89,000. If the commercial real estate market deteriorates, if our anticipated sublease income is not realized or if we cannot sublease these excess facilities at all, we may be required to record additional charges for excess facilities or revise our estimate of sublease income in the future which may be material to our consolidated financial condition and results of operations.

     We have continued to review operational performance across the Company and will continue to make cost adjustments to better align our expenses with our expected revenues. We also may be required to make further adjustments to our business model to achieve operational efficiency and, as a result, may be required to take additional charges, which could be material to our results of operations.

We are now required to account for stock-based compensation using the fair value method and it will significantly increase our compensation costs and decrease our net income, which may cause the trading price of our common stock to decline

     As of January 1, 2006, we adopted SFAS No. 123R, Share-Based Payment, which requires the measurement of all share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of compensation expense in the consolidated statement of operations. As a result, starting in 2006, our operating results contain charges for stock-based compensation expense related to share-based payments to employees. In the three and six months ended June 30, 2006, we incurred $565,000 and $1.4 million in stock compensation expense related to this pronouncement. As the computation of stock compensation expense under SFAS No. 123R is complex and subject to a number of factors outside of our control, the amount of our ongoing costs for stock compensation is difficult to predict. We believe, however, that SFAS No. 123R has had and will continue to have a significant adverse impact on our consolidated statements of operations. We cannot predict the effect that this adverse impact will have on the trading price of our common stock.

Difficulties in introducing new products and product upgrades and integrating new products with our existing products in a timely manner will make market acceptance of our products less likely.

     The market for our products is characterized by rapid technological change, frequent new product introductions and technology-related enhancements, uncertain product life cycles, changes in customer demands and evolving industry standards. We expect to add new functionality to our product offerings by internal development and possibly by acquisition. Content management and document management technology is more complex than most

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software and new products or product enhancements can require long development and testing periods. Any delays in developing and releasing new products or integrating new products with existing products could harm our business. New products or upgrades may not be released according to schedule, may not be adequately integrated with existing products or may contain defects when released, resulting in adverse publicity, loss of sales, delay in market acceptance of our products or customer claims against us, any of which could harm our business. If we do not develop, license or acquire new software products, adequately integrate them with existing products or deliver enhancements to existing products, on a timely and cost-effective basis, our business will be harmed.

Our products may lack essential functionality if we are unable to obtain and maintain licenses to third-party software and applications.

     We rely on software that we license from third parties, including software that is integrated with our internally developed software and used in our products to perform key functions. The functionality of our software products, therefore, depends on our ability to integrate these third-party technologies into our products. Furthermore, we may license additional software from third parties in the future to add functionality to our products. If our efforts to integrate this third-party software into our products are not successful, our customers may not license our products and our business will suffer.

     In addition, we would be seriously harmed if the providers from whom we license software fail to continue to deliver and support reliable products, enhance their current products or respond to emerging industry standards. Moreover, the third-party software may not continue to be available to us on commercially reasonable terms or at all. Each of these license agreements may be renewed only with the other party’s written consent. The loss of, or inability to maintain or obtain licensed software, could result in shipment delays or reductions. Furthermore, we may be forced to limit the features available in our current or future product offerings. Either alternative could seriously harm our business and operating results.

We might not be able to protect and enforce our intellectual property rights, a loss of which could harm our business.

     We depend upon our proprietary technology and rely on a combination of patent, copyright and trademark laws, trade secrets, confidentiality procedures and contractual restrictions to protect it. These protections may not be adequate. Also, it is possible that patents will not be issued from our currently pending applications or any future patent application we may file. Despite our efforts to protect our proprietary technology, unauthorized parties may attempt to copy aspects of our products or to obtain and use information we regard as proprietary. In addition, the laws of some foreign countries do not protect our proprietary rights as effectively as the laws of the United States and we expect that it will become more difficult to monitor use of our products as we increase our international presence. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Any such resulting litigation could result in substantial costs and diversion of resources that could materially and adversely affect our business, operating results and financial condition.

     Further, third parties may claim that our products infringe the intellectual property of their products. For example, Advanced Software, Inc. had filed suit against us in the United States District Court for the Northern District of California alleging that our TeamSite software infringes Advanced Software’s United States Patent. Although this matter was settled and dismissed with prejudice in September 2005, intellectual property litigation is inherently uncertain and, regardless of the ultimate outcome, could be costly and time-consuming to defend, cause us to cease making, licensing or using products that incorporate the challenged intellectual property, require us to redesign or reengineer such products, if feasible, divert management’s attention or resources, or cause product delays, or require us to enter into royalty or licensing agreements to obtain the right to use a necessary product, component or process; any of which could have a material impact on our consolidated financial condition and results of operation.

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ITEM 6. EXHIBITS

Exhibit No.	Description
3.01	Registrant’s Amended and Restated Bylaws.
10.01	1999 Equity Incentive Plan
10.02	Forms of Option Agreements, Stock Option Exercise Agreements and Restricted Stock Unit Agreements related to the 1999 Equity Incentive Plan.
10.03	2000 Stock Incentive Plan
10.04	Forms of Option Agreements, Stock Option Exercise Agreements and Restricted Stock Unit Agreements related to the 2000 Stock Incentive Plan.
10.05†	2006 Compensation Plan for Scipio M. Carnecchia.
31.01	Certification of the Interim President pursuant to Rule 13a-14(a)/15d-15(a).
31.02	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-15(a).
32.01	Certification of the Interim President pursuant to 18 U.S.C. Section 1350.
32.02	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

† Confidential treatment has been requested with regard to certain portions of this document. Such portions were filed separately with the commission.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Sunnyvale, County of Santa Clara, State of California, on the 8th day of August 2006.

INTERWOVEN, INC. (Registrant)
By:	/s/ SCIPIO M. CARNECCHIA
	Scipio M. Carnecchia
	Interim President
	/s/ JOHN E. CALONICO, JR.
	John E. Calonico, Jr.
	Senior Vice President and Chief Financial Officer

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INTERWOVEN, INC.

EXHIBIT INDEX

EXHIBITS TO FORM 10-Q QUARTERLY REPORT

For the Quarter Ended June 30, 2006

Number	Exhibit Title
3.01	Registrant’s Amended and Restated Bylaws.
10.01	1999 Equity Incentive Plan.
10.02	Forms of Option Agreements, Stock Option Exercise Agreements and Restricted Stock Unit Agreements related to the 1999 Equity Incentive Plan.
10.03	2000 Stock Incentive Plan.
10.04	Forms of Option Agreements, Stock Option Exercise Agreements and Restricted Stock Unit Agreements related to the 2000 Stock Incentive Plan.
10.05†	2006 Compensation Plan for Scipio M. Carnecchia.
31.01	Certification of the Interim President pursuant to Rule 13a-14(a)/15d-15(a).
31.02	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-15(a).
32.01	Certification of the Interim President pursuant to 18 U.S.C. Section 1350.
32.02	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

† Confidential treatment has been requested with regard to certain portions of this document. Such portions were filed separately with the commission.

49

EX-3.01

Exhibit 3.01

AMENDED AND RESTATED BYLAWS

OF

INTERWOVEN, INC.

(a Delaware corporation)

As amended through June 2006

AMENDED AND RESTATED BYLAWS
OF
INTERWOVEN, INC.

(a Delaware corporation)

TABLE OF CONTENTS

	PAGE
ARTICLE I — STOCKHOLDERS	1
Section 1.1: Annual Meetings	1
Section 1.2: Special Meetings	1
Section 1.3: Notice of Meetings	1
Section 1.4: Adjournments	2
Section 1.5: Quorum	2
Section 1.6: Organization	2
Section 1.7: Voting; Proxies	2
Section 1.8: Fixing Date for Determination of Stockholders of Record	3
Section 1.9: List of Stockholders Entitled to Vote	4
Section 1.10: Action by Written Consent of Stockholders	4
Section 1.11: Inspectors of Elections	5
Section 1.12: Notice of Stockholder Business; Nominations	6
ARTICLE II — BOARD OF DIRECTORS	8
Section 2.1: Number; Qualifications	8
Section 2.2: Election; Resignation; Removal; Vacancies	8

	PAGE
Section 2.3: Regular Meetings	9
Section 2.4: Special Meetings	9
Section 2.5: Telephonic Meetings Permitted	9
Section 2.6: Quorum; Vote Required for Action	10
Section 2.7: Organization	10
Section 2.8: Written Action by Directors	10
Section 2.9: Powers	10
Section 2.10: Compensation of Directors	10
ARTICLE III — COMMITTEES	10
Section 3.1: Committees	10
Section 3.2: Committee Rules	11
ARTICLE IV — OFFICERS	11
Section 4.1: Generally	11
Section 4.2: Chief Executive Officer	12
Section 4.3: Chairman of the Board	12
Section 4.4: President	12
Section 4.5: Vice President	13
Section 4.6: Chief Financial Officer	13
Section 4.7: Treasurer	13
Section 4.8: Secretary	13
Section 4.9: Delegation of Authority	13

	PAGE
Section 4.10: Removal	13
ARTICLE V — STOCK	13
Section 5.l: Certificates	13
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificate	14
Section 5.3: Other Regulations	14
ARTICLE VI — INDEMNIFICATION	14
Section 6.1: Indemnification of Officers and Directors	14
Section 6.2: Advance of Expenses	14
Section 6.3: Non-Exclusivity of Rights	15
Section 6.4: Indemnification Contracts	15
Section 6.5: Effect of Amendment	15
ARTICLE VII — NOTICES	15
Section 7.l: Notice	15
Section 7.2: Waiver of Notice	16
ARTICLE VIII — INTERESTED DIRECTORS	16
Section 8.1: Interested Directors; Quorum	16
ARTICLE IX — MISCELLANEOUS	17
Section 9.1: Fiscal Year	17
Section 9.2: Seal	17
Section 9.3: Form of Records	17
Section 9.4: Reliance Upon Books and Records	17

	PAGE
Section 9.5: Certificate of Incorporation Governs	17
Section 9.6: Severability	18
ARTICLE X — AMENDMENT	18
Section 10.1: Amendments	18

AMENDED AND RESTATED BYLAWS
OF
INTERWOVEN, INC.

(a Delaware corporation)

As amended through June 2006

ARTICLE I

STOCKHOLDERS

     Section 1.1: Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place, either within or without the State of Delaware, as the Board of Directors shall each year fix. Any other proper business may be transacted at the annual meeting.

     Section 1.2: Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Chairman of the Board, the Chief Executive Officer, the holders of shares of the Corporation that are entitled to cast not less than a ten percent (10%) of the total number of votes entitled to be cast by all stockholders at such meeting (the “Ten Percent Stockholders”), or by a majority of the members of the Board of Directors. Special meetings may not be called by any other person or persons. If a special meeting of stockholders is called by any person or persons other than by a majority of the members of the Board of Directors, then such person or persons shall call such meeting by delivering a written request to call such meeting to each member of the Board of Directors, and the Board of Directors shall then determine the time, date and place of such special meeting, which shall be held not more than one hundred twenty (120) nor less than thirty-five (35) days after the written request to call such special meeting was delivered to each member of the Board of Directors. Following the closing of the corporation’s initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock to the public (the “Initial Public Offering”), Ten Percent Stockholders may not call a Special Meeting of Stockholders.

     Section 1.3: Notice of Meetings. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by law (including, without limitation, as set forth in Section 7.1(b) of these Bylaws stating the place, date and time of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation of the Corporation, such notice shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting.

     Section 1.4: Adjournments. Any meeting of stockholders may adjourn from time to time to reconvene at the same or another place, and notice need not be given of any such

adjourned meeting if the time, date and place thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, or if after the adjournment, a new record date is fixed for the adjourned meeting, then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting.

     Section 1.5: Quorum. At each meeting of stockholders, the holders of a majority of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, except if otherwise required by applicable law. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity.

     Section 1.6: Organization. Meetings of stockholders shall be presided over by such person as the Board of Directors may designate, or, in the absence of such a person, the Chairman of the Board, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairman of the meeting and, subject to Section 1.12 hereof, shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in his or her absence, the chairman of the meeting may appoint any person to act as secretary of the meeting.

     Section 1.7: Voting; Proxies. Unless otherwise provided by law or the Certificate of Incorporation of the Corporation, and subject to the provisions of Section 1.8 of these Bylaws, each stockholder shall be entitled to one (1) vote for each share of stock held by such stockholder. Each stockholder entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Voting at meetings of stockholders need not be by written ballot unless such is demanded at the meeting before voting begins by a stockholder or stockholders holding shares representing at least one percent (1%) of the votes entitled to vote at such meeting, or by such stockholder’s or stockholders’ proxy; provided, however, that an election of directors shall be by written ballot if demand is so made by any stockholder at the meeting before voting begins. If a vote is to be taken by written ballot, then each such ballot shall state the name of the stockholder or proxy voting and such other information as the chairman of the meeting deems appropriate. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Unless otherwise provided by applicable law, the

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Certificate of Incorporation of the Corporation or these Bylaws, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the shares of stock entitled to vote thereon that are present in person or represented by proxy at the meeting and are voted for or against the matter.

     Section 1.8: Fixing Date for Determination of Stockholders of Record.

     (a) Generally. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If no record date is fixed by the Board of Directors, then the record date shall be as provided by applicable law. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

     (b) Stockholder Request for Action by Written Consent. For such period of time as stockholders are authorized to act by written consent pursuant to the provisions of the Certificate of Incorporation of the Corporation and Section 1.10 hereof, any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date for such consent. Such request shall include a brief description of the action proposed to be taken. The Board of Directors shall, within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. Such record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors within ten (10) days after the date on which such a request is received, then the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, to its principal place of business or to any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, then the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.

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     Section 1.9: List of Stockholders Entitled to Vote. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting.

     Section 1.10: Action by Written Consent of Stockholders.

     (a) Procedure. Unless otherwise provided by the Certificate of Incorporation of the Corporation, and except as set forth in Section 1.8(b) above, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted; provided, however, that effective immediately after the closing of an underwritten public offering of shares of the Corporation’s Common Stock pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission, any action required or permitted to be taken by the Corporation’s stockholders shall be taken only at a duly called annual or special meeting of such stockholders, and the Corporation’s stockholders shall not be able to act by written consent. For such period of time as written stockholder consents are permitted, such consents shall bear the date of signature of each stockholder who signs the consent and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, to its principal place of business or to any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. No written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered to the Corporation in the manner provided above, written consents signed by a sufficient number of stockholders to take the action set forth therein are delivered to the Corporation in the manner provided above.

     (b) Notice of Consent. Prompt notice of the taking of corporate action by stockholders without a meeting by less than unanimous written consent of the stockholders shall be given to those stockholders who have not consented thereto in writing and, in the case of a Certificate Action (as defined below), if the Delaware General Corporation Law so requires, such notice shall be given prior to filing of the certificate in question. If the action which is consented to requires the filing of a certificate under the Delaware General Corporation Law (a “Certificate Action”), then if the Delaware General Corporation Law so requires, the certificate so filed shall state that written stockholder consent has been given in accordance with Section 228 of the Delaware General Corporation Law and that written notice of the taking of corporate action by stockholders without a meeting as described herein has been given as provided in such section.

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     Section 1.11: Inspectors of Elections.

     (a) Applicability. Unless otherwise provided in the Corporation’s Certificate of Incorporation or required by the Delaware General Corporation Law, the following provisions of this Section 1.11 shall apply only if and when the Corporation has a class of voting stock that is: (i) listed on a national securities exchange; (ii) authorized for quotation on an interdealer quotation system of a registered national securities association; or (iii) held of record by more than 2,000 stockholders; in all other cases, observance of the provisions of this Section 1.11 shall be optional and at the discretion of the Corporation.

     (b) Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.

     (c) Inspector’s Oath. Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability.

     (d) Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (i) ascertain the number of shares outstanding and the voting power of each share, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors and (v) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.

     (e) Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the inspectors at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.

     (f) Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with Section 212(c)(2) of the Delaware General Corporation Law, the ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons that represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the

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inspectors at the time they make their certification of their determinations pursuant to this Section 1.11 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

     Section 1.12: Notice of Stockholder Business; Nominations.

     (a) Annual Meeting of Stockholders.

          (i) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders shall be made at an annual meeting of stockholders (A) pursuant to the Corporation’s notice of such meeting, (B) by or at the direction of the Board of Directors or (C) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 1.12, who is entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 1.12.

          (ii) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of subparagraph (a)(i) of this Section 1.12, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice must be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the sixtieth (60th) day nor earlier than the close of business on the ninetieth (90th) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder, to be timely, must be so delivered not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation. Such stockholder’s notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (1) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner and (2) the class and number of shares of the Corporation that are owned beneficially and held of record by such stockholder and such beneficial owner.

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          (iii) Notwithstanding anything in the second sentence of subparagraph (a)(ii) of this Section 1.12 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased board of directors at least seventy (70) days prior to the first anniversary of the preceding year’s annual meeting (or, if the annual meeting is held more than thirty (30) days before or sixty (60) days after such anniversary date, at least seventy (70) days prior to such annual meeting), a stockholder’s notice required by this Section 1.12 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive office of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.

     (b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of such meeting (i) by or at the direction of the Board of Directors or (ii) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.12. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by subparagraph (a)(ii) of this Section 1.12 shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not earlier than the ninetieth (90th) day prior to such special meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.

     (c) General.

          (i) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.12. Except as otherwise provided by law or these Bylaws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.12 and, if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall be disregarded.

          (ii) For purposes of this Section 1.12, the term “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or

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comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to sections 13, 14 or 15(d) of the Exchange Act.

          (iii) Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 1.12 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

ARTICLE II

BOARD OF DIRECTORS

     Section 2.1: Number; Qualifications. The Board of Directors shall consist of one or more members. The initial number of directors shall be six (6), and thereafter shall be fixed from time to time by resolution of the Board of Directors. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.

     Section 2.2: Election; Resignation; Removal; Vacancies. The Board of Directors shall initially consist of the person or persons elected by the incorporator. Each director shall hold office until the next annual meeting of stockholders and until his or her successor is elected and qualified, or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Corporation. Subject to the rights of any holders of Preferred Stock then outstanding, (i) any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, and (ii) any vacancy occurring in the Board of Directors for any cause, and any newly created directorship resulting from any increase in the authorized number of directors to be elected by all stockholders having the right to vote as a single class, may be filled by the stockholders, by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

     Section 2.3: Regular Meetings. Regular meetings of the Board of Directors may be held at such places, within or without the State of Delaware, and at such times as the Board of Directors may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board of Directors.

     Section 2.4: Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President, the Lead Independent Director or any two members of the Board of Directors then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand-delivery, telegram,

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telex, mailgram, facsimile, electronic mail or other means of electronic transmission. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.

     Section 2.5: Telephonic Meetings Permitted. Members of the Board of Directors, or any committee of the Board of Directors, may participate in a meeting of the Board or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or similar communications equipment shall constitute presence in person at such meeting.

     Section 2.6: Quorum; Vote Required for Action. At all meetings of the Board of Directors a majority of the total number of authorized directors shall constitute a quorum for the transaction of business. Except as otherwise provided herein or in the Certificate of Incorporation of the Corporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

     Section 2.7: Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, or in his or her absence by the President, or in his or her absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence, the chairman of the meeting may appoint any person to act as secretary of the meeting.

     Section 2.8: Written Action by Directors. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee, respectively. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

     Section 2.9: Powers. The Board of Directors may, except as otherwise required by law or the Certificate of Incorporation of the Corporation, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

     Section 2.10: Compensation of Directors. Directors, as such, may receive, pursuant to a resolution of the Board of Directors, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board of Directors.

ARTICLE III

COMMITTEES

     Section 3.1: Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate

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one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation of the Corporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in subsection (a) of Section 151 of the Delaware General Corporation Law, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation, or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation, or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series, adopting an agreement of merger or consolidation under Sections 251 or 252 of the Delaware General Corporation Law, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending these Bylaws; and unless the resolution of the Board of Directors expressly so provides, no such committee shall have the power or authority to declare a dividend, authorize the issuance of stock or adopt a certificate of ownership and merger pursuant to section 253 of the Delaware General Corporation Law.

     Section 3.2: Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these Bylaws.

ARTICLE IV

OFFICERS

     Section 4.1: Generally. The officers of the Corporation shall consist of a Chief Executive Officer and/or a President, one or more Vice Presidents, a Secretary, a Treasurer and such other officers, including a Chairman of the Board of Directors and/or Chief Financial Officer, as may from time to time be appointed by the Board of Directors. All officers shall be elected by the Board of Directors; provided, however, that the Board of Directors may empower the Chief Executive Officer of the Corporation to appoint officers other than the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. Any number of offices may be held by the same person.

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Any officer may resign at any time upon written notice to the Corporation. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board of Directors.

     Section 4.2: Chief Executive Officer. Subject to the control of the Board of Directors and such supervisory powers, if any, as may be given by the Board of Directors, the powers and duties of the Chief Executive Officer of the Corporation are:

     (a) To act as the general manager and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation;

     (b) To preside at all meetings of the stockholders;

     (c) To call meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and

     (d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.

     The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board of Directors has not designated any other officer to be the Chief Executive Officer, then the Chairman of the Board shall be the Chief Executive Officer.

     Section 4.3: Chairman of the Board. The Chairman of the Board shall have the power to preside at all meetings of the Board of Directors and shall have such other powers and duties as provided in these Bylaws and as the Board of Directors may from time to time prescribe.

     Section 4.4: President. The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors shall have designated another officer as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board of Directors to the Chairman of the Board and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the

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President) and shall perform all duties and have all powers that are commonly incident to the office of president or that are delegated to the President by the Board of Directors.

     Section 4.5: Vice President. Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President or that are delegated to him or her by the Board of Directors or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer in the event of the Chief Executive Officer’s absence or disability.

     Section 4.6: Chief Financial Officer. Subject to the direction of the Board of Directors and the President, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of chief financial officer.

     Section 4.7: Treasurer. The Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of a treasurer or as the Board of Directors or the President may from time to time prescribe.

     Section 4.8: Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep or cause to be kept, minutes of all meetings of the stockholders and the Board of Directors. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of secretary or as the Board of Directors or the President may from time to time prescribe.

     Section 4.9: Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.

     Section 4.10: Removal. Any officer of the Corporation shall serve at the pleasure of the Board of Directors and may be removed at any time, with or without cause, by the Board of Directors. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.

ARTICLE V

STOCK

     Section 5.1: Certificates. Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares

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owned by such stockholder in the Corporation. Any or all of the signatures on the certificate may be a facsimile.

     Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate previously issued by it that is alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to agree to indemnify the Corporation and/or to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

     Section 5.3: Other Regulations. The issue, transfer, conversion and registration of stock certificates shall be governed by such other regulations as the Board of Directors may establish.

ARTICLE VI

INDEMNIFICATION

     Section 6.1: Indemnification of Officers and Directors. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that he or she (or a person of whom he or she is the legal representative) is or was a director or officer of the Corporation or a Reincorporated Predecessor (as defined below) or is or was serving at the request of the Corporation or a Reincorporated Predecessor (as defined below) as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the Delaware General Corporation Law against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation; provided, further, that the Corporation shall not be required to indemnify a person for amounts paid in settlement of a proceeding unless the Corporation consents in writing to such a settlement (such consent not to be unreasonably withheld). As used herein, the term “Reincorporated Predecessor” means a corporation that is merged with and into the Corporation in a statutory merger where (a) the Corporation is the surviving corporation of such merger and (b) the primary purpose of such merger is to change the corporate domicile of the Reincorporated Predecessor, and shall include Interwoven, Inc., a California corporation.

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     Section 6.2: Advance of Expenses. The Corporation shall pay all expenses (including attorneys’ fees) incurred by such a director or officer in defending any such proceeding as such expenses are incurred in advance of its final disposition; provided, however, that if the Delaware General Corporation Law then so requires, the payment of such expenses incurred by such a director or officer in advance of the final disposition of such proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Article VI or otherwise; and provided, further, that the Corporation shall not be required to advance any expenses to a person against whom the Corporation directly brings a claim, in a proceeding, alleging that such person has breached his or her duty of loyalty to the Corporation, committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or derived an improper personal benefit from a transaction.

     Section 6.3: Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation of the Corporation, these Bylaws, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.

     Section 6.4: Indemnification Contracts. The Board of Directors is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification and related rights to such person. Such rights may be greater than those provided in this Article VI.

     Section 6.5: Effect of Amendment. Any amendment, repeal or modification of any provision of this Article VI shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI and existing at the time of such amendment, repeal or modification.

ARTICLE VII

NOTICES

     Section 7.1: Notice. (a) Except as otherwise specifically provided in these Bylaws (including, without limitation, Section 7.1(b) below) or required by law, all notices required to be given pursuant to these Bylaws shall be in writing and may in every instance be effectively given by hand delivery (including use of a delivery service) by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid telegram, telex, overnight express courier, mailgram or facsimile. Any such notice shall be addressed to the person to whom notice is to be given at such person’s address as it appears on the records of the Corporation. The

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notice shall be deemed given (i) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (ii) in the case of delivery by mail, upon deposit in the mail, (iii) in the case of delivery by overnight express courier, on the first business day after such notice is dispatched, and (iv) in the case of delivery via telegram, telex, mailgram or facsimile, when dispatched.

     (b) Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the Delaware General Corporation Law, the Certificate of Incorporation, or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (i) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 7.1(b) shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.

     (c) An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

     Section 7.2: Waiver of Notice. Whenever notice is required to be given under any provision of these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice.

ARTICLE VIII

INTERESTED DIRECTORS

     Section 8.1: Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or

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voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (i) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (ii) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

ARTICLE IX

MISCELLANEOUS

     Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.

     Section 9.2: Seal. The Board of Directors may provide for a corporate seal, which shall have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board of Directors.

     Section 9.3: Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, magnetic tape, diskettes, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.

     Section 9.4: Reliance Upon Books and Records. A member of the Board of Directors, or a member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

     Section 9.5: Certificate of Incorporation Governs. In the event of any conflict between the provisions of the Corporation’s Certificate of Incorporation and Bylaws, the provisions of the Corporation’s Certificate of Incorporation shall govern.

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     Section 9.6: Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Corporation’s Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including, without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Corporation’s Certificate of Incorporation that are not themselves invalid, illegal, unenforceable or in conflict with the Corporation’s Certificate of Incorporation) shall remain in full force and effect.

ARTICLE X

AMENDMENT

     Section 10.1: Amendments. Stockholders of the Corporation holding a majority of the Corporation’s outstanding voting stock shall have the power to adopt, amend or repeal Bylaws. To the extent provided in the Corporation’s Certificate of Incorporation, the Board of Directors of the Corporation shall also have the power to adopt, amend or repeal Bylaws of the Corporation, except insofar as Bylaws adopted by the stockholders shall otherwise provide.

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EX-10.01

Exhibit 10.01

INTERWOVEN, INC.

1999 EQUITY INCENTIVE PLAN

As Adopted July 22, 1999
As Amended and Adjusted Thereafter

     1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, its Parent and Subsidiaries, by offering them an opportunity to participate in the Company’s future performance through awards of Options, Restricted Stock, Stock Bonuses and Restricted Stock Units (RSU). Capitalized terms not defined in the text are defined in Section 24.

     2. SHARES SUBJECT TO THE PLAN.

          2.1 Number of Shares Available. Subject to Sections 2.2 and 19, the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be 6,900,000. ¹ Shares plus Shares that are subject to: (a) issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Option; (b) an Award granted hereunder but are forfeited or are repurchased by the Company at the original issue price; and (c) an Award that otherwise terminates without Shares being issued. In addition, any authorized shares not issued or subject to outstanding grants under the 1996 Stock Option Plan and the 1998 Stock Option Plan (the “Prior Plans”) on the Effective Date (as defined below) and any shares issued under the Prior Plans that are forfeited or repurchased by the Company or that are issuable upon exercise of options granted pursuant to the Prior Plans that expire or become unexercisable for any reason without having been exercised in full, will no longer be available for grant and issuance under the Prior Plans, but will be available for grant and issuance under this Plan. At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Options granted under this Plan and all other outstanding but unvested Awards granted under this Plan.

          2.2 Adjustment of Shares. In the event that the number of outstanding shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under this Plan, (b) the Exercise Prices of and number of Shares subject to outstanding Options, and (c) the number of Shares subject to other outstanding Awards will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction of a Share or will be rounded up to the nearest whole Share, as determined by the Committee.

     3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company. All other Awards may be granted to employees, officers, directors, consultants, independent contractors and advisors of the Company or any Parent or Subsidiary of the Company; provided such consultants, contractors and advisors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. No person will be eligible to receive more than 1,000,000 Shares in any calendar year under this Plan pursuant to the grant of Awards hereunder, other than new employees of the Company or of a Parent or Subsidiary of the Company (including new employees who are also officers and directors of the Company or any Parent or

¹ Adjusted to reflect (i) the authorization of 2,000,000 additional shares of Common Stock for issuance under the Plan approved by the Company’s stockholders on June 1, 2000; (ii) the 2-for-1 split of the Company’s Common Stock, paid in the form of a dividend, effected in July 2000 with respect to stockholders of record on June 22, 2000; (iii) the authorization of 4,000,000 additional shares of Common Stock for issuance under the Plan approved by the Company’s stockholders on December 12, 2000; (iv) the 2-for-1 split of the Company’s Common Stock, paid in the form of a dividend, effected in December 2000 with respect to stockholders of record on December 13, 2000; and (v) the 1-for-4 reverse stock split of the Company’s Common Stock effected in November 2003.

Interwoven, Inc.
1999 Equity Incentive Plan

Subsidiary of the Company), who are eligible to receive up to a maximum of 1,500,000 Shares in the calendar year in which they commence their employment. A person may be granted more than one Award under this Plan.

     4. ADMINISTRATION.

          4.1 Committee Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Except for automatic grants to Outside Directors pursuant to Section 10 hereof, and subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan. Except for automatic grants to Outside Directors pursuant to Section 10 hereof, the Committee will have the authority to:

(a)	construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;
(b)	prescribe, amend and rescind rules and regulations relating to this Plan or any Award;
(c)	select persons to receive Awards;
(d)	determine the form and terms of Awards;
(e)	determine the number of Shares or other consideration subject to Awards;
(f)	determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;
(g)	grant waivers of Plan or Award conditions;
(h)	determine the vesting, exercisability and payment of Awards;
(i)	correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;
(j)	determine whether an Award has been earned; and
(k)	make all other determinations necessary or advisable for the administration of this Plan.

          4.2 Committee Discretion. Except for automatic grants to Outside Directors pursuant to Section 10 hereof, any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of this Plan or Award, at any later time, and such determination will be final and binding on the Company and on all persons having an interest in any Award under this Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan to Participants who are not Insiders of the Company.

     5. OPTIONS. The Committee may grant Options to eligible persons and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISO”) or Nonqualified Stock Options (“NQSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following:

          5.1 Form of Option Grant. Each Option granted under this Plan will be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an NQSO (“Stock Option Agreement”),

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Interwoven, Inc.
1999 Equity Incentive Plan

and, except as otherwise required by the terms of Section 10 hereof, will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan.

          5.2 Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.

          5.3 Exercise Period. Options may be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (“Ten Percent Stockholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.

          5.4 Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and may be not less than 85% of the Fair Market Value of the Shares on the date of grant; provided that: (i) the Exercise Price of an ISO will be not less than 100% of the Fair Market Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than 110% of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 9 of this Plan.

          5.5 Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the “Exercise Agreement”) in a form approved by the Committee (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price for the number of Shares being purchased.

          5.6 Termination. Notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following:

(a)

If the Participant is Terminated for any reason except death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable upon the Termination Date no later than three (3) months after the Termination Date (or such shorter or longer time period not exceeding five (5) years as may be determined by the Committee, with any exercise beyond three (3) months after the Termination Date deemed to be an NQSO), but in any event, no later than the expiration date of the Options.

(b)

If the Participant is Terminated because of Participant’s death or Disability (or the Participant dies within three (3) months after a Termination other than for Cause or because of Participant’s Disability), then Participant’s Options may be exercised only to the extent that such Options would have been exercisable by Participant on the Termination Date and must be exercised by Participant (or Participant’s legal representative or authorized assignee) no later than twelve (12) months after the Termination Date (or such shorter or longer time period not exceeding five (5) years as may be determined by the Committee, with any such exercise beyond (a) three (3) months after the Termination Date when the Termination is for any reason other than the Participant’s death or Disability, or

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Interwoven, Inc.
1999 Equity Incentive Plan

(b)

twelve (12) months after the Termination Date when the Termination is for Participant’s death or Disability, deemed to be an NQSO), but in any event no later than the expiration date of the Options.

(c)

Notwithstanding the provisions in paragraph 5.6(a) above, if a Participant is terminated for Cause, neither the Participant, the Participant’s estate nor such other person who may then hold the Option shall be entitled to exercise any Option with respect to any Shares whatsoever, after termination of service, whether or not after termination of service the Participant may receive payment from the Company or Subsidiary for vacation pay, for services rendered prior to termination, for services rendered for the day on which termination occurs, for salary in lieu of notice, or for any other benefits. In making such determination, the Board shall give the Participant an opportunity to present to the Board evidence on his behalf. For the purpose of this paragraph, termination of service shall be deemed to occur on the date when the Company dispatches notice or advice to the Participant that his service is terminated.

          5.7 Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent Participant from exercising the Option for the full number of Shares for which it is then exercisable.

          5.8 Limitations on ISO. The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISO are exercisable for the first time by a Participant during any calendar year (under this Plan or under any other incentive stock option plan of the Company, Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value of Shares on the date of grant with respect to which ISO are exercisable for the first time by a Participant during any calendar year exceeds $100,000, then the Options for the first $100,000 worth of Shares to become exercisable in such calendar year will be ISO and the Options for the amount in excess of $100,000 that become exercisable in that calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date of this Plan to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISO, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

          5.9 Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. The Committee may reduce the Exercise Price of outstanding Options without the consent of Participants affected by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 of this Plan for Options granted on the date the action is taken to reduce the Exercise Price.

          5.10 No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISO will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.

     6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to restrictions. The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the price to be paid (the “Purchase Price”), the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following:

          6.1 Form of Restricted Stock Award. All purchases under a Restricted Stock Award made pursuant to this Plan will be evidenced by an Award Agreement (“Restricted Stock Purchase Agreement”) that will

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be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The offer of Restricted Stock will be accepted by the Participant’s execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within thirty (30) days, then the offer will terminate, unless otherwise determined by the Committee.

          6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined by the Committee on the date the Restricted Stock Award is granted, except in the case of a sale to a Ten Percent Stockholder, in which case the Purchase Price will be 100% of the Fair Market Value. Payment of the Purchase Price may be made in accordance with Section 9 of this Plan.

          6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall be subject to such restrictions as the Committee may impose. These restrictions may be based upon completion of a specified number of years of service with the Company or upon completion of the performance goals as set out in advance in the Participant’s individual Restricted Stock Purchase Agreement. Restricted Stock Awards may vary from Participant to Participant and between groups of Participants. Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Prior to the payment of any Restricted Stock Award, the Committee shall determine the extent to which such Restricted Stock Award has been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.

          6.4 Termination During Performance Period. If a Participant is Terminated during a Performance Period for any reason, then such Participant will be entitled to payment (whether in Shares, cash or otherwise) with respect to the Restricted Stock Award only to the extent earned as of the date of Termination in accordance with the Restricted Stock Purchase Agreement, unless the Committee will determine otherwise.

     7. STOCK BONUSES.

          7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares (which may consist of Restricted Stock) for services rendered to the Company or any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past services already rendered to the Company, or any Parent or Subsidiary of the Company pursuant to an Award Agreement (the “Stock Bonus Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. A Stock Bonus may be awarded upon satisfaction of such performance goals as are set out in advance in the Participant’s individual Award Agreement (the “Performance Stock Bonus Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. Stock Bonuses may vary from Participant to Participant and between groups of Participants, and may be based upon the achievement of the Company, Parent or Subsidiary and/or individual performance factors or upon such other criteria as the Committee may determine.

          7.2 Terms of Stock Bonuses. The Committee will determine the number of Shares to be awarded to the Participant. If the Stock Bonus is being earned upon the satisfaction of performance goals pursuant to a Performance Stock Bonus Agreement, then the Committee will: (a) determine the nature, length and starting date of any Performance Period for each Stock Bonus; (b) select from among the Performance Factors to be used to measure the performance, if any; and (c) determine the number of Shares that may be awarded to the Participant. Prior to the payment of any Stock Bonus, the Committee shall determine the extent to which such Stock Bonuses have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Stock Bonuses that are subject to different Performance Periods and different performance goals and other criteria. The number of Shares may be fixed or may vary in accordance with such performance goals and criteria as

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may be determined by the Committee. The Committee may adjust the performance goals applicable to the Stock Bonuses to take into account changes in law and accounting or tax rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships.

          7.3 Form of Payment. The earned portion of a Stock Bonus may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee may determine. Payment may be made in the form of cash or whole Shares or a combination thereof, either in a lump sum payment or in installments, all as the Committee will determine.

     8. RESTRICTED STOCK UNITS.

          8.1 Award of Restricted Stock Units. An RSU is an award to a Participant covering a number of Shares that may be settled in cash, or by issuance of those Shares for services to be rendered or for past services already rendered to the Company or any Subsidiary. RSUs will vest over a minimum of three years as measured from the date of grant.

          8.2 Form and Timing of Settlement. To the extent permissible under applicable law, the Committee may permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned, provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code (or any successor) and any regulations or rulings promulgated thereunder. Payment may be made in the form of cash or whole Shares or a combination thereof in a lump sum payment, all as the Committee determines.

     9. PAYMENT FOR SHARE PURCHASES.

          9.1 Payment. Payment for Shares purchased pursuant to this Plan may be made in cash (by check) or, where expressly approved for the Participant by the Committee and where permitted by law:

(a)	by cancellation of indebtedness of the Company to the Participant;
(b)	by surrender of shares that either: (1) have been owned by Participant for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by Participant in the public market;
(c)	by tender of a full recourse promissory note having such terms as may be approved by the Committee and bearing interest at a rate sufficient to avoid imputation of income under Sections 483 and 1274 of the Code; provided, however, that Participants who are not employees or directors of the Company will not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares;
(d)	by waiver of compensation due or accrued to the Participant for services rendered;
(e)	with respect only to purchases upon exercise of an Option, and provided that a public market for the Company’s stock exists:

(1) through a “same day sale” commitment from the Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the Exercise Price, and whereby the NASD Dealer

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irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

(2)

through a “margin” commitment from the Participant and a NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

(f) by any combination of the foregoing.

          9.2 Loan Guarantees. The Committee may help the Participant pay for Shares purchased under this Plan by authorizing a guarantee by the Company of a third-party loan to the Participant.

     10. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.

          10.1 Types of Options and Shares. Options granted under this Plan and subject to this Section 10 shall be NQSOs.

          10.2 Eligibility. Options subject to this Section 10 shall be granted only to Outside Directors.

          10.3 Annual Grants. Each Outside Director who was a member of the Board before the Effective Date will automatically be granted an Option for 10,000 Shares on the Effective Date, unless such Outside Director received a grant of Options before the Effective Date. Each Outside Director who first becomes a member of the Board on or after the Effective Date will automatically be granted an Option for 10,000² Shares on the date such Outside Director first becomes a member of the Board. Immediately following each annual meeting of stockholders, all Outside Directors will automatically be granted an Option for 10,000³ Shares, provided the Outside Director is a member of the Board on such date and has served continuously as a member of the Board for a period of at least one year since the date when such Outside Director first became a member of the Board (the “Annual Grant”).

          10.4 Vesting. Each Annual Grant shall be 100% vested and immediately exercisable as of the date of grant.

          10.5 Exercise Price. The exercise price of an Annual Grant shall be the Fair Market Value of the Shares, at the time that the Option is granted.

     11. WITHHOLDING TAXES.

          11.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. Whenever, under this Plan, payments in satisfaction of Awards are to be made in cash, such payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements.

2	Adjusted to reflect an amendment to: (i) increase the number of shares subject to grant by 20,000 shares, which was approved by the Company’s stockholders on June 6, 2002; and (ii) reduce the number of shares subject to grant by 30,000 shares, which was effected by the Board in November 2003.
3	Adjusted to reflect an amendment to: (i) increase the number of shares subject to grant by 10,000 shares, which was approved by the Company’s stockholders on June 6, 2002; and (ii) reduce the number of shares subject to grant by 10,000 shares, which was effected by the Board in November 2003.

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          11.2 Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may in its sole discretion allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee and be in writing in a form acceptable to the Committee

     12. TRANSFERABILITY.

          12.1 Except as otherwise provided in this Section 12, Awards granted under this Plan, and any interest therein, will not be transferable or assignable by Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution or as determined by the Committee and set forth in the Award Agreement with respect to Awards that are not ISOs.

          12.2 All Awards other than NQSO’s. All Awards other than NQSO’s shall be exercisable: (i) during the Participant’s lifetime, only by (A) the Participant, or (B) the Participant’s guardian or legal representative; and (ii) after Participant’s death, by the legal representative of the Participant’s heirs or legatees.

          12.3 NQSOs. Unless otherwise restricted by the Committee, an NQSO shall be exercisable: (i) during the Participant’s lifetime only by (A) the Participant, (B) the Participant’s guardian or legal representative, (C) a Family Member of the Participant who has acquired the NQSO by “permitted transfer;” and (ii) after Participant’s death, by the legal representative of the Participant’s heirs or legatees. “Permitted transfer” means, as authorized by this Plan and the Committee in an NQSO, any transfer effected by the Participant during the Participant’s lifetime of an interest in such NQSO but only such transfers which are by gift or domestic relations order. A permitted transfer does not include any transfer for value and neither of the following are transfers for value: (a) a transfer of under a domestic relations order in settlement of marital property rights or (b) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members or the Participant in exchange for an interest in that entity.

     13. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.

          13.1 Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased at the Participant’s Purchase Price or Exercise Price pursuant to this Section 13.

          13.2 Financial Statements. The Company will provide financial statements to each Participant prior to such Participant’s purchase of Shares under this Plan, and to each Participant annually during the period such Participant has Awards outstanding; provided, however, the Company will not be required to provide such financial statements to Participants whose services in connection with the Company assure them access to equivalent information.

          13.3 Restrictions on Shares. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Award Agreement a right to repurchase a portion of or all Unvested Shares held by a Participant following such Participant’s Termination at any time within ninety (90) days after the later of Participant’s Termination Date and the date Participant purchases Shares under this Plan, for cash and/or

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cancellation of purchase money indebtedness, at the Participant’s Exercise Price or Purchase Price, as the case may be.

     14. CERTIFICATES. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.

     15. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.

     16. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, Shares (including Restricted Stock) or other consideration, based on such terms and conditions as the Committee and the Participant may agree.

     17. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.

     18. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s employment or other relationship at any time, with or without cause.

     19. CORPORATE TRANSACTIONS.

          19.1 Assumption or Replacement of Awards by Successor. In the event of (a) a dissolution or liquidation of the Company, (b) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a

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different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the Awards granted under this Plan are assumed, converted or replaced by the successor corporation, which assumption will be binding on all Participants), (c) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (d) the sale of substantially all of the assets of the Company, or (e) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction, any or all outstanding Awards may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participants, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event such successor corporation (if any) refuses to assume or substitute Awards, as provided above, pursuant to a transaction described in this Subsection 19.1, such Awards will expire on such transaction at such time and on such conditions as the Committee will determine. Notwithstanding anything in this Plan to the contrary, the Committee may, in its sole discretion, provide that the vesting of any or all Awards granted pursuant to this Plan will accelerate upon a transaction described in this Section 19. If the Committee exercises such discretion with respect to Options, such Options will become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines, and if such Options are not exercised prior to the consummation of the corporate transaction, they shall terminate at such time as determined by the Committee.

          19.2 Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Section 19, in the event of the occurrence of any transaction described in Subsection 19.1, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, or sale of assets.

          19.3 Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of Shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price.

     20. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on the date on which the registration statement filed by the Company with the SEC under the Securities Act registering the initial public offering of the Company’s Common Stock is declared effective by the SEC (the “Effective Date”). This Plan shall be approved by the stockholders of the Company (excluding Shares issued pursuant to this Plan), consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board. Upon the Effective Date, the Committee may grant Awards pursuant to this Plan; provided, however, that: (a) no Option may be exercised prior to initial stockholder approval of this Plan; (b) no Option granted pursuant to an increase in the number of Shares subject to this Plan approved by the Board will be exercised prior to the time such increase has been approved by the stockholders of the Company; (c) in the event that initial stockholder approval is not obtained within the time period provided herein, all Awards granted hereunder shall be cancelled, any Shares issued pursuant to any Awards shall be cancelled and any purchase of Shares issued hereunder shall be rescinded; and (d) in the event that stockholder approval of such increase is not obtained within the time period provided herein, all Awards granted pursuant to such increase will be cancelled, any Shares issued pursuant to any Award

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granted pursuant to such increase will be cancelled, and any purchase of Shares pursuant to such increase will be rescinded.

     21. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the date this Plan is adopted by the Board or, if earlier, the date of stockholder approval. This Plan and all agreements thereunder shall be governed by and construed in accordance with the laws of the State of California.

     22. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval.

     23. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

     24. DEFINITIONS. As used in this Plan, the following terms will have the following meanings:

     “Award” means any award under this Plan, including any Option, Restricted Stock, Stock Bonus or RSU.

     “Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award.

     “Board” means the Board of Directors of the Company.

     “Cause” means the commission of an act of theft, embezzlement, fraud, dishonesty or a breach of fiduciary duty to the Company or a Parent or Subsidiary of the Company.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Committee” means the Compensation Committee of the Board.

     “Company” means Interwoven, Inc. or any successor corporation.

     “Disability” means a disability, whether temporary or permanent, partial or total, as determined by the Committee.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Exercise Price” means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.

     “Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

(a)	if such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in The Wall Street Journal;
(b)	if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal;

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(c)	if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal;
(d)	in the case of an Award made on the Effective Date, the price per share at which shares of the Company’s Common Stock are initially offered for sale to the public by the Company’s underwriters in the initial public offering of the Company’s Common Stock pursuant to a registration statement filed with the SEC under the Securities Act; or
(e)	if none of the foregoing is applicable, by the Committee in good faith.

     “Family Member” includes any of the following:

(a)	child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Participant, including any such person with such relationship to the Participant by adoption;
(b)	any person (other than a tenant or employee) sharing the Participant’s household;
(c)	a trust in which the persons in (a) and (b) have more than fifty percent of the beneficial interest;
(d)	a foundation in which the persons in (a) and (b) or the Participant control the management of assets; or
(e)	any other entity in which the persons in (a) and (b) or the Participant own more than fifty percent of the voting interest.

     “Insider” means an officer or director of the Company or any other person whose transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act.

     “Option” means an award of an option to purchase Shares pursuant to Section 5.

     “Outside Director” means a member of the Board who is not an employee of the Company or any Parent, Subsidiary or Affiliate of the Company.

     “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

     “Participant” means a person who receives an Award under this Plan.

     “Performance Factors” means the factors selected by the Committee from among the following measures to determine whether the performance goals established by the Committee and applicable to Awards have been satisfied:

(a)	Net revenue and/or net revenue growth;
(b)	Earnings before income taxes and amortization and/or earnings before income taxes and amortization growth;
(c)	Operating income and/or operating income growth;
(d)	Net income and/or net income growth;

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1999 Equity Incentive Plan

(e)	Earnings per share and/or earnings per share growth;
(f)	Total stockholder return and/or total stockholder return growth;
(g)	Return on equity;
(h)	Operating cash flow return on income;
(i)	Adjusted operating cash flow return on income;
(j)	Economic value added; and
(k)	Individual confidential business objectives.

     “Performance Period” means the period of service determined by the Committee, not to exceed five years, during which years of service or performance is to be measured for Restricted Stock Awards or Stock Bonuses.

     “Plan” means this Interwoven, Inc. 1999 Equity Incentive Plan, as amended from time to time.

     “Restricted Stock Award” means an award of Shares pursuant to Section 6.

     “RSU” means an Award granted pursuant to Section 8 of the Plan.

     “SEC” means the Securities and Exchange Commission.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Shares” means shares of the Company’s Common Stock reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 19, and any successor security.

     “Stock Bonus” means an award of Shares, or cash in lieu of Shares, pursuant to Section 7.

     “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

     “Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director, consultant, independent contractor, or advisor to the Company or a Parent or Subsidiary of the Company. An employee will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee, provided, that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing. In the case of any employee on an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the employ of the Company or a Subsidiary as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Option agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”).

     “Unvested Shares” means “Unvested Shares” as defined in the Award Agreement.

     “Vested Shares” means “Vested Shares” as defined in the Award Agreement.

13

EX-10.02

Exhibit 10.02

Notice of Grant of Stock
Options and Option Agreement

Interwoven, Inc.
ID: 94-3221352
803 — 11th Avenue
Sunnyvale, CA 94089

Employee Name
Option Number:
Plan:
ID:

Effective                     , you have been granted a(n)                     [Incentive/Nonqualified] Stock Option to buy                      shares of Interwoven, Inc. (the Company) stock at $                     per share.

The total option price of the shares granted is $                    .

Shares in each period will become fully vested on the date shown.

[Vesting may occur based on achievement, at the end of a period of time, of a specified goal or specified goals based on such factors as: annual revenue, cash position, earnings per share, operating cash flow, market share, new product releases, net income, operating income, return on assets, return on equity, return on investment, software license bookings, EBITDA or other financial measure, or any other performance-related goal as approved from time to time.]

By your signature and the Company’s signature below, you and the Company agree that these options are granted under and governed by the terms and conditions of the Company’s Stock Option Plan as amended and the Option Agreement, all of which are attached and made a part of this document.

Interwoven, Inc.	Date
Optionee Name	Date

INTERWOVEN, INC.

1999 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

          1. Grant of Option. Interwoven, Inc. (the “Company”) hereby grants to Optionee an option (this “Option”) to purchase up to the total number of shares of Common Stock of the Company set forth in the Notice of Grant (collectively, the “Shares”) at the exercise price set forth in the Notice of Grant (the “Exercise Price”), subject to all of the terms and conditions of the Notice of Grant, this Stock Option Agreement (the “Agreement”) and the 1999 Equity Incentive Plan (the “Plan”). If designated as an Incentive Stock Option in the Notice of Grant, the Option is intended to qualify as an “incentive stock option” (“ISO”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to the extent permitted under Code Section 422. Capitalized terms not defined herein shall have the meaning ascribed to them in the Plan.

          2. Vesting; Exercise Period.

               2.1 Vesting of Shares. The Option shall be exercisable as it vests, unless otherwise indicated in the Notice of Grant. Subject to the terms and conditions of the Plan and the Agreement, the Option shall vest and become exercisable as to portions of the Shares pursuant to the vesting schedule specified in the Notice of Grant, provided that Optionee has continuously provided services to the Company, or any Parent or Subsidiary of the Company, at all times during the relevant month.

               2.2 Vesting of Options. Shares that are vested pursuant to the vesting schedule set forth in the Notice of Grant are “Vested Shares.” Shares that are not vested pursuant to the schedule set forth in the Notice of Grant are “Unvested Shares.”

               2.3 Expiration. The Option shall expire on the expiration date set forth in the Notice of Grant, and must be exercised, if at all, on or before the earlier of the expiration date of the Option or the date on which the Option is earlier terminated in accordance with the provisions of Section 3 hereof.

          3. Termination.

               3.1 Termination for Any Reason Except Death, Disability or Cause. If Optionee is Terminated for any reason except Optionee’s death, Disability or Cause, then the Option, to the extent (and only to the extent) that it is vested in accordance with the schedule set forth in the Notice of Grant on the Termination Date, may be exercised by Optionee no later than three (3) months after the Termination Date, but in any event no later than the expiration date.

2

Interwoven, Inc.
Stock Option Agreement
1999 Equity Incentive Plan

               3.2 Termination Because of Death or Disability. If Optionee is Terminated because of death or Disability of Optionee (or the Optionee dies within three (3) months after Termination other than for Cause or because of Disability), then the Option, to the extent that it is vested in accordance with the schedule in the Notice of Grant on the Termination Date, may be exercised by Optionee (or Optionee’s legal representative or authorized assignee) no later than twelve (12) months after the Termination Date, but in any event no later than the expiration date. Any exercise after three months after the Termination Date when the Termination is for any reason other than Optionee’s death or disability, within the meaning of Code Section 22(e)(3), shall be deemed to be the exercise of a nonqualified stock option.

               3.3 Termination for Cause. If Optionee is Terminated for Cause, the Option will expire on the Optionee’s date of Termination.

               3.4 No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Optionee any right to continue in the employ of, or other relationship with, the Company or any Parent or Subsidiary of the Company, or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Optionee’s employment or other relationship at any time, with or without Cause.

          4. Manner of Exercise.

               4.1 Stock Option Exercise Agreement. To exercise the Option, Optionee (or in the case of exercise after Optionee’s death, Optionee’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company an executed stock option exercise agreement in the form attached hereto as Exhibit A, or in such other form as may be approved by the Company from time to time (the “Exercise Agreement”), which shall set forth, inter alia, Optionee’s election to exercise the Option, the number of shares being purchased, any restrictions imposed on the Shares and any representations, warranties and agreements regarding Optionee’s investment intent and access to information as may be required by the Company to comply with applicable securities laws. If someone other than Optionee exercises the Option, then such person must submit documentation reasonably acceptable to the Company that such person has the right to exercise the Option.

               4.2 Limitations on Exercise. The Option may not be exercised unless such exercise is in compliance with all applicable federal and state securities laws, as they are in effect on the date of exercise.

               4.3 Payment. The Exercise Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased in cash (by check), or where permitted by law:

(a)	by cancellation of indebtedness of the Company to the Optionee;
(b)	by surrender of shares of the Company’s Common Stock that either: (1) have been owned by Optionee for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such

3

Interwoven, Inc.
Stock Option Agreement
1999 Equity Incentive Plan

shares); or (2) were obtained by Optionee in the open public market; and (3) are clear of all liens, claims, encumbrances or security interests;

(c)	by waiver of compensation due or accrued to Optionee for services rendered;
(d)	provided that a public market for the Company’s stock exists: (1) through a “same day sale” commitment from Optionee and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby Optionee irrevocably elects to exercise this Option and to sell a portion of the Shares so purchased to pay for the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; or (2) through a “margin” commitment from Optionee and an NASD Dealer whereby Optionee irrevocably elects to exercise this Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or
(e)	by any combination of the foregoing.

               4.4 Tax Withholding. Prior to the issuance of the Shares upon exercise of the Option, Optionee must pay or provide for any applicable federal or state withholding obligations of the Company. If the Committee permits, Optionee may provide for payment of withholding taxes upon exercise of the Option by requesting that the Company retain Shares with a Fair Market Value equal to the minimum amount of taxes required to be withheld. In such case, the Company shall issue the net number of Shares to the Optionee by deducting the Shares retained from the Shares issuable upon exercise.

               4.5 Issuance of Shares. Provided that the Exercise Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of Optionee, Optionee’s authorized assignee, or Optionee’s legal representative, and shall deliver certificates representing the Shares with the appropriate legends affixed thereto.

          5. Notice of Disqualifying Disposition of ISO Shares. To the extent the Option is an ISO, if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (a) the date two (2) years after the date of grant, and (b) the date one (1) year after transfer of such Shares to Optionee upon exercise of the Option, then Optionee shall immediately notify the Company in writing of such disposition.

          6. Compliance with Laws and Regulations. The exercise of the Option and the issuance and transfer of Shares shall be subject to compliance by the Company and Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Stock may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the SEC, any state securities commission or any stock exchange to effect such compliance.

4

Interwoven, Inc.
Stock Option Agreement
1999 Equity Incentive Plan

          7. Nontransferability of Option. Except as otherwise set forth in Section 11 of the Plan, the Option may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Option shall be binding upon the executors, administrators, successors and assigns of Optionee.

          8. Tax Consequences. Set forth below is a brief summary as of the date the Board adopted the Plan of some of the federal tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

               8.1 Exercise of Incentive Stock Option. To the extent the Option qualifies as an ISO, there will be no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price will be treated as a tax preference item for federal income tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise.

               8.2 Exercise of Nonqualified Stock Option. To the extent the Option does not qualify as an ISO, there may be a regular federal income tax liability upon the exercise of the Option. Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price. The Company may be required to withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.

               8.3 Disposition of Shares. The following tax consequences may apply upon disposition of the Shares.

                    a. Incentive Stock Options. If the Shares are held for more than twelve (12) months after the date of the transfer of the Shares pursuant to the exercise of an ISO and are disposed of more than two (2) years after the date of grant, any gain realized on disposition of the Shares will be treated as capital gain for federal income tax purposes. If Shares purchased under an ISO are disposed of within the applicable one (1) year or two (2) year period, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price.

                    b. Nonqualified Stock Options. If the Shares are held for more than twelve (12) months after the date of the transfer of the Shares pursuant to the exercise of an NQSO, any gain realized on disposition of the Shares will be treated as long-term capital gain.

                    c. Withholding. The Company may be required to withhold from Participant’s compensation or collect from the Participant and pay to the applicable taxing authorities an amount equal to a percentage of the compensation income.

5

Interwoven, Inc.
Stock Option Agreement
1999 Equity Incentive Plan

          9. Privileges of Stock Ownership. Optionee shall not have any of the rights of a stockholder with respect to any Shares until the Shares are issued to Optionee.

          10. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or the Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and Optionee.

          11. Entire Agreement. The Plan is incorporated herein by reference. This Agreement, the Notice of Grant, the Plan and the Exercise Agreement constitute the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior understandings and agreements with respect to such subject matter.

          12. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated above or to such other address as such party may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: personal delivery; three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested); one (1) business day after deposit with any return receipt express courier (prepaid); or one (1) business day after transmission by facsimile.

          13. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Optionee and Optionee’s heirs, executors, administrators, legal representatives, successors and assigns.

          14. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without regard to that body of law pertaining to choice of law or conflict of law.

6

EXHIBIT A

STOCK OPTION EXERCISE AGREEMENT

Exhibit A

INTERWOVEN, INC.
1999 EQUITY INCENTIVE PLAN (the “Plan”)
STOCK OPTION EXERCISE AGREEMENT

     I hereby elect to purchase the number of shares of Common Stock of Interwoven, Inc. (the “Company”) as set forth below:

Optionee
Social Security Number
Address:
Type of Option:	[  ]  Incentive Stock Option
	[  ]  Nonqualified Stock Option

Number of Shares Purchased:

Purchase Price per Share:

Aggregate Purchase Price:

Date of Option Agreement:

Exact Name of Title to Shares:

1. Delivery of Purchase Price. Optionee hereby delivers to the Company the Aggregate Purchase Price, to the extent permitted in the Stock Option Agreement (the “Option Agreement”) and Notice of Grant as follows (check as applicable and complete):

[  ]	in cash (by check) in the amount of $                                           , receipt of which is acknowledged by the Company;
[  ]	by cancellation of indebtedness of the Company to Optionee in the amount of $                                        ;
[  ]	by delivery of                                          fully-paid, nonassessable and vested shares of the Common Stock of the Company owned by Optionee for at least six (6) months prior to the date hereof (and which have been paid for within the meaning of SEC Rule 144), or obtained by Optionee in the open public market, and owned free and clear of all liens, claims, encumbrances or security interests, valued at the current Fair Market Value of $                                         per share;
[  ]	by the waiver hereby of compensation due or accrued to Optionee for services rendered in the amount of $                                          ;
[  ]	through a “same-day-sale” commitment, delivered herewith, from Optionee and the NASD Dealer named therein, in the amount of $                                        ; or
[  ]	through a “margin” commitment, delivered herewith from Optionee and the NASD Dealer named therein, in the amount of $                                        .

2. Tax Consequences. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE’S PURCHASE OR DISPOSITION OF THE SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.

3. Entire Agreement. The Plan, Notice of Grant and Option Agreement are incorporated herein by reference. This Exercise Agreement, the Plan, Notice of Grant and the Option Agreement constitute the entire agreement and understanding of the parties and supersede in their entirety all prior understandings and agreements of the Company and Optionee with respect to the subject matter hereof, and are governed by California law except for that body of law pertaining to choice of law or conflict of law.

Date:
	Signature of Optionee

Spousal Consent

     I acknowledge that I have read the foregoing Stock Option Exercise Agreement (the “Agreement”) and that I know its contents. I hereby consent to and approve all of the provisions of the Agreement, and agree that the shares of the Common Stock of Interwoven, Inc. purchased thereunder (the “Shares”) and any interest I may have in such Shares are subject to all the provisions of the Agreement. I will take no action at any time to hinder operation of the Agreement on these Shares or any interest I may have in or to them.

	Date:
Signature of Optionee’s Spouse
Spouse’s Name — Typed or Printed
Optionee’s Name — Typed or Printed

INTERWOVEN, INC.

1999 EQUITY INCENTIVE PLAN

REVISED STOCK OPTION AGREEMENT
(Non-Standard )

     For use only with Option number                      granted on                                         

          1. Grant of Option. Interwoven, Inc. (the “Company”) hereby grants to Optionee an option (this “Option”) to purchase up to the total number of shares of Common Stock of the Company set forth in the Notice of Grant (collectively, the “Shares”) at the exercise price set forth in the Notice of Grant (the “Exercise Price”), subject to all of the terms and conditions of the Notice of Grant, this Stock Option Agreement (the “Agreement”) and the 1999 Equity Incentive Plan (the “Plan”). If designated as an Incentive Stock Option in the Notice of Grant, the Option is intended to qualify as an “incentive stock option” (“ISO”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to the extent permitted under Code Section 422. Capitalized terms not defined herein shall have the meaning ascribed to them in the Plan.

          2. Vesting; Exercise Period.

               2.1 Vesting of Shares. The Option shall be exercisable as it vests, unless otherwise indicated in the Notice of Grant. Subject to the terms and conditions of the Plan and the Agreement, the Option shall vest and become exercisable as to portions of the Shares pursuant to the vesting schedule specified in the Notice of Grant, provided that Optionee has continuously provided services to the Company, or any Parent or Subsidiary of the Company, at all times during the relevant month. Notwithstanding the provisions of the preceding sentence, however, if there is a Sale of the Company and Participant’s employment is terminated by the Company or its successor without Cause in connection with the Sale of the Company, then upon such termination the Option will become vested as to an additional number of Unvested Shares equal to fifty percent (50%) of the Shares that were Unvested Shares at the closing of the Sale of the Company.

     For purposes of this vesting acceleration provisions, “Cause” means (i) willfully engaging in gross misconduct that is materially and demonstrably injurious to the Company; (ii) willful act or acts of dishonesty undertaken by Participant and intended to result in substantial gain or personal enrichment for Participant at the expense of the Company; or (iii) willful and continued failure to substantially perform Participant’s duties with the Company or its successor (other than incapacity due to physical or mental illness); provided that the action or conduct described in clause (iii) above will constitute “Cause” only if such failure continues after the Board of Directors has provided Participant with a written demand for substantial performance setting forth in detail the specify respects in which it believes Participant has willfully and not substantially performed his duties thereof and a reasonable opportunity (to be not less than 30

days) to cure the same. For such purpose, a termination by the Company without Cause includes a termination of employment by Participant within 30 days following any of the following events: (x) the assignment of any duties to Participant inconsistent with, or reflecting a materially adverse change in, Participant’s position, duties or responsibilities with the Company (or any successor) without Participant’s concurrence; or (y) the relocation of the Company’s principal executive offices, or relocating Participant’s principal place of business, in excess of fifty (50) miles from the Company’s current executive offices located in Sunnyvale, California. For purposes of the vesting acceleration provisions of paragraph (b), the term “Sale of the Company” means (i) the sale or other disposition of all or substantially all of the assets of the Company, or (ii) the acquisition of the Company by another entity by means of consolidation, corporate reorganization or merger, or other transaction or series of related transactions in which more than fifty percent (50%) of the outstanding voting power of the Company is transferred.

               2.2 Vesting of Options. Shares that are vested pursuant to the vesting schedule set forth in the Notice of Grant are “Vested Shares.” Shares that are not vested pursuant to the schedule set forth in the Notice of Grant are “Unvested Shares.”

               2.3 Expiration. The Option shall expire on the expiration date set forth in the Notice of Grant, and must be exercised, if at all, on or before the earlier of the expiration date of the Option or the date on which the Option is earlier terminated in accordance with the provisions of Section 3 hereof.

          3. Termination.

               3.1 Termination for Any Reason Except Death, Disability or Cause. If Optionee is Terminated for any reason except Optionee’s death, Disability or Cause, then the Option, to the extent (and only to the extent) that it is vested in accordance with the schedule set forth in the Notice of Grant on the Termination Date, may be exercised by Optionee no later than three (3) months after the Termination Date, but in any event no later than the expiration date.

               3.2 Termination Because of Death or Disability. If Optionee is Terminated because of death or Disability of Optionee (or the Optionee dies within three (3) months after Termination other than for Cause or because of Disability), then the Option, to the extent that it is vested in accordance with the schedule in the Notice of Grant on the Termination Date, may be exercised by Optionee (or Optionee’s legal representative or authorized assignee) no later than twelve (12) months after the Termination Date, but in any event no later than the expiration date. Any exercise after three months after the Termination Date when the Termination is for any reason other than Optionee’s death or disability, within the meaning of Code Section 22(e)(3), shall be deemed to be the exercise of a nonqualified stock option.

               3.3 Termination for Cause. If Optionee is Terminated for Cause, the Option will expire on the Optionee’s date of Termination.

               3.4 No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Optionee any right to continue in the employ of, or other relationship with, the Company or any Parent or Subsidiary of the Company, or limit in any way the right of the

Company or any Parent or Subsidiary of the Company to terminate Optionee’s employment or other relationship at any time, with or without Cause.

          4. Manner of Exercise.

               4.1 Stock Option Exercise Agreement. To exercise the Option, Optionee (or in the case of exercise after Optionee’s death, Optionee’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company an executed stock option exercise agreement in the form attached hereto as Exhibit A, or in such other form as may be approved by the Company from time to time (the “Exercise Agreement”), which shall set forth, inter alia, Optionee’s election to exercise the Option, the number of shares being purchased, any restrictions imposed on the Shares and any representations, warranties and agreements regarding Optionee’s investment intent and access to information as may be required by the Company to comply with applicable securities laws. If someone other than Optionee exercises the Option, then such person must submit documentation reasonably acceptable to the Company that such person has the right to exercise the Option.

               4.2 Limitations on Exercise. The Option may not be exercised unless such exercise is in compliance with all applicable federal and state securities laws, as they are in effect on the date of exercise.

               4.3 Payment. The Exercise Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased in cash (by check), or where permitted by law:

(a)	by cancellation of indebtedness of the Company to the Optionee;
(b)	by surrender of shares of the Company’s Common Stock that either: (1) have been owned by Optionee for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by Optionee in the open public market; and (3) are clear of all liens, claims, encumbrances or security interests;
(c)	by waiver of compensation due or accrued to Optionee for services rendered;
(d)	provided that a public market for the Company’s stock exists: (1) through a “same day sale” commitment from Optionee and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby Optionee irrevocably elects to exercise this Option and to sell a portion of the Shares so purchased to pay for the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; or (2) through a “margin” commitment from Optionee and an NASD Dealer whereby Optionee irrevocably elects to exercise this Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

(e) by any combination of the foregoing.

               4.4 Tax Withholding. Prior to the issuance of the Shares upon exercise of the Option, Optionee must pay or provide for any applicable federal or state withholding obligations of the Company. If the Committee permits, Optionee may provide for payment of withholding taxes upon exercise of the Option by requesting that the Company retain Shares with a Fair Market Value equal to the minimum amount of taxes required to be withheld. In such case, the Company shall issue the net number of Shares to the Optionee by deducting the Shares retained from the Shares issuable upon exercise.

               4.5 Issuance of Shares. Provided that the Exercise Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of Optionee, Optionee’s authorized assignee, or Optionee’s legal representative, and shall deliver certificates representing the Shares with the appropriate legends affixed thereto.

          5. Notice of Disqualifying Disposition of ISO Shares. To the extent the Option is an ISO, if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (a) the date two (2) years after the date of grant, and (b) the date one (1) year after transfer of such Shares to Optionee upon exercise of the Option, then Optionee shall immediately notify the Company in writing of such disposition.

          6. Compliance with Laws and Regulations. The exercise of the Option and the issuance and transfer of Shares shall be subject to compliance by the Company and Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Stock may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the SEC, any state securities commission or any stock exchange to effect such compliance.

          7. Nontransferability of Option. Except as otherwise set forth in Section 11 of the Plan, the Option may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Option shall be binding upon the executors, administrators, successors and assigns of Optionee.

          8. Tax Consequences. Set forth below is a brief summary as of the date the Board adopted the Plan of some of the federal tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

               8.1 Exercise of Incentive Stock Option. To the extent the Option qualifies as an ISO, there will be no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the fair market value of the Shares on the date of exercise

over the Exercise Price will be treated as a tax preference item for federal income tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise.

               8.2 Exercise of Nonqualified Stock Option. To the extent the Option does not qualify as an ISO, there may be a regular federal income tax liability upon the exercise of the Option. Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price. The Company may be required to withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.

               8.3 Disposition of Shares. The following tax consequences may apply upon disposition of the Shares.

                    a. Incentive Stock Options. If the Shares are held for more than twelve (12) months after the date of the transfer of the Shares pursuant to the exercise of an ISO and are disposed of more than two (2) years after the date of grant, any gain realized on disposition of the Shares will be treated as capital gain for federal income tax purposes. If Shares purchased under an ISO are disposed of within the applicable one (1) year or two (2) year period, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price.

                    b. Nonqualified Stock Options. If the Shares are held for more than twelve (12) months after the date of the transfer of the Shares pursuant to the exercise of an NQSO, any gain realized on disposition of the Shares will be treated as long-term capital gain.

                    c. Withholding. The Company may be required to withhold from Participant’s compensation or collect from the Participant and pay to the applicable taxing authorities an amount equal to a percentage of the compensation income.

          9. Privileges of Stock Ownership. Optionee shall not have any of the rights of a stockholder with respect to any Shares until the Shares are issued to Optionee.

          10. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or the Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and Optionee.

          11. Entire Agreement. The Plan is incorporated herein by reference. This Agreement, the Notice of Grant, the Plan and the Exercise Agreement constitute the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior understandings and agreements with respect to such subject matter.

          12. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated above or to such other address as such party may designate in writing from time to time to the Company. All

notices shall be deemed to have been given or delivered upon: personal delivery; three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested); one (1) business day after deposit with any return receipt express courier (prepaid); or one (1) business day after transmission by facsimile.

          13. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Optionee and Optionee’s heirs, executors, administrators, legal representatives, successors and assigns.

          14. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without regard to that body of law pertaining to choice of law or conflict of law.

OPTIONEE:	INTERWOVEN, INC.
	By:
Date:	Its: Senior Vice President and CFO
	Date:

EXHIBIT A

STOCK OPTION EXERCISE AGREEMENT

Exhibit A

INTERWOVEN, INC.
1999 EQUITY INCENTIVE PLAN (the “Plan”)
STOCK OPTION EXERCISE AGREEMENT

          I hereby elect to purchase the number of shares of Common Stock of Interwoven, Inc. (the “Company”) as set forth below:

Optionee			Number of Shares Purchased:
Social Security Number:			Purchase Price per Share:
Address:			Aggregate Purchase Price:
			Date of Option Agreement:
Type of Option:	[  ]	Incentive Stock Option	Exact Name of Title to Shares:
	[  ]	Nonqualified Stock Option

1. Delivery of Purchase Price. Optionee hereby delivers to the Company the Aggregate Purchase Price, to the extent permitted in the Stock Option Agreement (the “Option Agreement”) and Notice of Grant as follows (check as applicable and complete):

[   ]	in cash (by check) in the amount of $                                                            , receipt of which is acknowledged by the Company;
[    ]	by cancellation of indebtedness of the Company to Optionee in the amount of $                                                            ;
[    ]	by delivery of                                                              fully-paid, nonassessable and vested shares of the Common Stock of the Company owned by Optionee for at least six (6) months prior to the date hereof (and which have been paid for within the meaning of SEC Rule 144), or obtained by Optionee in the open public market, and owned free and clear of all liens, claims, encumbrances or security interests, valued at the current Fair Market Value of $                                         per share;
[    ]	by the waiver hereby of compensation due or accrued to Optionee for services rendered in the amount of $                                                                                      ;
[    ]	through a “same-day-sale” commitment, delivered herewith, from Optionee and the NASD Dealer named therein, in the amount of $                                                            ; or
[    ]	through a “margin” commitment, delivered herewith from Optionee and the NASD Dealer named therein, in the amount of $                                                                                .

2. Tax Consequences. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE’S PURCHASE OR DISPOSITION OF THE SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.

3. Entire Agreement. The Plan, Notice of Grant and Option Agreement are incorporated herein by reference. This Exercise Agreement, the Plan, Notice of Grant and the Option Agreement constitute the entire agreement and understanding of the parties and supersede in their entirety all prior understandings and agreements of the Company and Optionee with respect to the subject matter hereof, and are governed by California law except for that body of law pertaining to choice of law or conflict of law.

Date:
	Signature of Optionee

Spousal Consent

          I acknowledge that I have read the foregoing Stock Option Exercise Agreement (the “Agreement”) and that I know its contents. I hereby consent to and approve all of the provisions of the Agreement, and agree that the shares of the Common Stock of Interwoven, Inc. purchased thereunder (the “Shares”) and any interest I may have in such Shares are subject to all the provisions of the Agreement. I will take no action at any time to hinder operation of the Agreement on these Shares or any interest I may have in or to them.

	Date:
Signature of Optionee’s Spouse
Spouse’s Name — Typed or Printed
Optionee’s Name — Typed or Printed

INTERWOVEN, INC.
1999 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD

     The terms defined in the Interwoven, Inc. 1999 Equity Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Restricted Stock Unit Award (“Notice of Grant”).

Name:

Address:

You (“Participant”) have been granted an award of Restricted Stock Units (“RSUs”), subject to the terms and conditions of the Plan and the attached Award Agreement (Restricted Stock Units) (hereinafter “RSU Agreement”) to the Plan (available in hard copy by request), as follows:

Number of RSUs:
Date of Grant:
First Vesting Date:
Expiration Date:	The date on which settlement of all RSUs granted hereunder occurs, with earlier expiration upon the Termination Date
[Vesting Schedule:]

Participant understands that his/her employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time with or without cause (i.e., is “at-will”), and that nothing in this Notice of Grant, the Attached Award Agreement or the Plan changes the at-will nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice of Grant is earned only by continuing service as an employee or consultant of the Company. Participant also understands that this Notice of Grant is subject to the terms and conditions of both the RSU Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the RSU Agreement and the Plan.

PARTICIPANT		INTERWOVEN, INC.
	By:
Print Name:	Its:

INTERWOVEN, INC.
AWARD AGREEMENT (RESTRICTED STOCK UNITS) TO THE
INTERWOVEN, INC. 1999 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in Interwoven, Inc.’s 1999 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Award Agreement (Restricted Stock Units) (the “Agreement”).

You have been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions and conditions of the Plan, the Notice of Restricted Stock Unit Grant (“Notice of Grant”) and this Agreement.

1. Settlement. Unless otherwise deferred by Participant as permitted by the Committee, settlement of RSUs shall be made within 30 days following the applicable date of vesting under the vesting schedule set forth in the Notice of Grant. Settlement of RSUs shall be in Shares or cash as determined by the Committee.

2. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant shall have no ownership of the Shares allocated to the RSUs and shall have no right dividends or to vote such Shares.

3. Dividend Equivalents. Dividends, if any (whether in cash or Shares), shall not be credited to Participant.

4. [Cessation of Vesting Due to Employee Schedule Change. Notwithstanding the vesting provided for in the Notice of Grant in the event a Participant who is an employee of the Company or a Subsidiary, who is regularly scheduled to work twenty (20) hours or more per week, voluntarily chooses (i.e., other than for reasons protected by law) to reduce his or her work schedule with the Company or a subsidiary to fewer than twenty (20) hours per week, the RSUs subject to the award shall cease to vest during the period of time in which such employee regularly maintains such a schedule.][Vesting schedule may or may not be subject to the foregoing provision.]

5. No Transfer. The RSUs and any interest therein shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of.

6. Termination. If Participant’s continuous employment with the Company or any of its subsidiaries shall terminate for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights of Participant to such RSUs shall immediately terminate. In case of any dispute as to whether Termination has occurred, the Committee shall have sole discretion to determine whether such Termination has occurred and the effective date of such Termination.

7. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by this Agreement, the provisions of the Plan and the Notice of Grant (incorporated herein by reference). Participant: (i) acknowledges receipt of a copy of the Plan and the Plan prospectus, (ii) represents that Participant has carefully read and is familiar with their provisions, and (iii) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant.

8. Tax Consequences. Participant acknowledges that there will be tax consequences upon settlement of the RSUs or disposition of the Shares, if any, received in connection therewith, and

Participant should consult a tax adviser regarding Participant’s tax obligations prior to such settlement or disposition. Upon vesting of the RSU, Participant will include in income the fair market value of the Shares subject to the RSU. The included amount will be treated as ordinary income by Participant and will be subject to withholding by the Company. The Company will satisfy any withholding obligations by reducing the number of Shares deliverable upon settlement by such an amount to satisfy such withholding requirements. Information on possible arrangements can be obtained from the Company. Upon disposition of the Shares, any subsequent increase or decrease in value will be treated as short-term or long-term capital gain or loss, depending on whether the Shares are held for more than one year from the date of settlement. In the event you are not a US taxpayer, the tax consequences described above could be different; you should consult your tax or financial advisor.

9. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.

10. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.

11. Severability. The Plan and Notice of Grant are incorporated herein by reference. The Plan, the Notice of Grant and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.

12. NO GUARANTEE OF EMPLOYMENT. PARTICIPANT UNDERSTANDS AND AGREES THAT HIS OR HER EMPLOYMENT WITH THE COMPANY OR ITS SUBSIDIARIES IS FOR AN UNSPECIFIED DURATION AND CONSTITUTES “AT-WILL” EMPLOYMENT. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF RSU’S PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY OR ITS SUBSIDIARY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED RSU’S OR BEING ISSUED SHARES HEREUNDER). PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER, AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PARTICIPANT’S RIGHT OR THE COMPANY’S AND/OR SUBSIDIARY’S RIGHT TO TERMINATE PARTICIPANT’S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

     By Participant’s signature and the signature of the Company’s representative on the Notice of Grant, Participant and the Company agree that this RSU is granted under and governed by the terms and conditions of the Plan, the Notice of Grant and this Agreement. Participant has reviewed the Plan, the Notice of Grant and this Agreement in their entirety, has had an opportunity to obtain the advice of

counsel prior to executing this Agreement, and fully understands all provisions of the Plan, the Notice of Grant and this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant and this Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address.

INTERWOVEN, INC.
1999 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD

     The terms defined in the Interwoven, Inc. 1999 Equity Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Restricted Stock Unit Award (“Notice of Grant”).

	Name:
	Address:
You (“Participant”) have been granted an award of Restricted Stock Units (“RSUs”), subject to the terms and conditions of the Plan and the attached Award Agreement (Restricted Stock Units) (hereinafter “RSU Agreement”) to the Plan (available in hard copy by request), as follows:
	Number of RSUs:
	Date of Grant:
	First Vesting Date:
	Expiration Date:	The date on which settlement of all RSUs granted hereunder occurs, with earlier expiration upon the Termination Date
	Vesting Schedule:	Provided Participant continues to provide services to the Company or any Subsidiary or Parent of the Company, the RSUs will become vested as to portions of the Number of RSUs as follows: (i) the RSUs shall not vest with respect to any of the underlying Shares until the First Vesting Date; (ii) on the First Vesting Date the RSUs will become vested as to twenty-five percent (25%) of the Number of RSUs; and (iii) thereafter each year on the anniversary of the First Vesting Date the RSUs shall vest as to an additional twenty-five percent (25%) of the Number of RSUs until this award is vested with respect to one hundred percent (100%) of the RSUs. RSUs that are vested pursuant to the schedule set forth in this paragraph (or pursuant to the following paragraph) are “Vested RSUs.” RSUs that are not vested pursuant to the schedule set forth in this paragraph (or pursuant to the following paragraph) are “Unvested RSUs.” Settlement of RSUs will be solely in Shares, on a one Share-for-one RSU basis, as the Unvested RSUs vest in accordance with Section 1 of the RSU Agreement.
		Notwithstanding the provisions of the preceding paragraph, however, if there is a Sale of the Company and Participant’s

employment is terminated by the Company or its successor without Cause in connection with the Sale of the Company, then upon such termination the Unvested RSUs subject to this award will become vested as to an additional number of Unvested RSUs equal to fifty percent (50%) of the RSUs that were Unvested RSUs at the closing of the Sale of the Company (or such lesser number as will result in a greater after-tax benefit if Participant would be subject to the excise tax imposed by Section 4999 of the Code).

For purposes of this vesting acceleration provision, “Cause” means (i) willfully engaging in gross misconduct that is materially and demonstrably injurious to the Company; (ii) willful act or acts of dishonesty undertaken by Participant and intended to result in substantial gain or personal enrichment for Participant at the expense of the Company; or (iii) willful and continued failure to substantially perform Participant’s duties with the Company or its successor (other than incapacity due to physical or mental illness); provided that the action or conduct described in clause (iii) above will constitute “Cause” only if such failure continues after the Board of Directors has provided Participant with a written demand for substantial performance setting forth in detail the specify respects in which it believes Participant has willfully and not substantially performed his duties thereof and a reasonable opportunity (to be not less than 30 days) to cure the same. For such purpose, a termination by the Company without Cause includes a termination of employment by Participant within 30 days following any of the following events: (x) the assignment of any duties to Participant inconsistent with, or reflecting a materially adverse change in, Participant’s position, duties or responsibilities with the Company (or any successor) without Participant’s concurrence; or (y) the relocation of the Company’s principal executive offices (or relocating Participant’s principal place of business) in excess of fifty (50) miles from the Company’s current executive offices located in Sunnyvale, California. For purposes of the vesting acceleration provisions of paragraph (b), the term “Sale of the Company” means (i) the sale or other disposition of all or substantially all of the assets of the Company, or (ii) the acquisition of the Company by another entity by means of consolidation, corporate reorganization or merger, or other transaction or series of related transactions in which more than fifty percent (50%) of the outstanding voting power of the Company is transferred.

Participant understands that his/her employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time with or without cause (i.e., is “at-will”), and that nothing in this Notice of Grant, the Attached Award Agreement or the Plan changes the at-will nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice of Grant is earned only by continuing service as an employee or consultant of the Company. Participant also understands that this Notice of Grant is subject to the terms and conditions of both the RSU Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the RSU Agreement and the Plan.

PARTICIPANT		INTERWOVEN, INC.
	By:
Print Name:	Its:

INTERWOVEN, INC.
AWARD AGREEMENT (RESTRICTED STOCK UNITS) TO THE
INTERWOVEN, INC. 1999 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in Interwoven, Inc.’s 1999 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Award Agreement (Restricted Stock Units) (the “Agreement”).

You have been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions and conditions of the Plan, the Notice of Restricted Stock Unit Grant (“Notice of Grant”) and this Agreement.

1. Settlement. Unless otherwise deferred by Participant as permitted by the Committee, settlement of RSUs shall be made within 30 days following the applicable date of vesting under the vesting schedule set forth in the Notice of Grant. Settlement of RSUs shall be in Shares or cash as determined by the Committee.

2. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant shall have no ownership of the Shares allocated to the RSUs and shall have no right dividends or to vote such Shares.

3. Dividend Equivalents. Dividends, if any (whether in cash or Shares), shall not be credited to Participant.

4. Cessation of Vesting Due to Employee Schedule Change. Notwithstanding the vesting provided for in the Notice of Grant in the event a Participant who is an employee of the Company or a Subsidiary, who is regularly scheduled to work twenty (20) hours or more per week, voluntarily chooses (i.e., other than for reasons protected by law) to reduce his or her work schedule with the Company or a subsidiary to fewer than twenty (20) hours per week, the RSUs subject to the award shall cease to vest during the period of time in which such employee regularly maintains such a schedule.

5. No Transfer. The RSUs and any interest therein shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of.

6. Termination. If Participant’s continuous employment with the Company or any of its subsidiaries shall terminate for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights of Participant to such RSUs shall immediately terminate. In case of any dispute as to whether Termination has occurred, the Committee shall have sole discretion to determine whether such Termination has occurred and the effective date of such Termination.

7. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by this Agreement, the provisions of the Plan and the Notice of Grant (incorporated herein by reference). Participant: (i) acknowledges receipt of a copy of the Plan and the Plan prospectus, (ii) represents that Participant has carefully read and is familiar with their provisions, and (iii) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant.

8. Tax Consequences. Participant acknowledges that there will be tax consequences upon settlement of the RSUs or disposition of the Shares, if any, received in connection therewith, and Participant should consult a tax adviser regarding Participant’s tax obligations prior to such settlement or disposition. Upon vesting of the RSU, Participant will include in income the fair market value of the Shares subject to the RSU. The included amount will be treated as ordinary income by Participant and will be subject to withholding by the Company. The Company will satisfy any withholding obligations by reducing the number of Shares deliverable upon settlement by such an amount to satisfy such withholding requirements. Information on possible arrangements can be obtained from the Company. Upon disposition of the Shares, any subsequent increase or decrease in value will be treated as short-term or long-term capital gain or loss, depending on whether the Shares are held for more than one year from the date of settlement. In the event you are not a US taxpayer, the tax consequences described above could be different; you should consult your tax or financial advisor.

9. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.

10. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.

11. Severability. The Plan and Notice of Grant are incorporated herein by reference. The Plan, the Notice of Grant and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.

12. NO GUARANTEE OF EMPLOYMENT. PARTICIPANT UNDERSTANDS AND AGREES THAT HIS OR HER EMPLOYMENT WITH THE COMPANY OR ITS SUBSIDIARIES IS FOR AN UNSPECIFIED DURATION AND CONSTITUTES “AT-WILL” EMPLOYMENT. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF RSU’S PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY OR ITS SUBSIDIARY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED RSU’S OR BEING ISSUED SHARES HEREUNDER). PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER, AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PARTICIPANT’S RIGHT OR THE COMPANY’S AND/OR SUBSIDIARY’S RIGHT TO TERMINATE PARTICIPANT’S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

     By Participant’s signature and the signature of the Company’s representative on the Notice of Grant, Participant and the Company agree that this RSU is granted under and governed by the terms

and conditions of the Plan, the Notice of Grant and this Agreement. Participant has reviewed the Plan, the Notice of Grant and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement, and fully understands all provisions of the Plan, the Notice of Grant and this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant and this Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address.

EX-10.03

Exhibit 10.03

INTERWOVEN, INC.

2000 STOCK INCENTIVE PLAN

As Adopted May 16, 2000
As Amended Thereafter

     1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, its Parent and Subsidiaries, by offering them an opportunity to participate in the Company’s future performance through awards of Options, Restricted Stock and Restricted Stock Units (RSU). Capitalized terms not defined in the text are defined in Section 23 if they are not otherwise defined in other sections of this Plan.

     2. SHARES SUBJECT TO THE PLAN.

          2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be 3,000,000¹ Shares. Subject to Sections 2.2 and 18, Shares that are subject to: (a) issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Award and (b) an Award granted hereunder but are forfeited or are repurchased by the Company at the original issue price because the Shares are Unvested Shares at the time of the Participant’s Termination, will again be available for grant and issuance in connection with future Awards under this Plan. At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Awards granted under this Plan.

          2.2 Adjustment of Shares. If the number of outstanding shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under this Plan, (b) the Exercise Prices of and number of Shares subject to outstanding Options, and (c) the number of Shares subject to other outstanding Awards, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, that fractions of a Share will not be issued but will either be paid in cash at the Fair Market Value of such fraction of a Share or will be rounded up to the nearest whole Share, as determined by the Committee; and provided, further, that the Exercise Price of any Award may not be decreased to below the par value of the Shares.

     3. ELIGIBILITY. Awards may be granted to employees, officers, directors, consultants, independent contractors and advisors of the Company or any Parent or Subsidiary of the Company; provided such consultants, independent contractors and advisors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. A

¹ Adjusted to reflect (i) the 2-for-1 split of the Company’s Common Stock effected in July 2000 (the “Split”); (ii) the authorization of an additional 4,000,000 (post-Split) shares of the Company’s Common Stock for issuance under the Plan approved by the Company’s Board of Directors on September 7, 2000; (iii) the 2-for-1 split of the Company’s Common Stock effected in December 2000; and (iv) the 1-for-4 reverse stock split of the Company’s Common Stock effected in November 2003.

Interwoven Inc.
2000 Stock Incentive Plan

person may be granted more than one Award under this Plan. Awards granted to officers may not exceed in the aggregate forty percent (40%) of all Shares that are reserved for grant under this Plan. Awards granted as Restricted Stock to officers may not exceed in the aggregate forty percent (40%) of all Shares that are granted as Restricted Stock.

     4. ADMINISTRATION.

          4.1 Committee Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan. Without limitation, the Committee will have the authority to:

               (a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;

               (b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award;

               (c) select persons to receive Awards;

               (d) determine the form and terms of Awards;

               (e) determine the number of Shares subject to Awards;

               (f) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;

               (g) grant waivers of Plan or Award conditions;

               (h) determine the vesting, exercisability and payment of Awards;

               (i) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;

               (j) determine whether an Award has been earned; and

               (k) make all other determinations necessary or advisable for the administration of this Plan.

          4.2 Committee Discretion. Any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of this Plan or Award, at any later time, and such determination will be final and binding on the Company and on all persons having an interest in any Award under this Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan to Participants who are not officers.

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     5. OPTIONS. Only nonqualified stock options that do not qualify as incentive stock options within the meaning of Section 422(b) of the Code may be granted under this Plan. The Committee may grant Options to eligible persons and will determine (i) the number of Shares subject to the Option, (ii) the Exercise Price of the Option, (iii) the period during which the Option may be exercised, and (iv) all other terms and conditions of the Option, subject to the following:

          5.1 Form of Option Grant. Each Option granted under this Plan will be evidenced by a Stock Option Agreement. The Stock Option Agreement will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan.

          5.2 Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant the Option, unless a later date is otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the Option is granted.

          5.3 Exercise Period and Expiration Date. Options will be exercisable within the times or upon the occurrence of events determined by the Committee as set forth in the Stock Option Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.

          5.4 Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and may be not less than the par value of the Shares on the date of grant. Payment for the Shares purchased must be made in accordance with Section 8 of this Plan.

          5.5 Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the “Exercise Agreement”) in a form approved by the Committee (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price for the number of Shares being purchased.

          5.6 Termination. Notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following:

               (a) If the Participant is Terminated for any reason except death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable upon the Termination Date no later than three (3) months after the Termination Date (or such shorter or longer time period not exceeding five (5)

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years as may be determined by the Committee, but in any event, no later than the expiration date of the Options.

               (b) If the Participant is Terminated because of Participant’s death or Disability (or the Participant dies within three (3) months after a Termination other than for Cause or because of Participant’s Disability), then Participant’s Options may be exercised only to the extent that such Options would have been exercisable by Participant on the Termination Date and must be exercised by Participant (or Participant’s legal representative or authorized assignee) no later than twelve (12) months after the Termination Date (or such shorter or longer time period not exceeding five (5) years as may be determined by the Committee) but in any event no later than the expiration date of the Options.

               (c) Notwithstanding the provisions in paragraph 5.6(a) above, if a Participant is terminated for Cause, neither the Participant, the Participant’s estate nor such other person who may then hold the Option shall be entitled to exercise any Option with respect to any Shares whatsoever, after termination of service, whether or not after termination of service the Participant may receive payment from the Company or any Parent or Subsidiary of the Company for vacation pay, for services rendered prior to termination, for services rendered for the day on which termination occurs, for salary in lieu of notice, or for any other benefits. In making such determination, the Board shall give the Participant an opportunity to present to the Board evidence on his behalf. For the purpose of this paragraph, termination of service shall be deemed to occur on the date when the Company dispatches notice or advice to the Participant that his service is terminated.

          5.7 Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that the minimum number will not prevent a Participant from exercising the Option for the full number of Shares for which it is then exercisable.

          5.8 Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. The Committee may reduce the Exercise Price of outstanding Options without the consent of Participants affected by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 of this Plan for Options granted on the date the action is taken to reduce the Exercise Price; and provided, further, that the Exercise Price shall not be reduced below the par value of the Shares.

     6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to restrictions. The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the price to be paid (the “Purchase Price”), the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following:

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          6.1 Form of Restricted Stock Award. All purchases under a Restricted Stock Award made pursuant to this Plan will be evidenced by an Award Agreement (“Restricted Stock Purchase Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The offer of Restricted Stock will be accepted by the Participant’s execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within thirty (30) days, then the offer will terminate, unless otherwise determined by the Committee.

          6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined by the Committee on the date the Restricted Stock Award is granted and may be not less than the par value of the Shares on the date of grant. Payment of the Purchase Price may be made in accordance with Section 8 of this Plan.

          6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall be subject to such restrictions as the Committee may impose. These restrictions may be based upon completion of a specified number of years of service with the Company or upon completion of the performance goals as set out in advance in the Participant’s individual Restricted Stock Purchase Agreement. Restricted Stock Awards may vary from Participant to Participant and between groups of Participants. Prior to the payment of any Restricted Stock Award, the Committee shall determine the extent to which such Restricted Stock Award has been earned.

          6.4 Termination During Performance Period. If a Participant is Terminated during a performance period for any reason, then such Participant will be entitled to payment (whether in Shares, cash or otherwise) with respect to the Restricted Stock Award only to the extent earned as of the date of Termination in accordance with the Restricted Stock Purchase Agreement, unless the Committee will determine otherwise.

7. RESTRICTED STOCK UNITS

          7.1 Award of Restricted Stock Units. An RSU is an award to a Participant covering a number of Shares that may be settled in cash, or by issuance of those Shares for services to be rendered or for past services already rendered to the Company or any Subsidiary. RSUs will vest over a minimum of three years as measured from the date of grant.

          7.2 Form and Timing of Settlement. To the extent permissible under applicable law, the Committee may permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned, provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code (or any successor) and any regulations or rulings promulgated thereunder. Payment may be made in the form of cash or whole Shares or a combination thereof in a lump sum payment, all as the Committee determines.

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     8. PAYMENT FOR SHARE PURCHASES.

          8.1 Payment. Payment for Shares purchased on exercise of an Award may be made in cash (by check) or, where expressly approved for the Participant by the Committee and where permitted by law:

               (a) by cancellation of indebtedness of the Company to the Participant;

               (b) by surrender of shares that either: (1) have been owned by Participant for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by Participant in the public market;

               (c) by tender of a full recourse promissory note having such terms as may be approved by the Committee and bearing interest at a rate sufficient to avoid imputation of income under Sections 483 and 1274 of the Code; provided, however, that a Participant who is not an employee of the Company may not purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares; and provided, further, that the portion of the Exercise Price equal to the par value of the Shares must be paid in cash;

               (d) by waiver of compensation due or accrued to the Participant for services rendered;

               (e) provided that a public market for the Company’s stock exists:

                    (1) through a “same day sale” commitment from the Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

                    (2) through a “margin” commitment from the Participant and a NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

               (f) by any combination of the foregoing.

          8.2 Loan Guarantees. The Committee may help the Participant pay for Shares purchased under this Plan by authorizing a guarantee by the Company of a third-party loan to the Participant.

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     9. WITHHOLDING TAXES.

          9.1 Withholding Generally. Whenever Shares are to be issued on exercise of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. If a payment in satisfaction of an Award is to be made in cash, such payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements.

          9.2 Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may in its sole discretion allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee and be in writing in a form acceptable to the Committee

     10. PRIVILEGES OF STOCK OWNERSHIP.

          10.1 Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, however, that if such Shares are Restricted Stock, any new, additional or different securities the Participant may become entitled to receive with respect to the Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further that the Participant will have no right to retain such dividends or distributions with respect to Shares that are repurchased at the Participant’s original Exercise Price pursuant to Section 12.

          10.2 Financial Statements. The Company will provide financial statements to each Participant prior to such Participant’s purchase of Shares under this Plan, and to each Participant annually during the period such Participant has Awards outstanding; provided, however, that the Company will not be required to provide such financial statements to Participants whose services in connection with the Company assure them access to equivalent information.

     11. TRANSFERABILITY.

          11.1 Except as otherwise provided in this Section 11, Awards granted under this Plan, and any interest therein, will not be transferable or assignable by Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws

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of descent and distribution or as determined by the Committee and set forth in the Award Agreement.

          11.2 Unless otherwise restricted by the Committee, an Option shall be exercisable: (i) during the Participant’s lifetime only by (A) the Participant, (B) the Participant’s guardian or legal representative, (C) a Family Member of the Participant who has acquired the Option by “permitted transfer;” and (ii) after Participant’s death, by the legal representative of the Participant’s heirs or legatees. “Permitted transfer” means, as authorized by this Plan and the Committee in an Option, any transfer effected by the Participant during the Participant’s lifetime of an interest in such Option but only such transfers which are by gift or domestic relations order. A permitted transfer does not include any transfer for value and neither of the following are transfers for value: (a) a transfer of under a domestic relations order in settlement of marital property rights or (b) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members or the Participant in exchange for an interest in that entity.

          11.3 Unless otherwise restricted by the Committee, a Restricted Stock may be transferred during the Participant’s lifetime, only to (A) the Participant, or (B) the Participant’s guardian or legal representative.

     12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Award Agreement a right to repurchase at the Participant’s Exercise Price a portion of or all Unvested Shares held by a Participant following such Participant’s Termination at any time within ninety (90) days after the later of Participant’s Termination Date and the date Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Exercise Price or Purchase Price, as the case may be.

     13. CERTIFICATES. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.

     14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing the Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any

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pledge of the Shares, Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.

     15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, Shares (including Restricted Stock) or other consideration, based on such terms and conditions as the Committee and the Participant may agree.

     16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.

     17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s employment or other relationship at any time, with or without cause.

     18. CORPORATE TRANSACTIONS.

          18.1 Assumption or Replacement of Awards by Successor. In the event of (a) a dissolution or liquidation of the Company, (b) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the Awards granted under this Plan are assumed, converted or replaced by the successor corporation, which assumption will be binding on all Participants), (c) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (d) the sale of substantially all of the assets of the

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Company, or (e) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction, any or all outstanding Awards may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event such successor corporation (if any) refuses to assume or substitute Awards, as provided above, pursuant to a transaction described in this Subsection 18.1, such Awards will expire on such transaction at such time and on such conditions as the Committee will determine; provided, however, that the Committee may, in its sole discretion, provide that the vesting of any or all Awards granted pursuant to this Plan will accelerate. If the Committee exercises such discretion with respect to Options, such Options will become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines, and if such Options are not exercised prior to the consummation of the corporate transaction, they shall terminate at such time as determined by the Committee.

          18.2 Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Section 18, in the event of the occurrence of any transaction described in Subsection 18.1, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, or sale of assets.

          18.3 Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of Shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price.

     19. ADOPTION. This Plan will become effective on the date that it is adopted by the Board (the “Effective Date”).

     20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the Effective Date. This Plan and all agreements thereunder shall be governed by and construed in accordance with the laws of the State of California.

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     21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan.

     22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock option and bonues otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

     23. DEFINITIONS. As used in this Plan, the following terms will have the following meanings:

          “Award” means any award under this Plan, including any Option or Restricted Stock.

          “Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award.

          “Board” means the Board of Directors of the Company.

          “Cause” means the commission of an act of theft, embezzlement, fraud, dishonesty or a breach of fiduciary duty to the Company or a Parent or Subsidiary of the Company.

          “Code” means the Internal Revenue Code of 1986, as amended.

          “Committee” means the Compensation Committee of the Board.

          “Company” means Interwoven, Inc. or any successor corporation.

          “Disability” means a disability, whether temporary or permanent, partial or total, as determined by the Committee.

          “Exercise Price” means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.

          “Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

(a) if such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in The Wall Street Journal;

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(b)	if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal; or
(c)	if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal;
(d)	if none of the foregoing is applicable, by the Committee in good faith.

          “Family Member” includes any of the following:

(a)	child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Participant, including any such person with such relationship to the Participant by adoption;
(b)	any person (other than a tenant or employee) sharing the Participant’s household;
(c)	a trust in which the persons in (a) and (b) have more than fifty percent of the beneficial interest;
(d)	a foundation in which the persons in (a) and (b) or the Participant control the management of assets; or
(e)	any other entity in which the persons in (a) and (b) or the Participant own more than fifty percent of the voting interest.

          “Option” means an award of an option to purchase Shares pursuant to Section 5.

          “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

          “Participant” means a person who receives an Award under this Plan.

          “Plan” means this Interwoven, Inc. 2000 Stock Incentive Plan, as amended from time to time.

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          “Restricted Stock Award” means an award of Shares pursuant to Section 6.

          “RSU” means an award granted pursuant to Section 7.

          “SEC” means the Securities and Exchange Commission.

          “Securities Act” means the Securities Act of 1933, as amended.

          “Shares” means shares of the Company’s Common Stock reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any successor security.

          “Stock Option Agreement” means, with respect to each Option, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Option.

          “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

          “Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, consultant, independent contractor, or advisor to the Company or a Parent or Subsidiary of the Company. An employee will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee, provided, that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing. In the case of any employee on an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the employ of the Company or a Parent or Subsidiary of the Company as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the Award Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”).

          “Unvested Shares” means “Unvested Shares” as defined in the Award Agreement.

          “Vested Shares” means “Vested Shares” as defined in the Award Agreement.

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EX-10.04

Exhibit 10.04

Notice of Grant of Stock
Options and Option Agreement

Interwoven, Inc.
ID: 94-3221352
803 — 11th Avenue
Sunnyvale, CA 94089

Employee Name
Option Number:
Plan:
ID:

Effective                       , you have been granted a(n)                       [Incentive/Nonqualified] Stock Option to buy                       shares of Interwoven, Inc. (the Company) stock at $                      per share.

The total option price of the shares granted is $                    .

Shares in each period will become fully vested on the date shown.

[Vesting may occur based on achievement, at the end of a period of time, of a specified goal or specified goals based on such factors as: annual revenue, cash position, earnings per share, operating cash flow, market share, new product releases, net income, operating income, return on assets, return on equity, return on investment, software license bookings, EBITDA or other financial measure, or any other performance-related goal as approved from time to time.]

By your signature and the Company’s signature below, you and the Company agree that these options are granted under and governed by the terms and conditions of the Company’s Stock Option Plan as amended and the Option Agreement, all of which are attached and made a part of this document.

Interwoven, Inc.	Date
Optionee Name	Date

INTERWOVEN, INC.

2000 STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT

          1. Grant of Option. The Interwoven, Inc. (the “Company”) hereby grants to Optionee an option (this “Option”) to purchase up to the total number of shares of Common Stock of the Company set forth in the Notice of Grant (collectively, the “Shares”) at the exercise price set forth in the Notice of Grant (the “Exercise Price”), subject to all of the terms and conditions of the Notice of Grant, this Stock Option Agreement (the “Agreement”) and the 2000 Stock Incentive Plan (the “Plan”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Plan.

          2. Vesting; Exercise Period.

               2.1 Vesting of Shares. The Option shall be exercisable as it vests, unless otherwise indicated in the Notice of Grant. Subject to the terms and conditions of the Plan and the Agreement, the Option shall vest and become exercisable as to portions of the Shares pursuant to the vesting schedule specified in the Notice of Grant, provided that Optionee has continuously provided services to the Company, or any Parent or Subsidiary of the Company, at all times during the relevant month.

               2.2 Vesting of Options. Shares that are vested pursuant to the vesting schedule set forth in the Notice of Grant are “Vested Shares.” Shares that are not vested pursuant to the schedule set forth in the Notice of Grant are “Unvested Shares.”

               2.3 Expiration. The Option shall expire on the expiration date set forth in the Notice of Grant, and must be exercised, if at all, on or before the earlier of the expiration date of the Option or the date on which the Option is earlier terminated in accordance with the provisions of Section 3 hereof.

          3. Termination.

               3.1 Termination for Any Reason Except Death, Disability or Cause. If Optionee is Terminated for any reason except Optionee’s death, Disability or Cause, then the Option, to the extent (and only to the extent) that it is vested in accordance with the schedule set forth in the Notice of Grant on the Termination Date, may be exercised by Optionee no later than three (3) months after the Termination Date, but in any event no later than the expiration date.

               3.2 Termination Because of Death or Disability. If Optionee is Terminated because of death or Disability of Optionee (or the Optionee dies within three (3) months after Termination other than for Cause or because of Disability), then the Option, to the extent that it is vested in accordance with the schedule in the Notice of Grant on the Termination Date, may be exercised by Optionee (or Optionee’s legal representative or authorized assignee)

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Interwoven, Inc.
Stock Option Agreement
2000 Stock Incentive Plan

no later than twelve (12)months after the Termination Date, but in any event no later than the expiration date.

               3.3 Termination for Cause. If Optionee is Terminated for Cause, the Option will expire on the Optionee’s date of Termination.

               3.4 No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Optionee any right to continue in the employ of, or other relationship with, the Company or any Parent or Subsidiary of the Company, or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Optionee’s employment or other relationship at any time, with or without Cause.

          4. Manner of Exercise.

               4.1 Stock Option Exercise Agreement. To exercise the Option, Optionee (or in the case of exercise after Optionee’s death, Optionee’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company an executed stock option exercise agreement in the form attached hereto as Exhibit A, or in such other form as may be approved by the Company from time to time (the “Exercise Agreement”), which shall set forth, inter alia, Optionee’s election to exercise the Option, the number of shares being purchased, any restrictions imposed on the Shares and any representations, warranties and agreements regarding Optionee’s investment intent and access to information as may be required by the Company to comply with applicable securities laws. If someone other than Optionee exercises the Option, then such person must submit documentation reasonably acceptable to the Company that such person has the right to exercise the Option.

               4.2 Limitations on Exercise. The Option may not be exercised unless such exercise is in compliance with all applicable federal and state securities laws, as they are in effect on the date of exercise.

               4.3 Payment. The Exercise Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased in cash (by check), or where permitted by law:

(a)	by cancellation of indebtedness of the Company to the Optionee;
(b)	by surrender of shares of the Company’s Common Stock that either: (1) have been owned by Optionee for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by Optionee in the open public market; and (3) are clear of all liens, claims, encumbrances or security interests;
(c)	by waiver of compensation due or accrued to Optionee for services rendered;
(d)	provided that a public market for the Company’s stock exists: (1) through a “same day sale” commitment from Optionee and a broker-dealer that is a member of the

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Interwoven, Inc.
Stock Option Agreement
2000 Stock Incentive Plan

National Association of Securities Dealers (an “NASD Dealer”) whereby Optionee irrevocably elects to exercise this Option and to sell a portion of the Shares so purchased to pay for the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; or (2) through a “margin” commitment from Optionee and an NASD Dealer whereby Optionee irrevocably elects to exercise this Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or

(e)

by any combination of the foregoing.

               4.4 Tax Withholding. Prior to the issuance of the Shares upon exercise of the Option, Optionee must pay or provide for any applicable federal or state withholding obligations of the Company. If the Committee permits, Optionee may provide for payment of withholding taxes upon exercise of the Option by requesting that the Company retain Shares with a Fair Market Value equal to the minimum amount of taxes required to be withheld. In such case, the Company shall issue the net number of Shares to the Optionee by deducting the Shares retained from the Shares issuable upon exercise.

               4.5 Issuance of Shares. Provided that the Exercise Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of Optionee, Optionee’s authorized assignee, or Optionee’s legal representative, and shall deliver certificates representing the Shares with the appropriate legends affixed thereto.

          5. [INTENTIONALLY LEFT BLANK]

          6. Compliance with Laws and Regulations. The exercise of the Option and the issuance and transfer of Shares shall be subject to compliance by the Company and Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Stock may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the SEC, any state securities commission or any stock exchange to effect such compliance.

          7. Nontransferability of Option. Except as otherwise set forth in Section 11 of the Plan, the Option may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Option shall be binding upon the executors, administrators, successors and assigns of Optionee.

          8. Tax Consequences. Set forth below is a brief summary as of the date the Board adopted the Plan of some of the federal tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD

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Interwoven, Inc.
Stock Option Agreement
2000 Stock Incentive Plan

CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

               8.1 Exercise of Nonqualified Stock Option. There may be a regular federal income tax liability upon the exercise of the Option. Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price. The Company may be required to withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.

               8.2 Disposition of Shares. The following tax consequences may apply upon disposition of the Shares.

                    a. Nonqualified Stock Options. If the Shares are held for more than twelve (12) months after the date of the transfer of the Shares pursuant to the exercise of an nonqualified stock option, any gain realized on disposition of the Shares will be treated as long-term capital gain.

                    b. Withholding. The Company may be required to withhold from Participant’s compensation or collect from the Participant and pay to the applicable taxing authorities an amount equal to a percentage of the compensation income.

          9. Privileges of Stock Ownership. Optionee shall not have any of the rights of a stockholder with respect to any Shares until the Shares are issued to Optionee.

          10. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or the Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and Optionee.

          11. Entire Agreement. The Plan is incorporated herein by reference. This Agreement, the Notice of Grant, the Plan and the Exercise Agreement constitute the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior understandings and agreements with respect to such subject matter.

          12. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated above or to such other address as such party may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: personal delivery; three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested); one (1) business day after deposit with any return receipt express courier (prepaid); or one (1) business day after transmission by facsimile.

          13. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors

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Interwoven, Inc.
Stock Option Agreement
2000 Stock Incentive Plan

and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Optionee and Optionee’s heirs, executors, administrators, legal representatives, successors and assigns.

          14. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without regard to that body of law pertaining to choice of law or conflict of law.

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EXHIBIT A

STOCK OPTION EXERCISE AGREEMENT

Exhibit A

INTERWOVEN, INC.
2000 STOCK INCENTIVE PLAN (the “Plan”)
STOCK OPTION EXERCISE AGREEMENT

     I hereby elect to purchase the number of shares of Common Stock of Interwoven, Inc. (the “Company”) as set forth below:

Optionee
Social Security Number:
Address:
Type of Option:	[ ] Incentive Stock Option
	[ ] Nonqualified Stock Option

Number of Shares Purchased:

Purchase Price per Share:

Aggregate Purchase Price:

Date of Option Agreement:

Exact Name of Title to Shares:

1. Delivery of Purchase Price. Optionee hereby delivers to the Company the Aggregate Purchase Price, to the extent permitted in the Stock Option Agreement (the “Option Agreement”) and Notice of Grant as follows (check as applicable and complete):

[ ]	in cash (by check) in the amount of $                                        , receipt of which is acknowledged by the Company;
[ ]	by cancellation of indebtedness of the Company to Optionee in the amount of $                                        ;
[ ]	by delivery of                                          fully-paid, nonassessable and vested shares of the Common Stock of the Company owned by Optionee for at least six (6) months prior to the date hereof (and which have been paid for within the meaning of SEC Rule 144), or obtained by Optionee in the open public market, and owned free and clear of all liens, claims, encumbrances or security interests, valued at the current Fair Market Value of $                                         per share;
[ ]	by the waiver hereby of compensation due or accrued to Optionee for services rendered in the amount of $                                        ;
[ ]	through a “same-day-sale” commitment, delivered herewith, from Optionee and the NASD Dealer named therein, in the amount of $                                        ; or
[ ]	through a “margin” commitment, delivered herewith from Optionee and the NASD Dealer named therein, in the amount of $                                        .

2. Tax Consequences. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE’S PURCHASE OR DISPOSITION OF THE SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.

3. Entire Agreement. The Plan, Notice of Grant and Option Agreement are incorporated herein by reference. This Exercise Agreement, the Plan, Notice of Grant and the Option Agreement constitute the entire agreement and understanding of the parties and supersede in their entirety all prior understandings and agreements of the Company and Optionee with respect to the subject matter hereof, and are governed by California law except for that body of law pertaining to choice of law or conflict of law.

Date:
	Signature of Optionee

Spousal Consent

     I acknowledge that I have read the foregoing Stock Option Exercise Agreement (the “Agreement”) and that I know its contents. I hereby consent to and approve all of the provisions of the Agreement, and agree that the shares of the Common Stock of Interwoven, Inc. purchased thereunder (the “Shares”) and any interest I may have in such Shares are subject to all the provisions of the Agreement. I will take no action at any time to hinder operation of the Agreement on these Shares or any interest I may have in or to them.

	Date:
Signature of Optionee’s Spouse
Spouse’s Name — Typed or Printed
Optionee’s Name — Typed or Printed

INTERWOVEN, INC.

2000 STOCK INCENTIVE PLAN

REVISED STOCK OPTION AGREEMENT
(Non-Standard for Executives)

     For use only with Option number                      granted on                     

          1. Grant of Option. Interwoven, Inc. (the “Company”) hereby grants to Optionee an option (this “Option”) to purchase up to the total number of shares of Common Stock of the Company set forth in the Notice of Grant (collectively, the “Shares”) at the exercise price set forth in the Notice of Grant (the “Exercise Price”), subject to all of the terms and conditions of the Notice of Grant, this Stock Option Agreement (the “Agreement”) and the 2000 Stock Incentive Plan (the “Plan”). If designated as an Incentive Stock Option in the Notice of Grant, the Option is intended to qualify as an “incentive stock option” (“ISO”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to the extent permitted under Code Section 422. Capitalized terms not defined herein shall have the meaning ascribed to them in the Plan.

          2. Vesting; Exercise Period.

               2.1 Vesting of Shares. The Option shall be exercisable as it vests, unless otherwise indicated in the Notice of Grant. Subject to the terms and conditions of the Plan and the Agreement, the Option shall vest and become exercisable as to portions of the Shares pursuant to the vesting schedule specified in the Notice of Grant, provided that Optionee has continuously provided services to the Company, or any Parent or Subsidiary of the Company, at all times during the relevant month. Notwithstanding the provisions of the preceding sentence, however, if there is a Sale of the Company and Participant’s employment is terminated by the Company or its successor without Cause in connection with the Sale of the Company, then upon such termination the Option will become vested as to an additional number of Unvested Shares equal to fifty percent (50%) of the Shares that were Unvested Shares at the closing of the Sale of the Company.

     For purposes of this vesting acceleration provisions, “Cause” means (i) willfully engaging in gross misconduct that is materially and demonstrably injurious to the Company; (ii) willful act or acts of dishonesty undertaken by Participant and intended to result in substantial gain or personal enrichment for Participant at the expense of the Company; or (iii) willful and continued failure to substantially perform Participant’s duties with the Company or its successor (other than incapacity due to physical or mental illness); provided that the action or conduct described in clause (iii) above will constitute “Cause” only if such failure continues after the Board of Directors has provided Participant with a written demand for substantial performance setting forth in detail the specify respects in which it believes Participant has willfully and not substantially performed his duties thereof and a reasonable opportunity (to be not less than 30 days) to cure the same. For such purpose, a termination by the Company without Cause includes a termination of employment by Participant within 30 days following any of the following

events: (x) the assignment of any duties to Participant inconsistent with, or reflecting a materially adverse change in, Participant’s position, duties or responsibilities with the Company (or any successor) without Participant’s concurrence; or (y) the relocation of the Company’s principal executive offices, or relocating Participant’s principal place of business, in excess of fifty (50) miles from the Company’s current executive offices located in Sunnyvale, California. For purposes of the vesting acceleration provisions of paragraph (b), the term “Sale of the Company” means (i) the sale or other disposition of all or substantially all of the assets of the Company, or (ii) the acquisition of the Company by another entity by means of consolidation, corporate reorganization or merger, or other transaction or series of related transactions in which more than fifty percent (50%) of the outstanding voting power of the Company is transferred.

               2.2 Vesting of Options. Shares that are vested pursuant to the vesting schedule set forth in the Notice of Grant are “Vested Shares.” Shares that are not vested pursuant to the schedule set forth in the Notice of Grant are “Unvested Shares.”

               2.3 Expiration. The Option shall expire on the expiration date set forth in the Notice of Grant, and must be exercised, if at all, on or before the earlier of the expiration date of the Option or the date on which the Option is earlier terminated in accordance with the provisions of Section 3 hereof.

          3. Termination.

               3.1 Termination for Any Reason Except Death, Disability or Cause. If Optionee is Terminated for any reason except Optionee’s death, Disability or Cause, then the Option, to the extent (and only to the extent) that it is vested in accordance with the schedule set forth in the Notice of Grant on the Termination Date, may be exercised by Optionee no later than three (3) months after the Termination Date, but in any event no later than the expiration date.

               3.2 Termination Because of Death or Disability. If Optionee is Terminated because of death or Disability of Optionee (or the Optionee dies within three (3) months after Termination other than for Cause or because of Disability), then the Option, to the extent that it is vested in accordance with the schedule in the Notice of Grant on the Termination Date, may be exercised by Optionee (or Optionee’s legal representative or authorized assignee) no later than twelve (12) months after the Termination Date, but in any event no later than the expiration date. Any exercise after three months after the Termination Date when the Termination is for any reason other than Optionee’s death or disability, within the meaning of Code Section 22(e)(3), shall be deemed to be the exercise of a nonqualified stock option.

               3.3 Termination for Cause. If Optionee is Terminated for Cause, the Option will expire on the Optionee’s date of Termination.

               3.4 No Obligation to Employ. Nothing in the Plan or this Agreement shall confer on Optionee any right to continue in the employ of, or other relationship with, the Company or any Parent or Subsidiary of the Company, or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Optionee’s employment or other relationship at any time, with or without Cause.

          4. Manner of Exercise.

               4.1 Stock Option Exercise Agreement. To exercise the Option, Optionee (or in the case of exercise after Optionee’s death, Optionee’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company an executed stock option exercise agreement in the form attached hereto as Exhibit A, or in such other form as may be approved by the Company from time to time (the “Exercise Agreement”), which shall set forth, inter alia, Optionee’s election to exercise the Option, the number of shares being purchased, any restrictions imposed on the Shares and any representations, warranties and agreements regarding Optionee’s investment intent and access to information as may be required by the Company to comply with applicable securities laws. If someone other than Optionee exercises the Option, then such person must submit documentation reasonably acceptable to the Company that such person has the right to exercise the Option.

               4.2 Limitations on Exercise. The Option may not be exercised unless such exercise is in compliance with all applicable federal and state securities laws, as they are in effect on the date of exercise.

               4.3 Payment. The Exercise Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased in cash (by check), or where permitted by law:

(a)	by cancellation of indebtedness of the Company to the Optionee;
(b)	by surrender of shares of the Company’s Common Stock that either: (1) have been owned by Optionee for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by Optionee in the open public market; and (3) are clear of all liens, claims, encumbrances or security interests;
(c)	by waiver of compensation due or accrued to Optionee for services rendered;
(d)	provided that a public market for the Company’s stock exists: (1) through a “same day sale” commitment from Optionee and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby Optionee irrevocably elects to exercise this Option and to sell a portion of the Shares so purchased to pay for the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; or (2) through a “margin” commitment from Optionee and an NASD Dealer whereby Optionee irrevocably elects to exercise this Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or
(e)	by any combination of the foregoing.

               4.4 Tax Withholding. Prior to the issuance of the Shares upon exercise of the Option, Optionee must pay or provide for any applicable federal or state withholding obligations of the Company. If the Committee permits, Optionee may provide for payment of withholding taxes upon exercise of the Option by requesting that the Company retain Shares with a Fair Market Value equal to the minimum amount of taxes required to be withheld. In such case, the Company shall issue the net number of Shares to the Optionee by deducting the Shares retained from the Shares issuable upon exercise.

               4.5 Issuance of Shares. Provided that the Exercise Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of Optionee, Optionee’s authorized assignee, or Optionee’s legal representative, and shall deliver certificates representing the Shares with the appropriate legends affixed thereto.

          5. Notice of Disqualifying Disposition of ISO Shares. To the extent the Option is an ISO, if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (a) the date two (2) years after the date of grant, and (b) the date one (1) year after transfer of such Shares to Optionee upon exercise of the Option, then Optionee shall immediately notify the Company in writing of such disposition.

          6. Compliance with Laws and Regulations. The exercise of the Option and the issuance and transfer of Shares shall be subject to compliance by the Company and Optionee with all applicable requirements of federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Stock may be listed at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Shares with the SEC, any state securities commission or any stock exchange to effect such compliance.

          7. Nontransferability of Option. Except as otherwise set forth in Section 11 of the Plan, the Option may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Option shall be binding upon the executors, administrators, successors and assigns of Optionee.

          8. Tax Consequences. Set forth below is a brief summary as of the date the Board adopted the Plan of some of the federal tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

               8.1 Exercise of Incentive Stock Option. To the extent the Option qualifies as an ISO, there will be no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price will be treated as a tax preference item for federal income tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise.

               8.2 Exercise of Nonqualified Stock Option. To the extent the Option does not qualify as an ISO, there may be a regular federal income tax liability upon the exercise

of the Option. Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price. The Company may be required to withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.

               8.3 Disposition of Shares. The following tax consequences may apply upon disposition of the Shares.

                    a. Incentive Stock Options. If the Shares are held for more than twelve (12) months after the date of the transfer of the Shares pursuant to the exercise of an ISO and are disposed of more than two (2) years after the date of grant, any gain realized on disposition of the Shares will be treated as capital gain for federal income tax purposes. If Shares purchased under an ISO are disposed of within the applicable one (1) year or two (2) year period, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price.

                    b. Nonqualified Stock Options. If the Shares are held for more than twelve (12) months after the date of the transfer of the Shares pursuant to the exercise of an NQSO, any gain realized on disposition of the Shares will be treated as long-term capital gain.

                    c. Withholding. The Company may be required to withhold from Participant’s compensation or collect from the Participant and pay to the applicable taxing authorities an amount equal to a percentage of the compensation income.

          9. Privileges of Stock Ownership. Optionee shall not have any of the rights of a stockholder with respect to any Shares until the Shares are issued to Optionee.

          10. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or the Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and Optionee.

          11. Entire Agreement. The Plan is incorporated herein by reference. This Agreement, the Notice of Grant, the Plan and the Exercise Agreement constitute the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior understandings and agreements with respect to such subject matter.

          12. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated above or to such other address as such party may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: personal delivery; three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested); one (1) business day after deposit with any return receipt express courier (prepaid); or one (1) business day after transmission by facsimile.

          13. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Optionee and Optionee’s heirs, executors, administrators, legal representatives, successors and assigns.

          14. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without regard to that body of law pertaining to choice of law or conflict of law.

OPTIONEE:	INTERWOVEN, INC.
Date:	Date:

EXHIBIT A

STOCK OPTION EXERCISE AGREEMENT

Exhibit A

INTERWOVEN, INC.
2000 STOCK INCENTIVE PLAN (the “Plan”)
STOCK OPTION EXERCISE AGREEMENT

     I hereby elect to purchase the number of shares of Common Stock of Interwoven, Inc. (the “Company”) as set forth below:

Optionee		Number of Shares Purchased:
Social Security Number:		Purchase Price per Share:
Address:		Aggregate Purchase Price:
		Date of Option Agreement:
Type of Option:	[  ]  Incentive Stock Option	Exact Name of Title to Shares:
	[  ]  Nonqualified Stock Option

1. Delivery of Purchase Price. Optionee hereby delivers to the Company the Aggregate Purchase Price, to the extent permitted in the Stock Option Agreement (the “Option Agreement”) and Notice of Grant as follows (check as applicable and complete):

[  ] in cash (by check) in the amount of $                    , receipt of which is acknowledged by the Company;

[  ] by cancellation of indebtedness of the Company to Optionee in the amount of $                                        ;

[  ] by delivery of                      fully-paid, nonassessable and vested shares of the Common Stock of the Company owned by Optionee for at least six (6) months prior to the date hereof (and which have been paid for within the meaning of SEC Rule 144), or obtained by Optionee in the open public market, and owned free and clear of all liens, claims, encumbrances or security interests, valued at the current Fair Market Value of $                     per share;

[  ] by the waiver hereby of compensation due or accrued to Optionee for services rendered in the amount of $                                        ;

[  ] through a “same-day-sale” commitment, delivered herewith, from Optionee and the NASD Dealer named therein, in the amount of $                                        ; or

[  ] through a “margin” commitment, delivered herewith from Optionee and the NASD Dealer named therein, in the amount of $                                        .

2. Tax Consequences. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE’S PURCHASE OR DISPOSITION OF THE SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.

3. Entire Agreement. The Plan, Notice of Grant and Option Agreement are incorporated herein by reference. This Exercise Agreement, the Plan, Notice of Grant and the Option Agreement constitute the entire agreement and understanding of the parties and supersede in their entirety all prior understandings and agreements of the Company and Optionee with respect to the subject matter hereof, and are governed by California law except for that body of law pertaining to choice of law or conflict of law.

Date:
	Signature of Optionee

Spousal Consent

     I acknowledge that I have read the foregoing Stock Option Exercise Agreement (the “Agreement”) and that I know its contents. I hereby consent to and approve all of the provisions of the Agreement, and agree that the shares of the Common Stock of Interwoven, Inc. purchased thereunder (the “Shares”) and any interest I may have in such Shares are subject to all the provisions of the Agreement. I will take no action at any time to hinder operation of the Agreement on these Shares or any interest I may have in or to them.

	Date:
Signature of Optionee’s Spouse
Spouse’s Name — Typed or Printed
Optionee’s Name — Typed or Printed

INTERWOVEN, INC.
2000 STOCK INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD

     The terms defined in the Interwoven, Inc. 2000 Stock Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Restricted Stock Unit Award (“Notice of Grant”).

	Name:
	Address:
You (“Participant”) have been granted an award of Restricted Stock Units (“RSUs”), subject to the terms and conditions of the Plan and the attached Award Agreement (Restricted Stock Units) (hereinafter “RSU Agreement”) to the Plan (available in hard copy by request), as follows:
	Number of RSUs:
	Date of Grant:
	First Vesting Date:
	Expiration Date:	The date on which settlement of all RSUs granted hereunder occurs, with earlier expiration upon the Termination Date
	[Vesting Schedule:]

Participant understands that his/her employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time with or without cause (i.e., is “at-will”), and that nothing in this Notice of Grant, the Attached Award Agreement or the Plan changes the at-will nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice of Grant is earned only by continuing service as an employee or consultant of the Company. Participant also understands that this Notice of Grant is subject to the terms and conditions of both the RSU Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the RSU Agreement and the Plan.

PARTICIPANT		INTERWOVEN, INC.
	By:
Print Name:	Its:

INTERWOVEN, INC.
AWARD AGREEMENT (RESTRICTED STOCK UNITS) TO THE
INTERWOVEN, INC. 2000 STOCK INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in Interwoven, Inc.’s 2000 Stock Incentive Plan (the “Plan”) shall have the same defined meanings in this Award Agreement (Restricted Stock Units) (the “Agreement”).

You have been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions and conditions of the Plan, the Notice of Restricted Stock Unit Grant (“Notice of Grant”) and this Agreement.

1. Settlement. Unless otherwise deferred by Participant as permitted by the Committee, settlement of RSUs shall be made within 30 days following the applicable date of vesting under the vesting schedule set forth in the Notice of Grant. Settlement of RSUs shall be in Shares or cash as determined by the Committee.

2. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant shall have no ownership of the Shares allocated to the RSUs and shall have no right dividends or to vote such Shares.

3. Dividend Equivalents. Dividends, if any (whether in cash or Shares), shall not be credited to Participant.

4. [Cessation of Vesting Due to Employee Schedule Change. Notwithstanding the vesting provided for in the Notice of Grant in the event a Participant who is an employee of the Company or a Subsidiary, who is regularly scheduled to work twenty (20) hours or more per week, voluntarily chooses (i.e., other than for reasons protected by law) to reduce his or her work schedule with the Company or a subsidiary to fewer than twenty (20) hours per week, the RSUs subject to the award shall cease to vest during the period of time in which such employee regularly maintains such a schedule.][Vesting schedule may or may not be subject to the foregoing provision.]

5. No Transfer. The RSUs and any interest therein shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of.

6. Termination. If Participant’s continuous employment with the Company or any of its subsidiaries shall terminate for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights of Participant to such RSUs shall immediately terminate. In case of any dispute as to whether Termination has occurred, the Committee shall have sole discretion to determine whether such Termination has occurred and the effective date of such Termination.

7. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by this Agreement, the provisions of the Plan and the Notice of Grant (incorporated herein by reference). Participant: (i) acknowledges receipt of a copy of the Plan and the Plan prospectus, (ii) represents that Participant has carefully read and is familiar with their provisions, and (iii) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant.

8. Tax Consequences. Participant acknowledges that there will be tax consequences upon settlement of the RSUs or disposition of the Shares, if any, received in connection therewith, and

Participant should consult a tax adviser regarding Participant’s tax obligations prior to such settlement or disposition. Upon vesting of the RSU, Participant will include in income the fair market value of the Shares subject to the RSU. The included amount will be treated as ordinary income by Participant and will be subject to withholding by the Company. The Company will satisfy any withholding obligations by reducing the number of Shares deliverable upon settlement by such an amount to satisfy such withholding requirements. Information on possible arrangements can be obtained from the Company. Upon disposition of the Shares, any subsequent increase or decrease in value will be treated as short-term or long-term capital gain or loss, depending on whether the Shares are held for more than one year from the date of settlement. In the event you are not a US taxpayer, the tax consequences described above could be different, you should consult your tax or financial advisor.

9. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.

10. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.

11. Severability. The Plan and Notice of Grant are incorporated herein by reference. The Plan, the Notice of Grant and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.

12. NO GUARANTEE OF EMPLOYMENT. PARTICIPANT UNDERSTANDS AND AGREES THAT HIS OR HER EMPLOYMENT WITH THE COMPANY OR ITS SUBSIDIARIES IS FOR AN UNSPECIFIED DURATION AND CONSTITUTES “AT-WILL” EMPLOYMENT. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF RSU’S PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY OR ITS SUBSIDIARY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED RSU’S OR BEING ISSUED SHARES HEREUNDER). PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER, AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PARTICIPANT’S RIGHT OR THE COMPANY’S AND/OR SUBSIDIARY’S RIGHT TO TERMINATE PARTICIPANT’S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

     By Participant’s signature and the signature of the Company’s representative on the Notice of Grant, Participant and the Company agree that this RSU is granted under and governed by the terms and conditions of the Plan, the Notice of Grant and this Agreement. Participant has reviewed the Plan, the Notice of Grant and this Agreement in their entirety, has had an opportunity to obtain the advice of

counsel prior to executing this Agreement, and fully understands all provisions of the Plan, the Notice of Grant and this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant and this Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address.

INTERWOVEN, INC.
2000 STOCK INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD

     The terms defined in the Interwoven, Inc. 2000 Stock Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Restricted Stock Unit Award (“Notice of Grant”).

	Name:
	Address:
You (“Participant”) have been granted an award of Restricted Stock Units (“RSUs”), subject to the terms and conditions of the Plan and the attached Award Agreement (Restricted Stock Units) (hereinafter “RSU Agreement”) to the Plan (available in hard copy by request), as follows:
	Number of RSUs:
	Date of Grant:
	First Vesting Date:
	Expiration Date:	The date on which settlement of all RSUs granted hereunder occurs, with earlier expiration upon the Termination Date
	Vesting Schedule:	Provided Participant continues to provide services to the Company or any Subsidiary or Parent of the Company, the RSUs will become vested as to portions of the Number of RSUs as follows: (i) the RSUs shall not vest with respect to any of the underlying Shares until the First Vesting Date; (ii) on the First Vesting Date the RSUs will become vested as to twenty-five percent (25%) of the Number of RSUs; and (iii) thereafter each year on the anniversary of the First Vesting Date the RSUs shall vest as to an additional twenty-five percent (25%) of the Number of RSUs until this award is vested with respect to one hundred percent (100%) of the RSUs. RSUs that are vested pursuant to the schedule set forth in this paragraph (or pursuant to the following paragraph) are “Vested RSUs.” RSUs that are not vested pursuant to the schedule set forth in this paragraph (or pursuant to the following paragraph) are “Unvested RSUs.” Settlement of RSUs will be solely in Shares, on a one Share-for-one RSU basis, as the Unvested RSUs vest in accordance with Section 1 of the RSU Agreement.
		Notwithstanding the provisions of the preceding paragraph, however, if there is a Sale of the Company and Participant’s

employment is terminated by the Company or its successor without Cause in connection with the Sale of the Company, then upon such termination the Unvested RSUs subject to this award will become vested as to an additional number of Unvested RSUs equal to fifty percent (50%) of the RSUs that were Unvested RSUs at the closing of the Sale of the Company (or such lesser number as will result in a greater after-tax benefit if Participant would be subject to the excise tax imposed by Section 4999 of the Code).

For purposes of this vesting acceleration provision, “Cause” means (i) willfully engaging in gross misconduct that is materially and demonstrably injurious to the Company; (ii) willful act or acts of dishonesty undertaken by Participant and intended to result in substantial gain or personal enrichment for Participant at the expense of the Company; or (iii) willful and continued failure to substantially perform Participant’s duties with the Company or its successor (other than incapacity due to physical or mental illness); provided that the action or conduct described in clause (iii) above will constitute “Cause” only if such failure continues after the Board of Directors has provided Participant with a written demand for substantial performance setting forth in detail the specify respects in which it believes Participant has willfully and not substantially performed his duties thereof and a reasonable opportunity (to be not less than 30 days) to cure the same. For such purpose, a termination by the Company without Cause includes a termination of employment by Participant within 30 days following any of the following events: (x) the assignment of any duties to Participant inconsistent with, or reflecting a materially adverse change in, Participant’s position, duties or responsibilities with the Company (or any successor) without Participant’s concurrence; or (y) the relocation of the Company’s principal executive offices (or relocating Participant’s principal place of business) in excess of fifty (50) miles from the Company’s current executive offices located in Sunnyvale, California. For purposes of the vesting acceleration provisions of paragraph (b), the term “Sale of the Company” means (i) the sale or other disposition of all or substantially all of the assets of the Company, or (ii) the acquisition of the Company by another entity by means of consolidation, corporate reorganization or merger, or other transaction or series of related transactions in which more than fifty percent (50%) of the outstanding voting power of the Company is transferred.

Participant understands that his/her employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time with or without cause (i.e., is “at-will”), and that nothing in this Notice of Grant, the Attached Award Agreement or the Plan changes the at-will nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice of Grant is earned only by continuing service as an employee or consultant of the Company. Participant

also understands that this Notice of Grant is subject to the terms and conditions of both the RSU Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the RSU Agreement and the Plan.

PARTICIPANT		INTERWOVEN, INC.
	By:
Print Name:	Its:

INTERWOVEN, INC.
AWARD AGREEMENT (RESTRICTED STOCK UNITS) TO THE
INTERWOVEN, INC. 2000 STOCK INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in Interwoven, Inc.’s 2000 Stock Incentive Plan (the “Plan”) shall have the same defined meanings in this Award Agreement (Restricted Stock Units) (the “Agreement”).

You have been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions and conditions of the Plan, the Notice of Restricted Stock Unit Grant (“Notice of Grant”) and this Agreement.

1. Settlement. Unless otherwise deferred by Participant as permitted by the Committee, settlement of RSUs shall be made within 30 days following the applicable date of vesting under the vesting schedule set forth in the Notice of Grant. Settlement of RSUs shall be in Shares or cash as determined by the Committee.

2. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant shall have no ownership of the Shares allocated to the RSUs and shall have no right dividends or to vote such Shares.

3. Dividend Equivalents. Dividends, if any (whether in cash or Shares), shall not be credited to Participant.

4. [Cessation of Vesting Due to Employee Schedule Change. Notwithstanding the vesting provided for in the Notice of Grant in the event a Participant who is an employee of the Company or a Subsidiary, who is regularly scheduled to work twenty (20) hours or more per week, voluntarily chooses (i.e., other than for reasons protected by law) to reduce his or her work schedule with the Company or a subsidiary to fewer than twenty (20) hours per week, the RSUs subject to the award shall cease to vest during the period of time in which such employee regularly maintains such a schedule.][Vesting schedule may or may not be subject to the foregoing provision.]

5. No Transfer. The RSUs and any interest therein shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of.

6. Termination. If Participant’s continuous employment with the Company or any of its subsidiaries shall terminate for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights of Participant to such RSUs shall immediately terminate. In case of any dispute as to whether Termination has occurred, the Committee shall have sole discretion to determine whether such Termination has occurred and the effective date of such Termination.

7. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by this Agreement, the provisions of the Plan and the Notice of Grant (incorporated herein by reference). Participant: (i) acknowledges receipt of a copy of the Plan and the Plan prospectus, (ii) represents that Participant has carefully read and is familiar with their provisions, and (iii) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant.

8. Tax Consequences. Participant acknowledges that there will be tax consequences upon settlement of the RSUs or disposition of the Shares, if any, received in connection therewith, and

Participant should consult a tax adviser regarding Participant’s tax obligations prior to such settlement or disposition. Upon vesting of the RSU, Participant will include in income the fair market value of the Shares subject to the RSU. The included amount will be treated as ordinary income by Participant and will be subject to withholding by the Company. The Company will satisfy any withholding obligations by reducing the number of Shares deliverable upon settlement by such an amount to satisfy such withholding requirements. Information on possible arrangements can be obtained from the Company. Upon disposition of the Shares, any subsequent increase or decrease in value will be treated as short-term or long-term capital gain or loss, depending on whether the Shares are held for more than one year from the date of settlement. In the event you are not a US taxpayer, the tax consequences described above could be different, you should consult your tax or financial advisor.

9. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.

10. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.

11. Severability. The Plan and Notice of Grant are incorporated herein by reference. The Plan, the Notice of Grant and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.

12. NO GUARANTEE OF EMPLOYMENT. PARTICIPANT UNDERSTANDS AND AGREES THAT HIS OR HER EMPLOYMENT WITH THE COMPANY OR ITS SUBSIDIARIES IS FOR AN UNSPECIFIED DURATION AND CONSTITUTES “AT-WILL” EMPLOYMENT. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF RSU’S PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY OR ITS SUBSIDIARY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED RSU’S OR BEING ISSUED SHARES HEREUNDER). PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER, AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PARTICIPANT’S RIGHT OR THE COMPANY’S AND/OR SUBSIDIARY’S RIGHT TO TERMINATE PARTICIPANT’S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

     By Participant’s signature and the signature of the Company’s representative on the Notice of Grant, Participant and the Company agree that this RSU is granted under and governed by the terms and conditions of the Plan, the Notice of Grant and this Agreement. Participant has reviewed the Plan, the Notice of Grant and this Agreement in their entirety, has had an opportunity to obtain the advice of

counsel prior to executing this Agreement, and fully understands all provisions of the Plan, the Notice of Grant and this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant and this Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address.

EX-10.05

Exhibit 10.05

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS DOCUMENT ***Confidential treatment has been requested with respect to the information contained within the "[***]” markings. Such marked portions have been omitted from this filing and have been filed separately with the Securities and Exchange Commission

2006 Compensation Plan

To:	Scipio M. Carnecchia,
	Senior Vice President of Worldwide Sales
Effective dates:	January 1, 2006 to December 31, 2006

This document outlines your individual compensation package (“Compensation Plan”) for calendar year 2006 including the at-risk components (“Incentive Pay”) determined under the Sales Compensation Plan. All other terms and conditions of your employment are governed by your offer letter.

In your role, you are responsible for the Interwoven’s worldwide sales organization. Interwoven reserves the right to change your responsibilities from time to time and modify your Compensation Plan to take into account its business needs.

COMPENSATION PACKAGE

Your Compensation Plan is comprised of a Base Salary and Incentive Pay, which is an at-risk component of your overall compensation package. The 2006 Sales Compensation Plan outlines the guidelines under which you will be paid your Incentive Pay component.

Your on-target earnings for calendar year 2006 are $475,000.00. Your on-target earnings are composed of the following:

• Annual Base Salary of $200,000.00.

• On-target Incentive Pay of $275,000.00:

• $250,000.00 related to Software License bookings.

• $25,000.00 related to Professional Services revenue.

• A Direct Margin Percentage factor will be applied in computing your commissions earned for Software License bookings and Professional Services revenue.

From your actual earnings, we will subtract payroll deductions, all required withholdings and other voluntary deductions you authorize Interwoven to make on your behalf.

BASE SALARY

Your annual base salary will be paid to you ratably over the year in accordance with Interwoven’s standard payroll practices.

INCENTIVE PAY

Your Incentive Pay will be calculated under the following process. Please be aware, this Incentive Pay process does not guarantee you a level of income.

Commissions on Software License Bookings and Professional Services Revenue

Of your on-target Incentive Pay, $250,000.00 will be related to commissions for Software License bookings and $25,000.00 will be related to commissions for Professional Services revenue. Commissions on Software License bookings relate to achieving the Company’s business plan objectives for Software License bookings. Customer support and maintenance is not included in the measurement of Software License bookings. Commissions on Professional Services relate to assisting the Professional Services Organization in achieving the Company’s business plan objectives for revenue from consulting and education services (collectively “Professional Services”).

Commissions will be earned upon recognition of bookings for Software License and revenue for Professional Services by Interwoven in accordance with the following rates:

Quarterly	License Bookings	Professional Services
Quota Attainment	Commission Rates	Commission Rates
0% to 100%	[***]%	[***]%
101% to 102%	[***]%	[***]%
103% to 104%	[***]%	[***]%
105% to 106%	[***]%	[***]%
Greater than 107%	[***]%	[***]%

All Quarterly Quota Attainment percentages will be rounded to the next whole number (ie: greater than or equal to 0.5 will be rounded up and less than 0.5 will be rounded down).

Additionally, the commission earned above will be multiplied by the following adjustment factor based on the Direct Margin Percentage achieved by the Sales organization on Software License bookings and Professional Services revenue for each quarter:

Direct	Adjustment
Margin Percentage	Factor
>3% below target	[***]%
2% below target	[***]%
At target	[***]%
2% above target	[***]%
3% above target	[***]%
4% above target	[***]%
>4% above target	[***]%

Direct Margin Percentage is defined as Software License bookings and Professional Services revenue less the cost of license revenues and the direct expenses incurred by the worldwide sales organization to acquire that revenue.

Your quota for the period January 1, 2006 to December 31, 2006 is $[***] for Software License booking and $[***] for Professional Services revenue as follows:

*** Confidential treatment has been requested with respect to the information contained within the “[***]” markings. Such marked portions have been omitted from this filing and have been filed separately with the Securities and Exchange Commission.

Software	Professional
License Bookings	Services Revenues
$[***] for Q1 2006	$[***] for Q1 2006
$[***] for Q2 2006	$[***] for Q2 2006
$[***] for Q3 2006	$[***] for Q3 2006
$[***] for Q4 2006	$[***] for Q4 2006

As outlined in the 2006 Sales Compensation Plan, Software License bookings and Professional Services revenue are computed in accordance with generally accepted accounting principles (as determined by the Company’s Finance Department and the Audit Committee of the Board of Directors). For Software License bookings, credit will be received for the amount of revenue that can be recognized in accordance with Interwoven’s revenue recognition policy. If the recognition of revenue extends beyond the end of the then current quarter, bookings credit will be received in the quarter when the revenue is recognized. Such amounts are subject to reduction for carve-outs, any returns, or uncollectible accounts as outlined in the Interwoven 2006 Sales Compensation Plan.

Your Direct Margin Percentage targets for the period January 1, 2006 to December 31, 2006 are as follows:

o [***]% for first quarter of 2006

o [***]% for the second quarter of 2006

o [***]% for the third quarter of 2006

o [***]% for the fourth quarter of 2006

By way of example, if Software License bookings for the first quarter of 2006 was $[***] and Professional Services revenue for the first quarter was $[***] (achievement of 101% of quota for both Software License and Professional Services revenue) and the direct gross margin was [***]%, your commission due would be computed as follows:

Software License bookings – ((($[***] times [***]%) + ($[***] times [***]%)) times [***]%) equals $[***].

Professional Services revenues – ((($[***] times [***]%) + ($[***] times [***]%)) times [***]%) equals $[***].

Total earned equals $[***].

Please acknowledge your acceptance with this Compensation Plan by signing below. Have a great 2006!

Read and accepted:	Signed:
/s/ Scipio M. Carnecchia	/s/ John E. Calonico, Jr.
Scipio M. Carnecchia	John E. Calonico, Jr.
Senior Vice President of Worldwide Sales	Chief Financial Officer
Interwoven, Inc.	Interwoven, Inc.

*** Confidential treatment has been requested with respect to the information contained within the “[***]” markings. Such marked portions have been omitted from this filing and have been filed separately with the Securities and Exchange Commission.

EX-31.01

EXHIBIT 31.01

CERTIFICATION

I, Scipio M. Carnecchia , Interim President of the registrant, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Interwoven, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 8, 2006	/s/ SCIPIO M. CARNECCHIA
	Scipio M. Carnecchia
	Interim President

EX-31.02

EXHIBIT 31.02

CERTIFICATION

I, John E. Calonico, Jr., Senior Vice President and Chief Financial Officer of the registrant, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Interwoven, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 8, 2006	/s/ JOHN E. CALONICO, JR.
	John E. Calonico, Jr.
	Senior Vice President and Chief Financial Officer

EX-32.01

EXHIBIT 32.01

     The following certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and pursuant to Securities and Exchange Commission Release No. 33-8238 are being “furnished” to the Securities and Exchange Commission rather than “filed” either as part of the Report or as a separate disclosure statement, and are not to be incorporated by reference into the Annual Report on Form 10-K or any other filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. The foregoing certifications shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002

     In connection with the Interwoven, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scipio M. Carnecchia, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1)	this Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)	that information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of Interwoven, Inc.

Dated: August 8, 2006	/s/ SCIPIO M. CARNECCHIA
	Scipio M. Carnecchia
	Interim President

EX-32.02

EXHIBIT 32.02

     The following certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and pursuant to Securities and Exchange Commission Release No. 33-8238 are being “furnished” to the Securities and Exchange Commission rather than “filed” either as part of the Report or as a separate disclosure statement, and are not to be incorporated by reference into the Annual Report on Form 10-K or any other filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. The foregoing certifications shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002

     In connection with the Interwoven, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John E. Calonico, Jr., certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1)	this Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)	that information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of Interwoven, Inc.

Dated: August 8, 2006	/s/ JOHN E. CALONICO, JR.
	John E. Calonico, Jr. Senior Vice President and Chief Financial Officer