IWOV Interwoven (MM)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. _____ )

Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o		Preliminary Proxy Statement.
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)).
þ		Definitive Proxy Statement.
o		Definitive Additional Materials.
o		Soliciting Material Pursuant to §240.14a-12.

INTERWOVEN, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
o		No fee required.
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies: Common Stock, par value $0.001 per share, of Interwoven, Inc.
	(2)		Aggregate number of securities to which transaction applies: 53,706,675 shares of Common Stock, which includes the issuance of up to 147,000 shares of Common Stock pursuant to the Interwoven, Inc. Employee Stock Purchase Plan prior to the completion of the merger, options to purchase 6,176,322 shares of Common Stock with exercise prices at or below $40.00, and 983,517 shares of Common Stock issuable upon settlement of restricted stock units.
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): The filing fee was determined based upon the sum of (A) 46,399,836 shares of Common Stock multiplied by $16.20 per share, (B) 147,000 shares of Common Stock issuable pursuant to the Interwoven, Inc. 1999 Employee Stock Purchase Plan multiplied by $3.59 per share (which is the difference between $16.20 and the expected purchase price per share for the offering period), (C) options to purchase 6,176,322 shares of Common Stock with exercise prices at or below $40.00 multiplied by $5.19 per share (which is the difference between $16.20 and the weighted average exercise price per share), and (D) 983,517 shares of Common Stock issuable upon settlement of restricted stock units multiplied by $16.20 per share. In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying $.00003930 by the sum of the preceding sentence.
	(4)		Proposed maximum aggregate value of transaction: $800,182,864
	(5)		Total fee paid: $31,448

þ		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

 

 

February 9, 2009

 

To our stockholders:

 

We invite you to attend a special meeting of stockholders of Interwoven, Inc. (“Interwoven”) to be held at 160 East Tasman Drive, San Jose, California 95134, at 10:00 a.m., local time, on March 11, 2009.

 

At the special meeting, we will ask you to vote “FOR” the adoption of the Agreement and Plan of Merger, dated as of January 22, 2009, among Autonomy Corporation plc (“Autonomy”), Milan Acquisition Corp., a wholly-owned subsidiary of Autonomy, and Interwoven (the “merger agreement”). As a result of the merger provided for in the merger agreement (the “merger”), Interwoven will become a wholly-owned subsidiary of Autonomy. We are also asking you to expressly grant the authority to vote your shares to adjourn the special meeting and any adjourned or postponed session of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

If the merger is completed, you will be entitled to receive $16.20 in cash, without interest, for each share of Interwoven common stock that you own.

 

After careful consideration, our Board of Directors unanimously approved the merger agreement and determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Interwoven and its stockholders. Our Board of Directors recommends that you vote “FOR” adoption of the merger agreement.

 

Our Board of Directors considered a number of factors in evaluating the transaction and consulted with its legal and financial advisors. The enclosed proxy statement also provides detailed information about the merger agreement and the merger. We encourage you to read this proxy statement carefully, including its annexes.

 

Your vote is very important, regardless of the number of shares you own. The adoption of the merger agreement must be approved by the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting. Only stockholders who owned shares of our common stock at the close of business on February 4, 2009, the record date for the special meeting, will be entitled to vote at the special meeting. To ensure that your shares will be represented at the special meeting, you are urged to complete, sign, date and return the enclosed proxy card or voting instruction card as soon as possible or vote via the Internet or telephone (if those options are available to you). If you fail to do so, and do not attend the special meeting, it will have the same effect as if you voted “AGAINST” approval of the merger agreement.

 

If you have any questions about the merger please call MacKenzie Partners, Inc., our proxy solicitor, toll-free at (800) 322-2885 or collect at (212) 929-5500.

 

On behalf of our Board of Directors, I thank you for your support and appreciate your consideration of this matter.

 

Sincerely,

 

Chief Executive Officer

160 East Tasman Drive

San Jose, CA 95134

(408) 774-2000

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On March 11, 2009

 

To our stockholders:

 

You are cordially invited to attend the Special Meeting of Stockholders of Interwoven, Inc., a Delaware corporation (“Interwoven”), that will be held at 160 East Tasman Drive, San Jose, California 95134, at 10:00 a.m., local time, on March 11, 2009, for the following purposes:

 

1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of January 22, 2009, among Autonomy Corporation plc (“Autonomy”), Milan Acquisition Corp., a wholly-owned subsidiary of Autonomy, and Interwoven (the “merger agreement”); and

 

2. To vote to adjourn the special meeting and any adjourned or postponed session of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

No other business will be considered at the special meeting. The proposals are described more fully in the proxy statement. Please give your careful attention to all of the information in the proxy statement.

 

Only stockholders who owned shares of our common stock at the close of business on February 4, 2009, the record date for the special meeting, or their proxies can vote at this special meeting or any adjournment(s) or postponement(s) that may take place. The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the shares of our common stock outstanding on the record date. Our Board of Directors unanimously recommends that you vote “FOR” the adoption of the merger agreement and “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies.

 

Our stockholders have the right to dissent from the merger and obtain payment in cash for the fair value of their shares of common stock under applicable provisions of Delaware law. In order to perfect and exercise appraisal rights, stockholders must give written demand for appraisal of their shares to Interwoven before the vote is taken on the adoption of the merger agreement at the special meeting and must not vote in favor of the adoption of the merger agreement. A copy of the applicable Delaware statutory provisions is included as Annex D of the attached proxy statement, and a summary of these provisions can be found under the section of the attached proxy statement entitled “The Merger — Appraisal Rights.”

 

Your vote is very important. Whether or not you expect to attend the special meeting in person, you are urged to complete, sign, date and return the enclosed proxy card or voting instruction card as soon as possible or vote via the Internet or telephone (if those options are available to you) and thus ensure that your shares will be represented at the special meeting if you are unable to attend. Instructions for voting your shares are included on the enclosed proxy or voting instruction card. For specific instructions on how to vote your shares, please refer to the section of this proxy statement entitled “The Special Meeting” beginning on page 10. If you do attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

 

By Order of the Board of Directors

 

Secretary

 

This proxy statement is dated February 9, 2009, and is first being mailed to stockholders of Interwoven on or about February 10, 2009.

 

TABLE OF CONTENTS

 

 

 

SUMMARY TERM SHEET

 

Interwoven, Inc. (page 9).

 

Autonomy Corporation plc and Milan Acquisition Corp. (page 9).

 

The Merger (page 13).

 

Merger Consideration (page 43).

 

Treatment of Stock Options (page 44).

 

Treatment of Restricted Stock Units (page 44).

 

Market Price (page 59).

 

Reasons for the Merger (page 19).

 

Opinions of Our Financial Advisors (page 22, Annex B and Annex C).

 

Recommendation to Interwoven Stockholders (page 32).

 

Interwoven Voting Agreements (page 33).

 

Autonomy Irrevocable Undertakings (page 33).

 

Merger Financing Agreements (page 55).

 

Interests of Our Directors and Executive Officers in the Merger (page 33).

 

Appraisal Rights (page 37 and Annex D).

 

Material U.S. Federal Income Tax Consequences (page 40).

 

Antitrust Matters (page 41).

 

The Special Meeting of Interwoven Stockholders (page 10).

 

The Merger Agreement (page 43 and Annex A).

 

Legal Proceedings Regarding the Merger (page 42).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This proxy statement, and the documents to which we refer you in this proxy statement, contain “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current views as to future events and financial performance with respect to our operations, the expected completion and timing of the merger and other information relating to the merger. These statements can be identified by the fact that they do not relate strictly to historical or current facts. There are forward-looking statements throughout this proxy statement, including, among others, under the sections entitled “Summary Term Sheet,” “The Merger,” “The Merger — Opinions of Interwoven’s Financial Advisors” and in statements containing words such as “anticipate,” “estimate,” “expect,” “will be,” “will continue,” “likely to become,” “intend,” “plan,” “believe” and other similar expressions. You should be aware that forward-looking statements involve known and unknown risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the results or developments we anticipate will be realized, or even if realized, that they will have the expected effects on our business or operations or on the merger and related transactions. Factors that could cause actual results to differ materially from those discussed in the forward-looking statements contained in this proxy statement include, among other things:

 

 

While it is not possible to identify all factors, Interwoven faces many risks and uncertainties that could cause actual results to differ from our forward-looking statements, including the risks described in the documents filed by Interwoven with the Securities and Exchange Commission. See the section of this proxy statement entitled “Where You Can Find More Information.”

 

The forward-looking statements made in this filing represent our views as of the date of this proxy statement, and it should not be assumed that the statements made herein remain accurate as of any future date. We undertake no duty to any person to update such statements in this proxy statement under any circumstances, except as otherwise required by law. You should review any additional disclosures made by Interwoven in its Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission.

 

Interwoven is a provider of content management software solutions. Our software and services enable organizations to leverage content to drive business growth by improving online business performance, increasing collaboration and streamlining business processes both internally and externally. Since our inception, over 4,700 enterprise and professional services organizations in 70 countries worldwide, including the customers we acquired through acquisitions, have chosen our solutions.

 

We are incorporated under the laws of the state of Delaware. Our executive offices are located at 160 East Tasman Drive, San Jose, California 95134. Our telephone number is (408) 774-2000. Our common stock is listed on The NASDAQ Global Select Market under the symbol “IWOV.”

 

Autonomy is a global leader in infrastructure software, principally providing software for automating the management, processing and delivery of unstructured information by virtue of extracting its meaning from and to sources across the internet, the extended enterprise and other digital domains. Autonomy remains committed to its core vision to be the standard platform for automating the management, processing and delivery of all forms of unstructured information. An historically important portion of that market, and an entry into many sales opportunities, includes the need to manage the workflow of content in corporate repositories and on websites.

 

Autonomy is a company formed under the laws of England and Wales. Autonomy’s executive offices are located at Cambridge Business Park, Cowley Road, Cambridge CB4 0WZ, United Kingdom. Autonomy’s phone number is (011-44) 1223 448 000.

 

Milan Acquisition Corp. is a wholly-owned subsidiary of Autonomy and has not engaged in any business activity other than in connection with the merger. Merger Sub is incorporated under the laws of the state of Delaware. Merger Sub’s executive offices are located at Cambridge Business Park, Cowley Road, Cambridge CB4 0WZ, United Kingdom. Merger Sub’s telephone number is (011-44) 1223 448 000.

 

We are furnishing this proxy statement to you as part of the solicitation of proxies by our Board of Directors for use at the special meeting.

 

The special meeting will be held at 160 East Tasman Drive, San Jose, California 95134, at 10:00 a.m., local time, on March 11, 2009.

 

At the special meeting, we are asking holders of record of our common stock on February 4, 2009, to consider and vote on the following proposals:

 

1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of January 22, 2009, among Autonomy Corporation plc, Milan Acquisition Corp., a wholly-owned subsidiary of Autonomy, and Interwoven; and

 

2. To vote to adjourn the special meeting and any adjourned or postponed session of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

No other business will be considered at the special meeting. A copy of the merger agreement is attached to this proxy statement as Annex A.

 

Our Board of Directors has fixed the close of business on February 4, 2009 as the record date for determination of Interwoven stockholders entitled to notice of and to vote at the special meeting. Only holders of record of Interwoven common stock on that date are entitled to notice of and to vote at the special meeting. Each share of Interwoven common stock issued and outstanding as of the record date entitles its holder to cast one vote at the special meeting. At the close of business on the record date, 46,533,786 shares of Interwoven common stock were issued and outstanding and such shares were held by approximately 349 holders of record. As of the record date, the directors and executive officers of our common stock and their affiliates held 221,551 outstanding shares of Interwoven common stock.

 

A majority of the outstanding shares of our common stock entitled to vote at the special meeting must be voted in favor of the proposal to adopt the merger agreement for the proposal to pass. A majority of the shares of our common stock cast at the special meeting (a quorum being present) must be voted in favor of the adjournment proposal for the proposal to pass. The inspector of elections appointed for the Interwoven special meeting will tabulate the votes.

 

The proxy card or voter instruction card accompanying this proxy statement is solicited on behalf of our Board of Directors for use at the special meeting.

 

General.   All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holders. Properly executed proxies that do not contain voting instructions will be voted “FOR” the adoption of the merger agreement and “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies. To vote, please complete, sign, date and return the enclosed proxy card or, if available, to appoint a proxy over the Internet or by telephone, follow the instructions provided below. If you attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person. If your shares are held in the name of your broker, bank or other nominee, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the special meeting.

Abstentions.   Interwoven will count a properly executed proxy marked “ABSTAIN” as present for purposes of determining whether a quorum is present, but the shares represented by that proxy will not be voted at the special meeting. Abstentions on the proposal to adopt the merger agreement will be treated as a vote “AGAINST” this proposal for purposes of determining whether it has been approved, and thus will affect the outcome. However, abstentions on the adjournment proposal will be treated as neither a vote “FOR” nor a vote “AGAINST” this proposal for purposes of determining whether it has been approved, and thus will not affect the outcome.

 

Broker non-votes.   Brokers who hold shares in street name for customers have the authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are precluded from exercising their voting discretion with respect to approval of non-routine matters, such as the adoption of the merger agreement and, as a result, absent specific instructions from the beneficial owner of such shares, brokers are not empowered to vote those shares, referred to generally as “broker non-votes.” If your shares are held by a broker, your broker will not be able to vote your shares for you on the issuance proposal without instructions from you on how to vote your shares. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Failure to instruct your broker how to vote on the proposal to adopt the merger agreement will be treated as a vote “AGAINST” this proposal for purposes of determining whether the proposal has been approved, and thus will have an effect on the outcome. Failure to instruct your broker on how to vote on the adjournment proposal will be treated as neither a vote “FOR” nor a vote “AGAINST” this proposal for purposes of determining whether the proposal has been approved, and thus will have no effect on the outcome.

 

Voting shares in person that are held through brokers.   If your shares are held by your broker or another nominee and you wish to vote those shares in person at the special meeting, you must obtain from the nominee holding your Interwoven common stock a properly executed legal proxy identifying you as an Interwoven stockholder, authorizing you to act on behalf of the nominee at the special meeting and identifying the number of shares with respect to which the authorization is granted.

 

Voting over the Internet or by telephone.   Most beneficial owners whose stock is held in “street name” receive instructions for authorizing votes by their banks, brokers or other agents, rather than from our proxy card. A number of brokers and banks are participating in a program provided through Broadridge Financial Solutions, Inc. that offers the means to authorize votes over the Internet and by telephone. If your shares are held in an account with a broker or bank participating in the Broadridge program you may authorize a proxy to vote those shares over the Internet at Broadridge Financial Solutions, Inc.’s website at www.proxyvote.com or by telephone by calling the telephone number shown on the instruction form received from your broker or bank.

 

In order to conduct business at the special meeting, a quorum must be present. Interwoven’s bylaws provide that a quorum at the special meeting will be the holders of a majority of the stock outstanding on the record date for the meeting. Interwoven will treat shares of common stock represented by a properly signed and returned proxy, including abstentions and broker non-votes, as present at the meeting for purposes of determining the existence of a quorum. If sufficient votes to constitute a quorum are not received by the date of the special meeting, the persons named as proxies may propose one or more adjournments of the meeting to permit further solicitation of proxies. The persons named as proxies would generally exercise their authority to vote in favor of adjournment.

 

Interwoven will count a properly executed proxy marked “ABSTAIN” as present for purposes of determining whether a quorum is present, but the shares represented by that proxy will not be voted at the special meeting. If you abstain from voting or do not vote, either in person or by proxy, it will have the same effect as a vote against the adoption of the merger agreement. However, abstentions on the adjournment proposal will have no effect on the outcome of the vote on that proposal.

 

The grant of a proxy on the enclosed proxy card does not preclude a stockholder from voting in person at the special meeting. You may revoke your proxy at any time before the shares reflected on your proxy card are voted at the special meeting by:

 

 

Your attendance at the special meeting will not in and of itself constitute the revocation of a proxy. If you have instructed your broker to vote your shares, you must follow the directions received from your broker to change these instructions.

 

All proxy solicitation costs will be borne by us. In addition to solicitation by mail, our directors, officers, employees and agents may solicit proxies from stockholders by telephone or other electronic means or in person. We also reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to you and getting your voting instructions. We have retained the services of a paid solicitor, MacKenzie Partners, Inc., 105 Madison Avenue, New York, New York, 10016, to solicit proxies, and will pay a fee of $12,500 plus expenses for such services.

 

You should not send your stock certificates with your proxy card. A letter of transmittal with instructions for the surrender of Interwoven common stock certificates will be mailed to our stockholders as soon as practicable after completion of the merger.

 

The discussion under the sections of this proxy statement entitled “The Merger” and “The Merger Agreement” summarizes the material terms of the merger. Although we believe that the description covers the material terms of the merger, this summary may not contain all of the information that is important to you. We encourage you to read this proxy statement, the merger agreement and the other documents referred to herein carefully for a more complete understanding of the merger.

 

On August 28, 2008, at the request of Anthony Bettencourt, the Chief Executive Officer of Zantaz, an Autonomy subsidiary, Joseph Cowan, our Chief Executive Officer, met with Sushovan Hussain, the Chief Financial Officer of Autonomy, and Mr. Bettencourt, to discuss ways in which Interwoven and Autonomy might work together, and during that discussion, Mr. Hussain indicated that Autonomy was interested in exploring a potential acquisition of Interwoven. Mr. Cowan informed Mr. Hussain that Interwoven was not pursuing a sale of the company but was willing to engage in discussions with Autonomy. On August 29, 2008, Interwoven and Autonomy entered into a mutual non-disclosure agreement, and Mr. Cowan, Scipio (“Max”) Carnecchia, our President, John Calonico, our Chief Financial Officer, Brian Andersen, our Vice President of Corporate Development, and Rafiq Mohammadi, our Senior Vice President and Chief Technology Officer, met with Mr. Hussain and Mr. Bettencourt. During this meeting, the parties each presented an overview of their respective businesses and exchanged high-level information regarding the two companies. On September 1, 2008, Mr. Cowan and Mr. Hussain spoke and further discussed the possibility of an acquisition, and potential valuations for Interwoven.

 

The parties continued to meet and exchange information on September 2, 2008. After these discussions, Mr. Hussain indicated that Autonomy anticipated that it would make a proposal for a potential acquisition of Interwoven. On September 4, 2008, Autonomy delivered a non-binding letter to Interwoven indicating its interest in pursuing a business combination in which it would acquire all of our outstanding common stock for cash at a premium of 25% to 30% above our seven-day average closing price over, up to a maximum of $20.00 per share. Our seven day average closing price on September 3, 2008 was $14.46. In that letter, Autonomy indicated that it expected the financing of the transaction to be funded with an equity and debt financing, and that it did not expect the transaction to be subject to any financing contingency. In addition, in that letter, it requested that Interwoven enter into an agreement providing for a 30-day period of exclusivity.

 

On September 5, 2008, our Board of Directors met, together with Mr. Calonico, Mr. Andersen and representatives of Fenwick & West LLP, our outside legal counsel, to discuss the Autonomy proposal and the meetings with Autonomy, and to discuss the retention of Lehman Brothers Inc. (“Lehman Brothers”) as financial advisor. At this meeting, our Board of Directors also discussed the process for discussions with Autonomy, the potential advantages and risks of proceeding with discussions with Autonomy, including the effect of those discussions on other strategic initiatives under consideration by us. Representatives of Fenwick & West reviewed the Board’s fiduciary duties with respect to considering a potential change in control transaction. Our Board of Directors then authorized the retention of Lehman Brothers as our financial advisor, and requested that its representatives prepare a financial analysis of Interwoven and a financial analysis of Autonomy’s proposal. In addition, our Board of Directors discussed Autonomy’s request for an exclusivity agreement under which Interwoven would agree not to negotiate with, or solicit proposals from, third parties for a period of 30 days, and determined that such an agreement would not be appropriate at this time. Following this meeting, on September 6, 2008, Mr. Cowan discussed Autonomy’s proposal with Mr. Hussain.

 

On September 7, 2008, our Board of Directors held a meeting, together with Mr. Calonico, Mr. Andersen, representatives of Lehman Brothers and Fenwick & West. At that meeting, Mr. Cowan described recent discussions with Autonomy. Representatives of Lehman Brothers then reviewed a preliminary analysis of the proposed acquisition valuation and of Interwoven on a stand-alone basis. The Board discussed with management and our advisors the process by which we might explore and evaluate a sale of the company, as well as our prospects and risks as an independent company, and other alternative transactions, including acquisitions by us of other companies, and opportunities for Interwoven to be acquired by a company other than Autonomy. Our Board of Directors and financial advisors discussed other parties that might be interested in a potential acquisition of

Interwoven, and the manner in which they should be contacted to assess their interest. At the conclusion of this discussion, our Board of Directors directed Mr. Cowan to have further discussions with Autonomy to seek to clarify the terms of the proposed transaction, including the price that Autonomy might pay, and the source and certainty of Autonomy’s funds to effect a potential transaction, and to work with Lehman Brothers to determine the identity of other parties that might be interested in, and capable of, acquiring Interwoven.

 

On September 8, 2008, Mr. Cowan again spoke with Mr. Hussain and discussed valuation. During this discussion, Mr. Cowan requested that Autonomy propose a specific price per share. On September 9, 2008, Mr. Hussain reiterated the proposed premium of 25% to 30% set forth in the September 4 letter. In addition, Mr. Cowan advised Mr. Hussain that Interwoven was not willing to enter into an exclusivity agreement.

 

Later on September 9, 2008, our Board of Directors held a meeting, together with members of senior management and representatives of Lehman Brothers and Fenwick & West, at which the Board discussed the current status of discussions with Autonomy, and authorized Interwoven to continue discussions with Autonomy. In addition, the Board discussed the process by which we might contact other parties to determine their potential interest in an acquisition of Interwoven, including the potential benefits and risks of that process and the identity of the other companies to be contacted. Following this discussion, our Board authorized Lehman Brothers and Mr. Cowan to contact those companies to determine whether any of them were interested in potentially pursuing a transaction with Interwoven.

 

On September 10, 2008, at the direction of our Board of Directors, Mr. Cowan and representatives of Lehman Brothers contacted representatives of five large enterprise software and technology companies that the Board, after consultation with Lehman Brothers, deemed likely to be interested in an acquisition of Interwoven to determine whether they would be interested in pursuing a strategic transaction. Between September 10 and September 19, 2008, Lehman Brothers and Mr. Cowan had discussions with representatives of each of these companies, none of which indicated that they were interested in pursuing a transaction with Interwoven at that time.

 

On September 10, 2008, Mr. Calonico and Mr. Andersen met with Mr. Hussain and Mr. Bettencourt to discuss the process by which a potential transaction could be evaluated and, on September 11, Autonomy delivered a revised non-binding indication of interest to Interwoven stating that it would expect to offer $19.00 to $20.00 cash per share, and when over $19 with a premium not exceeding 30%. In that letter, Autonomy again requested that Interwoven enter into an agreement providing for a 30-day period of exclusivity.

 

On September 11, 2008, our Board of Directors held a meeting, together with members of senior management and representatives of Lehman Brothers and Fenwick & West, at which the Board discussed Autonomy’s proposal, Autonomy’s request for exclusivity, and Autonomy’s plans for the financing of the proposed transaction, as well as the status of communications with other potential parties. In addition, the Board discussed our anticipated financial results for the quarter ending September 30, 2008. Representatives of Fenwick & West discussed the Board’s fiduciary duties and the process for discussions with Autonomy. The Board authorized management to continue the discussions with Autonomy, but determined not to agree to exclusivity at this time.

 

On September 15, 2008, Mr. Cowan had multiple calls with Mr. Hussain, in which Mr. Hussain indicated that Autonomy was unwilling to proceed without an exclusivity agreement, due to the substantial costs associated with the due diligence process. Mr. Cowan advised Mr. Hussain that we were not prepared to enter into an exclusivity agreement at that time. Mr. Hussain and Mr. Cowan then agreed that, while Interwoven would not at that time enter into an agreement to negotiate exclusively with Autonomy, Interwoven would agree to reimburse Autonomy’s transaction expenses (not to exceed $250,000) if Interwoven entered into a definitive agreement with another party.

 

On September 15, 2008, Lehman Brothers, our financial advisor, publicly announced that it intended to file a petition under Chapter 11 of the United States Bankruptcy Code.

 

On September 16, 2008, Interwoven and Autonomy executed a revised non-disclosure agreement proposed by Interwoven. On September 16, 17 and 18, 2008, representatives of Interwoven and Autonomy met to conduct further due diligence and, in particular, to discuss our products and technology, and continued to discuss the process for negotiation of a transaction. During these discussions, Autonomy continued to request that Interwoven enter into an exclusivity agreement with Autonomy. On September 17, 2008, we provided Autonomy with access to an online data room in which we provided additional due diligence materials.

On the evening of September 18, 2008, Interwoven executed an agreement to reimburse Autonomy’s transaction expenses (not to exceed $250,000) if Interwoven entered into a definitive acquisition agreement with another party. Autonomy reiterated its request that Interwoven agree to negotiate exclusively with Autonomy. Mr. Cowan advised Autonomy that our Board would be meeting on September 19 and would discuss this request, but that it would not consider this request if it had not received a draft of a definitive merger agreement from Autonomy. On September 19, 2008, Morgan, Lewis & Bockius LLP, Autonomy’s legal counsel, provided us with a proposed draft of a merger agreement and a proposed draft of an exclusivity agreement.

 

On September 19, 2008, our Board of Directors held a meeting together with Mr. Calonico, Mr. Andersen and representatives of Lehman Brothers and Fenwick & West, at which the Board reviewed the status of discussions with Autonomy and the anticipated plans and schedule for further negotiations and due diligence, as well as the results of the communications with other potential parties. Representatives of Fenwick & West described the terms contained in the draft merger agreement that had been provided by Autonomy. Management and counsel reported that, based on discussions with representatives of Autonomy, Autonomy appeared prepared to proceed with negotiating a definitive acquisition agreement and carrying out further due diligence, but only on an exclusive basis, and that Autonomy had expressed concerns about the effect any delay in entering into an exclusivity agreement and commencing negotiations on the merger agreement might have on its interest in proceeding with a potential transaction with us. Our Board of Directors discussed the fact that none of the other companies contacted by Mr. Cowan and representatives of Lehman Brothers had indicated that they were interested in pursuing a transaction with us, and discussed the possibility that delaying negotiations with Autonomy in order to pursue further alternatives might jeopardize any possible transaction with Autonomy. In addition, the Board discussed possible alternative strategic transactions, including potential material acquisitions by Interwoven of two other companies, the significant risks associated with completing these acquisitions and integrating the acquired companies with Interwoven. The Board also discussed risks relating to the emerging financial crisis and the resulting uncertainties in global capital markets. Following this discussion, the Board authorized the execution of an exclusivity agreement with Autonomy through September 30, 2008 (and providing for extension by mutual agreement of the parties). In addition, the Board discussed the recent developments involving Lehman Brothers, and that it was anticipated that Barclays Capital would acquire certain assets of Lehman Brothers, including its North American investment banking franchise. The Board noted that it was anticipated that Barclays Bank, an affiliate of Barclays Capital, would be providing debt financing for Autonomy, and accordingly the Board authorized our management to engage Credit Suisse to provide a separate opinion as to the fairness, from a financial point of view, of the consideration to be paid to our stockholders in any transaction with Autonomy.

 

On September 20 and 21, 2008, representatives of Interwoven and Autonomy discussed various issues relating to the draft exclusivity agreement and merger agreement. On September 21, 2008, Interwoven executed the exclusivity agreement in which it agreed that it would refrain from engaging in discussions with any other parties until September 30, 2008, and which superseded and terminated the prior agreement for expense reimbursement. From September 21 through October 10, 2008, representatives of Autonomy and Interwoven continued to negotiate the draft merger agreement, and Autonomy continued its due diligence review, and on September 24 and 25, 2008, representatives of Interwoven and Autonomy met to discuss Interwoven’s business, and aspects of the potential integration of that business with Autonomy’s business.

 

On September 25, 2008, we engaged Credit Suisse to provide an opinion as to the fairness, from a financial point of view, of the consideration to be paid to our stockholders in any transaction with Autonomy.

 

On October 1, 2008, the Interwoven Board of Directors held a meeting, at which the Board reviewed the status of discussions with Autonomy, and Autonomy’s plans with respect to the financing of the proposed merger. Representatives of Fenwick & West described the current state of the negotiations on the draft merger agreement and representatives of Fenwick & West and Barclays Capital also discussed Autonomy’s plans for financing the proposed transaction. Following this discussion, the Board authorized the extension of the exclusivity period with Autonomy.

 

On September 22, 2008, certain assets of Lehman Brothers, including its North American investment banking franchise, were acquired by Barclays Capital. As a result, the individuals from Lehman Brothers who had been advising us were subsequently hired by Barclays Capital.

On October 2, 2008, we entered into a letter agreement with Barclays Capital, pursuant to which Barclays Capital was engaged to provide financial advisory services in connection with a potential sale of Interwoven and, if requested by the Board of Directors, to provide an opinion as to the fairness, from a financial point of view, of the consideration to be offered to our stockholders in any such sale transaction.

 

On October 3, 2008, Mr. Calonico, Mr. Andersen, Andrew Kanter, Autonomy’s Chief Operating Officer, and the parties’ respective counsel participated in a negotiation of the merger agreement.

 

Between September 11, 2008, the date of Autonomy’s revised indication of interest, and October 8, 2008, our closing stock price decreased approximately 20%, from $13.86 to $11.15. In addition, during the same period, Autonomy’s stock price declined approximately 30%, from 1040 pence to 730 pence, substantially increasing the number of shares of its stock that it would need to sell to finance a transaction through an equity offering. Further, global financial markets experienced significant deterioration and volatility during this period, increasing the difficulty in agreeing upon a valuation of our company and the difficulty to Autonomy of financing the proposed transaction. Accordingly, Michael Lynch, Chief Executive Officer of Autonomy, had a discussion with Mr. Cowan on October 8, 2008 in which he advised Mr. Cowan that he did not believe that a transaction would be approved by Autonomy’s shareholders or could be financed at the prices previously proposed given current market conditions.

 

Between October 8, 2008 and October 13, 2008, Mr. Cowan had several discussions with Mr. Lynch and Mr. Hussain to discuss the continuing market volatility and the interest of Autonomy in acquiring us. Mr. Lynch expressed continued interest in pursuing a transaction, but stated that Autonomy could now only pay a price per share in the range of $15.00 to $16.00 due to changes in the stock prices of the two companies and Autonomy’s requirement that the premium not exceed 30%. On October 13, 2008, Mr. Hussain sent an email to Mr. Calonico and Mr. Cowan indicating that Autonomy’s stock price had just increased and that this increase, if sustained, could enable Autonomy to offer a price of $16.00 per share. The exclusivity agreement between Interwoven and Autonomy was not extended on its expiration on October 13, 2008, and active negotiations by our counsel on the proposed merger agreement were terminated.

 

On October 16, 2008, our Board of Directors held a meeting, together with Mr. Calonico, Mr. Carnecchia, Mr. Andersen and representatives of Fenwick & West. At this meeting, the Board and management reviewed third quarter results, their expectations for the fourth quarter, and market conditions in our industry. Mr. Cowan then reported on the status of discussions with Autonomy. The Board then discussed various strategic initiatives for us as an independent company, including the acquisition of another company.

 

Between October 9, 2008 and October 16, 2008, our stock price increased from $10.49 to $13.27. On October 17, 2008, Mr. Lynch and Mr. Cowan had a discussion in which they discussed transaction valuation, and in which Mr. Lynch reiterated that Autonomy could not offer more than a 30% premium to our then-current stock price. On October 20, 2008, Mr. Lynch had a further discussion with Mr. Cowan in which he indicated that based on the current prices of the two companies’ shares, a price in the range of $17.00 to 17.50 per share could be possible. On October 22, 2008, our Board of Directors held a meeting, together with representatives of Barclays Capital and Fenwick & West, at which the Board reviewed this new proposal, the outlook for our business as an independent company, the risks of remaining independent (including risks resulting from continued weakened global market conditions) and the risks of proceeding with discussions with Autonomy, and the strategic rationale for the proposed transaction. Representatives of Barclays Capital then discussed this revised proposal, and reviewed an analysis of the proposed valuation and of Interwoven on a stand-alone basis. The Board also discussed certain issues with respect to the draft merger agreement. Among other things, the Board discussed the requirement of the London Stock Exchange that the shareholders of Autonomy approve the merger, and discussed the risk to us of a failure by Autonomy’s shareholders to vote in favor of the merger. Our Board of Directors directed management to continue discussions with Autonomy regarding valuation, and to seek to obtain an agreement by Autonomy to pay a break-up fee to Interwoven in the event that the merger agreement was terminated as a result of the failure by Autonomy’s shareholders to vote in favor of the merger.

 

Mr. Cowan and Mr. Lynch continued to communicate regarding our valuation from October 22, 2008 through October 25, 2008. From October 20, 2008 to October 27, 2008, our stock price decreased from $13.17 to $11.42. Because of the high volatility in our and Autonomy’s trading prices and uncertainty as to Autonomy’s ability to

finance the proposed transaction in view of adverse conditions in equity capital markets and credit markets, active negotiations were terminated.

 

On November 25, 2008, Mr. Lynch sent Mr. Cowan an email indicating that Autonomy continued to be interested in a transaction.

 

On December 1, 2008, Mr. Lynch had a discussion with Mr. Cowan in which Mr. Lynch proposed a transaction at a premium of approximately 30% to our then-current stock price, representing a price of approximately $16.50.

 

On December 2, 2008, our Board of Directors met, together with members of senior management and representatives of Fenwick & West. At this meeting, the Board and management reviewed our expectations for the fourth quarter of 2008, our initial expectations for 2009, market conditions and trends in our industry (including continued weakened global market conditions) and our business strategy. The Board, management and our advisors then discussed the new offer, the status of negotiations when discussions terminated in October, the risks involved in our business and strategic plan, and our potential value as an independent company. Following this discussion, our Board of Directors authorized us to resume discussions with Autonomy, and directed Mr. Cowan to indicate to Autonomy that we would require that a definitive acquisition agreement must provide for payment of a break-up fee to Autonomy in the event that the merger agreement was terminated as a result of the failure by Autonomy’s shareholders to vote in favor of the merger. Mr. Cowan communicated this to Mr. Lynch on December 6, 2008. However, between November 28, 2008 (the trading day preceding the December 1 proposal) and December 5, 2008, our closing stock price decreased approximately 19%, from $13.01 to $10.52, and, as a result, on December 6, 2008, Mr. Lynch advised Mr. Cowan that any transaction would need to place a lower value on our stock than previously indicated. As a result, the parties suspended discussions pending further market developments.

 

On December 23, 2008, Mr. Cowan received a call from Mr. Hussain indicating a desire to reengage in discussions. Mr. Cowan instructed Mr. Hussain to indicate any interest in writing and advised him that he would take the information to the Board for consideration. On December 26, 2008, Autonomy delivered a non-binding indication of interest to Mr. Cowan proposing a transaction at $16.00 per share, which Autonomy noted represented a 38% premium to our average closing price over the 30 and 60 day periods ending December 23, 2008 and a 41% premium to our $11.31 closing price on December 23, 2008. Autonomy also reiterated that their proposal was not subject to any financing contingency, and requested a new 30-day exclusivity period.

 

On December 29, 2008, our Board of Directors held a meeting with its financial and legal advisors to discuss this proposal. At this meeting, representatives of Barclays Capital reviewed updated financial analyses and representatives of Fenwick & West discussed with the Board the status of the transaction terms, and the Board authorized Bob L. Corey, the chairman of our Board of Directors, and Mr. Cowan to resume discussions with Autonomy.

 

On December 30, 2008, Mr. Cowan, Mr. Corey, Mr. Lynch, Mr. Hussain and Mr. Kanter had further discussions regarding transaction price. Later on December 30, 2008, our Board of Directors held a meeting to review the status of the discussions with Autonomy.

 

On December 31, 2008, in a discussion among Mr. Corey, Mr. Cowan and Mr. Lynch, Autonomy proposed an increase in the price to $16.20 per share. During this call, Mr. Corey outlined conditions required by Interwoven to continue this process. Among other things, Mr. Corey indicated that the sources of the funding for the proposed acquisiton had to be certain and in place, and he indicated a timetable for completion of negotiations and due diligence. Our Board of Directors met on December 31, 2008 and discussed the new proposal, as well as current and anticipated conditions in our business. Following discussion, our Board of Directors authorized us to proceed with discussions with Autonomy, and directed that certain of the other companies which we had contacted in September be again contacted to determine whether they now had any interest in discussing a possible acquisition of Interwoven.

 

Between January 1 and January 5, 2009, Interwoven and Autonomy continued to negotiate the terms of the definitive merger agreement, and Autonomy conducted further due diligence. In addition, during this period, representatives of Barclays Capital contacted certain of the other companies previously contacted by representatives of Lehman Brothers, each of which indicated that they were not interested in proceeding with acquisition discussions with us. Autonomy also provided us with a draft of a credit agreement which would provide a portion of

the funds for the proposed transaction, and requested that we enter into a new exclusivity agreement with Autonomy in order to enable further discussions to proceed.

 

On January 5, 2009, our Board of Directors met, together with Mr. Andersen and representatives of Fenwick & West. At this meeting, the Board discussed our fourth quarter results and expectations for the first quarter of 2009 and weakening global market conditions, the discussions that had been conducted with Autonomy, and the results of communications with other companies. The Board also discussed a potential material acquisition by Interwoven that had been under discussion, including the results of our due diligence review of the target company. In addition, the Board discussed Autonomy’s request for a new exclusivity agreement. Following this discussion, the Board authorized the execution of an exclusivity agreement with Autonomy through January 7, 2009 (and providing for extension by mutual agreement of the parties).

 

Between January 5 and January 20, 2009, Interwoven and Autonomy continued to negotiate the terms of the definitive merger agreement and of the voting agreements and irrevocable undertakings to be signed by the directors and certain executive officers of the two companies, and Autonomy conducted further due diligence, including a detailed review of our fourth quarter results of operations and sales pipeline. Autonomy also provided us with a draft of the documents in connection with its proposed equity financing, which would provide a portion of the funds for the proposed transaction.

 

On January 7, 2009, Mr. Lynch informed Mr. Cowan that the results of Autonomy’s due diligence to date were satisfactory and that Autonomy was interested in completing due diligence, including reviewing our 2008 consolidated financial statements. Later on January 7, 2009, our Board of Directors met, together with Mr. Calonico, Mr. Andersen and representatives of Fenwick & West, and discussed the status of negotiations of definitive agreements and of the due diligence process.

 

On January 15, 2009, our Board of Directors met, together with Mr. Carnecchia, Mr. Calonico, Mr. Andersen and representatives of Barclays Capital, Credit Suisse and Fenwick & West. At this meeting, representatives of Fenwick & West reviewed the terms of the proposed merger agreement and Autonomy’s financing agreements. The Board discussed the progress that had been made in negotiations with Autonomy and the terms of the agreements to be signed by Autonomy in connection with its proposed debt and equity financings. Barclays Capital and Credit Suisse each reviewed with our Board of Directors their respective financial analyses with respect to the proposed merger. Our Board of Directors also reviewed with management, and discussed, weakening business conditions in 2009 and our outlook , as well as the continuing deterioration in global financial markets. The Board of Directors authorized management to continue to work toward completion of diligence and the finalization of a definitive acquisition agreement with Autonomy.

 

Between January 15 and January 20, 2009, Autonomy completed its due diligence, including with respect to our 2008 consolidated financial statements, we reviewed and provided input on Autonomy’s debt and equity financing documents, and we and Autonomy completed the negotiation of the draft merger agreement.

 

On the morning of January 21, 2009, our Board of Directors met, together with members of our senior management and representatives of Barclays Capital, Credit Suisse and Fenwick & West. At this meeting, the Board first received an update on the status of negotiations with Autonomy from our management and representatives of Fenwick & West and Barclays Capital. Representatives of Fenwick & West discussed with the Board the proposed merger agreement, copies of which had been previously distributed to our Directors. Representatives of Barclays Capital and Credit Suisse then each separately provided the Board with updated financial analyses, and informed the Board of Directors that there had been no material change to the factors presented in their respective financial reviews of the proposed transaction on January 15, 2009 (other than as a result of changes in trading prices of our stock and the stock of other companies described in their analyses). The Board also discussed the terms of the agreements to be entered into by Autonomy for its debt and equity financing. At the conclusion of their respective presentations, each of Barclays Capital and Credit Suisse provided the Board of Directors with its oral opinion (subsequently confirmed in writing) that, as of January 21, 2009 and based upon and subject to various qualifications, considerations, assumptions and limitations set forth in their respective written opinions, the consideration to be offered to the holders of our common stock in the merger was fair, from a financial point of view, to such stockholders. Such opinions are attached to this proxy statement as Annex B and Annex C, respectively. Following those presentations, the Board of Directors unanimously determined that the merger and the merger

agreement were advisable, fair to and in the best interests of our stockholders, approved the merger agreement and the merger, and recommended that our stockholders vote to adopt the merger agreement.

 

The merger agreement and related documents were subsequently finalized, executed and delivered by Interwoven and Autonomy in the evening of January 21, 2009 (the morning of January 22, 2009 in London), concurrently with the execution by Autonomy of definitive agreements for its equity and debt financings. Before the opening of the market in London on January 22, 2009, the parties announced the execution of the merger agreement.

 

In the course of reaching its decision to approve the merger agreement and to recommend that our stockholders vote to adopt the merger agreement, the Board of Directors consulted with our senior management, financial advisors and legal counsel, and considered a number of potentially positive factors in its deliberations concerning the merger, including the following:

 

 

 

The Board of Directors also considered a number of potentially countervailing factors in its deliberations concerning the merger, including the following:

 

 

 

Our Board of Directors also considered the interests of our directors and executive officers in the merger which existed as of the time of the Board of Directors’ determination and recommendation, which are described herein under the section of this proxy statement entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger” beginning on page 33.

 

The preceding discussion is not meant to be an exhaustive description of the information and factors considered by our Board of Directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Board of Directors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the various factors considered in reaching its determination. In considering the factors described above, individual members of the Board of Directors may have given different weight to different factors.

 

After its consideration of the preceding factors and deliberations, our Board of Directors unanimously determined that the merger and the merger agreement were advisable, fair to and in the best interests of, our stockholders, approved the merger agreement and the merger, and recommended that our stockholders vote to adopt the merger agreement.

 

Barclays Capital Inc.

 

Interwoven engaged Barclays Capital to act as its financial advisor with respect to a possible sale of Interwoven. On January 21, 2009, Barclays Capital rendered its oral opinion (which was subsequently confirmed in writing) to Interwoven’s Board of Directors that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be offered to the stockholders of Interwoven in the proposed transaction is fair, from a financial point of view, to such stockholders.

 

The full text of Barclays Capital’s written opinion, dated as of January 21, 2009 is attached as Annex B to this proxy statement. Barclays Capital’s written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays Capital in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. The following is a summary of Barclays Capital’s opinion and the methodology that Barclays Capital used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.

 

Barclays Capital’s opinion, the issuance of which was approved by Barclays Capital’s Fairness Opinion Committee, is addressed to the Board of Directors of Interwoven, addresses only the fairness, from a financial point of view, of the consideration to be offered to the stockholders of Interwoven in the proposed transaction and does not constitute a recommendation to any stockholder of Interwoven as to how such stockholder should vote with respect to the proposed transaction or any other matter. The terms of the proposed transaction were determined through arm’s-length negotiations between Interwoven and Autonomy and were unanimously approved by Interwoven’s Board of Directors. Barclays Capital did not recommend any specific form of consideration to Interwoven or that any specific form of consideration constituted the only appropriate consideration for the proposed transaction. Barclays Capital was not requested to address, and its opinion does not in any manner address, Interwoven’s underlying business decision to proceed with or effect the proposed transaction. In addition, Barclays Capital expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation, including any stock options or RSUs granted, to any officers, directors or employees of any parties to the proposed transaction, or any class of such persons, relative to the consideration to be offered to the stockholders of Interwoven in the proposed transaction. No limitations were imposed by Interwoven’s Board of Directors upon Barclays Capital with respect to the investigations made or procedures followed by it in rendering its opinion.

 

In arriving at its opinion, Barclays Capital, among other things:

 

 

 

In arriving at its opinion, Barclays Capital assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays Capital without any independent verification of such information. Barclays Capital also relied upon the assurances of management of Interwoven that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of Interwoven, upon advice of Interwoven, Barclays Capital assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Interwoven as to Interwoven’s future financial performance and that Interwoven would perform in accordance with such projections. In arriving at its opinion, Barclays Capital assumed no responsibility for and expressed no view as to any such projections or estimates or the assumptions on which they were based. In arriving at its opinion, Barclays Capital assumed that the proposed transaction would be consummated in accordance with the terms of the merger agreement. Further, in arriving at its opinion, Barclays Capital did not conduct a physical inspection of the properties and facilities of Interwoven and did not make or obtain any evaluations or appraisals of the assets or liabilities of Interwoven. Barclays Capital’s opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of its written opinion. Barclays Capital assumed no responsibility for updating or revising its opinion based on events or circumstances that may have occurred after, the date of its written opinion. In addition, Barclays Capital expressed no opinion as to whether the maintenance of the cash position closing condition set forth in Section 7.2(d) of the merger agreement would be satisfied or whether the financing proposed for the proposed transaction (or any alternative financing arrangements) would be available to Autonomy.

 

In connection with rendering its opinion, Barclays Capital performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, Barclays Capital did not ascribe a specific range of values to the shares of Interwoven’s common stock but rather made its determination as to fairness, from a financial point of view, to Interwoven’s stockholders of the consideration to be offered to such stockholders in the proposed transaction on the basis of various financial and comparative analyses. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.

 

In arriving at its opinion, Barclays Capital did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the particular transaction. Accordingly, Barclays Capital believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.

The following is a summary of the material financial analyses used by Barclays Capital in preparing its opinion to Interwoven’s Board of Directors. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Barclays Capital, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. In performing its analyses, Barclays Capital made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Interwoven or any other parties to the proposed transaction. For purposes of its review, Barclays Capital utilized, among other things, projections of the future financial performance of Interwoven, as prepared by the management of Interwoven. None of Interwoven, Autonomy, Barclays Capital or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the businesses do not purport to be appraisals or reflect the prices at which the businesses may actually be sold.

 

Historical Trading Analysis

 

To illustrate the trend in the historical trading prices of Interwoven’s common stock, Barclays Capital considered historical data with regard to the trading prices of Interwoven’s common stock for the five-year period from January 20, 2004 to January 20, 2009 (the “Five-Year Period”) and the one-year period from January 18, 2008 to January 20, 2009 (the “LTM Period”). On January 20, 2009, the last trading day before the delivery of its written opinion, Barclays Capital noted that the closing price of Interwoven’s common stock was $11.22.

 

For the LTM Period, Barclays Capital noted that the closing price of Interwoven’s common stock ranged from $10.10 to $15.88 per share, and as of January 20, 2009 Interwoven’s 30-day, 90-day and one-year trailing average closing prices were $12.24, $11.81 and $12.68 per share, respectively. For the Five-Year Period, Barclays Capital noted that the closing price of Interwoven’s common stock ranged from $6.49 to $17.18 per share, with a five-year average closing price of $11.14 per share. Barclays Capital compared this data to the closing price of Interwoven’s common stock of $11.22 per share on January 20, 2009 and the transaction consideration of $16.20 per share.

 

Barclays Capital then compared such historical trading data for Interwoven with the relative stock price performance during the same period of Autonomy and of selected indices and companies that Barclays Capital, based on its experience in the data management software industry, deemed comparable to Interwoven. The indices and companies selected for this analysis were Open Text Corporation, Vignette Corporation, the NASDAQ composite index and the S&P 500 index. Barclays Capital noted that during the LTM Period, the closing price of Interwoven’s common stock decreased 16.0%, compared to Autonomy which increased 1.3%, Open Text Corporation which increased 2.4%, Vignette Corporation which decreased 51.9%, the NASDAQ composite index which decreased 38.4%, and the S&P 500 index which decreased 39.2%.

 

In addition, to illustrate the trend in Interwoven’s historical ratio of enterprise value to projected forward twelve months revenue, or FTM revenue multiple, Barclays Capital considered historical data with regard to the FTM revenue multiple for Interwoven over the Five-Year Period. These historical FTM revenue multiples were calculated using publicly available information, Wall Street analyst research reports and consensus estimates available through the Institutional Brokerage Estimate System, or IBES. Barclays Capital calculated Interwoven’s FTM revenue multiple based on the transaction enterprise value and using Interwoven management projections and also using Wall Street analyst estimates and noted that such multiples, in each case, were above Interwoven’s trailing average historical FTM revenue multiples for the periods one-year, three-years and five-years prior to January 20, 2009.

 

Selected Comparable Company Analysis

 

Barclays Capital reviewed and compared specific financial and operating data relating to Interwoven to a group of selected companies that Barclays Capital, based on its experience in the data management software industry, deemed comparable to Interwoven. As described below, Barclays Capital applied public valuation metrics of the comparable companies to Interwoven management forecasts to determine a range of implied prices per share of Interwoven.

Barclays included the following companies in its review:

 

 

Barclays Capital calculated and analyzed various financial multiples of each of the selected comparable companies based on publicly available information, Wall Street analyst research reports and consensus estimates available through IBES. Barclays Capital calculated and analyzed the multiples of each selected company’s enterprise value to 2009 calendar year expected revenues, as well as the multiples of each company’s share price to 2009 calendar year expected cash earnings per share, or cash EPS. The enterprise value of each company was obtained by adding its short and long-term debt to the sum of the market value of its fully diluted common stock, the book value of any minority interest in other equity and the value of any material debt-equivalent liabilities less any cash and cash equivalents. The results of these analyses are summarized below:

 

 

Barclays Capital selected the comparable companies listed above because their businesses and operating profiles are reasonably similar to that of Interwoven. However, because of the inherent differences between the business, operations and prospects of Interwoven and those of the selected comparable companies, Barclays Capital believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, Barclays Capital also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of Interwoven and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, growth prospects, profitability levels and degree of operational risk between Interwoven and the companies included in the selected company analysis. Based upon these judgments, Barclays Capital selected an estimated 2009 price to cash earnings per share multiple range of 12.0x to 16.0x, and an estimated 2009 enterprise value to revenue multiple of 1.50x to 2.00x, for Interwoven and applied such ranges to the management projections provided by Interwoven to Barclays Capital to calculate a range of implied prices per share of Interwoven. The following summarizes the result of these calculations:

 

 

Barclays Capital noted that on the basis of the selected comparable company analysis, the transaction consideration of $16.20 per share was above the range of implied values per share calculated.

 

Selected Precedent Transaction Analysis

 

Barclays Capital reviewed and compared the purchase prices and financial multiples paid in selected other transactions that Barclays Capital, based on its experience with merger and acquisition transactions, deemed relevant. Barclays Capital chose such transactions based on, among other things, the similarity of the applicable

target companies in the transactions to Interwoven with respect to the size and similarity of their businesses. The following transactions were reviewed:

 

 

The reasons for and the circumstances surrounding each of the selected precedent transactions analyzed were diverse and there are inherent differences in the business, operations, financial conditions and prospects of Interwoven and the companies included in the selected precedent transaction analysis. Accordingly, Barclays Capital believed that a purely quantitative selected precedent transaction analysis would not be particularly meaningful in the context of considering the proposed transaction. Barclays Capital therefore made qualitative judgments concerning differences between the characteristics of the selected precedent transactions and the proposed transaction which would affect the acquisition values of the selected target companies and Interwoven. Based upon these judgments, Barclays Capital selected a range of multiples of enterprise value to twelve months forward revenues of 1.75x to 2.75x, and applied such range to the Interwoven management projections for the twelve months ending December 31, 2009 provided to Barclays Capital, to calculate a range of implied prices per share of Interwoven of $13.31 to $18.31.

 

Barclays Capital noted that on the basis of the selected precedent transaction analysis, the transaction consideration of $16.20 per share was within the range of implied values per share calculated using management projections.

 

Transaction Premium Analysis

 

In order to assess the premium offered to the stockholders of Interwoven in the proposed transaction relative to the premiums offered to stockholders in other transactions, Barclays Capital reviewed the premiums paid in the domestic technology industry for 69 merger and acquisition transactions since 2002 valued between $500 million and $1.5 billion. For each transaction, Barclays Capital calculated the premium per share paid by the acquirer by comparing the announced transaction value per share to the target company’s historical closing share price: (i) one trading day prior to announcement, and (ii) 30 calendar days prior to announcement. The results of this transaction premium analysis are summarized below:

 

 

The reasons for and the circumstances surrounding each of the transactions analyzed in the transaction premium analysis were diverse and there are inherent differences in the business, operations, financial conditions and prospects of Interwoven and the companies included in the transaction premium analysis. Accordingly, Barclays Capital believed that a purely quantitative transaction premium analysis would not be particularly meaningful in the context of considering the proposed transaction. Barclays Capital therefore made qualitative

judgments concerning the differences between the characteristics of the selected transactions and the proposed transaction which would affect the acquisition values of the target companies and Interwoven. Based upon these judgments, Barclays Capital selected a one-day premium range of 15% to 40% and a thirty-day premium range of 20% to 40%, as compared to the closing price of Interwoven’s common stock on January 20, 2009, to calculate a range of implied prices per share of Interwoven. The following summarizes the result of these calculations:

 

 

Barclays Capital noted that on the basis of the transaction premium analysis, the transaction consideration of $16.20 per share was above the ranges of implied values per share, calculated based on the ranges of one-day and thirty-day premiums, each using the closing price of Interwoven’s common stock on January 20, 2009.

 

Discounted Cash Flow Analysis

 

Barclays Capital performed a discounted cash flow analysis of Interwoven which is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

 

To calculate the estimated enterprise value of Interwoven using the discounted cash flow method, Barclays Capital added (i) Interwoven’s projected, fully-taxed unlevered free cash flows for fiscal years 2009 through 2013 based on management projections, each amount discounted to its present value using a range of selected discount rates; (ii) the “terminal value” of Interwoven as of December 31, 2013, discounted to its present value using a range of selected discount rates and (iii) Interwoven’s future net operating loss benefits for fiscal years 2009 through 2012 based on management projections, each amount discounted to its present value using a range of selected discount rates. The after-tax unlevered free cash flows were calculated by taking the tax-affected earnings before interest, tax expense and amortization (excluding amortization of intangible assets and purchased technology and stock based compensation expense), adding depreciation and amortization (excluding amortization of intangible assets and purchased technology), subtracting capital expenditures and adjusting for changes in working capital. The residual value of Interwoven at the end of the forecast period, or “terminal value,” was estimated by selecting a range of perpetuity growth rates of 2.0% to 3.0%, which was derived by analyzing the projected growth in Interwoven’s future cash flows and the growth rates of mature technology companies deemed comparable by Barclays Capital and applying such range to the management projections. The future net operating loss benefits, or NOLs, were calculated by utilizing the current federal and state NOLs and tax credit carryforwards derived from publicly available SEC filings to offset Interwoven management’s projected annual tax expense, based on a statutory income tax rate of 39.6%. Based on Interwoven management protections, the NOL balance was projected to reach zero by 2012 and Interwoven was projected to pay a full tax rate in 2013 and beyond. The range of after-tax discount rates of 12.0% to 16.0% was selected based on Barclays Capital’s market expertise. Barclays Capital then calculated a range of implied prices per share of Interwoven by subtracting estimated net debt as of December 31, 2008, from the estimated enterprise value and dividing such amount by the fully diluted number of shares of Interwoven’s common stock. This analysis indicated a range of equity values per share of Interwoven common stock of $11.38 to $14.77.

 

Barclays Capital noted that on the basis of the discounted cash flow analysis, the transaction consideration of $16.20 per share was above the range of implied values per share calculated using management projections.

 

General

 

Barclays Capital is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and

other purposes. Interwoven’s Board of Directors selected Barclays Capital because of the familiarity of its professionals with Interwoven and its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally, as well as substantial experience in transactions comparable to the proposed transaction.

 

Barclays Capital is acting as financial advisor to Interwoven in connection with the proposed transaction. As compensation for its services in connection with the proposed transaction, Interwoven will pay Barclays Capital a fee of approximately $7.2 million, payable on completion of the proposed transaction. In addition, Interwoven has agreed to reimburse Barclays Capital for a portion of its reasonable out-of-pocket expenses incurred in connection with the proposed transaction and to indemnify Barclays Capital for certain liabilities that may arise out of its engagement by Interwoven and the rendering of Barclays Capital’s opinion. Barclays Capital or its affiliates has performed various investment banking and financial services for Autonomy and its affiliates in the past and has received customary fees for such services. Specifically, Autonomy currently has a term loan facility in place with Barclays Bank PLC, which is an affiliate of Barclays Capital, and Barclays Commercial Bank, Eastern, a division of Barclays Bank PLC plans to make available a new term loan facility to Autonomy as part of the financing of the proposed transaction and will receive customary fees in connection therewith. On September 22, 2008, certain assets of Lehman Brothers Inc., including its North American investment banking franchise, were acquired by Barclays Capital. The current term loan facility was entered into with Barclays Bank PLC prior to such acquisition of Lehman Brothers and prior to the subsequent engagement of Barclays Capital as a financial advisor to Interwoven.

 

In the ordinary course of its business, Barclays Capital actively trades in the securities of Interwoven for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

 

Credit Suisse Securities (USA) LLC

 

Fairness Opinion Delivered to the Interwoven’s Board of Directors

 

Interwoven retained Credit Suisse to deliver an opinion to the Board of Directors with respect to the fairness to holders of Interwoven common stock, from a financial point of view, of the merger consideration. On January 21, 2009, at a meeting of the Board of Directors held to evaluate the merger, Credit Suisse rendered to the Board of Directors an oral opinion, subsequently confirmed in writing and dated January 21, 2009 , to the effect that, as of that date and based upon and subject to the factors, assumptions, limitations, qualifications and other considerations described in Credit Suisse’s written opinion, the merger consideration to be received by the holders of Interwoven common stock in the merger was fair, from a financial point of view, to such holders.

 

The full text of Credit Suisse’s written opinion, dated January 21, 2009 to the Board of Directors, which sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations and qualifications on the scope of the review undertaken by Credit Suisse in rendering its opinion, is attached as Annex C hereto and is incorporated herein by reference in its entirety. You are urged to read this opinion carefully in its entirety. Credit Suisse’s opinion was provided to the Board of Directors in connection with its consideration of the merger and addresses only the fairness to the holders of Interwoven common stock, from a financial point of view, of the merger consideration set forth in the merger agreement and does not address any other aspect or implication of the merger or any other agreement, arrangement or understanding entered into in connection with the merger or otherwise, including, without limitation, the fairness of the amount or nature of, or any other aspect relating to, any compensation to any officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration or otherwise and does not constitute advice or a recommendation to any stockholder as to how such stockholder should vote or act on any matter relating to the merger. The issuance of Credit Suisse’s opinion was approved by an authorized internal committee of Credit Suisse. The summary of Credit Suisse’s opinion herein is qualified in its entirety by reference to the full text of the opinion.

 

In arriving at its opinion, Credit Suisse reviewed the merger agreement and certain related documents as well as certain publicly available business and financial information relating to Interwoven. Credit Suisse also reviewed certain other information relating to Interwoven, including financial forecasts, provided to or discussed with Credit

Suisse by Interwoven, and met with Interwoven’s management to discuss Interwoven’s business and prospects. Credit Suisse also considered certain financial and stock market data of Interwoven, and compared that data with similar data for other publicly held companies in businesses Credit Suisse deemed similar to those of Interwoven and considered, to the extent publicly available, the financial terms of certain other business combinations and transactions which have been effected or announced. Credit Suisse also considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which it deemed relevant.

 

In connection with its review, Credit Suisse did not independently verify any of the foregoing information and it assumed that such information is and relied on such information being complete and accurate in all material respects. With respect to the financial forecasts for Interwoven, Interwoven’s management advised Credit Suisse, and Credit Suisse assumed, that such forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of Interwoven’s management as to the future financial performance of Interwoven. Credit Suisse also assumed, with the consent of the Board of Directors, that in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger, no modification, delay, limitation, restriction or condition will be imposed that would have an adverse effect on Interwoven or the merger and that the merger will be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any material term, condition or agreement thereof. In addition, Credit Suisse was not requested to make, and has not made, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Interwoven, nor has Credit Suisse been furnished with any such evaluations or appraisals.

 

Credit Suisse’s opinion is necessarily based upon information made available to it as of the date the opinion was delivered, upon financial, economic, market and other conditions as they existed and could be evaluated on the date of the opinion and upon certain assumptions regarding such financial, economic, market and other conditions, which are currently subject to unusual volatility and which, if different than assumed, would have a material impact on Credit Suisse’s analyses. Credit Suisse was not requested to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of Interwoven or any other alternative transaction. Credit Suisse did not advise Interwoven on the form or amount of the merger consideration nor did Credit Suisse participate in negotiations with respect to the terms of the merger agreement or the transactions contemplated thereby. Credit Suisse’s opinion does not address the merits of the merger as compared to alternative transactions or strategies that may be available to Interwoven, nor does it address the underlying business decision of Interwoven to proceed with the merger.

 

Financial Analyses

 

In preparing its opinion, Credit Suisse performed a variety of financial and comparative analyses, including those described below. The summary of Credit Suisse’s analyses described below is not a complete description of the analyses underlying Credit Suisse’s opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Credit Suisse made qualitative judgments with respect to the analyses and factors that it considered. Credit Suisse arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

 

In its analyses, Credit Suisse considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Interwoven’s control. No company, transaction or business used in Credit Suisse’s analyses as a comparison is identical to Interwoven, its business or the merger, and an evaluation of the results of the analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the merger, public trading or other values of the companies, business segments or transactions analyzed. The estimates contained in Credit Suisse’s analyses and the ranges of valuations resulting from any particular analysis

are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, Credit Suisse’s analyses are inherently subject to substantial uncertainty.

 

Credit Suisse was not requested to, and it did not, recommend the specific consideration payable in the merger, which consideration was determined between Interwoven and Autonomy, and the decision to enter into the merger agreement was solely that of Interwoven’s Board of Directors. Credit Suisse’s opinion and financial analyses were only one of many factors considered by the Board of Directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of either of the Board of Directors or Interwoven’s management with respect to the merger or the consideration to be paid in the merger.

 

The following is a summary of the material financial analyses reviewed with Interwoven’s Board of Directors in connection with Credit Suisse’s opinion dated January 21, 2009. The financial analyses summarized below include information presented in tabular format. In order to fully understand Credit Suisse’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Credit Suisse’s financial analyses. The implied per share equity reference ranges set forth below were based on the fully diluted shares outstanding of Interwoven’s common stock, including the dilutive effect of all outstanding restricted stock and in-the-money options based primarily on publicly available information as well as certain information provided by Interwoven’s management.

 

Selected Companies Analysis

 

Credit Suisse reviewed financial and stock market information of Interwoven and the following three selected publicly traded companies in the enterprise content management industry:

 

 

Although none of the selected companies is directly comparable to Interwoven, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Interwoven.

 

Credit Suisse reviewed, among other things, trading statistics and per share stock prices of the selected companies as a multiple of their calendar year 2008 estimated earnings per share and their calendar year 2009 estimated earnings per share. Credit Suisse also reviewed the aggregate market values (fully-diluted equity values plus all indebtedness minus cash) of the selected companies as a multiple of their calendar year 2008 estimated revenues and their calendar year 2009 estimated revenues and as a multiple of their calendar year 2008 estimated earnings before interest, taxes, depreciation and amortization (which we refer to as “EBITDA”), their calendar year 2009 estimated EBITDA and their estimated next twelve months (“NTM”) EBITDA. All statistics related to the selected companies that were reviewed by Credit Suisse in connection with its analysis were based on closing stock prices on January 20, 2009 and research analysts’ estimates. Credit Suisse also reviewed certain operating statistics of the selected companies, including revenue, revenue growth, EBITDA margin, and long-term growth rates. Credit Suisse applied a range of selected multiples derived from the selected companies analysis to revenue, EBITDA and earnings per share data of Interwoven, using the estimates of Interwoven’s management for 2009, in order to derive implied estimated per share equity reference ranges.

This analysis indicated the following implied per share equity reference ranges for Interwoven’s common stock, as compared to the merger consideration:

 

 

Selected Transactions Analysis

 

Credit Suisse reviewed publicly available information and data for the following twelve selected transactions announced since November 1, 2005:

 

 

While none of the companies that participated in the selected transactions are directly comparable to Interwoven, the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of Interwoven’s results, market size and product profile.

 

Credit Suisse compared the fully diluted aggregate value of each target company as a multiple of that target company’s revenue and EBITDA, and the price to earnings ratio on both a last twelve months (“LTM”) and NTM basis. All statistics related to the selected transactions that were reviewed by Credit Suisse in connection with its analysis were based on publicly available financial information at the time of announcement of the relevant transaction. Credit Suisse then applied ranges of selected multiples derived from the selected transactions to LTM and NTM revenues, EBITDA and price to earnings ratio data of Interwoven, using actual results for LTM revenues, EBITDA and price to earnings ratio data and the estimates of Interwoven’s management for NTM revenues, EBITDA and price to earnings ratio data, in order to derive implied estimated per share equity reference ranges.

 

This analysis indicated the following implied per share equity reference ranges for Interwoven’s common stock, as compared to the merger consideration:

 

 

Discounted Cash Flow Analysis

 

Credit Suisse calculated the estimated present value of the unlevered, after-tax free cash flows that Interwoven’s business could generate from calendar years 2009 through 2013, using projected financial information that was provided by Interwoven’s management. Credit Suisse estimated the unlevered, after-tax free cash flows by using estimated earnings before interest and taxes for each of the calendar years 2009 through 2013 and adjusting for taxes, depreciation and amortization, capital expenditures and changes in working capital. Credit Suisse estimated the present value of Interwoven’s net operating losses for the calendar years 2008 through 2013, using projected financial information that was provided by Interwoven’s management. Credit Suisse then calculated a range of estimated terminal values for Interwoven by multiplying the terminal year net operating profit after taxes,

based on estimates of Interwoven’s management, by selected NTM net operating profit after taxes multiples of 6.0x to 9.0x. The present values as of December 31, 2008 of the cash flows, the terminal value and the net operating losses of Interwoven were then calculated using discount rates ranging from 9.5% to 12.5%. The resulting present values of the cash flows of Interwoven ranged from $138 million to $145 million, the resulting present values of the terminal value of Interwoven ranged from $311 million to $520 million and the resulting present values of the net operating losses of Interwoven ranged from $47 million to $49 million. Credit Suisse then added the estimated net cash of Interwoven to the sum of the present values as of December 31, 2008 of the cash flows, the terminal value and the net operating losses of Interwoven to calculate the implied equity value of Interwoven, which ranged from $681 million to $900 million. The resulting implied equity values were then calculated on a per share basis.

 

This analysis indicated the following implied per share equity reference range for Interwoven’s common stock, as compared to the merger consideration:

 

 

Miscellaneous

 

Interwoven selected Credit Suisse based on Credit Suisse’s qualifications, experience and reputation, and its familiarity with Interwoven and its business. Credit Suisse is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes.

 

Neither Credit Suisse nor its affiliates have provided investment banking or other financial services to Interwoven, Autonomy or their respective affiliates in the past two years. Credit Suisse is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of its business, Credit Suisse and its affiliates may acquire, hold or sell, for Credit Suisse’s and its affiliates’ own accounts and for the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of Interwoven, Autonomy and any other companies that may be involved in the merger, as well as provide investment banking and other financial services to such companies.

 

Pursuant to the engagement agreement between Interwoven and Credit Suisse, Interwoven has agreed to pay Credit Suisse a customary fee, upon rendering its opinion to the Board of Directors, which fee is not contingent on the consummation of the merger. In addition, Interwoven also agreed to reimburse Credit Suisse for expenses resulting from or arising out of its engagement, including the fees and expenses of Credit Suisse’s outside legal counsel, and to indemnify Credit Suisse and related parties against certain liabilities and other items arising out of Credit Suisse’s engagement.

 

At a special meeting of our Board of Directors held on January 21, 2009, our Board of Directors approved the merger agreement, the merger and the other transactions contemplated thereby, determined that it was advisable, fair to and in the best interests of Interwoven and its stockholders that Interwoven enter into the merger agreement and consummate the merger on the terms and subject to the conditions set forth in the merger agreement, directed that the merger agreement be submitted to a vote for adoption at the special meeting, and recommended that our stockholders adopt the merger agreement.

 

Our Board of Directors recommends that our stockholders vote “FOR” adoption of the merger agreement.

 

In considering the recommendation of our Board of Directors with respect to the merger agreement, you should be aware that certain directors and executive officers of Interwoven have interests with respect to the merger that are in addition to or different than their interests as stockholders of Interwoven generally. See the section of this proxy statement entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger” beginning on page 33.

 

In connection with the execution of the merger agreement, each member of our Board of Directors, consisting of Charles M. Boesenberg, Ronald E.F. Codd, Joseph L. Cowan, Bob L. Corey, Frank J. Fanzilli, Jr., Roger J. Sippl and Thomas L. Thomas, as well as Scipio M. Carnecchia, our President, and John E. Calonico, Jr., our Chief Financial Officer, executed a voting agreement with and delivered an irrevocable proxy to Autonomy relating to the shares of Interwoven common stock owned by them (which also covers any shares of Interwoven common stock that may be issued upon the exercise of any options or the settlement of any restricted stock units held by such individuals). As of January 22, 2009, these individuals held an aggregate of 104,255 shares of our common stock (representing less than 1% of our outstanding shares on January 22, 2009), 432,081 restricted stock units and options to purchase 1,593,500 shares of our common stock. As of February 4, 2009, the record date for the special meeting, these directors and officers held an aggregate of 105,679 shares of our common stock, or less than 1% of the outstanding shares of our common stock as of February 4, 2009. Under the voting agreements, these individuals agreed to vote their shares of Interwoven common stock (including any newly acquired shares):

 

 

Each of these stockholders also agreed not to sell, encumber, grant an option with respect to or dispose of any of the securities, restricted stock units or options of Interwoven owned by such stockholder except, subject to certain conditions, for transfers to the stockholder’s immediate family or upon the death of the stockholder.

 

The voting agreements terminate upon the earlier of the consummation of the merger or the valid termination of the merger agreement.

 

In connection with the execution of the merger agreement, the members of Autonomy’s Board of Directors and Andrew M. Kanter, Chief Operating Officer of Autonomy, executed an irrevocable undertaking in favor of Autonomy and Interwoven to vote in favor of the approval of the merger at an extraordinary general meeting of Autonomy’s shareholders to consider the merger. As of January 22, 2009, these individuals held an aggregate of 22,728,735 ordinary shares of Autonomy (representing approximately 9.6% of the outstanding shares of Autonomy on January 22, 2009) and options to subscribe for 1,099,250 ordinary shares of Autonomy.

 

Under the irrevocable undertakings, these individuals agreed to vote their ordinary shares or other securities of Autonomy and any newly acquired shares or other securities to approve all of the resolutions required to be approved by the shareholders of Autonomy to approve the merger, and not to transfer or pledge their shares until after the vote has been taken. The approval of the merger by Autonomy’s shareholders will be sought at an extraordinary general meeting of Autonomy’s shareholders currently anticipated to be held on February 16, 2009.

 

In considering the recommendation of our Board of Directors to vote “FOR” adoption of the merger agreement, you should be aware that there are provisions of the merger agreement and other arrangements that will result in certain benefits to our directors and executive officers, but not to stockholders generally. As described in more detail below, these interests relate to or arise from:

 

 

 

Our Board of Directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the merger and in making its recommendation. Stockholders should take these benefits into account in deciding whether to vote for adoption of the merger agreement.

 

Interwoven Employment Agreements

 

Our employment letter agreement with Joseph L. Cowan, our Chief Executive Officer, dated March 16, 2007, as amended, provides that Mr. Cowan will be entitled to the following benefits:

 

 

if, within 12 months following the merger, he resigns because of a material diminution in his duties, responsibilities or authority (including if he no longer serves as Chief Executive Officer of Interwoven following the merger), we materially breach the agreement or his current annual base salary is reduced, or he is terminated for reasons other than his intentionally engaging in unfair competition with us, committing certain crimes (or being found guilty of a felony) or willfully and continually failing to substantially perform duties his with us. We also have agreed to increase Mr. Cowan’s severance payments by up to $2 million to the extent necessary to offset any excise tax imposed by Section 4999 of the Internal Revenue Code plus an amount equal to the sum of the federal, state, local and excise taxes due, although we currently do not expect that any such offset will be necessary in connection with the merger. Mr. Cowan’s entitlement to these severance payments is conditioned upon him providing us and our affiliates a general liability release and waiver of claims.

 

On September 4, 2007, we entered into letter agreements with Scipio M. Carnecchia, our President, and John E. Calonico, Jr., our Senior Vice President, Chief Financial Officer and Secretary. These agreements provide that if the executive officer is terminated without Cause (as defined below under “— Executive Officer Equity Awards”) in connection with or following the merger, then he will be entitled to receive certain compensation including severance payments, health benefits and acceleration of vesting of equity compensation awards. The amount of severance payments under the letter agreements will be equal to the sum of (a) nine months of the executive officer’s salary at the time of termination (or, if greater, his salary as of the date of the agreement) and (b) 75% of his total “on target” bonus amount in effect for the year in which he is terminated, plus any earned but unpaid bonus for any prior year to the extent previously accrued by us. We have also agreed to provide continued group medical coverage through COBRA to the executive officer and his dependents for up to nine months at our expense. In addition, the agreements provide that each stock option granted and restricted stock unit awarded to the executive officer after October 1, 2005 will immediately vest, and any sale and transfer restrictions applicable to stock options held by the executive officer at October 1, 2005 will lapse, as to the greater of (x) 50% of the number of any unvested shares (or vested shares with sale and transfer restrictions) subject to such options or restricted stock units at the closing of the merger or (y) the number of shares scheduled to be vested (or released from sale and transfer restrictions) under such stock options or restricted stock units as of the 9 month anniversary date of the executive officer’s termination of employment had the executive officer remained employed by us through such date (but treating cliff vesting or any non-monthly vesting as occurring in ratable increments on a monthly basis). The executive officer’s entitlement to these severance payments is conditioned upon him providing us and our affiliates a general liability release and waiver of claims, and him providing certain transitional services to us.

 

On August 6, 2003, we entered into a letter agreement with Rafiq Mohammadi which provides that Mr. Mohammadi will be entitled to a payment equal to 6 months annual base salary if following the merger he

(a) is terminated for reasons other than his willful misconduct or gross negligence in the performance of his duties, his dishonest or fraudulent conduct, his deliberate attempt to do an injury to us, his conduct that materially harms us or is materially detrimental to our reputation, including any felony conviction, or his breach of any element of his employee confidentiality and assignment of inventions agreement, or (b) resigns because his base salary or target incentive bonus are reduced by a different proportion than the compensation of all other members of our management, his principal office is relocated by more than 30 miles from its location prior to the closing of the merger, or his position is materially and adversely changed or his responsibilities as in effect on the effective date of the merger are materially reduced, in each case without his consent.

 

The table below summarizes the value of the change in control benefits payable to Mr. Cowan, Mr.Carnecchia, Mr. Calonico, and Mr. Mohammadi pursuant to their employment agreements upon completion of the merger and assumes, solely for purposes of providing the information therein, that the merger closed and qualifying termination occurred on January 21, 2009.

 

 

 

 

Executive Officer Equity Awards

 

In addition to the equity awards identified above for Mr. Cowan, Mr. Carnecchia and Mr. Calonico, certain equity awards held by our other executive officers provide for acceleration of vesting of 50% of the unvested shares subject to such award at the time of termination if the executive officer is terminated without Cause (as defined below), in connection with the merger. The following table lists the aggregate number of unvested shares that will vest in connection with the merger by type of award and summarizes the value of the payouts pursuant to these awards, assuming, solely for purposes of providing the information therein, that the merger closed and the qualifying termination occurred on January 21, 2009 (intrinsic values are based upon the merger consideration of $16.20 per share, and in the case of stock options are reduced by the exercise price).

 

 

 

 

For purposes of our letter agreements with Mr. Carnecchia and Mr. Calonico described under “Interests of Our Directors and Executive Officers in the Merger — Interwoven Employment Agreements” and the equity award agreements with our other executive officers discussed above “Cause” is defined as (i) willfully engaging in gross misconduct that is materially and demonstrably injurious to us; (ii) willful act(s) of dishonesty undertaken by the executive officer and intended to result in his substantial gain or personal enrichment at our expense; or (iii) the executive officer’s willful and continued failure to substantially perform his duties with us; and a termination without “Cause” includes a termination of employment by the executive officer within 30 days of any of the following events: (i) the assignment of any duties inconsistent with or reflecting a materially adverse change in the executive officer’s position, duties or responsibilities with us, without his concurrence, (ii) the relocation of our principal executive offices or relocating the executive officer’s principal place of business in excess of 50 miles from our current executive offices, or (iii) for Mr. Carnecchia and Mr. Calonico, a reduction in the executive officer’s annual base salary or the sum of the executive officer’s annual base salary and annual target bonus compensation as in effect immediately prior to the merger.

 

Non-Employee Directors

 

The equity awards of our non-employee directors provide for acceleration of vesting of 100% of the unvested shares subject to such equity awards prior to the consummation of the merger. In addition, pursuant to a policy adopted by our Board of Directors, the health benefits coverage currently provided to our non-employee directors shall continue to be provided for a period of five years after closing of the merger, with the cost of such coverage to be paid by the surviving entity for the first three years of such five-year term and to be paid by the individual director for the two years thereafter.

 

The table below summarizes the value of the change in control benefits payable to our non-employee directors upon completion of the merger and assumes, solely for purposes of providing the information therein, that the merger closed on January 21, 2009 (intrinsic values are based upon the merger consideration of $16.20 per share, and in the case of stock options are reduced by the exercise price).

 

 

 

 

Employee Stock Purchase Plan

 

Certain of our executive officers are participants in the Interwoven Amended and Restated Employee Stock Purchase Plan (“ESPP”). Under the terms of the ESPP, all participants, including such executive officers, may purchase shares of our common stock at a purchase price equal to 85% of the lesser of (a) the fair market value of a share of Interwoven common stock on the participant’s enrollment date, or (b) the fair market value of a share of Interwoven common stock on the exercise date. We will shorten the currently ongoing offering period that extends beyond the effective time of the merger, so that a new purchase date will occur on the earlier of April 30, 2009 and the day immediately prior to the closing of the merger, and all applicable shares will be purchased by ESPP

participants prior to the effective time of the merger. The ESPP will be terminated immediately following the new purchase date and no new purchase or offering period will commence or purchases occur after that time.

 

Indemnification of Directors and Executive Officers and Insurance

 

The merger agreement provides that all rights of indemnification for acts or omissions occurring at or prior to the completion of the merger that exist in favor of the current directors, officers and employees of Interwoven as provided in our certificate of incorporation or bylaws or any of our existing indemnification agreements and in effect as of the date of the merger agreement will continue in full force and effect after the merger in accordance with their terms. Autonomy has agreed to indemnify such persons to the same extent such persons are entitled to be indemnified pursuant to the certificate of incorporation, bylaws or such agreements. The merger agreement further provides that for a period of six years following the completion of the merger, the surviving corporation in the merger will, and Autonomy will cause the surviving corporation to, maintain our current directors’ and officers’ liability insurance or provide substitute directors’ and officers’ liability insurance with terms and conditions no less favorable than our directors’ and officers’ liability insurance, which insurance shall cover those persons who were, as of the date of the merger agreement, covered by our directors’ and officers’ liability insurance policy. Autonomy will not be required to pay an annual premium for the insurance that exceeds 250% of the annual premium that we were paying for our insurance as of the date of the merger agreement. If the amount of the aggregate annual premiums necessary to maintain or procure the insurance coverage exceeds the maximum amount, the surviving corporation during the six-year period is required to maintain or procure as much coverage as possible for aggregate annual premiums not to exceed the maximum amount. In lieu of the foregoing, Autonomy or Interwoven is entitled to purchase a tail policy providing at least the same coverage and amounts and containing terms and conditions that are no less advantageous to our former officers and directors as the current policies of directors’ and officers’ and fiduciary liability insurance maintained by us covering the six-year period.

 

If the merger is completed, holders of Interwoven common stock will be entitled to appraisal rights under Section 262 of the Delaware General Corporation Law (“Section 262”), provided that they comply with the conditions established by Section 262.

 

The discussion below is not a complete summary regarding your appraisal rights under Delaware law and is qualified in its entirety by reference to the text of the relevant provisions of Delaware law, which are attached to this proxy statement as Annex D. Stockholders intending to exercise appraisal rights should carefully review Annex D. Failure to follow precisely any of these statutory procedures may result in a termination or waiver of these rights.

 

A record holder of shares of Interwoven common stock who makes the demand described below with respect to such shares, who continuously is the record holder of such shares through the completion of the merger, who otherwise complies with the statutory requirements of Section 262 and who neither votes in favor of the adoption of the merger agreement nor consents thereto in writing will be entitled to an appraisal by the Delaware Court of Chancery (the “Delaware Court”) of the fair value of his or her shares of Interwoven common stock. All references in this summary of appraisal rights to a “stockholder” or “holders of shares of Interwoven common stock” are to the record holder or holders of shares of Interwoven common stock. Except as set forth herein, stockholders of Interwoven will not be entitled to appraisal rights in connection with the merger.

 

Under Section 262, where a merger is to be submitted for approval at a meeting of stockholders, such as the special meeting, not less than 20 days prior to the meeting a constituent corporation must notify each of the holders of its stock for whom appraisal rights are available that such appraisal rights are available and include in each such notice a copy of Section 262. This proxy statement shall constitute such notice to the record holders of Interwoven common stock.

 

Stockholders who desire to exercise their appraisal rights must satisfy all of the conditions of Section 262. Those conditions include the following:

 

 

 

 

Within 10 days after the completion of the merger, the surviving corporation shall provide notice of the completion of the merger to all of our stockholders who have complied with Section 262 and have not voted for the adoption of the merger agreement.

 

Within 120 days after the completion of the merger, either the surviving corporation or any stockholder who has complied with the required conditions of Section 262 may file a petition in the Delaware Court, with a copy served on the surviving corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares of all dissenting stockholders. A person who is the beneficial owner of shares of our common stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file the petition described in the previous sentence. There is no present intent on the part of the surviving corporation to file an appraisal petition and stockholders seeking to exercise appraisal rights should not assume that the surviving corporation will file such a petition or that the surviving corporation will initiate any negotiations with respect to the fair value of such shares. Accordingly, holders of Interwoven common stock who desire to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262.

 

Within 120 days after the completion of the merger, any stockholder who has satisfied the requirements of Section 262 will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares of Interwoven common stock not voting in favor of the adoption of the merger agreement and with respect to which demands for appraisal were received by Interwoven or the surviving corporation and the number of holders of such shares. Such statement must be mailed within 10 days after the stockholders’ request has been received by the surviving corporation or within 10 days after the expiration of the period for the delivery of demands as described above, whichever is later.

 

If a petition for an appraisal is timely filed, at the hearing on such petition, the Delaware Court will determine which stockholders are entitled to appraisal rights. The Delaware Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Delaware Court may dismiss the proceedings as to such stockholder. Where proceedings are not dismissed, the Delaware Court will appraise the shares of Interwoven common stock owned by

such stockholders, determining the fair value of such shares exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. Unless the Delaware Court of Chancery in it discretion determines otherwise for good cause shown, interest from the effective date of the merger, through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment.

 

Although we believe that the $16.20 per share cash consideration payable in the merger is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the consideration they would receive pursuant to the merger agreement. Moreover, we do not anticipate that the surviving corporation will offer more than the $16.20 per share cash consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of a share of Interwoven common stock is less than the $16.20 per share merger consideration. In determining “fair value,” the Delaware Court is required to take into account all relevant factors. The Delaware Supreme Court has stated that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “fair price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that in making this determination of fair value the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which could be ascertained as of the date of the merger which throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be exclusive of any element of value arising from the accomplishment or expectation of the merger. The Delaware Supreme Court has stated that such exclusion is a narrow exclusion that does not encompass known elements of value, but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. The Delaware Supreme Court has construed Section 262 to mean that elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.

 

The cost of the appraisal proceeding may be determined by the Delaware Court and taxed against the parties as the Delaware Court deems equitable in the circumstances. However, costs do not include attorneys’ and expert witness fees. Each dissenting stockholder is responsible for his or her attorneys’ and expert witness expenses, although, upon application of a dissenting stockholder, the Delaware Court may order that all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding, including without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all shares of stock entitled to appraisal.

 

Any stockholder who has duly demanded appraisal in compliance with Section 262 will not, after the completion of the merger, be entitled to vote for any purpose any shares subject to such demand or to receive payment of dividends or other distributions on such shares, except for dividends or distributions payable to stockholders of record at a date prior to the completion of the merger.

 

At any time within 60 days after the completion of the merger, any stockholder will have the right to withdraw his demand for appraisal and to accept the $16.20 per share cash consideration offered in the merger agreement. After this period, a stockholder may withdraw his, her or its demand for appraisal and receive payment for his, her or its shares as provided in the merger agreement only with the consent of the surviving corporation. If no petition for appraisal is filed with the court within 120 days after the completion of the merger, stockholders’ rights to appraisal (if available) will cease. Inasmuch as the surviving corporation will have no obligation to file such a petition, any stockholder who desires a petition to be filed is advised to file it on a timely basis. Any stockholder may withdraw such stockholder’s demand for appraisal by delivering to the surviving corporation a written withdrawal of his or her demand for appraisal and acceptance of the merger consideration, except (i) that any such attempt to withdraw made more than 60 days after the completion of the merger will require written approval of the surviving corporation and (ii) that no appraisal proceeding in the Delaware Court shall be dismissed as to any stockholder without the approval of the Delaware Court, and such approval may be conditioned upon such terms as the Delaware Court deems just.

Failure by any Interwoven stockholder to comply fully with the procedures described above and set forth in Annex D to this proxy statement may result in termination of such stockholder’s appraisal rights. In view of the complexity of exercising your appraisal rights under Delaware law, if you are considering exercising these rights you should consult with your legal counsel.

 

If the merger is completed, Interwoven common stock will be delisted from the NASDAQ Global Select Market and will be deregistered under the Securities Exchange Act of 1934.

 

The following summary is a general discussion of the material U.S. federal income tax consequences to our stockholders whose common stock is converted into cash in the merger. This summary is based on the current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury Regulations, judicial authority, and administrative rulings, all of which are subject to change, possibly with retroactive effect. Any such change could alter the tax consequences to our stockholders as described herein. No ruling from the Internal Revenue Service has been or will be sought with respect to any aspect of the transactions described herein. This summary is for the general information of our stockholders only and does not purport to be a complete analysis of all potential tax effects of the merger. For example, it does not consider the effect of any applicable state, local, or foreign income tax laws, or of any non-income-tax laws. In addition, this discussion does not address the tax consequences of transactions effectuated prior to or after the completion of the merger (whether or not such transactions occur in connection with the merger), including, without limitation, the acquisition or disposition of shares of Interwoven common stock other than pursuant to the merger, or the tax consequences to holders of options issued by Interwoven which are assumed, replaced, exercised, or converted, as the case may be, in connection with the merger. In addition, it does not address all aspects of U.S. federal income taxation that may affect particular Interwoven stockholders in light of their particular circumstances, including holders:

 

 

The following summary also does not address holders of stock options. Furthermore, this summary only applies to stockholders that hold their shares as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment.

 

If a partnership holds shares of our capital stock, the tax treatment of a partner generally will depend on the status of the partner and on the activities of the partnership. Partners of partnerships holding our stock should consult their tax advisors.

 

Treatment of Holders of Interwoven Common Stock

 

The conversion of Interwoven common stock into the right to receive cash in the merger will be a taxable transaction for U.S. federal income tax purposes. Generally, this means that our stockholders will recognize capital gain or loss equal to the difference between (1) the amount of cash they receive in the merger, and (2) their adjusted tax basis in their Interwoven common (generally the purchase price paid by the stockholder to acquire such stock).

For this purpose, Interwoven stockholders who acquired different blocks of shares of Interwoven common stock at different times for different prices must calculate gain or loss separately for each identifiable block of shares of Interwoven common stock surrendered in the exchange.

 

This gain or loss will be long-term capital gain or loss if the holder has held Interwoven common stock for more than one year as of the date of the completion of the merger. Under current law, long-term capital gains of stockholders who are individuals, trusts, and estates are subject to a maximum federal income tax rate of 15%, whereas the maximum federal income tax rate on ordinary income and short-term capital gains (that is, gain on capital assets held for not more than one year) of an individual is currently 35% (not taking into account any phase-out of tax benefits such as personal exemptions and certain itemized deductions). For corporations, capital gains and ordinary income are taxed at the same maximum rate of 35%. Capital losses are subject to limitations on deductibility for both corporations and individuals. Capital losses not offset by capital gains may be deducted against a non-corporate stockholder’s ordinary income only up to a maximum annual amount of $3,000, and non-corporate stockholders may carry forward unused capital losses in certain circumstances. A corporate stockholder can deduct capital losses only to the extent of capital gains; unused capital losses may be carried back three years and forward five years.

 

Backup Withholding

 

An Interwoven stockholder may be subject to “backup withholding” (at a current rate of 28%) with respect to certain “reportable payments” including taxable proceeds received in exchange for the stockholder’s shares of Interwoven common stock in the merger. Backup withholding will generally not apply, however, to an Interwoven stockholder who furnishes the paying agent with a correct taxpayer identification number on Form W-9 (and who does not subsequently become subject to backup withholding) or who otherwise establishes a basis for exemption from backup withholding (such as a corporation). In addition, certain foreign persons (such as certain nonresident aliens) may establish an exemption from, or a reduced rate of, backup withholding by delivering the proper version of Form W-8 (generally Form W-8BEN if the stockholder is a nonresident alien individual or foreign entity) to the paying agent. Each Interwoven stockholder and, if applicable, each other payee, should complete and sign the Form W-9 included with the letter of transmittal (or other applicable form such as a Form W-8) in order to provide the information and certification necessary to avoid the imposition of backup withholding, unless an exemption applies and is established in a manner satisfactory to the paying agent. Any amounts withheld from payments to an Interwoven stockholder under the backup withholding rules generally will be allowed as a credit against the Interwoven stockholder’s U.S. federal income tax liability, provided that the stockholder furnishes the required information to the IRS. Interwoven stockholders who fail to provide their correct taxpayer identification numbers and the appropriate certifications, or to establish an exemption as described above, will be subject to backup withholding on cash they receive in the merger and may be subject to a $50 penalty imposed by the IRS. If the paying agent withholds on a payment to a stockholder and the withholding results in an overpayment of taxes by that stockholder, a refund may be obtained from the IRS, provided that the stockholder furnishes the required information to the IRS.

 

The foregoing discussion of the U.S. federal income tax consequences of the merger is for our stockholders’ general information only. Accordingly, our stockholders should consult their own tax advisors with respect to the particular tax consequences to them of the merger, including the applicable federal, state, local, and foreign tax consequences.

 

Under the HSR Act and the rules that have been promulgated under the HSR Act, acquisitions of a sufficient size may not be completed unless information has been furnished to the Antitrust Division of the U.S. Department of Justice and to the Federal Trade Commission and applicable waiting period requirements have been satisfied or early termination of the waiting period has been granted. The merger of Interwoven with and into Merger Sub and the conversion of shares of Interwoven stock into the right to receive the merger consideration is subject to the provisions of the HSR Act. Under the HSR Act, the merger cannot be completed until the expiration or early termination of the waiting period following the filing of Hart-Scott-Rodino Notification and Report Forms by Autonomy and Interwoven. Both Autonomy and Interwoven have filed the required notification and report forms.

The merger agreement generally provides that Autonomy and Interwoven will use reasonable best efforts to complete the merger as promptly as practicable, including commercially reasonable efforts to obtain any clearance required under the HSR Act, subject to the more specific provisions in the merger agreement addressing regulatory matters.

 

At any time before or after the completion of the merger, notwithstanding that the applicable waiting period has ended or approval has been granted, any state, foreign country, or private individual could take action to enjoin the merger under the antitrust laws as it deems necessary or desirable in the public interest or any private party could seek to enjoin the merger on anti-competitive grounds. We cannot be sure that a challenge to the merger will not be made or that, if a challenge is made, that we will prevail.

 

Legal Proceedings Regarding the Merger

 

On January 26, 2009, a putative class action lawsuit was filed in the Court of Chancery of the State of Delaware against us and our directors. The case is captioned City of Roseville Employees’ Retirement System, on behalf of itself and all others similarly situated v. Interwoven, Inc. et al ., Case No. 4312- (“City of Roseville action”). On February 5, 2009, a substantially similarly putative class action lawsuit was filed in the Court of Chancery of the State of Delaware against us, our directors, Autonomy and Merger Sub. The case is captioned Newman, individually and on behalf of all others similarly situated v. Corey, et al ., Case No. 4337- (“Newman action”). Also on February 5, 2009, the plaintiff in the Newman action filed a motion for preliminary injunction seeking to enjoin the stockholders’ vote and the merger. Both complaints generally allege that, in connection with approving the merger, our directors breached their fiduciary duties owed to Interwoven stockholders. The complaints further allege that, among other things, our directors engaged in self-dealing, failed to properly value Interwoven, disregarded alleged conflicts of interest, failed to provide certain information in the preliminary proxy statement, and that the merger was the product of a flawed process designed to ensure the sale to Autonomy and subvert the interests of our stockholders. The complaints seek, among other things, certification of the actions as class actions, a declaration that the merger agreement was entered into in violation of the directors’ fiduciary duties, a direction requiring that the directors exercise their fiduciary duties to obtain a transaction that is in the best interests of Interwoven’s stockholders, an injunction precluding consummation of the merger, rescission of the merger or any of the terms thereof to the extent implemented, an award of costs, and other unspecified relief. Based on our review of the complaints, we believe that the claims are without merit and intend to vigorously defend against them. However, there can be no assurances that we will be successful in such defense.

 

The following description summarizes the material provisions of the merger agreement and is qualified in its entirety by reference to the complete text of the merger agreement. The merger agreement is included as Annex A to this proxy statement. We encourage you to read it carefully and in its entirety. The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about Interwoven. Such information can be found elsewhere in this proxy statement and in the other public filings Interwoven makes with the Securities and Exchange Commission, which are available without charge at www.sec.gov.

 

Upon completion of the merger, each outstanding share of Interwoven common stock, other than shares held by stockholders who demand and perfect their appraisal rights, will be converted into the right to receive $16.20 in cash, without interest. The price of $16.20 per share was determined through arm’s-length negotiations between us and Autonomy. Upon completion of the merger, no shares of Interwoven common stock will remain outstanding and all shares will automatically be canceled and will cease to exist.

 

Effective automatically upon completion of the merger, you will have the right to receive $16.20 per share of Interwoven common stock in cash, without interest. Prior to the completion of the merger, Autonomy will designate a bank or trust company reasonably acceptable to us to act as paying agent under the merger agreement. The merger agreement provides that on the day the merger is completed or promptly following the completion of the merger, Autonomy will deposit, or cause to be deposited, with the paying agent cash amounts sufficient to enable the paying agent to pay the aggregate merger consideration to the holders of shares of Interwoven common stock.

 

The merger agreement provides that as promptly as practicable after the completion of the merger, the surviving corporation in the merger will cause the paying agent to mail to each record holder of certificates representing outstanding shares of Interwoven common stock whose shares were converted into the right to receive a portion of the merger consideration a letter of transmittal and instructions for use in surrendering certificates in exchange for the merger consideration. No stockholder should surrender any certificates until the stockholder receives the letter of transmittal and other materials for such surrender. Upon surrender of a stock certificate for cancellation to the paying agent, together with a letter of transmittal, duly completed and executed in accordance with the instructions, and such other customary documents as the paying agent may reasonably require, the holder of such certificate will be entitled to receive the merger consideration into which the number of shares of Interwoven common stock previously represented by such stock certificate shall have been converted pursuant to the merger agreement, without any interest thereon. The certificates so surrendered will be canceled.

 

In the event of a transfer of ownership of shares of Interwoven common stock which is not registered in our transfer records, payment may be made with respect to such shares to the transferee if the stock certificate representing such shares is presented to the paying agent, is properly endorsed or otherwise in proper form for transfer, and the transferee either pays any applicable transfer taxes relating to such transfer, or establishes that such transfer taxes have been paid or are not applicable.

 

If your stock certificate has been lost, stolen or destroyed, the paying agent will deliver to you the applicable merger consideration for the shares represented by that certificate if:

 

 

You should not send your certificates now and should send them only pursuant to instructions set forth in the letters of transmittal to be mailed to stockholders promptly after the completion of the merger. In all cases, the merger consideration will be paid only in accordance with the procedures set forth in the merger agreement and such letters of transmittal.

The merger agreement provides that one year after the completion of the merger, the paying agent will deliver to the surviving corporation any funds made available to the paying agent which have not been disbursed to holders of Interwoven common stock, and that any holders of certificates who have not complied with the above-described procedures to receive payment of the merger consideration during such one year period may thereafter look only to Autonomy and the surviving corporation for payment of the merger consideration to which they are entitled, without any interest thereon.

 

The cash paid to you upon conversion of your shares of Interwoven common stock will be issued in full satisfaction of all rights relating to the shares of Interwoven common stock

 

The merger agreement provides that all Interwoven stock options with exercise prices at or below $40.00 will be assumed by Autonomy and become rights to purchase Autonomy ordinary shares on the same terms and conditions as are in effect immediately prior to the completion of the merger, except that the exercise price and number of shares subject to each such stock option will be adjusted to reflect the trading price of Autonomy shares at such time relative to the cash price payable in the merger. The merger agreement provides that all Interwoven stock options with exercise prices above $40.00 shall be canceled upon the completion of the merger with no cash or other consideration payable, whether or not then vested or exercisable.

 

Under the terms of the merger agreement, all optionees with outstanding vested stock options will be entitled, at the optionee’s election, to receive in cash the difference between $16.20 and the exercise price per share for each vested share subject to an outstanding stock option, less applicable withholding taxes. Such cash payment will be in lieu of the assumption of the vested portion of the options by Autonomy, and the conversion of such vested portion of the options into options to purchase Autonomy ordinary shares.

 

Many of our outstanding unvested stock options to acquire Interwoven common stock do not provide that the vesting and exercisability of those options will be accelerated by reason of change in control events (such as the completion of the merger). However, certain stock options held by our directors and employees provide, by their terms, the vesting of either all shares not yet vested or 12 months of vesting under those stock options upon a change in control (such as the completion of the merger). In addition, the vesting of certain stock options held by our directors, officers and employees will accelerate if they are terminated within a specified period after the completion of the merger. The accelerated vesting of stock options held by our directors and executive officers is described under the section of this proxy statement entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger” beginning on page 33.

 

The merger agreement provides that all Interwoven restricted stock units will be assumed by Autonomy on the same terms and conditions as are in effect immediately prior to the completion of the merger, except that the number of shares subject to each such restricted stock award will be adjusted to reflect the trading price of Autonomy shares at such time relative to the cash price payable in the merger.

 

Certain restricted stock units held by our directors provide, by their terms, the vesting of all restricted stock units not yet vested under those restricted stock units upon a change in control (such as the completion of the merger). In addition, the vesting of certain restricted stock options held by our officers will accelerate if they are terminated within a specified period after the completion of the merger. The accelerated vesting of restricted stock units held by our officers is described under the section of this proxy statement entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger” beginning on page 33.

 

The merger agreement provides that the last offering period under the ESPP will end on the earlier of (1) the day immediately prior to the completion of the merger and (2) April 30, 2009. Under the terms of the ESPP, all participants may purchase shares of our common stock at a purchase price equal to 85% of the lesser of (a) the fair value of a share of our common stock on November 3, 2008, or (b) the fair value of a share of our common stock on

either April 30, 2009 or, if the merger closes prior to April 30, 2009, the day immediately prior to the completion of the merger. The merger agreement further provides that any purchase rights outstanding on the earlier of (1) the day immediately prior to the completion of the merger and (2) April 30, 2009 will be exercised, and each share of Interwoven common stock acquired upon exercise of such purchase right will be converted in the merger into the right to receive $16.20 in cash, without interest. The ESPP will be terminated immediately following the exercise of any outstanding purchase rights and no new purchase or offering period will commence or purchases occur after that time.

 

The merger will become effective upon the filing of a certificate of merger with the Delaware Secretary of State or at such later time as is agreed upon by Autonomy and Interwoven and specified in the certificate of merger. The filing of the certificate of merger will occur on the closing date. Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, upon the completion of the merger, Merger Sub, a wholly-owned subsidiary of Autonomy and a party to the merger agreement, will merge with and into Interwoven. Interwoven will survive the merger as a wholly-owned subsidiary of Autonomy.

 

The merger agreement contains representations and warranties of each party to the agreement. The representations and warranties in the merger agreement are complicated and not easily summarized. You are urged to read carefully and in their entirety the sections of the merger agreement entitled “Representations and Warranties of the Company” and “Representations and Warranties of Parent and Merger Sub” in Articles III and IV, respectively, of the merger agreement attached as Annex A to this proxy statement. However, the assertions embodied in the representations and warranties made by Interwoven are qualified by information and statements made in a confidential disclosure letter that Interwoven provided to Autonomy in connection with the signing of the merger agreement. While Interwoven does not believe that such disclosure letter contains information that applicable securities laws require it to publicly disclose (other than information that has already been so disclosed), the disclosure letter does contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the merger agreement. Accordingly, you should not rely on the representations and warranties in the merger agreement as characterizations of the actual state of facts, since such representations and warranties were made by the parties to the merger agreement to and solely for the benefit of each other, and they are modified in important part by the underlying disclosure letter. The disclosure letter contains information that has been included in Interwoven’s general prior public disclosures, as well as additional non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, which subsequent information may or may not be fully reflected in Interwoven’s public disclosures.

 

The merger agreement contains representations and warranties of Interwoven as to, among other things:

 

 

 

In addition, the merger agreement contains representations and warranties by Autonomy and Merger Sub as to:

 

 

The merger agreement provides that the representations and warranties of Interwoven, Autonomy and Merger Sub will not survive the completion of the merger.

 

Conduct of Interwoven Business

 

We have agreed in the merger agreement that, except as expressly permitted or contemplated by the merger agreement or required by law or the terms of an existing contract disclosed by us to Autonomy, and except for certain actions set forth in the disclosure schedule or otherwise consented to by Autonomy in writing, between the date of the merger agreement and the earlier of the termination of the merger agreement or the completion of the merger, we will and will cause our subsidiaries to use commercially reasonable efforts to (a) operate our respective

businesses in the ordinary course consistent with past practice, (b) comply with all applicable laws in all material respects and (c) use commercially reasonable efforts to preserve and keep intact our current business organizations, the services of our officers, employees and consultants and relationships with customers, suppliers, licensors, licensees, distributors and others we have business dealing with. In addition, we have agreed in the merger agreement that, subject to the exceptions described above, between the date of the merger agreement and the earlier of the termination of the merger agreement or the completion of the merger, neither we nor any of our subsidiaries may, without Autonomy’s written consent (which, as to certain of the matters listed below, may not be unreasonably withheld):

 

 

 

The covenants in the merger agreement relating to the conduct of our business are complicated and not easily summarized. You are urged to read carefully and in its entirety Section 5.1 of the merger agreement entitled “Conduct of Business” in Annex A to this proxy statement.

 

Other Covenants

 

The merger agreement contains a number of other covenants on the part of the parties, including covenants relating to:

 

 

 

We have agreed in the merger agreement, between the date of the merger agreement and the earlier of the termination of the merger agreement or the completion of the merger, to certain limitations on our ability to take action with respect to alternative acquisition transactions. Except as set forth below, we have agreed to not:

 

 

Notwithstanding these limitations, the merger agreement provides that our Board of Directors may furnish information to, enter into discussions or negotiations with and cooperate in or facilitate any effort or attempt to make, implement or accept a Company Takeover Proposal from, a person who has made a written bona fide Company Takeover Proposal not solicited in violation of the provisions described above if the Board of Directors of Interwoven has:

 

 

We are required by the merger agreement to furnish substantially concurrently to Autonomy all nonpublic information provided to the person who has made the Company Takeover Proposal to the extent that such information has not been previously provided to Autonomy.

Under the merger agreement, a “Company Takeover Proposal” means any inquiry, proposal or offer, whether or not conditional, with respect to a proposed or potential Acquisition Transaction from a person other than Autonomy.

 

Under the merger agreement, an “Acquisition Transaction” means:

 

 

Under the merger agreement, “Company Superior Proposal” means any bona fide written offer made by a third party, that if consummated would result in such person (or its stockholders) owning, directly or indirectly, greater than 50% of Interwoven common stock then outstanding (or of the surviving entity in a merger or the direct or indirect parent of the surviving entity in a merger) or all or substantially all of the total consolidated assets of Interwoven on terms that our Board determines in good faith (following consultation with our financial advisor and outside counsel and in light of all relevant circumstances, including all the terms and conditions of such proposal and the merger agreement) to (i) be more favorable to our stockholders from a financial point of view than the transactions contemplated with Autonomy and (ii) be reasonably likely to be completed, taking into account any financing and approval requirements and all other financing, legal, regulatory and other aspects of such proposal.

 

In addition to our obligations set forth above, the merger agreement provides that we must promptly, but in no event later than 24 hours after any of our officers becomes aware that any Company Takeover Proposal has been received by us, or any inquiry or request for information that we believe would reasonably be expected to lead to a Company Takeover Proposal has been received by us, advise Autonomy orally and in writing of (1) any inquiry or request for information that we reasonably believe could lead to a Company Takeover Proposal, and (2) the terms and conditions of any such Company Takeover Proposal, request or inquiry and the identity of the person making the Company Takeover Proposal, inquiry or request. We are required to keep Autonomy informed in all material respects on a timely basis of any material change in the status of, or any material modification or material amendment to, any Company Takeover Proposal, and to provide Autonomy, as soon as practicable, with copies of any written offer, all correspondence and any other written material sent or provided to us or any of our subsidiaries from any person that describes any of the terms or conditions of any such request, Company Takeover Proposal or inquiry.

 

The merger agreement provides that our Board of Directors is not prevented from withholding, withdrawing, amending, modifying or changing its recommendation in favor of the adoption of the merger agreement and, in the case of a tender or exchange offer by a person other than Autonomy or its affiliates made directly to our stockholders, recommending that our stockholders accept the tender or exchange offer, if, prior to the special meeting, our Board of Directors determines in good faith (after receiving the advice of its financial advisors and outside legal counsel) that the failure of our Board of Directors to so act would be reasonably likely to result in a breach of its fiduciary obligations to Interwoven’s stockholders under applicable law. The merger agreement also provides that our Board of Directors will not make such a change in its recommendation in response to a Company Superior Proposal until 72 hours after we have notified Autonomy of our intent to do so, negotiated with Autonomy during such period with respect to any revisions to the terms of the merger that Autonomy elects to propose, and considered any such revisions in determining whether to change such recommendation.

 

The merger agreement provides that the parties’ obligations to complete the merger are subject to the following conditions:

 

 

 

The merger agreement provides that Autonomy’s and Merger Sub’s obligations to complete the merger are subject to the following additional conditions:

 

 

The merger agreement also provides that our obligation to complete the merger is subject to the following additional conditions:

 

 

The merger agreement provides that a “material adverse effect” means a material adverse effect on the business, assets, condition (financial or otherwise) or results of operations of a party and its subsidiaries, taken as a whole, or to the ability of either party to perform its obligations under the merger agreement or to consummate the merger or the other transactions contemplated by merger agreement; provided, however, none of the following shall be deemed in and of themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a material adverse effect:

 

 

 

The merger agreement provides that it may be terminated at any time prior to the completion of the merger:

 

 

 

 

 

 

 

 

The merger agreement provides that in the event of termination of the merger agreement, the merger agreement shall forthwith become void and have no effect, without any liability or obligation on the part of any party, other than with respect to the treatment of confidential information, the payment of transaction expenses and the possible payment of termination fees, provided that no such termination will relieve any party from any liability resulting from any willful breach of the merger agreement.

 

Whether or not the merger is completed, all fees and expenses incurred in connection with the merger agreement shall be paid by the party incurring such fees or expenses. However, we will share equally with Autonomy all fees and expenses (other than the fees and expenses of attorneys and accountants) incurred in connection with the printing and filing this proxy statement with the Securities and Exchange Commission and any amendments or supplements thereto and the premerger notification and report forms under the HSR Act.

 

We must pay Autonomy a termination fee equal to $25 million in cash if the merger agreement is terminated under any of the following circumstances:

 

 

In addition, we must pay Autonomy an amount equal to $7 million in cash if the merger agreement is terminated due to an Interwoven No-Vote Termination. The $25 million termination fee shall be reduced by any amount that we pay or are required to pay due to an Interwoven No-Vote Termination. We are not required to pay the $25 million termination fee on more than one occasion and in the event we pay the $25 million termination fee, we shall have no further liability with respect to the merger or the merger agreement.

 

Autonomy must pay us a termination fee equal to $25 million if the merger agreement is terminated under any of the following circumstances:

 

 

To the extent that payment of such amount by Autonomy would violate the laws of England and Wales or the rules and regulations of the London Stock Exchange plc, then the amount payable by Autonomy will be reduced to equal the maximum amount that may be paid without violating such laws or rules. Autonomy is not required to pay the $25 million termination fee on more than one occasion and in the event Autonomy pays the $25 million termination fee, it shall have no further liability with respect to the merger or the merger agreement.

 

Concurrently with the execution of the merger agreement, Citi, Deutsche Bank and Morgan Stanley entered into a placing agreement with Autonomy under which Autonomy has raised £222 million through the sale of its ordinary shares to institutional investors. This equity financing was completed, and the funds received by Autonomy, on January 27, 2009.

 

In addition, concurrently with the execution of the merger agreement, Barclays Bank entered into a revolving facility agreement with Autonomy in which Barclays Bank has committed to lend to a subsidiary of Autonomy $237.5 million to, among other things, fund a portion of the merger consideration. The obligations of Barclays Bank to lend under the facility agreement are subject to (1) certain specified representations being correct and not misleading in all material respects when made or deemed to have been made and if there are any misrepresentations made by a subsidiary of Autonomy (not being Autonomy NA Holdings, Inc. or Merger Sub), such misrepresentations not being material in the context of the funding, (2) there being no breach of certain specified events of default and if there is any breach of such events of default by a subsidiary of Autonomy (not being Autonomy NA Holdings, Inc. or Merger Sub), such breach not being material in the context of the financing, (3) there being no breach of certain specified insolvency-related events of default, (4) the conditions of the merger agreement having been satisfied other than the payment obligations, and no circumstances existing that, individually or in the aggregate, has caused or would reasonably expected to have a material adverse effect on Interwoven, and (5) there being no change in control or sale of all or substantially all of the assets of the borrower (Autonomy Holdings NA, Inc.).

 

Autonomy’s obligation to complete the merger is not conditioned upon these financing transactions occurring, although the ability of Autonomy to pay the full merger consideration will likely require that Autonomy obtain a portion of the merger consideration funds pursuant to the credit facility or alternate financing.

 

The Adjournment Proposal

 

If at the special meeting the number of shares of our common stock represented and voting in favor of adoption of the merger agreement is not sufficient to adopt the merger agreement, we may move to adjourn the special meeting in order to enable our Board of Directors to solicit additional proxies in respect of such proposal. In that event, we will ask our stockholders to vote only upon the adjournment proposal, and not the proposal regarding the adoption of the merger agreement.

 

In this proposal, we are asking you to authorize the holder of any proxy solicited by our Board of Directors to vote in favor of granting discretionary authority to the proxy or attorney-in-fact to adjourn the special meeting to another time and place for the purpose of soliciting additional proxies. If our stockholders approve the adjournment proposal, we could adjourn the special meeting and any adjourned or postponed session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from our stockholders that have previously voted. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against the adoption of the merger agreement to defeat that proposal, we could adjourn the special meeting without a vote on the merger agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the merger agreement.

 

Failure of this proposal to pass will not affect the ability of the holder of any proxy solicited by us to adjourn the special meeting in the event that a sufficient number of shares of our common stock are not represented at the special meeting to establish a quorum, or for any other lawful purpose.

 

Votes Required and Board Recommendation

 

Approval of the proposal to vote to adjourn the special meeting and any adjourned or postponed session of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement, requires the affirmative vote of the holders of a majority of the shares of Interwoven common stock that was voted on the proposal at the special meeting. Abstentions and broker non-votes will have no effect on the adjournment proposal.

 

For the reasons set forth in this proxy statement, our Board of Directors unanimously recommend that you vote “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies.

 

The following table sets forth information, as of February 4, 2009, with respect to the beneficial ownership of our common stock by:

 

 

 

 

Except as otherwise indicated, the address of each beneficial owner is c/o Interwoven, Inc., 160 East Tasman Drive, San Jose, California 95134.

 

The percentage of shares beneficially owned is based on 46,533,786 shares of common stock outstanding as of February 4, 2009. Unless indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of common stock subject to options or restricted stock units that are currently exercisable or settleable within 60 days of February 4, 2009 are deemed to be outstanding for the purposes of calculating the amount of beneficial ownership of that person, and for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

 

 

 

 

 

 

 

PRICE RANGE OF OUR COMMON STOCK AND DIVIDENDS

 

Our common stock is listed on The NASDAQ Global Select Market under the ticker symbol “IWOV.” This table shows, for the periods indicated, the high and low sales price per share for Interwoven common stock as reported by The NASDAQ Global Select Market.

 

 

The following table sets forth the closing price per share of our common stock, as reported by the NASDAQ Global Select Market on January 21, 2009, the last full trading day before the public announcement of the merger, and on February 6, 2009, the latest practicable trading day before the printing of this proxy statement:

 

 

The above tables contain only historical information and may not provide meaningful information to stockholders in determining whether to approve the adoption of the merger agreement. Stockholders are urged to obtain current market quotations for Interwoven common stock and to carefully review the other information contained in this proxy statement in considering whether to approve the adoption of the merger agreement.

 

The approximate number of holders of record of the shares of our common stock was 349 as of February 4, 2009. This number does not include stockholders whose shares are held by other entities. The actual number of our stockholders is greater than the number of holders of record.

 

We have not declared or paid any cash dividends on our capital stock since our incorporation. We currently intend to retain future earnings, if any, for use in our business and, therefore, do not anticipate paying any cash dividends in the foreseeable future.

OTHER MATTERS

 

As of the date of this proxy statement, our Board of Directors is not aware of any matter to be presented for action at the special meeting, other than the matters set forth in this proxy statement. Our bylaws provide that only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to our notice of such meeting.

STOCKHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING

 

We will hold an Annual Meeting of Stockholders in 2009 only if the merger is not completed prior to such time. For a stockholder proposal to be included in our proxy materials for the 2009 Annual Meeting of Stockholders, the proposal must have been received at our principal executive offices, addressed to the Secretary, not later than the close of business on January 1, 2009. Stockholder business that is not intended for inclusion in our proxy materials may be brought before the 2009 Annual Meeting of Stockholders so long as we receive notice of the proposal as specified by our Bylaws, addressed to the Secretary at our principal executive offices no earlier than March 6, 2009 and no later than April 5, 2009; unless our 2009 Annual Meeting of Stockholders is held on or before May 5, 2009 or on or after August 5, 2009, in which case, notice by stockholders must be received not earlier than the close of business on the 90th day prior to the date of the annual meeting and not later than the close of business on the later of (i) the 60th day prior to such annual meeting or (ii) the 10th day following the day on which public disclosure of the day of the annual meeting was made.

 

We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any reports, statements or other information that we file with the Securities and Exchange Commission at the Securities and Exchange Commission public reference room at the following location: Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference room. These Securities and Exchange Commission filings are also available to the public from commercial document retrieval services and at the website maintained by the Securities and Exchange Commission at www.sec.gov. Reports, proxy statements and other information concerning us may also be inspected at the offices of The NASDAQ Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.

 

You should rely only on the information contained in this proxy statement. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated February 9, 2009. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date. Neither the mailing of this proxy statement to stockholders nor the issuance of cash in the merger creates any implication to the contrary.

 

Your vote is important. To vote your shares, please complete, date, sign and return the enclosed proxy card (if you are a holder of record) or instruction card (if you were forwarded these materials by your broker or nominee) as soon as possible in the enclosed envelope. Please call our proxy solicitor, MacKenzie Partners, Inc., toll-free at (800) 322-2885 or collect at (212) 929-5500 if you have any questions about this proxy statement the special meeting or the merger, or need assistance with the voting procedures.

 

Autonomy has supplied all information contained in this proxy statement relating to Autonomy and Merger Sub and we have supplied all information relating to us.

by and among

AUTONOMY CORPORATION PLC,

MILAN ACQUISITION CORP.

and

INTERWOVEN, INC.

Dated as of January 22, 2009

 

TABLE OF CONTENTS

 

AGREEMENT AND PLAN OF MERGER

 

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of January 22, 2009, is by and among Autonomy Corporation plc, a corporation formed under the laws of England and Wales (“ Parent ”), Milan Acquisition Corp., a corporation organized under the laws of the State of Delaware and a wholly owned subsidiary of Parent (“ Merger Sub ”), and Interwoven, Inc., a Delaware corporation (the “ Company ”).

 

W I T N E S S E T H:

 

WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have each approved, adopted and declared advisable this Agreement and the merger of Merger Sub with and into the Company, upon the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, (i) Parent has entered into a Placing Agreement with Deutsche Bank AG, London Branch, Morgan Stanley & Co. International plc, and Citigroup Global Markets U.K. Equity Limited dated as of the date hereof (the “ Placing Agreement ”) and (ii) Autonomy NA Holdings Inc., a subsidiary of Parent, as Borrower, and Parent and Autonomy Systems Limited, as Original Guarantors, have entered into a Revolving Facility Agreement with Barclays Bank plc, Eastern Larger Business, as Original Lender, and Barclays Bank plc, Eastern Larger Business, as Agent, dated as of the date hereof, as may be amended from time to time (the “ Loan Agreement ” and, together with the Placing Agreement, the “ Financing Agreements ”);

 

WHEREAS, concurrently with the execution of this Agreement, as a condition and inducement to Parent’s willingness to enter into this Agreement, certain stockholders of the Company have entered into a Voting Agreement (the “ Voting Agreement ”) pursuant to which such stockholders are, among other things, covenanting to vote in favor of the adoption of this Agreement and otherwise to support the transactions contemplated hereby;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, certain shareholders of Parent are executing and delivering one or more Irrevocable Undertakings, dated as of the date of this Agreement (the “ Irrevocable Undertakings ”), pursuant to which such shareholders are, among other things, covenanting to vote in favor of the approval of the Merger upon the terms and conditions of this Agreement and otherwise to support the transactions contemplated hereby and the Financing Agreements.

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereto agree as follows:

 

ARTICLE I

 

The Merger

 

1.1.   The Merger .  On the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (the “ DGCL ”), at the Effective Time, (a) Merger Sub shall merge with and into the Company (the “ Merger ”), and (b) the separate corporate existence of Merger Sub shall cease and the Company shall continue its corporate existence under Delaware law as the surviving entity in the Merger (the “ Surviving Entity ”), and the corporate existence of the Company, with all of its rights, privileges, immunities, powers and franchises, shall continue unaffected by the Merger.

 

1.2.   Closing .  The closing of the Merger (the “Closing”) will take place at 10:00 a.m. (Pacific Time) on a date to be specified by the parties (the “Closing Date”), which shall be no later than the fourth Business Day after satisfaction or waiver of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time), at the offices of Morgan, Lewis & Bockius LLP, One Market Street, San Francisco, California 94105, unless another date, place or time is agreed to in writing by the parties hereto.

1.3.   Effective Time .  Subject to the provisions of this Agreement, as promptly as practicable on the Closing Date, the Company and Merger Sub shall cause the certificate of merger in the form attached as Exhibit A (the “Certificate of Merger”) to be executed and filed with the Secretary of State of the State of Delaware in accordance with Section 251(c) of the DGCL. The Merger shall become effective at such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by Merger Sub and the Company in writing and specified in the Certificate of Merger in accordance with the DGCL (the effective date and time of the Merger being hereinafter referred to as the “Effective Time”).

 

1.4.   Effects of the Merger .  The Merger shall have the effects set forth in this Agreement and the applicable provisions of the DGCL.

 

1.5.   Certificate of Incorporation; By-laws .

 

(a) The Certificate of Incorporation of the Company, as the Surviving Entity shall be amended and restated to read the same as the Certificate of Incorporation of Merger Sub as in effect immediately prior to the Effective Time, except that Article I of the Certificate of Incorporation of the Surviving Entity shall read as follows: “The name of this corporation is Interwoven, Inc.”. As so amended and restated, the Certificate of Incorporation of the Company shall be the Certificate of Incorporation of the Surviving Entity until thereafter changed or amended as provided therein or by the DGCL or other applicable Law.

 

(b) The By-laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Entity until thereafter changed or amended as provided therein or by applicable Law; provided , however , that the By-laws of the Surviving Entity shall be amended as necessary to comply with the obligations of the Surviving Entity set forth in Section 6.4 hereof.

 

1.6.   Directors .  The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Entity at the Effective Time until the earlier of their resignation or removal or until their respective successors are duly designated, as the case may be.

 

1.7.   Officers .  The officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Entity at the Effective Time until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

 

ARTICLE II

 

Effect of the Merger on the Capital Stock of the Constituent Entities;

Exchange of Certificates; Company Stock Options

 

2.1.   Effect on Capital Stock .  At the Effective Time, as a result of the Merger and without any action on the part of Merger Sub or the Company or the holder of any capital stock of Merger Sub or the Company or any other person:

 

(a)  Merger Consideration .  Each share (a “ Share ” or, collectively, the “ Shares ”) of the common stock, par value $0.001 per share, of the Company (“ Company Common Stock ”) issued and outstanding immediately prior to the Effective Time other than (i) Shares owned by Parent, Merger Sub or any other direct or indirect subsidiary of Parent, and (ii) Shares owned by the Company or any direct or indirect subsidiary of the Company, and in each case not held on behalf of third parties (each, an “ Excluded Share ” and collectively, “ Excluded Shares ”) shall be converted into the right to receive $16.20 in cash from Merger Sub (the “ Per Share Merger Consideration ”). At the Effective Time, all of the Shares shall cease to be outstanding, shall be cancelled and shall cease to exist, and each certificate (a “ Certificate ”) formerly representing any of the Shares (other than Excluded Shares) shall thereafter represent only the right to receive the Per Share Merger Consideration, without interest.

 

(b)  Cancellation of Excluded Shares .  Each Excluded Share shall, by virtue of the Merger and without any action on the part of the holder of the Excluded Share, cease to be outstanding, be cancelled without payment of any consideration therefor and shall cease to exist.

(c)  Merger Sub .  At the Effective Time, each share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, par value $0.001 per share, of the Surviving Entity.

 

(d)  Dissenting Shares .

 

(i) Notwithstanding any provision of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and that are held by stockholders of the Company who have demanded and perfected appraisal rights for such shares in accordance with Section 262 of the DGCL (collectively, the “ Dissenting Shares ”) shall not be converted into or represent the right to receive the Per Share Merger Consideration. Such stockholders shall be entitled to receive payment of the appraised value of such shares of Company Common Stock held by them in accordance with Section 262 of the DGCL, unless and until such stockholders fail to perfect or effectively withdraw or otherwise lose their appraisal rights under Section 262 of the DGCL. All Shares held by Company stockholders who shall have failed to perfect or who shall have effectively withdrawn or lost their right to appraisal of such shares under Section 262 of the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the Per Share Merger Consideration in cash, without any interest thereon (subject to any applicable withholding taxes), upon the surrender or transfer, in the manner provided in Section 2.1(a), of the corresponding Certificate.

 

(ii) The Company shall give Parent (A) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other related instruments served pursuant to the DGCL and received by the Company and (B) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

 

2.2.   Exchange of Certificates .

 

(a)  Paying Agent .  On or promptly following the Closing Date, Parent shall deliver or cause to be delivered to a paying agent selected prior to the Closing Date by Parent with the Company’s prior approval, which shall not be unreasonably withheld (the “ Paying Agent ”), amounts sufficient in the aggregate to make all payments of the Per Share Merger Consideration pursuant to Section 2.1(a) (such cash being hereinafter referred to as the “ Exchange Fund ”). The Exchange Fund will be held in trust for the benefit of the holders of record of Shares (other than Excluded Shares). Any interest and other income resulting from such investment shall become a part of the Exchange Fund, and any amounts in excess of the amounts payable under Section 2.1(a) shall be promptly returned to Parent.

 

(b)  Exchange Procedures .  As promptly as practicable (and in any event within two Business Days) after the Effective Time, the Surviving Entity shall cause the Paying Agent to mail to each holder of record of Shares (other than Excluded Shares) (i) a letter of transmittal in customary form specifying that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 2.2(e)) to the Paying Agent, such letter of transmittal to be in such form and have such other provisions as Parent and the Company may reasonably agree, and (ii) instructions for use in effecting the surrender of the Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 2.2(e)) in exchange for the Per Share Merger Consideration. Upon surrender of a Certificate (or affidavit of loss in lieu of the Certificate as provided in Section 2.2(e)) to the Paying Agent in accordance with the terms of such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a cash amount in immediately available funds (after giving effect to any required tax withholdings as provided in Section 2.2(f)) equal to (x) the number of Shares represented by such Certificate (or affidavit of loss in lieu of the Certificate as provided in Section 2.2(e)) multiplied by (y) the Per Share Merger Consideration, and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any amount payable upon due surrender of the Certificates. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, a check for any cash to be exchanged upon due surrender of the Certificate may be issued to such transferee if the Certificate formerly representing such Shares is presented to the Paying Agent, accompanied

by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable.

 

(c)  Transfers .  From and after the Effective Time, there shall be no transfers on the stock transfer books of the Company of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificate is presented to the Paying Agent, it shall be cancelled and exchanged for the cash amount in immediately available funds to which the holder of the Certificate is entitled pursuant to this Article II.

 

(d)  Termination of Exchange Fund .  Any portion of the Exchange Fund (including the proceeds of any investments of the Exchange Fund) that remains unclaimed by the stockholders of the Company for 365 days after the Effective Time shall be delivered to the Surviving Entity. Any holder of Shares (other than Excluded Shares) who has not theretofore complied with this Article II shall thereafter look only to the Surviving Entity and Parent for payment of the Per Share Merger Consideration (after giving effect to any required tax withholdings as provided in Section 2.2(f)) upon due surrender of such holder’s Certificates (or affidavits of loss in lieu of the Certificates), without any interest thereon. Notwithstanding the foregoing, none of the Surviving Entity, Parent, the Paying Agent or any other person shall be liable to any former holder of Shares for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws.

 

(e)  Lost, Stolen or Destroyed Certificates .  In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in customary and reasonable amount and upon such customary and reasonable terms as may be required by Parent as indemnity against any claim that may be made against it or the Surviving Entity with respect to such Certificate, the Paying Agent will issue a check in the amount (after giving effect to any required tax withholdings) equal to the number of Shares represented by such lost, stolen or destroyed Certificate multiplied by the Per Share Merger Consideration.

 

(f)  Withholding Rights .  Parent and the Surviving Entity shall each be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “ Code ”), or any other applicable state, local or foreign tax law. To the extent that amounts are so withheld by the Surviving Entity or Parent, as the case may be, such withheld amounts (i) shall be remitted by Parent or the Surviving Entity, as applicable, to the applicable Governmental Authority, and (ii) shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of which such deduction and withholding was made by the Surviving Entity or Parent, as the case may be.

 

2.3.   Company Equity Awards; ESPP .

 

(a)  Options .  At the Effective Time, all Company Stock Options outstanding immediately prior to the Effective Time with an exercise price at or below $40.00 per share of Company Common Stock (a “Lower Priced Option”) shall be assumed by Parent in accordance with, and to the extent provided in, Section 6.10. At the Effective Time, all Company Stock Options outstanding immediately prior to the Effective Time with an exercise price in excess of $40.00 per share of Company Common Stock (a “Higher Priced Option”) shall not be assumed by Parent and shall accordingly be cancelled with no cash or other consideration to be paid to the holders of such cancelled Company Stock Options. At the Effective Time, all of such Higher Priced Options shall cease to be outstanding, shall be cancelled and shall cease to exist.

 

(b)  Contingent Option Exercises .  Notwithstanding anything to the contrary in this Agreement or the Company Stock Plans, the Company shall be permitted to take such actions as it may deem necessary or appropriate to permit the exercise of all vested Company Stock Options (including Company Stock Options that will vest upon the consummation of the Merger) on a cashless basis contingent upon the Closing. With respect to each current or former employee of the Company or its Subsidiaries who exercises one or more Company Stock Options on such a cashless basis, the Company shall at the time of such exercise collect, either in the form of cash or through the withholding of a portion of the shares of Company Common Stock otherwise issuable upon such exercise, all federal, state and local income, employment and other payroll withholding taxes at the applicable rates and shall pay all such withholding taxes in cash to the appropriate taxing authorities promptly when due. The holders of Company Stock Options exercised on the foregoing basis shall be entitled to receive, promptly following

the Effective Time, cash in respect of each share of Company Common Stock issued in connection with such cashless exercise, net of any shares withheld to satisfy the applicable withholding taxes, in an amount equal to the excess, if any, of (i) the Per Share Merger Consideration, over (ii) the exercise price per share of Company Common Stock at which such Company Stock Option was exercisable immediately prior to the Effective Time.

 

(c)  Treatment of Company RSUs .  At the Effective Time, each Company RSU outstanding immediately prior to the Effective Time shall be assumed by Parent in accordance with Section 6.11.

 

(d)  ESPP .  All purchase rights under the ESPP outstanding on the earlier of (a) April 30, 2009 and (b) the day immediately prior to the Effective Time (such earlier date, the “ESPP Purchase Date”), shall automatically be exercised, in accordance with the terms of the ESPP and resolutions of the Board relating thereto to the extent required pursuant to the terms of the ESPP, on the ESPP Purchase Date, and the shares of Company Common Stock purchased under those exercised rights shall at the Effective Time be cancelled and converted into the right to receive the consideration payable pursuant to Section 2.1. No further purchase rights shall be granted or exercised under the ESPP thereafter. No consent or approval of the participants in the ESPP is required in connection with the final purchase date and termination of the ESPP in accordance with this Section 2.3(d), and the ESPP and the agreement or agreements evidencing each outstanding purchase right under the ESPP permit each of the actions contemplated by this Section 2.3(d).

 

2.4.   Adjustments to Prevent Dilution .  In the event that after the date hereof and prior to the Effective Time, the Company changes the number of Shares or securities convertible or exchangeable into or exercisable for Shares issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization or other similar transaction, the Per Share Merger Consideration shall be equitably adjusted.

 

ARTICLE III

 

Representations and Warranties of the Company

 

The Company represents and warrants to Parent and Merger Sub that, except as set forth in the disclosure letter (with specific reference to the Section or Subsection of this Agreement to which the information stated in such disclosure relates) delivered by the Company to Parent concurrently with the execution of this Agreement (the “ Company Disclosure Letter ”), provided , however , that disclosure in any Section of the Company Disclosure Letter shall be deemed to have been set forth in all other applicable Sections of the Company Disclosure Letter where the applicability of such disclosure to such other Sections is reasonably apparent notwithstanding the omission of any cross-reference to such other Section in the Company Disclosure Letter; provided , further , that the mere listing of the name of a Contract, the parties thereto and the date thereof shall not make the applicability of such disclosure “reasonably apparent” for purposes of the immediately preceding proviso unless such listing contains other descriptive language making the applicability of such disclosure reasonably apparent:

 

3.1.   Organization, Standing and Corporate Power .  The Company and each of its Subsidiaries is an entity duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is formed and has all requisite power and authority to carry on its business as now being conducted. The Company and each of its Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, other than (A) in any jurisdiction that does not recognize the concept of good standing, and (B) in such jurisdictions where the failure to be so qualified or licensed or to be in good standing would not reasonably be expected to have a Material Adverse Effect on the Company. The Company has Made Available to Parent complete and correct copies of its Certificate of Incorporation (the “ Company Certificate ”) and By-laws (the “ Company By-laws ”). The Company has Made Available to Parent or its representatives correct and complete copies of the minutes of all meetings of stockholders, the Company Board and each committee of the Company Board held since December 31, 2004.

 

3.2.   Subsidiaries .  Section 3.2 of the Company Disclosure Letter lists all of the Subsidiaries of the Company and, for each such Subsidiary, the state of formation. All the outstanding shares of capital stock of, or other equity interests in, each such Subsidiary have been validly issued and are fully paid and nonassessable and are owned

directly or indirectly by the Company (other than shares owned of record by other persons as nominee for, or on behalf of, the Company or a Subsidiary), free and clear of all pledges, claims, liens, charges, title defects, easements, encumbrances, rights of first offer or refusal or security interests of any kind or nature whatsoever (collectively, “ Liens ”), and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interests. Except for the capital stock or other equity or voting interests of its Subsidiaries and publicly traded securities held for investment that do not exceed 5% of the outstanding securities of any entity, the Company does not own, directly or indirectly, any capital stock or other equity or voting interests in any person.

 

3.3.   Capital Structure .

 

(a) The authorized capital stock of the Company consists of 125,000,000 Shares and 5,000,000 shares of preferred stock, par value $0.001 per share (“ Company Preferred Stock ”). At the close of business on January 15, 2009, (i) 46,397,353 Shares were issued and outstanding, (ii) no Shares were issued and held by the Company in its treasury, and (iii) no shares of Company Preferred Stock were issued and outstanding, or issued and held by the Company in its treasury.

 

(b) As of January 15, 2009 and regarding any rights or awards which grant a right to acquire Shares from the Company, including any awards which grant a right to purchase Shares from the Company under the Company Stock Plans (“ Company Stock Options ”) and restricted stock units of the Company granted under the Company Stock Plans (“ Company RSUs ”) (collectively, “ Company Equity Awards ”):

 

(i) The Company has reserved 223 Shares for issuance to employees, consultants and directors pursuant to the Metacode Technologies, Inc. Amended and Restated 1995 Stock Plan (the “ M Stock Plan ”), all of which Shares are subject to outstanding unexercised Company Stock Options thereunder. No Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and no Shares are reserved for issuance upon the exercise of additional Company Stock Options.

 

(ii) The Company has reserved 30,248 Shares for issuance to employees, consultants and directors pursuant to the 1996 Stock Option Plan and the 1998 Stock Option Plan (collectively, the “ 1996 Stock Plan ”), all of which Shares are subject to outstanding unexercised Company Stock Options thereunder. No Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and no Shares are reserved for issuance upon the exercise of additional Company Stock Options.

 

(iii) The Company has reserved 482,654 Shares for issuance to employees, consultants and directors pursuant to the iManage, Inc. 1997 Stock Option Plan, as amended (the “ 1997 Stock Plan ”), all of which Shares are subject to outstanding unexercised Company Stock Options thereunder. No Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and no Shares are reserved for issuance upon the exercise of additional Company Stock Options.

 

(iv) The Company has reserved 219,286 Shares for issuance to employees, consultants and directors pursuant to the iManage, Inc. 2000 Non-Officer Stock Option Plan (the “ iM 2000 Stock Plan ”), all of which Shares are subject to outstanding unexercised Company Stock Options thereunder. No Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and no Shares are reserved for issuance upon the exercise of additional Company Stock Options.

 

(v) The Company has reserved 540 Shares for issuance to employees, consultants and directors pursuant to the Ajuba Solutions, Inc. 1998 Amended and Restated Stock Option Plan (the “ A Stock Plan ”), all of which Shares are subject to outstanding unexercised Company Stock Options thereunder. No Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and no Shares are reserved for issuance upon the exercise of additional Company Stock Options.

 

(vi) The Company has reserved 4,178,229 Shares for issuance to employees, consultants and directors pursuant to the 1999 Equity Incentive Plan (the “ 1999 Stock Plan ”), of which (A) 3,368,293 Shares are subject to outstanding unexercised Company Stock Options thereunder and 809,936 Shares are subject to issuance pursuant to unvested Company RSUs (B) no Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and (C) no Shares are reserved for issuance upon the exercise of

additional Company Stock Options that may be granted thereunder in accordance with the limitations and restrictions of Section 5.1(a)(ii) of this Agreement.

 

(vii) The Company has reserved 1,093,974 Shares for issuance to employees, consultants and directors pursuant to the 2000 Stock Incentive Plan (the “ 2000 Stock Plan ”), of which (A) 990,393 Shares are subject to outstanding unexercised Company Stock Options thereunder and 103,581 Shares are subject to issuance pursuant to unvested Company RSUs, (B) no Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and (C) no Shares are reserved for issuance upon the exercise of additional Company Stock Options or Company RSUs that may be granted thereunder in accordance with the limitations and restrictions of Section 5.1(a)(ii) of this Agreement.

 

(viii) The Company has reserved 2,635 Shares for issuance to employees, consultants and directors pursuant to the MediaBin, Inc. 2001 Stock Option Plan, as amended (the “ M 2001 Stock Plan ”), all of which Shares are subject to outstanding unexercised Company Stock Options thereunder. No Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and no Shares are reserved for issuance upon the exercise of additional Company Stock Options.

 

(ix) The Company has reserved 418,941 Shares for issuance to employees, consultants and directors pursuant to the 2003 Acquisition Plan (the “ 2003 Stock Plan ”), of which (A) 330,985 Shares are subject to outstanding unexercised Company Stock Options thereunder, (B) no Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and (C) 87,956 Shares are reserved for issuance upon the exercise of additional Company Stock Options or Company RSUs that may be granted thereunder in accordance with the limitations and restrictions of Section 5.1(a)(ii) of this Agreement.

 

(x) The Company has reserved 464,801 Shares for issuance to employees, consultants and directors pursuant to the Optimost, LLC 2006 Equity Compensation Plan (the “ 2006 Stock Plan ”), all of which Shares are subject to outstanding unexercised Company Stock Options thereunder. No Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and no Shares are reserved for issuance upon the exercise of additional Company Stock Options.

 

(xi) The Company has reserved 342,736 Shares for issuance to employees, consultants and directors pursuant to the Discovery Mining, Inc. 2003 Stock Option Plan (the “ DM Stock Plan ”), all of which Shares are subject to outstanding unexercised Company Stock Options thereunder. No Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and no Shares are reserved for issuance upon the exercise of additional Company Stock Options.

 

(xii) The Company has reserved 3,956,776 Shares for issuance to employees, consultants and directors pursuant to the 2008 Equity Incentive Plan (the “ 2008 Stock Plan ”), of which (A) 385,100 Shares are subject to outstanding unexercised Company Stock Options and 70,000 Shares are subject to issuance pursuant to unvested Company RSUs thereunder, (B) no Shares outstanding thereunder are unvested and subject to repurchase rights in favor of the Company and (C) 3,501,676 Shares are reserved for issuance upon the exercise of additional Company Stock Options or Company RSUs that may be granted thereunder in accordance with the limitations and restrictions of Section 5.1(a)(ii) of this Agreement.

 

(xiii) The Company has reserved 3,764,031 Shares for issuance to employees under the Company’s 1999 Employee Stock Purchase Plan (“ ESPP ”), of which 2,044,705 Shares have been issued pursuant to the exercise of purchase rights and 1,719,326 Shares are available for future issuance thereunder. The current “Offering Period” (as defined in the ESPP) commenced under the ESPP on November 1, 2008 and will end on the earlier of (1) the day immediately prior to the Effective Time and (2) April 30, 2009, and except for the purchase rights granted on such commencement date to participants in the current Offering Period, there are no other purchase rights or options outstanding under the ESPP. A maximum of 147,000 Shares may be purchased under the current Offering Period (as defined in the ESPP) under the ESPP on the final purchase date thereunder which is to occur on the earlier of (x) the day immediately prior to the Effective Time and (y) April 30, 2009. The Company has taken all required actions to terminate the ESPP and to cause the Offering Period to terminate effective automatically on the earlier of (i) the day immediately prior to the Effective Time and (ii) April 30, 2009.

(xiv) The Company has Made Available to Parent true and correct copies of all Company Stock Plans and the forms of all agreements and instruments relating to or issued thereunder and such agreements and instruments have not been amended, modified or supplemented and there are no agreements to amend, modify or supplement such agreements or instruments in any case from the form provided to Parent.

 

(c) Section 3.3(c) of the Company Disclosure Letter contains a correct and complete list of Company Equity Awards as of the close of business on January 15, 2009, including Company Stock Options, and Company RSUs under the Company Stock Plans, including the holder, date of grant, term, number of Shares and, where applicable, exercise price and vesting schedule, including vesting commencement date and whether the vesting will be accelerated by the execution of this Agreement or consummation of the Merger or by termination of employment or change of position following consummation of the Merger. Other than the Company Stock Options and Company RSUs, there are no other outstanding equity awards under the Company Stock Plans as of the close of business on January 15, 2009. Except as set forth above in this Section 3.3, as of the close of business on January 15, 2009, there are no outstanding stock appreciation rights, rights to receive Shares on a deferred basis or other rights that are linked to the value of Shares granted under the Company Stock Plans or otherwise. All outstanding shares of capital stock of the Company are, and all shares that may be issued pursuant to the Company Stock Plans will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the Company Certificate, Company By-laws or any Contract to which the Company is a party or otherwise bound. Each Company Equity Award (i) was granted in material compliance with all applicable Laws and all of the terms and conditions of the Company Stock Plans pursuant to which it was issued, (ii) has an exercise price per Share equal to or greater than the fair market value of a Share at the close of business on the date of such grant and is not subject to Section 409A of the Code, (iii) has a grant date identical to the date on which the Company Board or compensation committee of the Company Board actually awarded such Company Equity Award, (iv) provides, in the case of each outstanding Company RSU, for the issuance of the underlying Shares within thirty (30) days of the vesting of that RSU and is not otherwise subject to Section 409A of the Code, and (v) qualifies for the tax and accounting treatment afforded to such Company Equity Award in the Company’s tax returns and the Company’s financial statements, respectively.

 

(d) There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth above in this Section 3.3, as of the close of business on January 15, 2009, there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities of the Company, (B) any securities of the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock or voting securities of the Company or any of its Subsidiaries or (C) any warrants, calls, options or other rights of any kind to acquire from the Company or any of its Subsidiaries, or any obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company or any of its Subsidiaries.

 

(e) There are not any outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any securities of the Company or any of its Subsidiaries or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities, or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any person (other than any Subsidiary). Neither the Company nor any of its Subsidiaries is a party to any voting agreement with respect to the voting of any such securities. There are no accrued and unpaid dividends with respect to any outstanding shares of capital stock of the Company. There are no registration rights or other agreements or understandings to which the Company or any of its Subsidiaries is a party or by which it or they are bound with respect to any capital stock of the Company or any of its Subsidiaries

 

(f) The Shares constitute the only classes of securities of the Company or its Subsidiaries registered or required to be registered under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

 

3.4.   Authority; Noncontravention.

 

(a) The Company has the requisite corporate power and authority to enter into this Agreement and, subject to the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding Shares (the

“ Company Stockholder Approval ”), to consummate the Merger and the other transactions contemplated, by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, subject, in the case of the Merger, to receipt of the Company Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (subject to applicable bankruptcy, solvency, fraudulent transfer, reorganization, moratorium and other Laws affecting creditors’ rights generally from time to time in effect and by general principles of equity). As of the date hereof, the Company Board, at a meeting duly called and held at which all the directors of the Company were present in person or by telephone, duly and unanimously adopted resolutions (i) declaring that this Agreement, the Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of the Company and the Company’s stockholders, (ii) approving and adopting this Agreement, the Merger and the other transactions contemplated by this Agreement, (iii) directing that the adoption of this Agreement be submitted to a vote at a meeting of the stockholders of the Company and (iv) recommending that the stockholders of the Company adopt this Agreement, which resolutions have not been rescinded, modified or withdrawn in any manner. The Company Board has taken all action necessary to render the provisions of Section 203 of the DGCL inapplicable to this Agreement, the Merger, and the other transactions contemplated by this Agreement (based on the representation of Parent in Section 4.8). Except for Section 203 of the DGCL (which has been rendered inapplicable by action of the Company Board), no “moratorium,” “control share,” “fair price,” or other antitakeover laws or regulations (together, “ Takeover Laws ”) are applicable to the Merger and the other transactions contemplated by this Agreement and the Voting Agreement.

 

(b) The execution and delivery of this Agreement do not, and the consummation of the Merger and the other transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to the loss of a material benefit under, or result in the creation of any Lien (other than Permitted Liens) in or upon any of the properties or other assets of the Company or any of its Subsidiaries under, (i) the Company Certificate or the Company By-laws or the comparable organizational documents of any of its Subsidiaries, (ii) any loan or credit agreement, bond, debenture, note, mortgage, policy, certificate of coverage, indenture, lease or other contract, agreement, obligation, commitment, legally binding arrangement or legally binding understanding (each, a “ Contract ”), to which the Company or any of its Subsidiaries is a party or any of their respective properties or other assets is subject or (iii) subject to the governmental filings and other Necessary Consents referred to in Section 3.5, any Law applicable to the Company or any of its Subsidiaries or their respective properties or other assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, breaches, defaults, losses or Liens that individually or in the aggregate (A) have not had and would not reasonably be expected to have a Material Adverse Effect, (B) would not reasonably be expected to impair in any material respect the ability of the Company to perform its obligations hereunder and (C) would not reasonably be expected to prevent or materially delay the consummation of any of the transactions contemplated by this Agreement.

 

(c) For purposes of this Agreement, “ Material Adverse Effect ” means, when used in connection with the Company or Parent, as the case may be, a material adverse effect on the business, assets, condition (financial or otherwise) or results of operations of such Party and its Subsidiaries, taken as a whole, or to the ability of the Party to perform its obligations under this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement; provided , however , none of the following shall be deemed in and of themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect: (i) any change in the market price or trading volume of the outstanding securities of such Party; (ii) any failure by such Party to meet internal projections or forecasts or published revenue or earnings predictions; (iii) any adverse effect to the extent attributable to the announcement or pendency of the Merger (including cancellations in customer orders, reduction in sales, disruption in relationships with suppliers, distributors, partners or similar relationships or loss of employees); (iv) any adverse effect that results from changes attributable to conditions affecting the industries in which such Party participates, the United States or

United Kingdom economy as a whole, or foreign economies in any locations where such Party or any of such Party’s Subsidiaries has material operations or sales (to the extent that such changes in each case do not disproportionately adversely affect such Party and its Subsidiaries taken as a whole compared to similarly situated companies in such Party’s industry); (v) any adverse effect that results from (A) any Party taking any action at the written request of the other Party, or (B) any Party taking any action required by this Agreement; or (vi) any adverse effect that results from any act of God, any act of terrorism, war or other armed hostilities, any regional, national or international calamity or any other similar event.

 

3.5.   Governmental Approvals .  No consent, approval, order or authorization of, or registration, declaration or filing with, any Federal, state, local or foreign government, any court, administrative, regulatory or other governmental agency, commission or authority or any non-governmental self-regulatory agency, commission or authority (each, a “ Governmental Authority ”) is required by the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the Merger or the other transactions contemplated by this Agreement, except for those required under or in relation to (a) the premerger notification and report form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (b) the Exchange Act, (c) the Certificate of Merger to be filed with the Secretary of State of the State of Delaware, (d) any appropriate or required filings with and approvals of Nasdaq, (e) the assumption of Lower Priced Options granted under the Interwoven 1999 Equity Incentive Plan and the iManage, Inc. 1997 Stock Option Plan pursuant to any Approved Rollover Offer (as defined in Section 6.10(f)), and (f) such other consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate would not reasonably be expected to (x) have a Material Adverse Effect, (y) impair in any material respect the ability of the Company to perform its obligations hereunder or (z) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement. The consents, approvals, orders, authorizations, registrations, declarations and filings set forth in (a) through (f) above or listed in Section 3.5 of the Company Disclosure Letter are referred to herein as “ Necessary Consents ”.

 

3.6.   Company SEC Documents; No Undisclosed Liabilities .