##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
      þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the year ended
    December 31, 2006ORo

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.)   160 East Tasman Drive, San Jose, California 95134
 (Address of principal executive
    offices and zip code)
  (408) 774-2000
 (Registrants telephone
    number, including area code)
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per share

The NASDAQ Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  o þ
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ




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##### 





INTERWOVEN,
    INC.
  TABLE OF CONTENTS
   
 Page No.PART IItem 1.


Business


5Item 1A.


Risk Factors


12Item 1B.


Unresolved Staff Comments


24Item 2.


Properties


24Item 3.


Legal Proceedings


25Item 4.


Submission of Matters to a Vote of Security
    Holders


25PART IIItem 5.


Market for the Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


26Item 6.


Selected Financial Data


27Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


31Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


52Item 8.


Financial Statements and Supplementary Data


55Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


63Item 9A.


Controls and Procedures


63Item 9B.


Other Information


65PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


66Item 11.


Executive Compensation


69Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


96Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


99Item 14.


Principal Accountant Fees and Services


100PART IVItem 15.


Exhibits and Financial Statement Schedules


101Signatures


149EXHIBIT 10.01EXHIBIT 10.06EXHIBIT 10.16EXHIBIT 10.17EXHIBIT 10.20EXHIBIT 10.21EXHIBIT 10.22EXHIBIT 10.24EXHIBIT 21.01EXHIBIT 23.01EXHIBIT 23.02EXHIBIT 31.01EXHIBIT 31.02EXHIBIT 32.01EXHIBIT 32.02




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CAUTION
    REGARDING FORWARD LOOKING STATEMENTS
  Form 10-K Form 10-K
    EXPLANATORY
    NOTE
  Form 10-K,
  Form 10-K
  Form 10-K Form 10-Q
    Pre-Tax


After TaxAs


(Income)


(Income)As


Previously


Expense


ExpenseRestated


Reported


Adjustments


AdjustmentsFor the year ended December 31,1999

$
3,722


$
3,686


$
36


$
362000


25,066



7,522



17,544



17,5442001


26,802



14,225



12,577



12,5772002


4,712



4,880



(168
)


(168
)2003


3,944



2,348



1,596



1,596Total impact 1999 to 2003


64,246



32,661



31,585



31,5852004


4,906



4,982



(76
)


(76
)2005


1,734



1,743



(9
)


(9
)2006


3,451



3,451







Total

$
74,337


$
42,837


$
31,500


$
31,500  3




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##### Table of Contents



Accounting for Income Taxes
      Accounting for Stock-Based Compensation
 4




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##### Table of Contents



PART I
  ITEM 1.
    BUSINESS  Overview
    (408) 774-2000. www.interwoven.com Form 10-K, Form 10-Q, Form 8-K www.sec.gov
  Interwoven
    Solutions and Products
  Solution
    Areas
    Interwoven
    Solutions for the Enterprise
    
    Interwoven Web Content Management enables organizations to
    transform their online presence, protect their brand online,
    comply with corporate governance standards and improve
    operational efficiency across Web-based initiatives.
    Interwoven Digital Asset Management enables self-service access
    to current and approved rich-media marketing content and allows
    marketing organizations to better promote products and brands.
    Interwoven Composite Application Provisioning standardizes the
    method by which changes to code, content and configuration are
    aggregated, synchronized and deployed. This solution increases
    efficiency and reduces provisioning costs, accelerates
    application time-to-market, and eliminates error-prone manual
    processes.
    Interwoven Collaborative Document Management allows
    organizations to better manage the creation, distribution and
    use of documents, enabling businesses to get to market faster,
    accelerate the negotiation and contract process, understand
    intellectual property, manage written assets and improve the
    productivity of people and content inside and outside the
    enterprise.
    Interwoven Segmentation and Analytics enables marketing
    organizations to deliver more compelling and relevant online
    experiences, target content and offers to high value segments,
    and optimize the return on customer interactions based on
    analyzed behavior, resulting in increased conversions, greater
    competitive differentiation and more interactive dialogues with
    customers.
    Interwoven Multivariable Testing and Website Optimization
    optimizes a wide range of online marketing elements, such as
    landing pages, registration pages, shopping carts, credit card
    pages, banner ads, email creatives and Web applications. By
    exposing different combinations of content to different visitors
    and then measuring visitors actions, this solution can
    identify the most compelling combination of content and layout
    to drive increased online conversions. 5




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Interwoven
    Solutions for Professional Services
  e-mail 
  
    Interwoven Practice Support enables firms to manage the workflow
    of new business intake and conflicts checking, to improve
    efficiency, mitigate risks to the firm and reduce the amount of
    time professionals spend on non-billable activities.
    Interwoven Electronic Client File enables firms to protect
    intellectual capital in a secure, centralized repository,
    improve productivity, accelerate user adoption with little or no
    training and provide convenient access.
    Interwoven records management solution enables organizations to
    implement effective unified physical and electronic records
    retention policies and is designed to improve control over
    storage costs and reduce risk of loss or unauthorized access.
    Interwoven Universal Search  Professional Services
    Edition delivers a highly tailored and comprehensive search
    solution that spans firm-wide repositories and provides a simple
    Web interface with rich tools to refine search results for
    end-users.  Interwoven
    Solutions for Global Capital Markets
    
    Interwoven P2P (peer-to-peer) is a standardized communication
    platform that enables streamlined messaging and workflow for
    automated OTC derivatives confirmations. Interwoven P2P also
    provides a solution that enables peer-to-peer messaging for
    secure, bilateral messaging between transaction counterparties.
    Interwoven MessageConnect enables mitigation of trade
    confirmation and settlement risks by enabling seamless
    connectivity with market utilities such as DTCC.
    Interwoven Trade Lifecycle solution enables financial services
    customers to automate the entire realm of trade-related
    documentation and workflow.  Products
   6




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
    Document Management Interwoven
    WorkSitetm
    provides collaboration and document management capabilities that
    enable organizations to capture, develop, manage, share, review,
    approve and archive multiple forms of electronic media. WorkSite
    is designed to provide quick and intuitive document storing,
    location and retrieval within an environment that provides rich
    collaboration and project based context to capture the highest
    level of organizational knowledge and facilitate team
    information exchange. With WorkSite, documents,
    e-mails,
    voicemail, images, schedules, tasks and calendars are combined
    within a single project environment that provides a
    comprehensive set of document handling features, including
    check-in/check-out, version control, full-text and metadata
    search and document-level security and permissions.
    Web Content Management Interwoven Web
    Content Management Suite provides the capabilities needed to
    build, deploy and integrate content management for the
    enterprise. With Interwoven Web content management, companies
    can easily and cost effectively create and manage up to hundreds
    of thousands of Websites. Companies can centralize the control
    of site architecture, navigation and presentation, distribute
    site development, deployment and ongoing management to
    individual business units, and improve the ability of content
    contributors and editors to add, modify, and approve content
    within the context of individual Web initiatives. Interwoven Web
    content management provides the foundation and tools for
    effectively using the Web and all of its complex permutations to
    increase business value, improve productivity, and reduce
    information technology expenses. The suite is made up of the
    following products:  
    Interwoven
    TeamSite®
    provides a content management platform to manage authoring, site
    design and layout, workflow and approval, archiving and content
    tagging.
    Interwoven
    TeamPortaltm
    enables content contributors, reviewers and approvers to access
    the TeamSite system via industry-standard portals, such as IBM
    WebSphere and BEA WebLogic.
    Interwoven
    LiveSite®
    powers dynamic, online content delivery and Web 2.0 capabilities
    such as blogs, Really Simple Syndication and other social
    computing functionality.
    Interwoven
    MetaTagger®automates the tagging of content to increase accessibility
    and relevance for customers.
    Interwoven
    OpenDeploy®
    provides multi-tiered, multi-stage, transaction based deployment
    and provisioning of content, code, and configurations.
    Interwoven Targetingprovides user segmentation, rules
    creation and management and dynamic, targeted content delivery.  
    Multivariable Optimization Interwoven
    Optimost provides a multivariable testing and Website
    optimization solution on a software-as-a-service delivery model.
    Digital Asset Management Interwoven
    MediaBin®
    helps organizations effectively manage, distribute, and publish
    the thousands of customer-facing digital assets our customers
    typically use to promote products and brands. MediaBin enables
    marketing teams to provide their global sales force and business
    partners with instant, self-service access to current and
    approved marketing content  including photographs,
    logos, presentations, audio, video and more. When used in
    conjunction with Interwoven TeamSite, MediaBin streamlines the
    usage of rich media content across global Web properties and
    other channels.
    Records Management Interwoven
    RecordsManagerprovides for the application and management
    of retention policy for paper, electronic documents and
    e-mail in a
    single solution. Enabling the management of all forms of
    records, Interwoven RecordsManager aids organizations in
    controlling records consistently and effectively across offices,
    media types and systems, reducing the cost of managing records
    and the risk from inconsistent application of records policies.
    Interwoven RecordsManager is integrated with WorkSite.
    Unified Search Interwoven Universal
    Search  Professional Services Editionunifies content across multiple internal and external
    content sources within a single search environment and presents
    easy to 7




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navigate results quickly in a user-friendly Web interface, with
    enhanced filtering capabilities. Interwoven Universal
    Search  Professional Services Edition is powered by
    Vivisimo Velocity, a third party software vendor.  
    E-Mail
    Management Interwoven
    E-Mail
    Managementprovides organizations a multiple-path solution
    to assist in the capture and storage of
    e-mail
    within the unified context of a project, engagement or matter
    file  reducing the burden on
    e-mail
    servers, and transforming
    e-mail from
    an isolated knowledge source into an asset that can be shared
    across all locations, easily and securely.
    Content Integration Content Integration
    Module provides an integration framework for connecting
    content-centric business processes and systems. For example,
    this module enables integration between our products such as
    Interwoven MetaTagger, Interwoven WorkSite MP and Interwoven
    TeamSite.  Support
    and Service
  Customer Support. e-mail
  Consulting.
  Training.
  Customers
  and/or
  Sales and
    Marketing
   8




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Research
    and Development
      Acquisitions
    Competition
    
    companies addressing needs of the market in which we compete
    such as EMC Corporation, IBM, Microsoft Corporation, Open Text
    Corporation, Oracle Corporation, Vignette Corporation and Xerox
    Corporation;
    intranet and groupware companies, such as IBM, Microsoft
    Corporation and Novell, Inc.;
    open source vendors, such as RedHat, Inc., OpenCms and
    Mambo; and
    in-house development efforts by our customers and partners.   9




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
    breadth of the enterprise content management solution;
    product functionality and features;
    coverage of sales force and distribution channel;
    availability of global support;
    quality and depth of integration of the individual software
    modules across the full content management suite;
    ease and speed of product implementation;
    hardware implications and the total cost of ownership required
    to deploy content management solutions;
    financial condition of vendors;
    vendor and product reputation;
    ability of products to support large numbers of concurrent users;
    price;
    security;
    interoperability with established software;
    scalability; and
    ease of access and use.    Seasonality
    Intellectual
    Property and Other Proprietary Rights
     10




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Employees
   11




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ITEM 1A.
    RISK
    FACTORS  Form 10-K
  The
    Audit Committee review of our historical stock option practices
    and resulting restatement has been time consuming and expensive,
    and may have a material adverse effect on us.
  follow-up follow-up
  We may
    be named in lawsuits in the future. Any such litigation could
    become time consuming and expensive and could result in the
    payment of significant judgments and settlements, which could
    have a material adverse effect on our financial condition and
    results of operations.
      Failure
    to maintain effective internal control over financial reporting
    may cause us to delay filing our periodic reports with the
    Securities and Exchange Commission, affect our NASDAQ Global
    Market listing and adversely affect our stock
    price.
  Form 10-K
   12




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We
    have not been in compliance with NASDAQ listing requirements and
    remain subject to the risk of our common stock being delisted
    from The NASDAQ Global Market, which could, among other things,
    reduce the price of our common stock and the levels of liquidity
    available to our stockholders.
  Form 10-K Form 10-Q
  We
    have only recently begun to report net income and may not be
    able to sustain profitability.
   13




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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.
    
    the discretionary nature of our customers purchases and
    their budget cycles;
    the inherent complexity, length and associated unpredictability
    of our sales cycle;
    seasonal fluctuations in information technology purchasing;
    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 or technologies
    with our existing products and effectively sell newly acquired
    or enhanced products; and
    the level of our sales incentive and commission-related expenses.    Sales
    cycles for our products are generally long and unpredictable, so
    it is difficult to forecast our future results.
    
    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, budgetary constraints of the customer 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. 14




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Contractual
    terms or issues that arise during the negotiation process may
    delay anticipated transactions and revenue.
        Our
    revenues depend on a small number of products and markets, so
    our results are vulnerable to unexpected shifts in
    demand.
       15




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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
    revenues from international operations are a significant part of
    our overall operating results.
    
    difficulties in attracting and retaining staff (particularly
    sales personnel) and managing foreign operations;
    the expense of foreign operations and compliance with applicable
    laws;
    political and economic instability;
    the expense of localizing our products for sale in various
    international markets and providing support and services in the
    local language;
    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;
    regulation by United States federal and state laws, including
    the Foreign Corrupt Practices Act, and foreign laws, regulations
    and policies;
    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.   16




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The
    timing of large customer orders may have a significant impact on
    our consolidated financial results from period to
    period.
    We
    must attract and retain qualified personnel to be successful and
    competition for qualified personnel is increasing in our
    market.
    Share-Based Payment,
  We may
    not realize the anticipated benefits of past or future
    acquisitions, and integration of these acquisitions may disrupt
    our business and management.
    
    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; 17




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
    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.    and/or
  Economic
    conditions and significant world events have harmed and could
    continue to negatively affect our revenues and results of
    operations.
   18




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Increasing
    competition could cause us to reduce our prices and result in
    lower gross margins or loss of market share.
    
    companies addressing needs of the market in which we compete
    such as EMC Corporation, IBM, Microsoft Corporation, Open Text
    Corporation, Oracle Corporation, 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.      Our
    future revenues depend in part on our installed customer base
    continuing to license additional products, renew customer
    support agreements and purchase additional
    services.
   19




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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.
          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.
   20




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Our
    stock price may be volatile, and your investment in our common
    stock could suffer a decline in value.
    
    actual or anticipated variations in quarterly operating results,
    or key balance sheet metrics such as days sales outstanding;
    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 deemed comparable to us;
    announcements by us or our competitors of new products or
    services, technological innovations, significant acquisitions,
    strategic relationships or divestitures;
    our failure to realize the expected benefits of acquisitions;
    announcements of investigations or regulatory scrutiny of our
    operations or lawsuits filed against us;
    announcements of negative conclusions about our internal
    controls;
    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.    Our
    failure to deliver defect-free software could result in losses
    and harmful publicity.
   21




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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.
      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.
     22




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Our
    products may lack essential functionality if we are unable to
    obtain and maintain licenses to
    third-party
    software and applications.
      Our
    ability to use net operating losses to offset future taxable
    income may be subject to certain limitations.
    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.
    We
    might not be able to protect and enforce our intellectual
    property rights, a loss of which could harm our
    business.
   23




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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.
      ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES   24




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ITEM 3.
    LEGAL
    PROCEEDINGS  Simmonds v. Bank of
    America Corp. No. 07-1585,
      ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   25




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PART II
  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Price
    Range of Common Stock
      High


LowYear ended December 31, 2006:Fourth quarter

$
15.27


$
10.98Third quarter

$
11.46


$
8.41Second quarter

$
10.57


$
8.35First quarter

$
9.79


$
8.12Year ended December 31, 2005:Fourth quarter

$
10.00


$
7.96Third quarter

$
8.61


$
6.78Second quarter

$
8.78


$
7.21First quarter

$
11.29


$
7.52   Holders
    of Record
    Dividend
    Policy
    Unregistered
    Sales of Equity Securities
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
   26




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ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K. Form 10-K Form 10-K.
  Form 10-K Form 10-Q Form 10-K,
    Years Ended December 31,2006


2005


2004


2003


2002As restated(1)


As restated(1)


As restated(1)


As restated(1)(In thousands, except per share amounts)Selected Consolidated Statements of Operations Data:Total revenues

$
200,319


$
175,037


$
160,220


$
111,222


$
127,601Gross profit

$
133,696


$
117,518


$
108,122


$
73,269


$
85,085Income (loss) from operations

$
2,316


$
(1,860
)

$
(24,307
)

$
(51,938
)

$
(152,706
)Net income (loss)

$
6,437


$
626


$
(23,568
)

$
(49,608
)

$
(147,825
)Basic and diluted net income (loss) per common share

$
0.15


$
0.01


$
(0.58
)

$
(1.80
)

$
(5.77
)Shares used in computing basic net income (loss) per common share


42,979



41,751



40,494



27,585



25,607Shares used in computing diluted net income (loss) per common
    share


43,995



42,390



40,494



27,585



25,607   December 31,2006


2005


2004


2003


2002As restated(1)


As restated(1)


As restated(1)


As restated(1)(In thousands)Selected Consolidated Balance Sheet Data:Cash, cash equivalents and short-term investments

$
176,461


$
137,199


$
133,757


$
140,487


$
181,669Working capital

$
120,294


$
86,009


$
85,975


$
94,879


$
148,404Total assets

$
426,287


$
398,606


$
393,776


$
421,634


$
298,657Bank borrowings

$



$



$



$
1,213


$
Total stockholders equity

$
323,960


$
298,700


$
289,123


$
301,412


$
204,684     (1)
    
    See the Explanatory Note immediately preceding
    Part I, Item 1 and Note 3, Restatement of
    Consolidated Financial Statements, in the Notes to
    Consolidated Financial Statements of this Annual Report on
    Form 10-K. 27




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Form 10-K.
  Year Ended December 31, 2005As





AsReported


Adjustments


Restated(In thousands, except per share amounts)For the year:Total revenues

$
175,037


$



$
175,037Gross profit

$
117,495


$
23


$
117,518Loss from operations

$
(1,869
)

$
9


$
(1,860
)Net income

$
617


$
9


$
626Basic and diluted net income per common share

$
0.01


$



$
0.01Shares used in computing basic net income per common share


41,751







41,751Shares used in computing diluted net income per common share


42,390







42,390At year end:Cash, cash equivalents and short-term investments

$
137,199


$



$
137,199Working capital

$
85,508


$
501


$
86,009Total assets

$
398,606


$



$
398,606Bank borrowings

$



$



$
Total stockholders equity

$
298,199


$
501


$
298,700   Year Ended December 31, 2004As





AsReported


Adjustments


Restated(In thousands, except per share amounts)For the year:Total revenues

$
160,388


$
(168
)

$
160,220Gross profit

$
108,309


$
(187
)

$
108,122Loss from operations

$
(24,406
)

$
99


$
(24,307
)Net loss

$
(23,667
)

$
99


$
(23,568
)Basic and diluted loss per common share

$
(0.58
)

$



$
(0.58
)Shares used in computing basic and diluted net loss per common
    share


40,494







40,494At year end:Cash, cash equivalents and short-term investments

$
133,757


$



$
133,757Working capital

$
85,474


$
501


$
85,975Total assets

$
393,776


$



$
393,776Bank borrowings

$



$



$
Total stockholders equity

$
288,622


$
501


$
289,123   28




---



##### Table of Contents



Year Ended December 31, 2003As





AsReported


Adjustments


Restated(In thousands, except per share amounts)For the year:Revenues:License

$
45,936


$



$
45,936Support and service


65,576



(290
)


65,286Total revenues


111,512



(290
)


111,222Cost of revenues:License


5,368







5,368Support and service


32,333



252



32,585Total cost of revenues


37,701



252



37,953Gross profit


73,811



(542
)


73,269Operating expenses:Sales and marketing


58,916



354



59,270Research and development


25,770



365



26,135General and administrative


12,651



816



13,467Amortization of intangible assets


2,348







2,348In-process research and development


5,174







5,174Restructuring and excess facilities charges


18,813







18,813Total operating expenses


123,672



1,535



125,207Loss from operations


(49,861
)


(2,077
)


(51,938
)Interest income and other, net


3,401







3,401Loss before provision for income taxes


(46,460
)


(2,077
)


(48,537
)Provision for income taxes


1,071







1,071Net loss

$
(47,531
)

$
(2,077
)

$
(49,608
)Basic and diluted net loss per common share

$
(1.72
)

$
(0.08
)

$
(1.80
)Shares used in computing basic and diluted net loss per common
    share


27,585







27,585At year end:Cash, cash equivalents and short-term investments

$
140,487


$



$
140,487Working capital

$
94,401


$
478


$
94,879Total assets

$
421,825


$
(191
)

$
421,634Bank borrowings

$
1,213


$



$
1,213Total stockholders equity

$
300,934


$
478


$
301,412   29




---



##### Table of Contents



Year Ended December 31, 2002As





AsReported


Adjustments


Restated(In thousands, except per share amounts)For the year:Revenues:License

$
57,309


$



$
57,309Support and service


69,523



769



70,292Total revenues


126,832



769



127,601Cost of revenues:License


3,283







3,283Support and service


39,437



(204
)


39,233Total cost of revenues


42,720



(204
)


42,516Gross profit


84,112



973



85,085Operating expenses:Sales and marketing


76,584



(320
)


76,264Research and development


28,231



(273
)


27,958General and administrative


14,557



775



15,332Amortization of intangible assets


3,722







3,722Impairment of goodwill


76,431







76,431Restructuring and excess facilities charges


38,084







38,084Total operating expenses


237,609



182



237,791Loss from operations


(153,497
)


791



(152,706
)Interest income and other, net


5,958







5,958Loss before provision for income taxes


(147,539
)


791



(146,748
)Provision for income taxes


1,077







1,077Net loss

$
(148,616
)

$
791


$
(147,825
)Basic and diluted net loss per common share

$
(5.80
)

$
0.03


$
(5.77
)Shares used in computing basic and diluted net loss per common
    share


25,607







25,607At year end:Cash, cash equivalents and short-term investments

$
181,669


$



$
181,669Working capital

$
147,445


$
959


$
148,404Total assets

$
298,657


$



$
298,657Bank borrowings

$



$



$
Total stockholders equity

$
203,725


$
959


$
204,684  30




---



##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Restatement
    of Previously Issued Financial Results
  Introduction
  Form 8-K
          Form 10-K Form 10-Q
   31




---



##### Table of Contents



Form 10-K Form 10-K Form 10-K Form 10-Q Form 10-K,
  Accounting for Stock-Based Compensation
    Stock
    Option Grant Process
    Accounting
    Adjustments
   32




---



##### Table of Contents




    Employee New Hire, Promotion and Merit
    Grants.  New hire, promotional and merit
    grants during the Review Period were made to non-officer
    employees pursuant to the authority delegated to both the Chief
    Executive Officer and Chief Financial Officer by the Board of
    Directors. Based on the Audit Committee review, we determined
    that the measurement dates for 12 of the 101 new hire, promotion
    and merit granting actions during the Review Period should be
    revised. For nine of these granting actions, we determined that
    insufficient contemporaneous documentation to support the
    recorded measurement date existed, so a later measurement date
    was selected based on the existence of adequate contemporaneous
    documentation to support the conclusion that the grant was
    fixed. We recognized a pre-tax stock-based compensation expense
    of $12.6 million in relation to these nine granting actions
    using the intrinsic value method of accounting under Accounting
    Principles Board Opinion (APB) No. 25,
    Accounting for Stock Issued to Employees. For the other
    three granting actions, we determined that measurement date
    criteria had been met on a date prior to the recorded grant date
    when the stock price was higher, resulting in variable
    accounting for these granting actions. Accordingly, we
    recognized a pre-tax stock-based compensation expense of
    $7.5 million for these granting actions in accordance with
    Financial Accounting Standards Board Interpretation
    (FIN) No. 44, Accounting for Certain
    Transactions involving Stock Compensation.
    Corrections to Employee New Hire, Promotion and Merit
    Grants.  In a small number of cases,
    corrections were made to employee new hire, promotion and merit
    grant. These corrections amounted to approximately 1% of total
    shares granted. We determined that in substantially all
    instances, these corrections were for new hire, promotion and
    merit grants that were inadvertently left off the initial
    authorization document and for new hires whose shares on the
    initial authorization document did not correctly reflect the
    number of shares stated in their offer letters. Based on the
    Audit Committee review, we did not identify evidence indicating
    that the corrections were effected to achieve a lower exercise
    price for the grantee, nor did we identify a pattern of
    effecting corrections to achieve a lower exercise price. We
    determined that the measurement dates for the individual option
    grants constituting these corrections should be revised to the
    date the correction was determined to be finalized. Accordingly,
    in addition to the granting actions described above, we
    recognized additional pre-tax stock-based compensation expense
    of $1.4 million related to corrections to employee new
    hire, promotion and merit granting actions.
    Employee Refresh Grants.  We
    periodically made broad-based equity compensation awards
    (refresh grants) to certain employees based on, such
    factors as, the employees unvested equity ownership, total
    equity ownership, market conditions and the importance of the
    employees expected contributions to Interwoven. Employee
    refresh grants were issued pursuant to the authority delegated
    to the Chief Executive Officer and Chief Financial Officer.
    Based on the Audit Committee review, we determined that the
    measurement dates for three of the employee refresh granting
    actions should be revised because the number of shares to be
    allocated to each individual employee was not determined with
    finality by the recorded grant dates. Accordingly, we recognized
    a pre-tax stock-based compensation expense of $1.7 million
    for these granting actions using the intrinsic value method of
    accounting under APB No. 25. We also determined that the
    measurement date criteria for one employee refresh granting
    action had been met on a date prior to the recorded grant date
    when the stock price was higher, resulting in variable
    accounting for this granting action. Accordingly, we recognized
    a pre-tax stock-based compensation expense of $964,000 for this
    granting action in accordance with FIN No. 44.
    Grants to Officers and Certain
    Employees.  We granted stock options to newly
    hired officers and certain non-officer members of management,
    employees who were promoted to officer positions or periodic
    refresh grants to officers and certain non-officer members of
    management based on such factors as the employees unvested
    equity ownership and total equity ownership, performance and
    market conditions. Grants to officers and certain non-officer
    members of management were authorized by the Board of Directors
    or the Compensation Committee in thirty-two granting actions
    during the review period. Based on the Audit Committee review,
    we determined that for four of these granting actions there was
    insufficient 33




---



##### Table of Contents



contemporaneous documentation to support the recorded
    measurement date. Accordingly, we recognized a pre-tax
    stock-based compensation expense of $6.8 million for such
    granting actions using the intrinsic value method of accounting
    under APB No. 25. We also determined that for four granting
    actions the measurement date criteria were met on a date prior
    to the recorded grant date when the stock price was higher,
    resulting in variable accounting. Accordingly, we recognized a
    pre-tax stock-based compensation expense of $54,000 for such
    granting actions in accordance with FIN No. 44.  
    Initial Director Grants.  Under the 1999
    Equity Incentive Plan, each non-employee director is
    automatically granted options to purchase shares of our common
    stock when he or she first joins the Board. Based on the Audit
    Committee review, we determined that the measurement date for
    one automatic initial Director grant should be revised because
    the measurement date criteria had been met on the date of the
    directors appointment to the Board of Directors, but the
    recorded grant date was the following day, when the stock price
    was lower. We accounted for this grant as a variable award in
    accordance with FIN No. 44 and, accordingly, we
    recorded stock-based compensation expense of approximately
    $1.7 million for 2000, which was reversed in 2001 due to
    fluctuation in our stock price. This stock option grant was
    never exercised by the non-employee director.
    Terminations.  We determined that the
    vesting of approximately 75,000 shares for eighteen
    employees was permitted after their respective stock option
    termination dates. Accordingly, as this additional vesting was
    considered a modification of the original terms of the
    respective option grants, we recognized a pre-tax stock-based
    compensation expense of $522,000 using the intrinsic value
    method of accounting under APB No. 25 and in accordance
    with FIN No. 44.
    Grants to Non-Employees.  During the
    Review Period, grants were made to non-employees in exchange for
    services as authorized in seven granting actions. In connection
    with one such granting action, we concluded that the grant had
    not been accounted for in accordance Emerging Issues Task Force
    Issue (EITF)
    No. 96-18,
    Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services,and EITF Issue
    No. 00-18,
    Accounting Recognition for Certain Transactions Involving
    Equity Instruments Granted to Other Than Employee.Accordingly, we determined that an additional compensation
    expense should be recorded and we recognized pre-tax stock-based
    compensation expense of $41,000.  Impact
    of Judgments and Interpretations on Restatement
    Values
     34




---



##### Table of Contents



10-day
    Adjustmentsto Pre-Tax


Incremental ImpactStock-Based


At Lowest


At HighestCompensation


Closing


ClosingExpense


Price


PriceEmployee new hire, promotion and merit grants

$
20,056


$
(8,451
)

$
785Corrections to employee new hire, promotion and merit grants


1,373



(699
)


457Employee refresh grants


2,645



(380
)


32,124Grants to officers and certain employees


6,863



(614
)


Director grants










Terminations


522







Grants to non-employees


41







$
31,500


$
(10,144
)

$
33,367    35




---



##### Table of Contents



Financial
    Impact of the Restatement
    Pre-Tax


After TaxAs


(Income)


(Income)As


Previously


Expense


ExpenseRestated


Reported


Adjustments


AdjustmentsFor the year ended December 31,1999

$
3,722


$
3,686


$
36


$
362000


25,066



7,522



17,544



17,5442001


26,802



14,225



12,577



12,5772002


4,712



4,880



(168
)


(168
)2003


3,944



2,348



1,596



1,596Total impact 1999 to 2003


64,246



32,661



31,585



31,5852004


4,906



4,982



(76
)


(76
)2005


1,734



1,743



(9
)


(9
)2006


3,451



3,451







Total

$
74,337


$
42,837


$
31,500


$
31,500         Restatement AdjustmentsAs


Stock-based


PreviouslyPreviously


Compensation


Unrecorded


Total


AsReported


Adjustments


Adjustments(1)


Adjustments


RestatedFor the year ended December 31,1999

$
(28,882
)

$
36


$



$
36


$
(28,918
)2000


(32,055
)


17,544







17,544



(49,599
)2001


(129,175
)


12,577



(336
)


12,241



(141,416
)2002


(148,616
)


(168
)


(623
)


(791
)


(147,825
)2003


(47,531
)


1,596



481



2,077



(49,608
)2004


(23,667
)


(76
)


(23
)


(99
)


(23,568
)2005


617



(9
)






(9
)


6262006


6,437















6,437     (1)
    
    Previously unrecorded adjustments reflect adjustments to support
    and services revenues of $(55,000), $(904,000), $290,000 and
    $168,000 for the years ended December 31, 2001, 2002, 2003
    and 2004, respectively, 36




---



##### Table of Contents



and adjustments to the allowance for doubtful accounts of
    $(281,000), $281,000, $191,000 and $(191,000) for the years
    ended December 31, 2001, 2002, 2003 and 2004.    Accumulated deficit as of December 31, 2003, as previously
    reported

$
(383,340
)Stock-based compensation expense adjustments through
    December 31, 2003


(31,585
)Previously unrecorded adjustments through December 31, 2003


478Impact of adjustments


(31,107
)Accumulated deficit as of December 31, 2003, as restated

$
(414,447
)     Internal
    Revenue Code Section 409A
      Overview
       37




---



##### Table of Contents



time-and-materials
         38




---



##### Table of Contents



Subsequent
    Events
  No. 13-1, Accounting for Rental Costs incurred during a Construction
    Period
          Results
    of Operations
  Revenues
  Years Ended December 31,


Percentage Change2006


2005


2004


2005 to 2006


2004 to 2005As restated(1)(In thousands, except percentages)License

$
75,678


$
67,754


$
67,341



12
%


1
%Percentage of total revenues


38
%


39
%


42
%Support and service


124,641



107,283



92,879



16
%


16
%Percentage of total revenues


62
%


61
%


58
%$
200,319


$
175,037


$
160,220



14
%


9
%  39




---



##### Table of Contents



(1)
    
    See the Explanatory Note immediately preceding
    Part I, Item 1 and Note 3, Restatement of
    Consolidated Financial Statements, in the Notes to
    Consolidated Financial Statements of this Annual Report on
    Form 10-K.    License.
  Support and Service.
    Cost
    of Revenues
  Years Ended December 31,


Percentage Change2006


2005


2004


2005 to 2006


2004 to 2005As restated(1)


As restated(1)(In thousands, except percentages)Cost of license revenues

$
16,367


$
15,262


$
13,336



7
%


14
%Percentage of license revenues


22
%


23
%


20
%Percentage of total revenues


8
%


9
%


8
%Cost of support and service revenues


50,256



42,257



38,762



19
%


9
%Percentage of support and service revenues


40
%


39
%


42
%Percentage of total revenues


25
%


24
%


24
%$
66,623


$
57,519


$
52,098



16
%


10
%  40




---



##### Table of Contents



(1)
    
    See the Explanatory Note immediately preceding
    Part I, Item 1 and Note 3, Restatement of
    Consolidated Financial Statements, in the Notes to
    Consolidated Financial Statements of this Annual Report on
    Form 10-K.  License.
    Support and Service.
    Operating
    Expenses
  Sales
    and Marketing
  Years Ended December 31,

Percentage Change2006

2005

2004

2005 to 2006

2004 to 2005As restated(1)

As restated(1)(In thousands, except percentages)Sales and marketing

$
77,114


$
70,731


$
72,644



9
%


(3
)%Percentage of total revenues


39
%


40
%


45
%  41




---



##### Table of Contents



(1)
    
    See the Explanatory Note immediately preceding
    Part I, Item 1 and Note 3, Restatement of
    Consolidated Financial Statements, in the Notes to
    Consolidated Financial Statements of this Annual Report on
    Form 10-K.      Research
    and Development
  Years Ended December 31,

Percentage Change2006

2005

2004

2005 to 2006

2004 to 2005As restated(1)

As restated(1)(In thousands, except percentages)Research and development

$
35,069


$
31,483


$
31,826



11
%


(1
)%Percentage of total revenues


18
%


18
%


20
%     (1)
    
    See the Explanatory Note immediately preceding
    Part I, Item 1 and Note 3, Restatement of
    Consolidated Financial Statements, in the Notes to
    Consolidated Financial Statements of this Annual Report on
    Form 10-K.    General
    and Administrative
  Years Ended December 31,

Percentage Change2006

2005

2004

2005 to 2006

2004 to 2005As restated(1)

As restated(1)(In thousands, except percentages)General and administrative

$
16,787


$
14,498


$
13,636



16
%


6
%Percentage of total revenues


8
%


8
%


9
%  42




---



##### Table of Contents



(1)
    
    See the Explanatory Note immediately preceding
    Part I, Item 1 and Note 3, Restatement of
    Consolidated Financial Statements, in the Notes to
    Consolidated Financial Statements of this Annual Report on
    Form 10-K.    Amortization
    of Intangible Assets
  Years Ended December 31,

Percentage Change2006

2005

2004

2005 to 2006

2004 to 2005(In thousands, except percentages)Amortization of intangible assets

$
3,312


$
3,358


$
4,541



(1
)%


(26
)%Percentage of total revenues


2
%


2
%


3
%     Restructuring
    and Excess Facilities Charges (Recoveries)
  Years Ended December 31,

Percentage Change2006

2005

2004

2005 to 2006

2004 to 2005(In thousands, except percentages)Restructuring and excess facilities charges (recoveries)

$
(902
)

$
(692
)

$
9,782



30
%


*
%Percentage of total revenues


*
%


*
%


6
%     *
    
    Percentage is not meaningful   43




---



##### Table of Contents



Accounting for Costs Associated with
    Exit or Disposal Activities
        Interest
    Income and Other, Net
  Years Ended December 31,


Percentage Change2006


2005


2004


2005 to 2006


2004 to 2005(In thousands, except percentages)Interest income and other, net

$
6,324


$
3,574


$
1,725



77
%


107
%Percentage of total revenues


3
%


2
%


1
%     Provision
    for Income Taxes
  Years Ended December 31,


Percentage Change2006


2005


2004


2005 to 2006


2004 to 2005(In thousands, except percentages)Provision for income taxes

$
2,203


$
1,088


$
986



102
%


10
%Percentage of total revenues


1
%


1
%


1
%     Accounting for Stock-Based
    Compensation,
 44




---



##### Table of Contents



Liquidity
    and Capital Resources
  December 31,


Percentage Change2006


2005


2004


2005 to 2006


2004 to 2005As restated(1)


As restated(1)(In thousands, except percentages)Cash, cash equivalents and short-term investments

$
176,461


$
137,199


$
133,757



29
%


3
%Working capital

$
120,294


$
86,009


$
85,975



40
%


1
%Stockholders equity

$
323,960


$
298,700


$
289,123



9
%


4
%     (1)
    
    See the Explanatory Note immediately preceding
    Part I, Item 1 and Note 3, Restatement of
    Consolidated Financial Statements, in the Notes to
    Consolidated Financial Statements of this Annual Report on
    Form 10-K.       45




---



##### Table of Contents



46




---



##### Table of Contents



Bank Borrowings.
  Facilities.
  Excess FacilitiesOccupied


Minimum Lease


Estimated Sub-


Estimated


Net


Net FutureYears Ending December 31,

Facilities


Commitments


Lease Income


Costs


Outflows


Outflows2007

$
8,389


$
5,498


$
(994
)

$
651


$
5,155


$
13,5442008


4,144



1,973



(802
)


382



1,553



5,6972009


2,731



1,258



(523
)


345



1,080



3,8112010


2,673



1,049



(452
)


339



936



3,6092011


2,826



















2,826Thereafter


10,078



















10,078$
30,841


$
9,778


$
(2,771
)

$
1,717



8,724


$
39,565   Less: Present value discount of future lease payments


(28
)Obligations for excess facilities recognized as of
    December 31, 2006

$
8,696          47




---



##### Table of Contents



StandbyLetters ofCreditYears Ending December 31,2007

$
3,5942008

$
2,9412009

$
2,9412010

$
1,4412011

$
1,441After 2011

$
1,441     Financial
    Risk Management
  non-United
      Off-Balance
    Sheet Arrangements
  Regulation S-K.
     48




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
    
    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.
  No. 97-2, Software Revenue Recognition, SOP No. 98-9, Modification of
    SOP 97-2,
    Software Revenue Recognition with Respect to Certain
    Transactions. SOP No. 97-2
  SOP No. 97-2,
  case-by-case
 49




---



##### Table of Contents



time-and-materials
    Allowance for Doubtful Accounts.
  Allowance for Sales Returns. Revenue Recognition When Right of
    Return Exists.
  Restructuring and Excess Facilities
    Accrual.
  Accounting for Stock-Based
    Compensation. Share-Based Payment, Accounting for
    Stock-Based Compensation
 50




---



##### Table of Contents



Accounting for Income Taxes. Accounting for Income Taxes
       51




---



##### Table of Contents



Impairment of Goodwill and Long-Lived
    Assets. Goodwill and Other Intangible
    Assets
  
    Step 1  We compare the fair value of our
    single 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.      Accounting for the
    Impairment or Disposal of Long-Lived Assets.
    Recent
    Accounting Pronouncements
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   52




---



##### Table of Contents



Interest
    Rate Risk
        AverageCarrying


InterestValue


RateCash equivalents

$
36,169



4.47
%Short-term investments


102,342



4.49
%$
138,511



4.48
%     AverageCarrying


InterestValue


RateCash equivalents

$
49,601



2.47
%Short-term investments


63,581



3.14
%$
113,182



2.94
%       Foreign
    Currency Risk
   53




---



##### Table of Contents



Accounting for Derivative Instruments
    and Hedging Activities
    ContractNotional


ExchangePrincipal


RateAustralian Dollars

$
2,053



0.79Euros


3,386



1.32British Pounds


4,106



1.96Japanese Yen


653



0.01$
10,198Estimated fair value of liability

$
24     ContractNotional


ExchangePrincipal


RateAustralian Dollars

$
883



0.73Euros


2,740



1.18British Pounds


2,155



1.72$
5,778Estimated fair value of liability

$
19       Commodity
    Price Risk
   54




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Quarterly
    Financial Information (Unaudited)
    Three Months EndedDecember 31,


September 30,


June 30,


March 31,2006


2006


2006


2006Revenues:License

$
21,021


$
18,580


$
18,508


$
17,569Support and service


32,896



32,335



30,521



28,889Total revenues


53,917



50,915



49,029



46,458Cost of revenues:License


3,352



4,426



4,417



4,172Support and service


12,932



13,140



12,327



11,857Total cost of revenues


16,284



17,566



16,744



16,029Gross profit


37,633



33,349



32,285



30,429Operating expenses:Sales and marketing


20,668



18,877



19,168



18,401Research and development


9,085



8,902



8,528



8,554General and administrative


3,772



3,964



3,791



5,260Amortization of intangible assets


828



828



828



828Restructuring and excess facilities charges (recoveries)


(15
)


41



(591
)


(337
)Total operating expenses


34,338



32,612



31,724



32,706Income (loss) from operations


3,295



737



561



(2,277
)Interest income and other, net


1,888



1,631



1,531



1,274Income (loss) before provision for income taxes


5,183



2,368



2,092



(1,003
)Provision for income taxes


853



595



315



440Net income (loss)

$
4,330


$
1,773


$
1,777


$
(1,443
)Basic net income (loss) per common share

$
0.10


$
0.04


$
0.04


$
(0.03
)Shares used in computing basic net income (loss) per common share


43,813



43,045



42,629



42,430Diluted net income (loss) per common share

$
0.10


$
0.04


$
0.04


$
(0.03
)Shares used in computing diluted net income (loss) per common
    share


45,337



43,922



43,350



42,430   55




---



##### Table of Contents



Three Months EndedDecember 31,


September 30,


June 30,


March 31,2005


2005


2005


2005As restated(1)


As restated(1)


As restated(1)


As restated(1)Revenues:License

$
19,254


$
17,417


$
14,666


$
16,417Support and service


28,325



26,522



26,368



26,068Total revenues


47,579



43,939



41,034



42,485Cost of revenues:License


4,481



3,951



3,342



3,488Support and service


11,295



10,740



10,222



10,000Total cost of revenues


15,776



14,691



13,564



13,488Gross profit


31,803



29,248



27,470



28,997Operating expenses:Sales and marketing


18,760



17,966



16,679



17,326Research and development


7,842



7,639



7,840



8,162General and administrative


4,090



3,674



3,123



3,611Amortization of intangible assets


886



834



782



856Restructuring and excessfacilities charges (recoveries)


(94
)


35



(303
)


(330
)Total operating expenses


31,484



30,148



28,121



29,625Income (loss) from operations


319



(900
)


(651
)


(628
)Interest income and other, net


969



984



908



713Income before provision for income taxes


1,288



84



257



85Provision for income taxes


185



278



325



300Net income (loss)

$
1,103


$
(194
)

$
(68
)

$
(215
)Basic net income (loss) per common share

$
0.03


$
(0.01
)

$
(0.00
)

$
(0.01
)Shares used in computing basic net income (loss) per common share


42,244



41,988



41,635



41,137Diluted net income (loss) per common share

$
0.03


$
(0.01
)

$
(0.00
)

$
(0.01
)Shares used in computing diluted net income (loss) per common
    share


43,085



41,988



41,635



41,137     (1)
    
    See the Explanatory Note immediately preceding
    Part I, Item 1 and Note 3, Restatement of
    Consolidated Financial Statements, in the Notes to
    Consolidated Financial Statements of this Annual Report on
    Form 10-K. 56




---



##### Table of Contents



4th Quarter


3rd QuarterAs





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedRevenues:License

$
19,254


$



$
19,254


$
17,417


$



$
17,417Support and service


28,325







28,325



26,522







26,522Total revenues


47,579







47,579



43,939







43,939Cost of revenues:License


4,481







4,481



3,951







3,951Support and service


11,293



2



11,295



10,731



9



10,740Total cost of revenues


15,774



2



15,776



14,682



9



14,691Gross profit


31,805



(2
)


31,803



29,257



(9
)


29,248Operating expenses:Sales and marketing


18,753



7



18,760



17,966







17,966Research and development


7,840



2



7,842



7,639







7,639General and administrative


4,088



2



4,090



3,673



1



3,674Amortization of intangible assets


886







886



834







834Restructuring and excess facilities charges (recoveries)


(94
)






(94
)


35







35Total operating expenses


31,473



11



31,484



30,147



1



30,148Income (loss) from operations


332



(13
)


319



(890
)


(10
)


(900
)Interest income and other, net


969







969



984







984Income before provision for income taxes


1,301



(13
)


1,288



94



(10
)


84Provision for income taxes


185







185



278







278Net income (loss)

$
1,116


$
(13
)

$
1,103


$
(184
)

$
(10
)

$
(194
)Basic net income (loss) per common share

$
0.03


$



$
0.03


$
(0.00
)

$



$
(0.00
)Shares used in computing basic net income (loss) per common share


42,244







42,244



41,988







41,988Diluted net income (loss) per common share

$
0.03


$



$
0.03


$
(0.00
)

$



$
(0.00
)Shares used in computing diluted net income (loss) per common
    share


43,085







43,085



41,988







41,988   57




---



##### Table of Contents



2nd Quarter


1st QuarterAs





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedRevenues:License

$
14,666


$



$
14,666


$
16,417


$



$
16,417Support and service


26,368







26,368



26,068







26,068Total revenues


41,034







41,034



42,485







42,485Cost of revenues:License


3,342







3,342



3,488







3,488Support and service


10,227



(5
)


10,222



10,029



(29
)


10,000Total cost of revenues


13,569



(5
)


13,564



13,517



(29
)


13,488Gross profit


27,465



5



27,470



28,968



29



28,997Operating expenses:Sales and marketing


16,671



8



16,679



17,328



(2
)


17,326Research and development


7,842



(2
)


7,840



8,168



(6
)


8,162General and administrative


3,122



1



3,123



3,608



3



3,611Amortization of intangible assets


782







782



856







856Restructuring and excess facilities charges (recoveries)


(303
)






(303
)


(330
)






(330
)Total operating expenses


28,114



7



28,121



29,630



(5
)


29,625Loss from operations


(649
)


(2
)


(651
)


(662
)


34



(628
)Interest income and other, net


908







908



713







713Income before provision for income taxes


259



(2
)


257



51



34



85Provision for income taxes


325







325



300







300Net loss

$
(66
)

$
(2
)

$
(68
)

$
(249
)

$
34


$
(215
)Basic and diluted net lossper common share

$
(0.00
)

$



$
(0.00
)

$
(0.01
)

$



$
(0.01
)Shares used in computing basic and diluted net income (loss) per
    common share


41,635







41,635



41,137







41,137  58




---



##### Table of Contents



September 30, 2006


June 30, 2006As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedAssetsCurrent assets:Cash and cash equivalents

$
79,019


$



$
79,019


$
60,312


$



$
60,312Short-term investments


81,349







81,349



86,231







86,231Accounts receivable, net


29,851







29,851



33,466







33,466Prepaid expenses and other current assets


5,564







5,564



5,254







5,254Total current assets


195,783







195,783



185,263







185,263Property and equipment, net


4,873







4,873



5,163







5,163Goodwill


191,620







191,620



191,595







191,595Other intangible assets, net


13,904







13,904



18,474







18,474Other assets


2,997







2,997



3,284







3,284Total assets

$
409,177


$



$
409,177


$
403,779


$



$
403,779Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
2,493


$



$
2,493


$
2,430


$



$
2,430Accrued liabilities


29,763







29,763



28,185







28,185Restructuring and excess facilities accrual


6,520







6,520



7,214







7,214Deferred revenues


53,112



(501
)


52,611



56,308



(501
)


55,807Total current liabilities


91,888



(501
)


91,387



94,137



(501
)


93,636Accrued liabilities


2,504







2,504



2,290







2,290Restructuring and excess facilities accrual


3,966







3,966



5,140







5,140Total liabilities


98,358



(501
)


97,857



101,567



(501
)


101,066Stockholders equity:Preferred stock






















Common stock


43







43



43







43Additional paid-in capital


715,235



31,500



746,735



708,519



31,500



740,019Cumulative translation adjustment


(64
)






(64
)


16







16Accumulated other comprehensive loss


(112
)






(112
)


(310
)






(310
)Accumulated deficit


(404,283
)


(30,999
)


(435,282
)


(406,056
)


(30,999
)


(437,055
)Total stockholders equity


310,819



501



311,320



302,212



501



302,713Total liabilities andstockholders equity

$
409,177


$



$
409,177


$
403,779


$



$
403,779   59




---



##### Table of Contents



March 31, 2006As





AsReported


Adjustments


RestatedAssetsCurrent assets:Cash and cash equivalents

$
60,266


$



$
60,266Short-term investments


82,814







82,814Accounts receivable, net


30,826







30,826Prepaid expenses and other current assets


4,769







4,769Total current assets


178,675







178,675Property and equipment, net


5,001







5,001Goodwill


191,595







191,595Other intangible assets, net


22,924







22,924Other assets


2,891







2,891Total assets

$
401,086


$



$
401,086Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
2,740


$



$
2,740Accrued liabilities


25,881







25,881Restructuring and excess facilities accrual


7,145







7,145Deferred revenues


57,176



(501
)


56,675Total current liabilities


92,942



(501
)


92,441Accrued liabilities


2,499







2,499Restructuring and excess facilities accrual


7,645







7,645Total liabilities


103,086



(501
)


102,585Stockholders equity:Preferred stock










Common stock


42







42Additional paid-in capital


706,292



31,500



737,792Accumulated other comprehensive loss


(501
)






(501
)Accumulated deficit


(407,833
)


(30,999
)


(438,832
)Total stockholders equity


298,000



501



298,501Total liabilities and stockholders equity

$
401,086


$



$
401,086  60




---



##### Table of Contents



December 31, 2005


September 30, 2005As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedAssetsCurrent assets:Cash and cash equivalents

$
73,618


$



$
73,618


$
49,480


$



$
49,480Short-term investments


63,581







63,581



77,236







77,236Accounts receivable, net


31,542







31,542



29,001







29,001Prepaid expenses and other current assets


4,732







4,732



6,242







6,242Total current assets


173,473







173,473



161,959







161,959Property and equipment, net


5,044







5,044



5,528







5,528Goodwill


191,595







191,595



191,480







191,480Other intangible assets, net


25,527







25,527



30,134







30,134Other assets


2,967







2,967



1,907







1,907Total assets

$
398,606


$



$
398,606


$
391,008


$



$
391,008Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
2,318


$



$
2,318


$
4,196


$



$
4,196Accrued liabilities


24,371







24,371



21,253







21,253Restructuring and excess facilities accrual


7,266







7,266



7,475







7,475Deferred revenues


54,010



(501
)


53,509



49,574



(501
)


49,073Total current liabilities


87,965



(501
)


87,464



82,498



(501
)


81,997Accrued liabilities


2,761







2,761



2,904







2,904Restructuring and excess facilities accrual


9,681







9,681



11,529







11,529Total liabilities


100,407



(501
)


99,906



96,931



(501
)


96,430Stockholders equity:Preferred stock






















Common stock


42







42



42







42Additional paid-in capital


705,908



31,500



737,408



703,661



31,501



735,162Deferred stock-based compensation


(1,002
)






(1,002
)


(1,752
)


(14
)


(1,766
)Accumulated other comprehensive loss


(359
)






(359
)


(368
)






(368
)Accumulated deficit


(406,390
)


(30,999
)


(437,389
)


(407,506
)


(30,986
)


(438,492
)Total stockholders equity


298,199



501



298,700



294,077



501



294,578Total liabilities andstockholders equity

$
398,606


$



$
398,606


$
391,008


$



$
391,008   61




---



##### Table of Contents



June 30, 2005


March 31, 2005As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedAssetsCurrent assets:Cash and cash equivalents

$
57,249


$



$
57,249


$
58,647


$



$
58,647Short-term investments


86,820







86,820



82,456







82,456Accounts receivable, net


25,194







25,194



23,523







23,523Prepaid expenses and other current assets


6,480







6,480



8,480







8,480Total current assets


175,743







175,743



173,106







173,106Property and equipment, net


5,782







5,782



5,590







5,590Goodwill


185,464







185,464



185,464







185,464Other intangible assets, net


22,947







22,947



26,454







26,454Other assets


1,947







1,947



1,947







1,947Total assets

$
391,883


$



$
391,883


$
392,561


$



$
392,561Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
4,536


$



$
4,536


$
5,623


$



$
5,623Accrued liabilities


19,032







19,032



19,171







19,171Restructuring and excess facilities accrual


7,750







7,750



8,197







8,197Deferred revenues


50,831



(501
)


50,330



51,633



(501
)


51,132Total current liabilities


82,149



(501
)


81,648



84,624



(501
)


84,123Accrued liabilities


3,078







3,078



3,194







3,194Restructuring and excess facilities accrual


13,214







13,214



14,935







14,935Total liabilities


98,441



(501
)


97,940



102,753



(501
)


102,252Stockholders equity:Preferred stock






















Common stock


42







42



41







41Additional paid-in capital


702,045



31,503



733,548



698,791



31,522



730,313Deferred stock-based compensation


(1,074
)


(26
)


(1,100
)


(1,534
)


(47
)


(1,581
)Accumulated other comprehensive loss


(249
)






(249
)


(234
)






(234
)Accumulated deficit


(407,322
)


(30,976
)


(438,298
)


(407,256
)


(30,974
)


(438,230
)Total stockholders equity


293,442



501



293,943



289,808



501



290,309Total liabilities andstockholders equity

$
391,883


$



$
391,883


$
392,561


$



$
392,561     Form 10-K.
 62




---



##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.CONTROLS
    AND PROCEDURES
  Audit
    Committee Review
  Form 10-K, Form 10-K.
      
    Documenting and assessing the design and operation of internal
    controls;
    Segregating responsibilities, adding reviews and reconciliations;
    Upgrading systems that support the processes;
    Providing training to the stock administration function; and
    Identifying key controls, developing test plans and testing
    controls in the stock option granting and administration
    function.      Restatement
    of Financial Statements
   63




---



##### Table of Contents



Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e) 15d-15(e) Rule 13a-15 Rules 13a-15(e) 15d-15(e)
  Form 10-K.
  Form 10-K.
  Managements
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f)
 64




---



##### Table of Contents



Form 10-K
    Changes
    in Internal Control over Financial Reporting
    Form 10-K Rule 13a-14 Form 10-K
  ITEM 9B.
    OTHER
    INFORMATION  2007
    Annual Meeting of Stockholders
  Rule 14a-5(f) Rule 14a-8 Rule 14a-8
  2008
    Annual Meeting of Stockholders
   65




---



##### Table of Contents



Rule 14a-5(f)
  Rule 14a-8
  14a-8
    PART III
  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Board of
    Directors
    Name of Director

Age

Principal Occupation

Director SinceCharles M. Boesenberg(1)(3)(4)


59


Retired

July 2006Ronald E. F. Codd(1)(3)


52


Independent Business Consultant

July 1999Bob L. Corey *(1)


56


Independent Business Consultant

November 2003Joseph L. Cowan


59


Chief Executive Officer, Interwoven, Inc.

April 2007Frank J. Fanzilli, Jr.(2)(3)(4)


51


Independent Business Consultant

July 2002Roger J. Sippl(2)(4)


52


Partner, Sippl MacDonald Ventures

April 2007Thomas L. Thomas(1)(2)


58


President and Chief Operating Officer of GXS

February 2004     *
    
    Chairman of the Board of Directors(1)
    
    Member of the Audit Committee(2)
    
    Member of the Compensation Committee(3)
    
    Member of the Nominating and Governance Committee(4)
    
    Member of the Strategy Committee  Charles M. Boesenberg
  Ronald E. F. Codd
 66




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Bob L. Corey
  Joseph L. Cowan e-Education
  Frank J. Fanzilli, Jr.
  Roger J. Sippl
  Thomas L. Thomas e-commerce
 67




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##### Table of Contents



Executive
    Officers
    Joseph L. Cowan
  Scipio M. Carnecchia
  John E. Calonico, Jr.
  Benjamin E. Kiker, Jr.
  Steven J. Martello e-business
  Rafiq R. Mohammadi,
  David A. Nelson-Gal
   68




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##### Table of Contents



Identification
    of Audit Committee and Financial Expert
  Audit Committee. http://www.interwoven.com/company/investors/corp_governance.html
    Section 16(a)
    Beneficial Ownership Reporting Compliance
      Code of
    Conduct and Business Ethics
  http://www.interwoven.com/company/investors/corp_governance.html
  ITEM 11.
    EXECUTIVE
    COMPENSATION  Compensation
    Discussion and Analysis
  Introduction
   69




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##### Table of Contents



General
    Compensation Policy and Objectives
    
    Provide competitive total compensation compared to similar
    positions at comparable companies, assuming that our performance
    and that the executives performance meet specified goals;
    Link compensation to company performance and individual
    achievement;
    Link specific cash-based elements of compensation to our
    near-term financial performance; and
    Align the interests of our executives and our stockholders to
    provide long-term incentives to build stockholder value.  non-financial
    Compensation
    Surveys and Consultants
   70




---



##### Table of Contents



Ariba

OpenText Corporation

Salesforce.comBorland Software

Openwave Systems

TIBCO SoftwareDigital Insight

QAD

VignetteEpicor Software

Quest Software

WebEx CommunicationsInformatica

Radiant Systems

Wind River SystemsMacrovision   th
    th th th th th
 71




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th
  Elements
    of Compensation
    Base
    Salary
      th
  th
 72




---



##### Table of Contents



th th
  Cash
    Incentive Awards
       73




---



##### Table of Contents



2006


2007Bonus Plan








Bonus PlanCompany





Commission





Company





CommissionName

Performance


MBO


Plan


Total


Performance


MBO


Plan


TotalMartin W. Brauns(1)


*



*



*



*



*



*



*



*John E. Calonico, Jr.

$
100,000


$
25,000



*


$
125,000


$
100,000


$
38,000



*


$
138,000Scipio M. Carnecchia


*



*


$
275,000


$
275,000



*



*


$
275,000


$
275,000Joseph L. Cowan(2)


*



*



*



*


$
400,000



*



*


$
400,000Benjamin E. Kiker, Jr.(3)

$
16,000


$
7,500



*


$
23,500


$
80,000


$
30,000



*


$
110,000Steven J. Martello

$
25,000


$
25,000


$
150,000


$
200,000



*


$
40,000


$
160,000


$
200,000David A. Nelson-Gal

$
73,000


$
30,000



*


$
103,000


$
76,000


$
32,000



*


$
108,000William Seawick

$
80,000


$
30,000



*


$
110,000



*



*



*



*     *
    
    Not applicable.(1)
    
    Mr. Brauns announced his retirement prior to the
    Compensation Committees determination of bonus targets.(2)
    
    Mr. Cowans employment commenced in April 2007.(3)
    
    Mr. Kikers annual target goal was $110,000, prorated
    based on his date of hire of September 12, 2006.    Bonus Plans.
  
    non-GAAP operating income goals, which, in 2006 and 2007, were
    the same as the quarterly and annual non-GAAP operating income
    targets contained in our financial plan, as approved by the
    Board of Directors (Non-GAAP Operating Income
    Goals);
    revenue targets, which, in 2006 and 2007, were the same as the
    quarterly and annual revenue targets contained in our financial
    plan, as approved by the Board of Directors (Revenue
    Goals); and
    Individual goals and objectives established for each of those
    persons by our principal executive officer (MBO
    Goals).     74




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75




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Commission Plans.
  ,
   76




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Long-Term
    Equity Awards
     77




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78




---



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Employee
    Benefits.
    Severance
    Arrangements.
        Change in
    Control Arrangements.
   79




---



##### Table of Contents



gross-ups gross-up
    Supplementary
    Compensation Policies
    Limitations
    on Deductibility of Compensation
    Compensation
    Committee Report
  The information contained in this report shall not be deemed
    to be soliciting material, to be filed
    with the Securities and Exchange Commission or be subject to
    Regulation 14A or Regulation 14C (other than as
    provided in Item 407 of S-K) or to the liabilities of
    Section 18 of the Securities Exchange Act of 1934, and
    shall not deemed to be incorporated by reference in future
    filings with the Securities and Exchange Commission except to
    the extent that Interwoven, Inc. specifically incorporates it by
    reference into a document filed under the Securities Act of 1933
    or the Securities Exchange Act of 1934.
  Form 10-K
 80




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##### Table of Contents



Form 10-K.
  Compensation
    Committee:
  Thomas L.
    Thomas, Chairperson
    Frank J. Fanzilli, Jr.
    Roger J. Sippl (member since April 2007)
    Bob L. Corey (member from October 2006 to March 2007)
    Charles M. Boesenberg (member from October 2006 to April
    2007)
  Compensation
    Committee Interlocks and Insider Participation
    Summary
    Compensation
    SUMMARY
    COMPENSATION TABLE  2006
  Non-EquityStock


Option


Incentive Plan


All OtherSalary


Awards


Awards


Compensation


CompensationName and Principal Position

Year


($)(1)


($)(2)


($)(3)


($)(4)


($)(5)


Total ($)Scipio M. Carnecchia 
    President(6)


2006


$
290,000
(7)

$
51,969


$
144,983


$
533,520
(8)

$
750


$
1,021,222John E. Calonico, Jr. 
    Senior Vice President and Chief Financial Officer


2006


$
255,000


$
41,575


$
13,592


$
137,775


$
750


$
448,692Steven J. Martello
    Senior Vice President of Client Services


2006


$
250,000


$
36,378


$
36,291


$
275,894
(9)





$
598,563David A. Nelson-Gal
    Senior Vice President of Engineering


2006


$
253,651


$
10,394


$
249,618


$
108,872


$
750


$
623,285Benjamin E. Kiker, Jr. 
    Senior Vice President and Chief Marketing Officer


2006


$
76,705


$
14,692


$
23,994


$
25,360






$
140,751Former OfficersMartin W. Brauns(6) 
    Former Chief Executive Officer and Director


2006


$
100,000


$
738,400
(10)



(10)





$
1,437,052
(11)

$
2,275,452William Seawick(12)
     Former Senior Vice President and Chief Marketing Officer


2006


$
113,720










$
45,060


$
129,016
(13)

$
287,796     (1)
    
    Effective January 31, 2007, the following Named Executive
    Officers received an increase in annual base salary to the
    following amounts: Mr. Calonico  $280,000 and
    Mr. Nelson-Gal  $268,000. Effective
    April 19, 2007, Mr. Carnecchia received an increase in
    annual base salary to $300,000. Effective August 1, 2007,
    Mr. Calonicos annual base salary was increased to
    $305,000. 81




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##### Table of Contents



(2)
    
    The amounts reflect the dollar amount recognized for financial
    statement reporting purposes for the year ended
    December 31, 2006 in accordance with Statement of Financial
    Accounting Standard SFAS No. 123R of restricted stock
    unit awards issued pursuant to the 1999 Equity Incentive Plan.
    For restricted stock unit awards, fair value is calculated using
    the closing price on the grant date as if these awards were
    vested and issued on the grant date. No stock awards were
    forfeited by any of our Named Executive Officers during the
    year. See the Grants of Plan-Based Awards 
    2006 table for information on restricted stock unit awards
    made in 2006. See also Footnote 10 below. These amounts reflect
    our accounting expense for these awards, and do not correspond
    to the actual value that may be recognized by the Named
    Executive Officers.(3)
    
    The amounts reflect the dollar amount recognized for financial
    statement reporting purposes for the year ended
    December 31, 2006 in accordance with
    SFAS No. 123R of stock option awards issued pursuant
    to the 1999 Equity Incentive Plan and thus includes amounts from
    outstanding stock option awards granted during and prior to
    2006. Assumptions used, except for forfeiture assumptions, in
    the calculation of these amounts are included in the notes to
    our audited consolidated financial statements for the year ended
    December 31, 2006 as included in this Annual Report on
    Form 10-K.
    No stock options were forfeited by any of our Named Executive
    Officers during 2006 other than Mr. Brauns and
    Mr. Seawick who forfeited options to purchase
    1,275,000 shares and 200,000 shares, respectively, in
    connection with the cessation of their employment. See the
    Grant of Plan-Based Awards  2006 table
    for information on stock option grants made in 2006. See also
    Footnote 10 below. These amounts reflect our stock-based
    compensation expense for these awards, and do not correspond to
    the actual value that may be recognized by the Named Executive
    Officers.(4)
    
    Except as disclosed in footnotes 8 and 9, the amounts reflect
    the cash awards paid to the Named Executive Officers under the
    2006 Executive Officer Incentive Bonus Plan, as further
    described in Compensation Discussion and Analysis
    above and the Grants of Plan-Based Awards 
    2006 table below. The MBO Bonus portion of the awards for
    Messrs. Calonico, Kiker, Martello, Nelson-Gal and Seawick
    was $23,875, $5,760, $22,500, $25,725 and $11,460, respectively.(5)
    
    The All Other Compensation column includes the items
    described and quantified below and, to the extent amounts are
    not described and quantified below, matching contributions we
    made under our 401(k) plan during 2006 on behalf of each Named
    Executive Officer.(6)
    
    Mr. Brauns retired on March 31, 2006.
    Mr. Carnecchia served as Interim President from the time
    Mr. Brauns retired until September 14, 2006, when he
    was appointed President. Mr. Carnecchia has served as our
    President since that date, and as our principal executive
    officer from that date until Joseph L. Cowan became our Chief
    Executive Officer on April 2, 2007.(7)
    
    Mr. Carnecchia was paid an additional $30,000 per quarter
    for each quarter in which he served as our principal executive
    officer for a total of $90,000 in 2006.(8)
    
    Represents cash awards paid pursuant to
    Mr. Carnecchias 2006 Compensation Plan.(9)
    
    Includes cash awards of $224,919 paid pursuant to
    Mr. Martellos 2006 Compensation Plan.  (10)
    
    Reflects amounts expensed in 2006 for Mr. Brauns and does
    not include expense for awards that were forfeited in connection
    with his retirement (which amounts have not been previously
    disclosed). We issued 80,000 shares of restricted stock
    under the 1999 Equity Incentive Plan pursuant to the terms of
    our separation agreement with Mr. Brauns and in exchange
    for his surrender of outstanding options to purchase
    1.0 million shares of our common stock, with a weighted
    average exercise price of $14.39 per share. In addition,
    Mr. Brauns agreed to surrender an option to purchase
    250,000 shares, with an exercise price of $49.38 per share,
    and an option to purchase 25,000 shares, with an exercise
    price of $111.52 per share. Accordingly, the entire amount of
    expense reflected in the column entitled Stock
    Awards for these 80,000 shares of restricted stock
    was offset by the value of options surrendered.(11)
    
    Mr. Brauns received a cash payment of $1,400,000 in
    connection with his retirement, representing the sum of his
    annual base salary of $350,000 plus the amount equal to the sum
    of his targeted annual cash bonuses for 2006 and 2007; $17,419
    for accrued vacation and $18,883 in perquisites and other
    personal benefits. Of the $18,883 in perquisites and other
    personal benefits, $10,000 represents reimbursement of
    Mr. Brauns legal fees in connection with the review
    and execution of his separation agreement and $8,083 represents
    Consolidated Omnibus Budget Reconciliation Act of 1995
    (COBRA) premium payments for Mr. Brauns and his
    spouse during 2006. The balance of his perquisites and other
    personal benefits consists of the value of 82




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##### Table of Contents



our personal computer equipment that we permitted
    Mr. Brauns to retain following his retirement and our
    incremental cost of providing post-termination telephone and
    e-mail
    support.We are obligated to provide Mr. Brauns and his spouse
    continued group medical coverage through COBRA for up to
    21 months following March 31, 2006 at our expense. We
    have paid $8,083 for COBRA premiums for Mr. Brauns and his
    spouse during the first nine months of 2007, and expect to pay
    an additional $2,694 for such payments during the last three
    months of 2007.(12)
    
    Mr. Seawicks employment was terminated on
    July 6, 2006.(13)
    
    Mr. Seawick received severance of $110,000, representing
    six months of his base salary, $6,466 for accrued vacation and
    $12,500 in perquisites or other personal benefits, which amount
    represents the benefit to Mr. Seawick as a result of our
    not requesting that he repay a portion of his sign-on bonus in
    connection with the termination of his employment per the terms
    of his offer letter.  GRANTS OF
    PLAN-BASED AWARDS  2006
  All


AllOther


Other





GrantStock


Option





DateAwards:


Awards:


Exercise


FairNumber of


Number of


or Base


ValueShares of


Securities


Price of


of StockEstimated Possible Payouts under Non-Equity Incentive Plan
    Awards


Estimated Future Payouts Under Equity Incentive Plan
    Awards


Stock or


Underlying


Option


andGrant


Threshold


Target


Maximum


Threshold


Target


Maximum


Units (#)


Options


Awards


OptionName

Date


($)


($)


($)


(#)


(#)


(#)


(1)


(#) (2)(3)


($/Sh.)


Awards ($)Scipio M. Carnecchia



(4)





$
275,000































5/19/06































100,000


$
9.24


$
359,1806/19/06



























50,000










$
431,000John E. Calonico, Jr.



(5)

$
30,000


$
100,000


$
300,000



























(6)





$
25,000


$
25,000



























6/19/06



























40,000










$
344,800Steven J. Martello



(7)

$
18,740


$
150,000































(5)

$
7,500


$
25,000


$
75,000



























(6)





$
25,000


$
25,000



























6/19/06



























35,000










$
301,700David A. Nelson-Gal



(5)

$
21,900


$
73,000


$
219,000(6)





$
30,000


$
30,000



























6/19/06



























10,000










$
86,200Benjamin E. Kiker



(5)


9/12/06































90,000


$
10.80


$
352,7649/12/06



























20,000










$
216,000Former OfficersMartin W. Brauns



(8)


























80,000










$
738,400William Seawick



(5)

$
24,000


$
80,000


$
240,000



























(6)





$
30,000


$
30,000



























     (1)
    
    Except as indicated in footnote 8, all awards reported in this
    column are awards of restricted stock units. These restricted
    stock unit awards were granted under the 1999 Equity Incentive
    Plan, vest annually in 25% increments on each of the first
    through fourth anniversaries of the date of grant and are
    settled in shares on the vesting date.(2)
    
    These stock option awards were granted under the 1999 Equity
    Incentive Plan. Mr. Carnecchias options vest as to
    50% of the shares subject to the options on the first
    anniversary of grant and thereafter vest in monthly pro-rata
    increments over the following twelve months.
    Mr. Kikers options vest as to 25% of the shares
    subject to the options on the first anniversary of grant and
    thereafter vest in monthly pro-rata increments over the
    following thirty-six months. The options have a maximum term of
    ten years subject to earlier termination upon cessation of
    service to us. The exercise price of each option may be paid in
    cash or in shares of common stock valued at the closing price on
    the exercise date or may be paid with the proceeds from a
    same-day
    sale of the purchased shares.(3)
    
    In the event of a change of control in which we sell all or
    substantially all of our assets or an entity acquires us by
    means of consolidation, corporate reorganization or merger, or
    other transaction or series of related transactions in which
    more than 50% of the outstanding voting power of our company is
    transferred, and the executive 83




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officer is terminated without Cause in connection with or
    following the transaction, then the stock options granted and
    restricted stock units awarded will immediately vest as to the
    greater of 50% of the unvested shares or the number of shares
    that would have vested had the termination not involved a change
    in control.(4)
    
    Mr. Carnecchias awards were granted under his 2006
    Compensation Plan, which provides for commissions for software
    license bookings and revenues from consulting and education
    services. As further described below, the commissions are earned
    and paid quarterly upon attainment of quarterly goals for such
    bookings and revenues, and quarterly goals for such bookings and
    revenue less the cost of license revenues and sales expenses to
    attain such bookings and revenue. The actual payments from this
    incentive compensation are included in the Non-Equity
    Incentive Plan Compensation column in the Summary
    Compensation Table  2006 above.
    Mr. Carnecchias 2006 Compensation Plan did not
    contain any threshold or maximum value. Accordingly, no such
    values have been included in the table for this plan.(5)
    
    Represents the Company Performance Bonus portion of the
    participants Target Bonus award under the 2006 Executive
    Officer Incentive Bonus Plan, which is further described below.
    The actual payments from these awards are included in the
    Non-Equity Incentive Plan Compensation column in the
    Summary Compensation Table  2006 above. The maximum
    values are calculated by multiplying the Company Performance
    Target Bonus amount by 300% and the threshold values are
    calculated by multiplying the Company Performance Target Bonus
    amount by 30%.(6)
    
    Represents the MBO Bonus portion of the participants
    Target Bonus award under the 2006 Executive Officer Incentive
    Bonus Plan, which is further described below. The actual
    payments from these awards are included in the Non-Equity
    Incentive Plan Compensation column in the Summary
    Compensation Table  2006 above. There was no set
    Threshold payout established with respect to this
    portion of the participants Target Bonus award under the
    2006 Executive Officer Incentive Bonus Plan.(7)
    
    Mr. Martellos incentive compensation award was
    granted under his 2006 Compensation Plan that provides for
    commissions for revenues from maintenance, consulting and
    education services. As further described below, the commissions
    are earned and paid quarterly upon attainment of quarterly goals
    for such revenues, and quarterly goals for such revenues less
    the cost of the customer support and professional services
    organization to attain such revenues. The actual payments from
    this incentive compensation are included in the Non-Equity
    Incentive Plan Compensation column in the Summary
    Compensation Table  2006 above. The threshold value
    is calculated by multiplying the sum of each quarterly goal for
    such revenues by the product of 0.0635% multiplied by 25%.
    Mr. Martellos 2006 Compensation Plan did not contain
    any maximum value. Accordingly, no such value has been included
    in the table for this plan.(8)
    
    Pursuant to his separation agreement with us, Mr. Brauns
    surrendered options to purchase an aggregate of 1.0 million
    shares in exchange for 80,000 shares of restricted stock.
    Additionally, in connection with his retirement, he surrendered
    options to purchase an additional 275,000 shares.    2006 Executive Officer Incentive Bonus
    Plan.
   84




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##### Table of Contents




    achievement of non-GAAP operating income goals, which, in 2006,
    were the same as the quarterly and annual non-GAAP operating
    income targets contained in our financial plan, as approved by
    the Board of Directors (the Non-GAAP Operating
    Income Goals);
    achievement of revenue targets, which, in 2006, were the same as
    the quarterly and annual revenue targets contained in our
    financial plan, as approved by the Board of Directors (the
    Revenue Goals); and
    in the case of each Named Executive Officer other than our
    President and Chief Executive Officer, achievement of individual
    goals and objectives established for each of those persons by
    our President (the MBO Goals).          
    60% to 72% for achievement of less than $500,000 below the
    Non-GAAP Operating Income Goal;
    75% to 95% for achievement of not more than $500,000 below the
    Non-GAAP Operating Income Goal;
    100% for achievement of the Non-GAAP Operating Income Goal;
    101% to 104% for achievement of $100,000 to less than $500,000
    above the Non-GAAP Operating Income Goal;
    105% to 113% for achievement of $500,000 to less than
    $1.0 million above the Non-GAAP Operating Income
    Goal; and
    115% to 300% for achievement of $1.0 million or more above
    the Non-GAAP Operating Income Goal;   85




---



##### Table of Contents




    60% to 70% for achievement of 95% or less of the Revenue Goal;
    76% to 94% for achievement of not more than 96% below the
    Revenue Goal;
    100% for achievement of 100% of the Revenue Goal;
    102% to 110% for achievement of 101% to 105% above the Revenue
    Goal; and
    115% to 300% for achievement of 106% or more above the Revenue
    Goal;      Commissions
    Plans.
    
    license bookings ranged from 0.3344% to 1.6720% of actual
    license bookings at 0% to more than 107% of the license bookings
    goal, respectively, each quarter, with the rate only increasing
    above 0.3344% if achievement exceeds 100% of the license
    bookings goal; and
    professional services revenue ranged from 0.0708% to 0.3540% of
    actual professional services revenue from 0% to more than 107%
    of the license bookings goal, respectively, each quarter, with
    the rate only increasing above 0.0708% if achievement exceeds
    100% of the professional services revenue goal;   86




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##### Table of Contents



and/or
 87




---



##### Table of Contents



OUTSTANDING
    EQUITY AWARDS AT 2006 YEAR-END
  Option Awards


Stock AwardsNumber of


Number of











Market ValueSecurities


Securities








Number of


of SharesUnderlying


Underlying


Option





Shares or


or Units ofUnexercised


Unexercised


Exercise


Option


Units of Stock


Stock ThatOptions (#)


Options (#)


Price


Expiration


That Have


Have NotName

Exercisable


Unexercisable


($)


Date


Not Vested (#)


Vested* ($)Scipio M. Carnecchia


21,251
(1)





$
24.25



4/3/20116,250
(4)





$
25.60



2/6/201210,000
(6)





$
13.60



5/7/201210,000
(7)





$
9.60



7/11/201210,000
(9)





$
9.92



12/5/201222,917



2,083
(10)

$
6.60



4/15/201325,000
(12)





$
10.00



8/1/201365,000
(14)





$
13.72



1/30/201450,000
(15)





$
8.83



6/22/201440,000
(17)





$
9.43



1/10/201530,000
(18)





$
8.38



6/22/2015



100,000
(19)

$
9.24



5/19/201650,000
(20)

$
733,500John E. Calonico, Jr.


104,602
(2)





$
11.76



1/14/201229,886
(3)





$
11.76



1/14/201244,829
(2)





$
6.69



1/14/201274,716
(8)





$
4.10



10/18/201247,500
(13)





$
13.41



12/4/201320,000
(17)





$
9.43



1/10/201540,000
(20)

$
586,800Steven J. Martello


50,000
(5)





$
16.88



4/30/201222,396



2,604
(11)

$
7.24



5/1/201380,000
(14)





$
13.72



1/30/201450,000
(15)





$
8.83



6/22/201440,000
(17)





$
9.43



1/10/201550,000
(18)





$
8.38



6/22/201535,000
(20)

$
513,450David A. Nelson-Gal


112,500



87,500
(16)

$
7.77



9/10/201410,000
(17)





$
9.43



1/10/201510,000
(20)

$
146,700Benjamin E. Kiker, Jr.






90,000
(21)

$
10.80



9/12/201620,000
(22)

$
293,400Former OfficersMartin W. Brauns






















William Seawick






















     *
    
    The market value of the restricted stock units that have not
    vested is calculated by multiplying the number of units that
    have not vested by the closing price of our common stock at
    December 29, 2006, the last trading day in 2006, which was
    $14.67.
    
    On October 3, 2005, the Board of Directors approved the
    acceleration of vesting of all outstanding, unvested common
    stock options, with exercise prices in excess of $8.23 per
    share, previously awarded to employees and officers under our
    equity compensation plans. As a condition to the acceleration of
    vesting, holders of the options accelerated were required to
    refrain from selling any shares acquired upon exercise before
    the date on which the shares to be sold would have vested had
    the vesting of common stock options not been accelerated. 88




---



##### Table of Contents



Vesting
    Schedule for Outstanding Stock Options and Unvested Stock
    Units
  Note

Grant Dates

Incremental Vesting Dates(1)

4/3/2001

25% on 4/3/02; pro-rata monthly for next 36 months(2)

1/14/2002

1/8th on 7/14/02; pro-rata monthly for next 42 months(3)

1/14/2002

1/3rd on 1/14/04; pro-rata monthly for next 48 months(4)

2/6/2002

25% on 5/6/02; pro-rata monthly for next 45 months(5)

4/30/2002

25% on 4/22/03; pro-rata monthly for next 36 months(6)

5/7/2002

25% on 11/7/02; pro-rata monthly for next 42 months(7)

7/11/2002

25% on 1/11/03; pro-rata monthly for next 42 months(8)

10/18/2002

Pro-rata monthly over 36 months(9)

12/5/2002

25% on 6/5/03; pro-rata monthly for next 42 months(10)

4/15/2003

25% on 10/15/03; pro-rata monthly for next 42 months(11)

5/1/2003

25% on 11/1/03; pro-rata monthly for next 48 months(12)

8/1/2003

25% on 8/1/04; pro-rata monthly for next 36 months(13)

12/4/2003

25% on 11/19/04; pro-rata monthly for next 36 months(14)

1/30/2004

1/8th on 1/30/05; pro-rata monthly for next 42 months(15)

6/22/2004

25% on 12/22/04; pro-rata monthly for next 42 months(16)

9/10/2004

25% on 9/10/05; pro-rata monthly for next 36 months(17)

1/10/2005

25% on 1/10/06; pro-rata monthly for next 36 months(18)

6/22/2005

25% on 12/22/06; pro-rata monthly for next 42 months(19)

5/19/2006

50% on 3/31/07; pro-rata monthly for next 12 months(20)

6/19/2006

Pro-rata annually for 4 years(21)

9/12/2006

25% on 9/12/07; pro-rata monthly for next 36 months(22)

9/12/2006

Pro-rata annually for 4 years       OPTIONS
    EXERCISES AND STOCK VESTED  2006
  Option AwardsNumber of SharesAcquired on


Value Realized onName

Exercise (#)


Exercise ($)Scipio M. Carnecchia






John E. Calonico, Jr.






Steven J. Martello






David A. Nelson-Gal






Benjamin E. Kiker






Former OfficersMartin W. Brauns(1)


750,000


$
2,734,146William Seawick






  89




---



##### Table of Contents



(1)
    
    Excludes any value associated with the forfeiture of options to
    purchase an aggregate of 1.0 million shares of our common
    stock, with a weighted average exercise price of $14.39 per
    share, in exchange for the issuance of 80,000 shares of
    restricted stock under the terms of Mr. Brauns
    separation agreement. There was $738,400 of expense associated
    with such issuance, which was offset by the value of options
    surrendered.  Potential
    Payments Upon Termination or Change in Control
  Joseph
    L. Cowan
      IntrinsicIntrinsic


Value ofValue of


AcceleratedCOBRA


Accelerated


RestrictedSeverance Pay


Premiums(1)


Stock Options(2)


Stock Units


TotalResignation with Good Reason or Termination without Cause

$
1,275,000


$
15,993


$




N/A


$
1,290,993Resignation with Good Reason or Termination without Cause within
    12 months of a change in control

$
1,275,000


$
15,993


$



$
4,401,000


$
5,691,993     (1)
    
    Represents the estimated value of COBRA premiums for medical,
    dental and vision benefits over the
    18-month
    term of the obligation, based on the number of his dependents
    that received medical, dental or vision benefits under our
    benefit plans as of September 30, 2007.(2)
    
    The exercise price of Mr. Cowans stock option is
    $15.27 per share.   90




---



##### Table of Contents



Scipio
    M. Carnecchia
      IntrinsicIntrinsic


Value ofValue of


AcceleratedCOBRA


Accelerated


RestrictedSeverance Pay


Premiums(1)


Stock Options


Stock Units


TotalResignation with Good Reason or Termination without Cause

$
401,250


$
12,114


$
271,500


$
183,375


$
868,239Resignation with Good Reason or Termination without Cause in
    connection with a change in control

$
802,500


$
12,114


$
271,500


$
366,750


$
1,452,864     (1)
    
    Represents the estimated value of COBRA premiums for medical,
    dental and vision benefits over the
    9-month term
    of the obligation, based on the number of his dependents that
    received medical, dental or vision benefits under our benefit
    plans as of December 31, 2006.  John
    E. Calonico, Jr.
   91




---



##### Table of Contents



Intrinsic


IntrinsicValue of


Value ofAccelerated


AcceleratedCOBRA


Stock


RestrictedSeverance Pay


Premiums(1)


Options(2)


Stock Units


TotalResignation with Good Reason or Termination without Cause

$
285,000


$
12,114


$



$
146,700


$
443,814Resignation with Good Reason or Termination without Cause in
    connection with a change of control

$
570,000


$
12,114


$



$
293,400


$
875,514     (1)
    
    Represents the estimated value of COBRA premiums for medical,
    dental and vision benefits over the
    9-month term
    of the obligation, based on the number of his dependents that
    received medical, dental or vision benefits under our benefit
    plans as of December 31, 2006.(2)
    
    No stock options have been granted to Mr. Calonico since
    prior to October 3, 2005, the date on which the Board of
    Directors approved the acceleration of vesting of all unvested
    stock options, with an exercise price in excess of $8.23 per
    share, previously awarded to employees and officers under our
    equity compensation plans, including all of
    Mr. Calonicos outstanding stock options on that date.  Other
    Change in Control Arrangements
      Intrinsic Value ofIntrinsic Value of


Accelerated ofName

Accelerated Stock Options


Restricted Stock Units


TotalScipio M. Carnecchia

$
279,905


$
366,750


$
646,655John E. Calonico, Jr.





$
293,400


$
293,400Steven Martello

$
9,674


$
256,725


$
266,399David A. Nelson-Gal





$
73,350


$
73,350Benjamin E. Kiker, Jr.

$
174,150


$
146,700


$
320,850  92




---



##### Table of Contents



Severance
    Arrangements
  Martin W.
    Brauns (Former Chief Executive Officer and Chairman)
  e-mail 21-month
  William
    Seawick (former Senior Vice President and Chief Marketing
    Officer)
    Benjamin
    E. Kiker, Jr. (Senior Vice President and Chief Marketing
    Officer)
   93




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##### Table of Contents



Director
    Compensation
    DIRECTOR
    COMPENSATION  2006
  Fees Earned or


Option


All OtherName

Paid in Cash ($)


Awards ($)(1)


Compensation ($)(2)


Total ($)Charles M. Boesenberg

$
12,500


$
41,245


$
4,499


$
58,244Ronald E.F. Codd

$
26,250


$
41,245


$
15,401


$
82,897Bob L. Corey

$
31,250


$
41,245


$
10,662


$
83,158Frank J. Fanzilli, Jr.

$
40,625


$
41,245


$
14,865


$
96,361Thomas L. Thomas

$
30,625


$
41,245


$
10,744


$
82,614Anthony Zingale(3)

$
12,500










$
12,500     (1)
    
    The amounts reflect the dollar amount recognized for financial
    statement reporting purposes for the year ended
    December 31, 2006, in accordance with
    SFAS No. 123R of stock option awards issued pursuant
    to the 1999 Equity Incentive Plan and predecessor stock option
    plans and thus include amounts from outstanding stock option
    awards granted during and prior to 2006. Assumptions used,
    except for forfeiture assumptions, in the calculation of these
    amounts are included in the notes to our audited consolidated
    financial statements for the year ended December 31, 2006
    included in this Annual Report on
    Form 10-K.
    No stock options were forfeited by any of our non-employee
    directors during 2006 other than Anthony Zingale, who forfeited
    options to purchase 30,000 shares upon his cessation of
    service on the board of directors. There is no dollar amount
    recognized in the table relating to those forfeited options
    because there was no accounting expense relating to those
    options in 2006. The grant date fair value of the options
    granted on July 12, 2006 to each non-employee director
    re-elected on that date, and to Mr. Boesenberg, who was
    appointed to the Board of Directors on that date, was $33,763;
    the grant date fair value of the options granted to each of the
    non-employee directors on October 31, 2006, was $89,666.
    For information regarding the number of stock options held by
    each non-employee director as of December 31, 2006, see the
    column Stock Options Outstanding in the table below.
    These amounts reflect our accounting expense for these awards,
    and do not correspond to the actual value that may be recognized
    by the non-employee directors.(2)
    
    Represents the amount of contributions by us on behalf of the
    non-employee director for medical, dental and vision benefits
    provided to the non-employee director that would have been
    required to be paid by the non-employee director had he been our
    employee.(3)
    
    Mr. Zingale served on the Board of Directors through
    July 12, 2006, the date of our 2006 Annual Meeting of
    Stockholders.    Stock OptionsName

OutstandingCharles M. Boesenberg


30,000Ronald E.F. Codd


90,500Bob L. Corey


68,966Frank J. Fanzilli, Jr.


80,000Thomas L. Thomas


60,000Anthony Zingale


  94




---



##### Table of Contents




    Annual retainer fee of $20,000 for each non-employee director
    other than Mr. Boesenberg and Zingale, whose retainers were
    $10,000 for serving roughly half of 2006;
    Additional annual retainer fee of $10,000 for Mr. Fanzilli
    for serving as Lead Independent Director and Chairman during a
    portion of 2006;
    Additional annual retainer fee of $5,000 for Mr. Corey for
    serving as chair of the Audit Committee for 2006;
    Additional retainer fee of $1,500 for Mr. Fanzilli for
    serving as chair of the Compensation Committee during the first
    three quarters of 2006;
    Additional retainer fee of $625 for Mr. Thomas for serving
    as chair of the Compensation Committee during the fourth quarter
    of 2006; and
    The balance for each non-employee director consists of
    additional annual retainer fees of $5,000 for each standing
    committee of the Board of Directors on which a non-employee
    director serves, which fees are prorated in accordance with the
    policy below.      
    on the Audit Committee is $25,000 for the Chairman of that
    committee and $12,500 for each of its other members;
    on the Compensation Committee is $15,000 for the Chairman of
    that committee and $7,500 for each of its other members;
    on the Nomination and Governance Committee is $10,000 for the
    Chairman of that committee and $5,000 for each of its other
    members;
    on the Strategy Committee is $10,000 for the Chairman of that
    committee and $5,000 for each of its other members; and
    as the Chairman of the Board of Directors is $20,000.     95




---



##### Table of Contents



ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED
    STOCKHOLDER MATTERS    
    each of our Named Executive Officers;
    each of our directors;
    each person known by us to be the beneficial owner of more than
    5% of our common stock; and
    all of our executive officers and directors as a group. 96




---



##### Table of Contents



c/o Interwoven,
    Shares IssuableUnder Options orRestricted StockAmount of


Units ExercisableBeneficial


or Settleable


AggregateName and Address of Beneficial Owner

Ownership(1)


Within 60 Days


PercentageGoldman Sachs Asset Management, L.P.(2)


5,129,169







11.3
%Dimensional Fund Advisors LP(3)


3,641,504







8.0Martin W. Brauns(4)


49,125







*John E. Calonico, Jr.


365,584



321,533



*Scipio M. Carnecchia


422,932



371,668



*Benjamin E. Kiker, Jr.


44,963



26,250Steven J. Martello


326,872



295,000



*David A. Nelson-Gal


180,041



168,334



*William Seawick(5)






Charles M. Boesenberg


20,000



20,000



*Ronald E. F. Codd


58,966



58,966



*Bob L. Corey


83,027



80,500



*Frank J. Fanzilli, Jr.


70,000



70,000



*Roger J. Sippl


15,000



15,000



*Thomas L. Thomas


73,634



50,000



*All 13 directors and executive officers as a group


2,226,389



1,649,637



4.7
%     *
    
    Less than 1%(1)
    
    Includes shares over which the person currently holds or shares
    voting or investment power. Also includes shares listed under
    Shares Issuable Under Options Exercisable Within 60
    Days.(2)
    
    Based on information set forth in a Schedule 13G filed with
    the Securities and Exchange Commission on June 11, 2007 by
    Goldman Sachs Asset Management, L.P., reporting sole power to
    vote or direct the vote over 4,514,573 shares and sole
    power to dispose or direct the disposition of
    5,129,169 shares. The address of Goldman Sachs Asset
    Management, L.P. is 32 Old Slip, New York, NY 10005.(3)
    
    Based on information set forth in a Schedule 13G filed with
    the Securities and Exchange Commission on February 9, 2007
    by Dimensional Fund Advisors LP, reporting sole power to vote or
    dispose or direct the vote over or disposition of
    3,641,504 shares. The address of Dimensional Fund Advisors
    LP is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401.(4)
    
    Based solely on information obtained from our transfer agent. As
    such, this number does not include any shares Mr. Brauns
    beneficially owns that are held for his account in street name
    by brokers and other nominees. Mr. Brauns ceased serving as
    a director and our Chief Executive Officer in March 2006.(5)
    
    Based solely on information obtained from our transfer agent.
    Although he is not a record holder of any shares of our common
    stock, he may beneficially own shares that are held for his
    account in street name by brokers and other nominees.
    Mr. Seawick ceased serving as our Senior Vice President and
    Chief Marketing Officer in July 2006. 97




---



##### Table of Contents



Equity
    Compensation Plan Information
    Number ofSecuritiesRemaining Availablefor Future Issuanceunder EquityNumber of Securities to be





Compensation PlansIssued upon Exercise


Weighted-average Exercise


(Excludingof Outstanding


Price of


SecuritiesOptions, Warrants


Outstanding Options,


ReflectedPlan Category

and Rights


Warrants and Rights


in Column(a))(a)


(b)


(c)Equity compensation plans approved by security holders(1)


4,633,625


$
16.21



2,690,005
(2)Equity compensation plans not approved by security holders


1,606,395


$
18.68



1,581,150Total


6,240,020


$
16.84



4,271,155     (1)
    
    Excludes shares that were subject to purchase rights accruing
    under the 1999 Employee Stock Purchase Plan and
    691,000 shares that were subject to restricted stock units
    under the 1999 Equity Incentive Plan. Our 1999 Equity Incentive
    Plan provides for the award of stock options, restricted stock,
    restricted stock units and stock bonuses.(2)
    
    Includes 672,081 shares that remain available for purchase
    under the 1999 Employee Stock Purchase Plan. The 1999 Employee
    Stock Purchase Plan incorporates an evergreen formula pursuant
    to which on January 1 of each year, the aggregate number of
    shares reserved for issuance under this plan will increase by a
    number of shares equal to 1% of the outstanding shares on
    December 31 of the preceding year.  Summary
    Description of Non-Stockholder Approved Plans
  2000 Stock Incentive Plan. 36-month
 98




---



##### Table of Contents



2003 Acquisition Plan. 36-month
  ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  Review,
    Approval or Ratification of Transactions with Related
    Persons
    Certain
    Transactions with Related Persons
   99




---



##### Table of Contents



Indemnification
    Agreements
    Director
    Independence
    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    Year EndedDecember 31,2006


2005E&Y(1)


KPMGAudit fees(2)(3)

$
2,190,200


$
1,409,808Audit-related fees


44,077



39,435Tax fees






All other fees






$
2,234,277


$
1,449,243     (1)
    
    Excludes fees billed for services rendered of $22,000 by KPMG
    LLP in 2006.(2)
    
    Fees associated with the audit of our consolidated financial
    statement, the review of our Quarterly Reports on
    Form 10-Q
    and the audit of internal controls over financial reporting
    totaled $1,165,200 for 2006.(3)
    
    Audit fees for 2005 excludes costs of $1,250,000 associated with
    the review of historical stock options granting procedures and
    the related restatement.  Form 10-Q,
  Audit
    Committee Pre-Approval Policy
   100




---



##### Table of Contents



PART IV
  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES      Reports of Independent Registered Public
    Accounting FirmsConsolidated Financial Statements:Consolidated Balance Sheets at December 31, 2006
    and 2005Consolidated Statements of Operations for the
    years ended December 31, 2006, 2005 and 2004Consolidated Statements of Stockholders
    Equity and Comprehensive Income (Loss) for the years ended
    December 31, 2006, 2005 and 2004Consolidated Statements of Cash Flows for the
    years ended December 31, 2006, 2005 and 2004Notes to Consolidated Financial Statements     Schedule II 
    Valuation and Qualifying Accounts
  Balance





Charged





Balanceat Beginning





(Credited) to





at EndDescription

of Period


Write-Offs


Expenses


Adjustments


of Period(In thousands)Allowance for doubtful accounts:Year ended December 31, 2006

$
779


$
(330
)

$



$



$
449Year ended December 31, 2005

$
961


$
(218
)

$
36


$



$
779Year ended December 31, 2004

$
1,689


$
(510
)

$
(218
)

$



$
961Allowance for sales returns:Year ended December 31, 2006

$
321


$
(342
)

$
363


$



$
342Year ended December 31, 2005

$
670


$
(278
)

$
(71
)

$



$
321Year ended December 31, 2004

$
745


$
(48
)

$
(27
)

$



$
670     Incorporated by Reference

FiledNumber

Exhibit Title

Form

Date

Number

Herewith2
.01

Agreement and Plan of Merger, dated October 17, 2007, by
    and among Registrant, Broadway Merger LLC, Optimost LLC and Mark
    Wachen, as representative


8-K



10/22/07



2
.13
.01

Registrants Fourth Amended and Restated Certificate of
    Incorporation


S-8



11/19/03



4
.083
.02

Registrants Amended and Restated Bylaws


8-K



4/25/07



3
.014
.01

Form of Certificate for Registrants common stock


S-1



09/23/99



4
.0110
.01*

Form of Indemnity Agreement between Registrant and each of its
    directors and executive officers













X10
.02*

1996 Stock Option Plan and related agreements


S-1



07/27/99



10
.0210
.03*

1998 Stock Option Plan and related agreements


S-1



07/27/99



10
.0310
.04*

1999 Equity Incentive Plan


10-Q



8/8/06



10
.0110
.05*

Forms of Option Agreements and Stock Option Exercise Agreements
    related to the 1999 Equity Incentive Plan


10-Q



8/8/06



10
.0210
.06*

1999 Employee Stock Purchase Plan













X10
.07*

Forms of Enrollment Form, Subscription Agreement, Notice of
    Withdrawal and Notice of Suspension related to the 1999 Employee
    Stock Purchase Plan


S-1



09/03/99



10
.0510
.08*

2000 Stock Incentive Plan


10-Q



8/8/06



10
.03 101




---



##### Table of Contents



Incorporated by ReferenceFiledNumber

Exhibit Title

Form

Date

Number

Herewith10
.09*

Forms of Stock Option Agreement and Stock Option Exercise
    Agreements related to the 2000 Stock Incentive Plan


10-Q



8/8/06



10
.0410
.10*

Forms of Incentive Stock Option Agreement and Nonstatutory Stock
    Option Agreement under iManage, Inc. 1997 Stock Option Plan


S-8



11/19/03



4
.0210
.11*

iManage, Inc. 2000 Non-Officer Stock Option Plan and related
    forms of stock option and option exercise agreements


S-8



11/19/03



4
.0310
.12*

2003 Acquisition Plan


S-8



11/19/03



4
.0710
.13*

Forms of Stock Option Agreement and Stock Option Exercise
    Agreements related to the 2003 Acquisition Plan


10-K



3/13/06



10
.1310
.14*

Form of Notice of Stock Option Acceleration and Share
    Restrictions


10-K



3/13/06



10
.1410
.15*

Regional Prototype Profit Sharing Plan and Trust/Account
    Standard Plan Adoption Agreement AA #001


S-1



07/27/99



10
.0610
.16*

Employment Agreement between Registrant and Scipio M. Carnecchia













X10
.17*

Employment Agreement between Registrant and John E. Calonico,
    Jr.













X10
.18*

Separation Agreement and Release between Registrant and Martin
    W. Brauns


10-K



03/13/06



10
.1910
.19*

Offer Letter, dated March 16, 2007, between Registrant and
    Joseph L. Cowan


8-K



04/02/07



10
.110
.20*

2007 Executive Officer Incentive Bonus Plan













X10
.21*

2007 Compensation Plan for Scipio M. Carnecchia













X10
.22*

2007 Compensation Plan for Steven J. Martello













X10
.23

Lease, dated December 20, 2006, by and between Registrant
    and Silicon Valley CA-I, LLC.


8-K



12/22/06



10
.110
.24

First Amendment to Lease, dated January 12, 2007, by and
    between Registrant and Silicon Valley CA-I, LLC













X10
.25

Office Lease for 303 East Wacker, Chicago, Illinois between 303
    Wacker Realty LLC and iManage, Inc. dated March, 17, 2003


(1)



(1)



(1)10
.26

First Amendment to Lease dated November 12, 2003 between
    iManage, Inc. and 303 Wacker Realty LLC


10-K



03/15/05



10
.2710
.27

Sublease between Hyperion Solutions Corporation and iManage,
    Inc. dated January 17, 2002


(2)



(2)



(2)21
.01

Subsidiaries of the Registrant













X23
.01

Consent of Independent Registered Public Accounting Firm













X23
.02

Consent of Independent Registered Public Accounting Firm













X31
.01

Rule 13a-14(a)/15d-15(a)
    certification of the Chief Executive Officer













X31
.02

Rule 13a-14(a)/15d-15(a)
    certification of the Chief Financial Officer













X32
.01

Section 1350 certification of Chief Executive Officer













X32
.02

Section 1350 certification of the Chief Financial Officer













X     (1)
    
    Incorporated by reference to Exhibit 10.18 of the iManage,
    Inc. Annual Report
    Form 10-K
    filed with the Commission on March 26, 2003.(2)
    
    Incorporated by reference to Exhibit 10.13 of the iManage,
    Inc. Annual Report
    Form 10-K
    filed with the Commission on March 29, 2002.*
    
    Management contract, compensatory plan or arrangement.
    
    Confidential treatment has been requested with regard to certain
    portions of this document. Such portions were filed separately
    with the Commission. 102




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##### Table of Contents



REPORT
    OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM
           Internal Control 
    Integrated Framework
  Share-Based Payment 
      103




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##### Table of Contents



REPORT OF
    KPMG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING
    FIRM
             /s/
    KPMG LLP
     104




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                     105




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##### Table of Contents



INTERWOVEN,
    INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2006


2005As restated(1)(In thousands, exceptper share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
74,119


$
73,618Short-term investments


102,342



63,581Accounts receivable, net of allowances of $791 and $1,100 in
    2006 and 2005, respectively


34,492



31,542Prepaid expenses and other current assets


5,371



4,732Total current assets


216,324



173,473Property and equipment, net


4,815



5,044Goodwill


190,935



191,595Other intangible assets, net


10,655



25,527Other assets


3,558



2,967Total assets

$
426,287


$
398,606LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
1,897


$
2,318Accrued liabilities


31,684



24,371Restructuring and excess facilities accrual


5,132



7,266Deferred revenues


57,317



53,509Total current liabilities


96,030



87,464Accrued liabilities


2,733



2,761Restructuring and excess facilities accrual


3,564



9,681Total liabilities


102,327



99,906Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value, 5,000 shares
    authorized at December 31, 2006 and 2005






Common stock, $0.001 par value, 125,000 shares
    authorized at December 31, 2006 and 2005;
    44,417 shares and 42,386 shares issued and outstanding
    at December 31, 2006 and 2005, respectively


44



42Additional paid-in capital


754,904



737,408Deferred stock-based compensation






(1,002
)Accumulated other comprehensive loss


(36
)


(359
)Accumulated deficit


(430,952
)


(437,389
)Total stockholders equity


323,960



298,700Total liabilities and stockholders equity

$
426,287


$
398,606     (1)
    
    See Note 3, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.   106




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##### Table of Contents



INTERWOVEN,
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Years Ended December 31,2006


2005


2004As restated(1)


As restated(1)(In thousands, except per share amounts)Revenues:License

$
75,678


$
67,754


$
67,341Support and service


124,641



107,283



92,879Total revenues


200,319



175,037



160,220Cost of revenues:License


16,367



15,262



13,336Support and service


50,256



42,257



38,762Total cost of revenues


66,623



57,519



52,098Gross profit


133,696



117,518



108,122Operating expenses:Sales and marketing


77,114



70,731



72,644Research and development


35,069



31,483



31,826General and administrative


16,787



14,498



13,636Amortization of intangible assets


3,312



3,358



4,541Restructuring and excess facilities charges (recoveries)


(902
)


(692
)


9,782Total operating expenses


131,380



119,378



132,429Income (loss) from operations


2,316



(1,860
)


(24,307
)Interest income and other, net


6,324



3,574



1,725Income (loss) before provision for income taxes


8,640



1,714



(22,582
)Provision for income taxes


2,203



1,088



986Net income (loss)

$
6,437


$
626


$
(23,568
)Basic net income (loss) per common share

$
0.15


$
0.01


$
(0.58
)Shares used in computing basic net income (loss) per common share


42,979



41,751



40,494Diluted net income (loss) per common share

$
0.15


$
0.01


$
(0.58
)Shares used in computing diluted net income (loss) per common
    share


43,995



42,390



40,494     (1)
    
    See Note 3, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.   107




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##### Table of Contents



INTERWOVEN,
    INC.
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND
    COMPREHENSIVE INCOME (LOSS)
 For the
    Three Years Ended December 31, 2006
  AccumulatedAdditional


Deferred


Other





TotalCommon Stock


Paid-in


Stock-Based


Comprehensive


Accumulated


StockholdersShares


Amount


Capital


Compensation


Income (Loss)


Deficit


EquityAs restated(1)


As restated(1)





As restated(1)


As restated(1)(In thousands)Balances, December 31, 2003, as previously reported


40,008


$
40


$
693,773


$
(9,564
)

$
25


$
(383,340
)

$
300,934Adjustment to opening stockholders equity










32,220



(635
)






(31,107
)


478Balances, December 31, 2003, as restated


40,008



40



725,993



(10,199
)


25



(414,447
)


301,412Components of comprehensive loss:Net loss






















(23,568
)


(23,568
)Unrealized loss on investments


















(264
)






(264
)Cumulative translation adjustment


















34







34Comprehensive loss


























(23,798
)Stock issued in acquisition


118







782















782Issuance of common stock under stock plans


961



1



5,820















5,821Reversal of stock-based compensation for terminated employees










(3,068
)


3,068











Amortization of stock-based compensation










(64
)


4,970











4,906Balances, December 31, 2004


41,087



41



729,463



(2,161
)


(205
)


(438,015
)


289,123Components of comprehensive income:Net income






















626



626Unrealized loss on investments


















(129
)






(129
)Cumulative translation adjustment


















(25
)






(25
)Comprehensive income


























472Stock options assumed in acquisition










1,354















1,354Issuance of common stock under stock plans


1,299



1



7,101















7,102Income tax related to exercise of common stock options










80















80Reversal of stock-based compensation for terminated employees










(555
)


555











Deferred stock-based compensation














(1,165
)










(1,165
)Amortization of stock-based compensation










(35
)


1,769











1,734Balances, December 31, 2005


42,386



42



737,408



(1,002
)


(359
)


(437,389
)


298,700Components of comprehensive income:Net income






















6,437



6,437Unrealized gain on investments


















282







282Cumulative translation adjustment


















41







41Comprehensive income


























6,760Issuance of common stock under stock plans


2,031



2



15,029















15,031Income tax related to exercise of common stock options










18















18Reclassification of deferred compensation upon adoption of
    SFAS No. 123R










(1,002
)


1,002











Stock-based compensation










3,451















3,451Balances, December 31, 2006


44,417


$
44


$
754,904


$



$
(36
)

$
(430,952
)

$
323,960     (1)
    
    See Note 3, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.   108




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##### Table of Contents



INTERWOVEN,
    INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Years Ended December 31,2006


2005


2004As restated(1)


As restated(1)(In thousands)Cash flows from operating activities:Net income (loss)

$
6,437


$
626


$
(23,568
)Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Depreciation


3,809



3,728



4,276Stock-based compensation expense


3,451



1,734



4,906Amortization of intangible assets and purchased technology


16,495



15,499



15,177Reduction in allowance for doubtful accounts and sales returns


(309
)


(531
)


(612
)Changes in operating assets and liabilities:Accounts receivable


(2,653
)


(1,749
)


5,963Prepaid expenses and other assets


(1,833
)


2,423



579Accounts payable and accrued liabilities


7,524



(992
)


528Restructuring and excess facilities accrual


(8,251
)


(8,735
)


(20,620
)Deferred revenues


3,808



3,515



6,139Net cash provided by (used in) operating activities


28,475



15,518



(7,232
)Cash flows from investing activities:Purchases of property and equipment


(3,580
)


(2,848
)


(2,704
)Purchases of investments


(189,420
)


(86,274
)


(118,378
)Maturities of investments


151,544



134,275



117,249Acquisition of businesses and technology, net of cash acquired


(1,590
)


(16,596
)


(1,172
)Net cash provided by (used in) investing activities


(43,046
)


28,557



(5,005
)Cash flows from financing activities:Payment of bank borrowings










(1,213
)Net proceeds from issuance of common stock


15,031



7,102



5,821Net cash provided by financing activities


15,031



7,102



4,608Effect of exchange rates


41



(25
)


34Net increase (decrease) in cash and cash equivalents


501



51,152



(7,595
)Cash and cash equivalents at beginning of period


73,618



22,466



30,061Cash and cash equivalents at end of period

$
74,119


$
73,618


$
22,466Supplemental disclosures of cash flow information:Cash paid for interest

$



$
1


$
37Cash paid for income taxes, net of refunds

$
868


$
267


$
313Supplemental disclosures of non-cash investing and financing
    activities:Unrealized gain (loss) on investments

$
282


$
(129
)

$
(264
)Common stock issued and stock options assumed in acquisitions

$



$
1,354


$
782     (1)
    
    See Note 3, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.   109




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Organization
    and Business    2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
    Share-Based Payment
    Foreign Currency
    Translation
  Use of
    Estimates
   110




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Revenue
    Recognition
  No. 97-2, Software Revenue Recognition SOP No. 98-9, Modification of
    SOP 97-2 Software Revenue Recognition with Respect to Certain
    Transactions SOP No. 97-2 SOP No. 98-9,
  SOP No. 97-2,
  Persuasive evidence of an arrangement
    exists.
  Delivery has occurred.
  The fee is fixed or determinable.
  Collectibility is probable. case-by-case
 111




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    time-and-materials
    SOP No. 81-1, Accounting for Performance of Construction-Type and Certain
    Production-Type Contracts
    Cash,
    Cash Equivalents and Short-Term Investments
      Allowance
    for Doubtful Accounts
   112




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Allowance
    for Sales Returns
    Risks
    and Concentrations
      third-party
  Financial
    Instruments
  Accounting for Derivative Instruments and Hedging
    Activities
   113




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Property
    and Equipment
      Goodwill
  Goodwill and
    Other Intangible Assets
  
    Step 1  The Company has determined that it has
    one reporting unit and compares the fair value of its reporting
    unit to its carrying value, including goodwill. If the reporting
    units carrying value, including goodwill, exceeds the
    units fair value, the Company moves 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  The Company performs 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. The Company then compares 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 shall
    be recognized for the excess.    Impairment
    of Long-Lived Assets
  Accounting for the Impairment or Disposal of Long-Lived
    Assets
 114




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Software
    Development Costs
  Accounting for the Costs of Computer
    Software to be Sold, Leased, or Otherwise Marketed
  Restructuring
    and Related Expenses
  Accounting for costs associated with
    Exit or Disposal Activities lease/contract
  No. 88-10, Cost Associated with Lease Modification or Termination No. 94-3, Liability Recognition for Certain Employee Termination
    Benefits and Other Costs to Exit an Activity (including Certain
    Costs Incurred in a Restructuring).
  No. 88-10, and/or No. 88-10, and/or
  Income
    Taxes
  Accounting for Income Taxes
  Accounting
    for Stock-based Compensation
 115




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Advertisement
    and Sales Promotion Expenses
    Business
    Segment and Major Customer Information
  Disclosures about Segments of an
    Enterprise and Related Information
      Foreign
    Currency Translation
    Comprehensive
    Income (Loss)
   116




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2006


2005Unrealized loss on available-for-sale investments*

$
(86
)

$
(368
)Cumulative translation adjustment*


50



9$
(36
)

$
(359
)     *
    
    The tax effect on translation adjustments and unrealized gain
    (loss) was not significant.  Net
    Income (Loss) per Common Share
      Years Ended December 31,2006


2005


2004As restated(1)As restated(1)Net income (loss)

$
6,437


$
626


$
(23,568
)Weighted-average shares used in computing basic net income
    (loss) per common share


42,979



41,751



40,494Dilutive common equivalent shares from stock options and ESPP


1,016



639



Weighed-average shares used in computing dilutednet income (loss) per common share


43,995



42,390



40,494Basic net income (loss) per common share

$
0.15


$
0.01


$
(0.58
)Diluted net income (loss) per common share

$
0.15


$
0.01


$
(0.58
)     (1)
    
    See Note 3, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.    Accounting
    for Stock-based Compensation
  Accounting for Stock Issued to
    Employees
 117




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting for
    Stock Appreciation Rights and Other Variable Stock Option or
    Award Plans
    Years Ended December 31,2005


2004As restated(1)


As restated(1)Net income (loss):As reported

$
626


$
(23,568
)Stock-based employee compensation included in net income (loss)
    as reported, net of related tax*


1,734



4,906Stock-based employee compensation using the fair value method,
    net of related tax*


(23,300
)


(21,287
)Pro forma

$
(20,940
)

$
(39,949
)Basic and diluted net income (loss) per common share:As reported

$
0.01


$
(0.58
)Pro forma

$
(0.50
)

$
(0.99
)     *
    
    The tax effects on stock-based compensation have been fully
    reserved by way of a valuation allowance.(1)
    
    See Note 3, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.  Recent
    Accounting Pronouncements
  Accounting
    for Uncertainty in Income Taxes  an interpretation of
    FAS Statement No. 109
  Fair Value Measurements.
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115.
 118




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    3.
    Restatement
    of Consolidated Financial Statements  Form 10-K,
    Form 10-K Form 10-Q
  Introduction
  Form 8-K
       119




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Stock
    Option Grant Process
    Accounting
    Adjustments
    
    Employee New Hire, Promotion and Merit
    Grants.  New hire, promotional and merit
    grants during the Review Period were made to non-officer
    employees pursuant to the authority delegated to both the Chief
    Executive Officer and Chief Financial Officer by the Board of
    Directors. Based on the Audit Committee review, the Company
    determined that the measurement dates for 12 of the 101 new
    hire, promotion and merit granting actions during the Review
    Period should be revised. For nine of these granting actions,
    the Company determined that insufficient contemporaneous
    documentation to support the recorded measurement date existed,
    so a later measurement date was selected based on the existence
    of adequate contemporaneous documentation to support the
    conclusion that the grant was fixed. The Company recognized a
    pre-tax stock-based compensation expense of $12.6 million
    in relation to these nine granting actions using the intrinsic
    value method of accounting under APB No. 25. For the other
    three granting actions, the Company determined that measurement
    date criteria had been met on a date prior to the recorded grant
    date when the stock price was higher, resulting in variable
    accounting for these granting actions. Accordingly, the Company
    recognized a pre-tax stock-based compensation expense of
    $7.5 million for these granting actions in accordance with
    FIN No. 44, Accounting for Certain Transactions
    involving Stock Compensation. 120




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    Corrections to Employee New Hire, Promotion and Merit
    Grants.  In a small number of cases,
    corrections were made to employee new hire, promotion and merit
    grant. These corrections amounted to approximately 1% of total
    shares granted. The Company determined that in substantially all
    instances, these corrections were for new hire, promotion and
    merit grants that were inadvertently left off the initial
    authorization document and for new hires whose shares on the
    initial authorization document did not correctly reflect the
    number of shares stated in their offer letters. Based on the
    Audit Committee review, the Company did not identify evidence
    indicating that the corrections were effected to achieve a lower
    exercise price for the grantee, nor did the Company identify a
    pattern of effecting corrections to achieve a lower exercise
    price. The Company determined that the measurement dates for the
    individual option grants constituting these corrections should
    be revised to the date the correction was determined to be
    finalized. Accordingly, in addition to the granting actions
    described above, the Company recognized additional pre-tax
    stock-based compensation expense of $1.4 million related to
    corrections to employee new hire, promotion and merit granting
    actions.
    Employee Refresh Grants.  The Company
    periodically made broad-based equity compensation awards
    (refresh grants) to certain employees based on, such
    factors as, the employees unvested equity ownership, total
    equity ownership, market conditions and the importance of the
    employees expected contributions to Interwoven. Employee
    refresh grants were issued pursuant to the authority delegated
    to the Chief Executive Officer and Chief Financial Officer.
    Based on the Audit Committee review, the Company determined that
    the measurement dates for three of the employee refresh granting
    actions should be revised because the number of shares to be
    allocated to each individual employee was not determined with
    finality by the recorded grant dates. Accordingly, the Company
    recognized a pre-tax stock-based compensation expense of
    $1.7 million for these granting actions using the intrinsic
    value method of accounting under APB No. 25. The Company
    also determined that the measurement date criteria for one
    employee refresh granting action had been met on a date prior to
    the recorded grant date when the stock price was higher,
    resulting in variable accounting for this granting action.
    Accordingly, the Company recognized a pre-tax stock-based
    compensation expense of $964,000 for this granting action in
    accordance with FIN No. 44.
    Grants to Officers and Certain
    Employees.  The Company granted stock options
    to newly hired officers and certain non-officer members of
    management, employees who were promoted to officer positions or
    periodic refresh grants to officers and certain non-officer
    members of management based on such factors as the
    employees unvested equity ownership and total equity
    ownership, performance and market conditions. Grants to officers
    and certain non-officer members of management were authorized by
    the Board of Directors or the Compensation Committee in
    thirty-two granting actions during the review period. Based on
    the Audit Committee review, the Company determined that for four
    of these granting actions there was insufficient contemporaneous
    documentation to support the recorded measurement date.
    Accordingly, the Company recognized a pre-tax stock-based
    compensation expense of $6.8 million for such granting
    actions using the intrinsic value method of accounting under APB
    No. 25. The Company also determined that for four granting
    actions the measurement date criteria were met on a date prior
    to the recorded grant date when the stock price was higher,
    resulting in variable accounting. Accordingly, the Company
    recognized a pre-tax stock-based compensation expense of $54,000
    for such granting actions in accordance with
    FIN No. 44.
    Initial Director Grants.  Under the 1999
    Equity Incentive Plan, each non-employee director is
    automatically granted options to purchase shares of the
    Companys common stock when he or she first joins the
    Board. Based on the Audit Committee review, the Company
    determined that the measurement date for one automatic initial
    Director grant should be revised because the measurement date
    criteria had been met on the date of the directors
    appointment to the Board of Directors, but the recorded grant
    date was the following day, when the stock price was lower. The
    Company accounted for this grant as a variable award in
    accordance with FIN No. 44 and, accordingly, recorded
    stock-based compensation expense of approximately
    $1.7 million for 2000, which was reversed in 2001 due to
    fluctuation in the Companys stock price. This stock option
    grant was never exercised by the non-employee director. 121




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    Terminations.  The Company determined
    that the vesting of approximately 75,000 shares for
    eighteen employees was permitted after their respective stock
    option termination dates. Accordingly, as this additional
    vesting was considered a modification of the original terms of
    the respective option grants, the Company recognized a pre-tax
    stock-based compensation expense of $522,000 using the intrinsic
    value method of accounting under APB No. 25 and in
    accordance with FIN No. 44.
    Grants to Non-Employees.  During the
    Review Period, grants were made to non-employees in exchange for
    services as authorized in seven granting actions. In connection
    with one such granting action, the Company concluded that the
    grant had not been accounted for in accordance EITF
    No. 96-18,
    Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services,and EITF Issue
    No. 00-18,
    Accounting Recognition for Certain Transactions Involving
    Equity Instruments Granted to Other Than Employee.Accordingly, the Company determined that an additional
    compensation expense should be recorded and recognized pre-tax
    stock-based compensation expense of $41,000.  Impact
    of Judgments and Interpretations on Restatement
    Values
     122




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Financial
    Impact of the Restatement
    Pre-Tax


After TaxAs


(Income)


(Income)As


Previously


Expense


ExpenseRestated


Reported


Adjustments


AdjustmentsFor the year ended December 31,1999

$
3,722


$
3,686


$
36


$
362000


25,066



7,522



17,544



17,5442001


26,802



14,225



12,577



12,5772002


4,712



4,880



(168
)


(168
)2003


3,944



2,348



1,596



1,596Total impact 1999 to 2003


64,246



32,661



31,585



31,5852004


4,906



4,982



(76
)


(76
)2005


1,734



1,743



(9
)


(9
)2006


3,451



3,451







Total

$
74,337


$
42,837


$
31,500


$
31,500      123




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Restatement AdjustmentsAs


Stock-based


PreviouslyPreviously


Compensation


Unrecorded


Total


AsReported


Adjustments


Adjustments(1)


Adjustments


RestatedFor the year ended December 31,1999

$
(28,882
)

$
36


$



$
36


$
(28,918
)2000


(32,055
)


17,544







17,544



(49,599
)2001


(129,175
)


12,577



(336
)


12,241



(141,416
)2002


(148,616
)


(168
)


(623
)


(791
)


(147,825
)2003


(47,531
)


1,596



481



2,077



(49,608
)2004


(23,667
)


(76
)


(23
)


(99
)


(23,568
)2005


617



(9
)






(9
)


6262006


6,437















6,437     (1)
    
    Previously unrecorded adjustments reflect adjustments to support
    and services revenues of $(55,000), $(904,000), $290,000 and
    $168,000 for the years ended December 31, 2001, 2002, 2003
    and 2004, respectively, and adjustments to the allowance for
    doubtful accounts of $(281,000), $281,000, $191,000 and
    $(191,000) for the years ended December 31, 2001, 2002,
    2003 and 2004.    Accumulated deficit as of December 31, 2003, as previously
    reported

$
(383,340
)Stock-based compensation expense adjustments through
    December 31, 2003


(31,585
)Previously unrecorded adjustments through December 31, 2003


478Impact of adjustments


(31,107
)Accumulated deficit as of December 31, 2003, as restated

$
(414,447
)   Form 10-K
    Accounting for Stock-Based Compensation
 124




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Financial
    Impact of the Restatement
    December 31, 2005As





AsReported


Adjustments


RestatedAssetsCurrent assets:Cash and cash equivalents

$
73,618


$



$
73,618Short-term investments


63,581







63,581Accounts receivable, net


31,542







31,542Prepaid expenses and other current assets


4,732







4,732Total current assets


173,473







173,473Property and equipment, net


5,044







5,044Goodwill


191,595







191,595Other intangible assets, net


25,527







25,527Other assets


2,967







2,967Total assets

$
398,606


$



$
398,606Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
2,318


$



$
2,318Accrued liabilities


24,371







24,371Restructuring and excess facilities accrual


7,266







7,266Deferred revenues


54,010



(501
)


53,509Total current liabilities


87,965



(501
)


87,464Accrued liabilities


2,761







2,761Restructuring and excess facilities accrual


9,681







9,681Total liabilities


100,407



(501
)


99,906Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value, 5,000 shares
    authorized at December 31, 2005










Common stock, $0.001 par value, 125,000 shares,
    authorized at December 31, 2005; 42,386 shares issued
    and outstanding at December 31, 2005, respectively


42







42Additional paid-in capital


705,908



31,500



737,408Deferred stock-based compensation


(1,002
)






(1,002
)Accumulated other comprehensive loss


(359
)






(359
)Accumulated deficit


(406,390
)


(30,999
)


(437,389
)Total stockholders equity


298,199



501



298,700Total liabilities and stockholders equity

$
398,606


$



$
398,606  125




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31, 2005


Year Ended December 31, 2004As





As


As





AsReported


Adjustments


Restated


Reported


Adjustments


RestatedRevenues:License

$
67,754


$



$
67,754


$
67,341


$



$
67,341Support and service


107,283







107,283



93,047



(168
)


92,879Total revenues


175,037







175,037



160,388



(168
)


160,220Cost of revenues:License


15,262







15,262



13,336







13,336Support and service


42,280



(23
)


42,257



38,743



19



38,762Total cost of revenues


57,542



(23
)


57,519



52,079



19



52,098Gross profit


117,495



23



117,518



108,309



(187
)


108,122Operating expenses:Sales and marketing


70,718



13



70,731



72,532



112



72,644Research and development


31,489



(6
)


31,483



31,874



(48
)


31,826General and administrative


14,491



7



14,498



13,986



(350
)


13,636Amortization of intangible assets


3,358







3,358



4,541







4,541Restructuring and excess facilities charges (recoveries)


(692
)






(692
)


9,782







9,782Total operating expenses


119,364



14



119,378



132,715



(286
)


132,429Loss from operations


(1,869
)


9



(1,860
)


(24,406
)


99



(24,307
)Interest income and other, net


3,574







3,574



1,725







1,725Income (loss) before provision for income taxes


1,705



9



1,714



(22,681
)


99



(22,582
)Provision for income taxes


1,088







1,088



986







986Net income (loss)

$
617


$
9


$
626


$
(23,667
)

$
99


$
(23,568
)Basic net income (loss) per common share)

$
0.01


$



$
0.01


$
(0.58
)

$



$
(0.58
)Shares used in computing basic net income (loss) per common share


41,751







41,751



40,494







40,494Diluted net income (loss) per common share)

$
0.01


$



$
0.01


$
(0.58
)

$



$
(0.58
)Shares used in computing diluted net income (loss) per common
    share


42,390







42,390



40,494







40,494  126




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Additional


Deferred





Net ImpactPaid-in


Stock-Based


Accumulated


to StockholdersAs of December 31,

Capital


Compensation


Deficit


Equity2001

$
(40,916
)

$
10,759


$
29,821


$
(336
)2002

$
(33,748
)

$
3,759


$
29,030


$
(959
)2003

$
(32,220
)

$
635


$
31,107


$
(478
)2004

$
(31,603
)

$
94


$
31,008


$
(501
)2005

$
(31,500
)

$



$
30,999


$
(501
)  127




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31, 2005


Year Ended December 31, 2004Cash flows from operating activities:Net income (loss)

$
617


$
9


$
626


$
(23,667
)

$
99


$
(23,568
)Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Depreciation


3,728







3,728



4,276







4,276Amortization of deferred stock-based compensation


1,743



(9
)


1,734



4,982



(76
)


4,906Amortization of intangible assets and purchased technology


15,499







15,499



15,177







15,177Reduction in allowance for doubtful accounts and sales returns


(531
)






(531
)


(612
)






(612
)Changes in operating assets and liabilities:Accounts receivable


(1,749
)






(1,749
)


6,154



(191
)


5,963Prepaid expenses and other assets


2,423







2,423



579







579Accounts payable and accrued liabilities


(992
)






(992
)


528







528Restructuring and excess facilities accrual


(8,735
)






(8,735
)


(20,620
)






(20,620
)Deferred revenues


3,515







3,515



5,971



168



6,139Net cash provided by (used in) operating activities


15,518







15,518



(7,232
)






(7,232
)Cash flows from investing activities:Purchases of property and equipment


(2,848
)






(2,848
)


(2,704
)






(2,704
)Purchases of investments


(86,274
)






(86,274
)


(118,378
)






(118,378
)Maturities and sales of investments


134,275







134,275



117,249







117,249Acquisition of business and technologies, net of cash acquired


(16,596
)






(16,596
)


(1,172
)






(1,172
)Net cash provided by (used in) investing activities


28,557







28,557



(5,005
)






(5,005
)Cash flows from financing activities:Payment of bank borrowings














(1,213
)






(1,213
)Net proceeds from issuance of common stock


7,102







7,102



5,821







5,821Net cash provided by (used in) financing activities


7,102







7,102



4,608







4,608Effect of exchange rates


(25
)






(25
)


34







34Net increase (decrease) in cash and cash equivalents


51,152







51,152



(7,595
)






(7,595
)Cash and cash equivalents at beginning of period


22,466







22,466



30,061







30,061Cash and cash equivalents at end of period

$
73,618


$



$
73,618


$
22,466


$



$
22,466    128




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Internal
    Revenue Code Section 409A
      4.
    Mergers
    and Acquisitions     129




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Cash,
    Cash Equivalents and Short-term Investments    December 31, 2006Gross


Gross


EstimatedUnrealized


Unrealized


FairCost


Gains


Losses


ValueCash

$
37,950


$



$



$
37,950Cash equivalents:Commercial paper


29,176











29,176Money market funds


6,993











6,993Total cash equivalents


36,169











36,169Total cash and cash equivalents


74,119











74,119Short-term investments:Government agencies


73,646



6



(35
)


73,617Corporate obligations


21,592







(36
)


21,556Commercial paper


5,659



2



(23
)


5,638Certificates of deposit


1,531











1,531Total short-term investments


102,428



8



(94
)


102,342Total cash, cash equivalents and 
    short-term investments

$
176,547


$
8


$
(94
)

$
176,461   December 31, 2005Gross


Gross


EstimatedUnrealized


Unrealized


FairCost


Gains


Losses


ValueCash

$
24,017


$



$



$
24,017Cash equivalents:Government agencies


10,671











10,671Commercial paper


33,498











33,498Money market funds


5,432











5,432Total cash equivalents


49,601











49,601Total cash and cash equivalents


73,618











73,618Short-term investments:Government agencies


60,060



1



(326
)


59,735Corporate obligations


3,359



1



(12
)


3,348Commercial paper


530







(32
)


498Total short-term investments


63,949



2



(370
)


63,581Total cash, cash equivalents and short-term investments

$
137,567


$
2


$
(370
)

$
137,199  130




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  115-1, The Meaning of Other-Than-Temporary Impairment and Its
    Application to Certain Investments,
  Less Than 12 Months


More Than 12 Months


TotalGross





Gross





GrossFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


LossesGovernment agencies

$
45,243


$
(23
)

$
7,585


$
(12
)

$
52,828


$
(35
)Commercial paper


27,119



(22
)


601



(1
)


27,720



(23
)Corporate obligations


21,055



(36
)


501







21,556



(36
)$
93,417


$
(81
)

$
8,687


$
(13
)

$
102,104


$
(94
)       FairCost


ValueDue within one year

$
89,118


$
89,095Due one year to five years


49,479



49,416$
138,597


$
138,511   6.
    Property
    and Equipment    December 31,2006


2005Computer software and equipment

$
33,001


$
31,685Furniture and office equipment


3,510



3,929Leasehold improvements


10,938



10,71947,449



46,333Less: accumulated depreciation and amortization


42,634



41,289$
4,815


$
5,044    131




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  7.
    Goodwill
    and Other Intangible Assets    2006


2005Gross








GrossCarrying


Accumulated


Net


Carrying


Accumulated


NetAmount


Amortization


Amount


Amount


Amortization


AmountPurchased technology

$
44,103


$
(38,119
)

$
5,984


$
42,381


$
(26,783
)

$
15,598Patents and patent applications


4,506



(4,447
)


59



4,506



(3,152
)


1,354Customer list


12,831



(9,584
)


3,247



12,831



(6,272
)


6,559Existing contract


153



(153
)






251



(120
)


131Non-compete agreements


9,009



(7,644
)


1,365



9,009



(7,124
)


1,885Other intangible assets

$
70,602


$
(59,947
)


10,655


$
68,978


$
(43,451
)


25,527Goodwill










190,935











191,595$
201,590










$
217,122       December 31,2006


2005Beginning balance

$
191,595


$
185,464Goodwill recorded in business combinations






6,131Subsequent goodwill adjustments


(660
)


Ending balance

$
190,935


$
191,595    132




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  8.
    Accrued
    Liabilities    December 31,2006


2005Accrued compensation

$
17,043


$
12,718Professional services


3,906



2,257Deferred rent


2,937



3,705Sales and income taxes


2,671



2,180Other


7,860



6,272$
34,417


$
27,132   9.
    Restructuring
    and Excess Facilities    Workforce
    Reductions
        Excess
    Facilities
       133




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        ExcessYears Ending December 31,

Facilities2007

$
5,1552008


1,5532009


1,0802010


9368,724Present value discount of future lease payments


(28
)$
8,696  134




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Non-CancelableWork


LeaseForce


CommitmentsCost


and Other


TotalBalance at January 1, 2004

$
2,651


$
43,468


$
46,119Restructuring and excess facilities charges


1,654



8,128



9,782Cash payments and other


(3,649
)


(26,570
)


(30,219
)Balance at December 31, 2004


656



25,026



25,682Restructuring and excess facilities recoveries


(365
)


(327
)


(692
)Cash payments


(257
)


(7,786
)


(8,043
)Balance at December 31, 2005


34



16,913



16,947Restructuring and excess facilities recoveries


(15
)


(887
)


(902
)Cash payments and other


(19
)


(7,330
)


(7,349
)Balance at December 31, 2006

$



$
8,696


$
8,696   10.
    Bank
    Borrowings    11.
    Guarantees  and/or
     135




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    12.
    Commitments
    and Contingencies      FutureOccupied


Excess


LeaseYears Ending December 31,

Facilities


Facilities


Payments2007

$
8,389


$
5,498


$
13,8872008


4,144



1,973



6,1172009


2,731



1,258



3,9892010


2,673



1,049



3,7222011


2,826







2,826After 2011


10,078







10,078$
30,841


$
9,778


$
40,619        136




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Simmonds v. Bank of America Corp. No. 07-1585,
      13.
    Stockholders
    Equity  Preferred
    Stock
    Common
    Stock
    14.
    Employee
    Benefit Plans and Stock-Based Compensation   137




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Employee
    Stock Purchase Plan
  24-month 6-month 6-month
  Prior
    Stock Option Plans
    1999
    Equity Incentive Plan
     138




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2000
    Stock Incentive Plan
      2003
    Acquisition Plan
    Adoption
    of Statement of Financial Accounting Standard
    No. 123R
   139




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Cost of revenues

$
672Sales and marketing


1,327Research and development


968General and administrative


484$
3,451       Valuation and Amortization
    Method.
  Expected Life.
  Expected Volatility.
  Risk-Free Interest Rate.
  Dividends.
 140




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Forfeitures.
    Years Ended December 31,2006

2005

2004Expected life from grant date of option (in years)

3.25

1.8 - 5.0

1.8 - 5.0Risk-free interest rate

4.4% - 5.1%

3.2% - 4.5%

2.6% - 3.7%Expected dividend yield

0.0%

0.0%

0.0%Expected volatility

39.7% - 59.5%

39.2% - 70.9%

58.9% - 118.9%Weighted average expected volatility

46.0%

51.3%

111.8%     Years Ended December 31,2006

2005

2004Expected life from grant date of ESPP (in years)

0.5

0.5 to 2

0.5 to 2Risk-free interest rate

4.9% - 5.1%

3.1% - 4.1%

1.1% - 2.6%Expected dividend yield

0.0%

0.0%

0.0%Expected volatility

29.8% - 33.9%

27.9% - 56.1%

45.0% - 83.0%Weighted average expected volatility

31.4%

49.2%

75.6%  141




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock
    Option and Restricted Stock Units Activities
    Weighted-Weighted-


AverageAverage


Remaining


AggregateNumber of


Exercise


Contractual-


IntrinsicShares


Price


Term


ValueOutstanding at January 1, 2004


9,925


$
25.83Granted


3,819



10.12Exercised


(632
)


5.95Forfeited or expired


(2,245
)


29.65Outstanding at December 31, 2004


10,867


$
20.52Granted


1,880



8.57Assumed


320



3.67Exercised


(1,049
)


5.21Forfeited or expired


(1,973
)


25.56Outstanding at December 31, 2005


10,045


$
18.36Granted


915



10.64Exercised


(1,755
)


7.65Forfeited or expired


(2,965
)


25.51Outstanding at December 31, 2006


6,240


$
16.85



6.75


$
27,626Exercisable at December 31, 2006


4,980


$
18.65



6.21


$
21,407Vested and expected to vest at December 31, 2006


6,091


$
17.01



6.69


$
26,967    142




---



##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Options Outstanding


Options ExercisableWeightedAverage


Weighted





WeightedRemaining


Average


Number


AverageExercise

Number of


Contractual


Exercise


of


ExercisePrices

Options


Life (Years)


Price


Options


Price$ 0.18 to $ 6.60


636



4.73


$
4.78



599


$
4.80$ 6.69 to $ 7.84


631



7.31


$
7.60



436


$
7.56$ 7.87 to $ 8.70


659



8.26


$
8.23



453


$
8.25$ 8.76 to $ 8.83


841



7.43


$
8.83



841


$
8.83$ 8.99 to $ 9.51


692



8.66


$
9.32



303


$
9.28$ 9.60 to $11.76


686



7.27


$
10.71



497


$
10.71$11.92 to $13.72


954



7.05


$
13.39



814


$
13.51$14.00 to $49.38


699



5.04


$
27.77



595


$
30.16$58.56 to $289.64


442



3.61


$
86.98



442


$
86.986,240



6.75


$
16.85



4,980


$
18.65     Weighted-


WeightedAverage


AverageGrant Date


Remaining


AggregateFair Value/


Contractual-


IntrinsicShares


Share


Term


ValueOutstanding at January 1, 2006





$
Granted


719



8.65Forfeited


(28
)


8.58Outstanding at December 31, 2006


691


$
8.65



1.93


$
10,137Vested and expected to vest at December 31, 2006


572


$
8.65



1.80


$
8,388        143




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Comparable
    Disclosures
    ,
  Tax
    Elections upon Adoption of Statement of Financial Accounting
    Standard No. 123R
      401(k)
    Plan
   144




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Interest
    Income and Other    Years Ended December 31,2006


2005


2004Interest income

$
6,358


$
3,744


$
1,962Interest expense






(1
)


(43
)Foreign currency gain (loss)


132



12



(73
)Other


(166
)


(181
)


(121
)$
6,324


$
3,574


$
1,725   16.
    Income
    Taxes    Years Ended December 31,2006


2005


2004As restated(1)


As restated(1)United States

$
6,612


$
137


$
(23,922
)Foreign


2,028



1,577



1,340$
8,640


$
1,714


$
(22,582
)     (1)
    
    The amounts for the years ended December 31, 2005 and 2004
    have been restated to reflect adjustments to the Companys
    income (loss) before provision for income taxes of $9,000 and
    $99,000, respectively. See Note 3, Restatement of
    Consolidated Financial Statements, in Notes to
    Consolidated Financial Statements.    Years Ended December 31,2006


2005


2004Current:Federal

$
917


$
75


$
State


152



96



107Foreign


1,134



917



879$
2,203


$
1,088


$
986     Years Ended December 31,2006


2005


2004As restated(1)


As restated(1)Income tax provision (benefit) at federal statutory rate of 34%

$
2,938


$
583


$
(7,678
)State taxes, net of federal tax benefits


163



77



71Amortization of stock-based compensation


360



476



1,180Goodwill


690







Changes in valuation allowance


(1,948
)


(48
)


7,413$
2,203


$
1,088


$
986     (1)
    
    Income tax provision (benefit) at federal statutory rate of 34%
    and timing differences not currently benefited for the years
    ended December 31, 2005 and 2004 have been restated to
    reflect adjustments to the Companys 145




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  income (loss) before provision for income taxes of $9,000 and
    $99,000, respectively. See Note 3, Restatement of
    Consolidated Financial Statements, in Notes to
    Consolidated Financial Statements.  non-United
  December 31,2006


2005As restatedDeferred tax assets:Net operating loss carryforwards

$
39,937


$
63,317Deferred revenues






597Restructuring and excess facilities charges


3,325



6,390Accrued liabilities and allowances


2,576



3,447Tax credit carryforwards


7,869



10,086Depreciation and amortization


14,863



17,546Stock-based compensation


1,274



1,733Valuation allowance


(66,442
)


(93,965
)3,402



9,151Deferred tax liabilities:Non-deductible intangible assets


(3,402
)


(9,151
)$



$
      146




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    17.
    Significant
    Customer Information and Segment Reporting      Years Ended December 31,2006


2005


2004As restated(1)Revenues:United States

$
128,171


$
119,002


$
105,155United Kingdom


30,057



18,414



23,757Other geographies


42,091



37,621



31,308$
200,319


$
175,037


$
160,220     (1)
    
    See Note 3, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.  December 31,2006


2005Long-lived assets (excluding goodwill):United States

$
3,083


$
4,295International


1,732



749$
4,815


$
5,044     Years Ended December 31,2006


2005


2004As restated(1)License

$
75,678


$
67,754


$
67,341Customer support


86,568



76,755



65,051Consulting


33,382



25,911



23,553Training


4,691



4,617



4,275$
200,319


$
175,037


$
160,220  147




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##### Table of Contents



INTERWOVEN,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    See Note 3, Restatement of Consolidated Financial
    Statements, in Notes to Consolidated Financial Statements.  18.
    Subsequent
    Events (unaudited)  No. 13-1, Accounting for Rental Costs incurred during a Construction
    Period
         148




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##### Table of Contents



SIGNATURES
    INTERWOVEN, INC.
  By:
    /s/  Joseph
    L. Cowan   Chief Executive Officer
    Form 10-K
  Signature

Title

Date/s/  Joseph
    L. CowanJoseph
    L. Cowan

Chief Executive Officer

December 14, 2007/s/  John
    E. Calonico, Jr.John
    E. Calonico, Jr.

Senior Vice President and
    Chief Financial Officer (Principal Financial and
    Accounting Officer)

December 14, 2007/s/  Bob
    L. CoreyBob
    L. Corey

Chairman of the Board of Directors

December 14, 2007/s/  Charles
    M. BoesenbergCharles
    M. Boesenberg

Director

December 14, 2007/s/  Ronald
    E.F. CoddRonald
    E.F. Codd

Director

December 14, 2007/s/  Frank
    J. Fanzilli, Jr.Frank
    J. Fanzilli, Jr.

Director

December 14, 2007/s/  Roger
    J. SipplRoger
    J. Sippl

Director

December 14, 2007/s/  Thomas
    L. ThomasThomas
    L. Thomas

Director

December 14, 2007  149




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##### Table of Contents



INTERWOVEN,
    INC.
   EXHIBITS TO
    FORM 10-K
    ANNUAL REPORT
    For the year ended December 31, 2006
  Incorporated by Reference

FiledNumber

Exhibit Title

Form

Date

Number

Herewith2
.01

Agreement and Plan of Merger, dated October 17, 2007, by
    and among Registrant, Broadway Merger LLC, Optimost LLC and Mark
    Wachen, as representative

8-K


10/22/07



2
.13
.01

Registrants Fourth Amended and Restated Certificate of
    Incorporation

S-8


11/19/03



4
.083
.02

Registrants Amended and Restated Bylaws

8-K


4/25/07



3
.014
.01

Form of Certificate for Registrants common stock

S-1


09/23/99



4
.0110
.01

Form of Indemnity Agreement between Registrant and each of its
    directors and executive officers











X10
.02*

1996 Stock Option Plan and related agreements

S-1


07/27/99



10
.0210
.03*

1998 Stock Option Plan and related agreements

S-1


07/27/99



10
.0310
.04*

1999 Equity Incentive Plan

10-Q


8/8/06



10
.0110
.05*

Forms of Option Agreements and Stock Option Exercise Agreements
    related to the 1999 Equity Incentive Plan

10-Q


8/8/06



10
.0210
.06*

1999 Employee Stock Purchase Plan











X10
.07*

Forms of Enrollment Form, Subscription Agreement, Notice of
    Withdrawal and Notice of Suspension related to the 1999 Employee
    Stock Purchase Plan

S-1


09/03/99



10
.0510
.08*

2000 Stock Incentive Plan

10-Q


8/8/06



10
.0310
.09*

Forms of Stock Option Agreement and Stock Option Exercise
    Agreements related to the 2000 Stock Incentive Plan

10-Q


8/8/06



10
.0410
.10*

Forms of Incentive Stock Option Agreement and Nonstatutory Stock
    Option Agreement under iManage, Inc. 1997 Stock Option Plan

S-8


11/19/03



4
.0210
.11*

iManage, Inc. 2000 Non-Officer Stock Option Plan and related
    forms of stock option and option exercise agreements

S-8


11/19/03



4
.0310
.12*

2003 Acquisition Plan

S-8


11/19/03



4
.0710
.13*

Forms of Stock Option Agreement and Stock Option Exercise
    Agreements related to the 2003 Acquisition Plan

10-K


3/13/06



10
.1310
.14*

Form of Notice of Stock Option Acceleration and Share
    Restrictions

10-K


3/13/06



10
.1410
.15*

Regional Prototype Profit Sharing Plan and Trust/Account
    Standard Plan Adoption Agreement AA #001

S-1


07/27/99



10
.0610
.16*

Employment Agreement between Registrant and Scipio M. Carnecchia











X10
.17*

Employment Agreement between Registrant and John E. Calonico,
    Jr.











X10
.18*

Separation Agreement and Release between Registrant and Martin
    W. Brauns

10-K


03/13/06



10
.1910
.19*

Offer Letter, dated March 16, 2007, between Registrant and
    Joseph L. Cowan

8-K


04/02/07



10
.110
.20*

2007 Executive Officer Incentive Bonus Plan











X10
.21*

2007 Compensation Plan for Scipio M. Carnecchia











X10
.22*

2007 Compensation Plan for Steven J. Martello











X10
.23

Lease, dated December 20, 2006, by and between Registrant
    and Silicon Valley CA-I, LLC

8-K


12/22/06



10
.1




---



##### Table of Contents



Incorporated by Reference

FiledNumber

Exhibit Title

Form

Date

Number

Herewith10
.24

First Amendment to Lease, dated January 12, 2007, by and
    between Registrant and Silicon Valley CA-I, LLC











X10
.25

Office Lease for 303 East Wacker, Chicago, Illinois between 303
    Wacker Realty LLC and iManage, Inc. dated March, 17, 2003

(1)


(1)



(1)10
.26

First Amendment to Lease dated November 12, 2003 between
    iManage, Inc. and 303 Wacker Realty LLC

10-K


03/15/05



10
.2710
.27

Sublease between Hyperion Solutions Corporation and iManage,
    Inc. dated January 17, 2002

(2)


(2)



(2)21
.01

Subsidiaries of the Registrant











X23
.01

Consent of Independent Registered Public Accounting Firm











X23
.02

Consent of Independent Registered Public Accounting Firm











X31
.01

Rule 13a-14(a)/15d-15(a)
    certification of the Chief Executive Officer











X31
.02

Rule 13a-14(a)/15d-15(a)
    certification of the Chief Financial Officer











X32
.01

Section 1350 certification of Chief Executive Officer











X32
.02

Section 1350 certification of the Chief Financial Officer











X     (1)
    
    Incorporated by reference to Exhibit 10.18 of the iManage,
    Inc. Annual Report
    Form 10-K
    filed with the Commission on March 26, 2003.(2)
    
    Incorporated by reference to Exhibit 10.13 of the iManage,
    Inc. Annual Report
    Form 10-K
    filed with the Commission on March 29, 2002.*
    
    Management contract, compensatory plan or arrangement.
    
    Confidential treatment has been requested with regard to certain
    portions of this document. Such portions were filed separately
    with the Commission.