10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

x           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2007

OR

¨           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File Number: 000-29357

CHORDIANT SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

Delaware	93-1051328
(State or other jurisdiction of incorporation or organization)	(IRS Employer identification No.)

20400 Stevens Creek Blvd., Suite 400

Cupertino, California 95014

(Address of principal executive offices, including zip code)

(408) 517-6100

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock $.001 Par Value per Share	The NASDAQ Stock Market LLC
	(NASDAQ Global Market)

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Transition Report on Form 10-K or any amendment to this Form 10-K.    x

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

Large accelerated filer  ¨ Accelerated filer  x Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of March 31, 2007, the last business day of the registrant’s most recently completed second fiscal quarter: $327,939,833.

As of October 31, 2007, there were 33,289,780 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III-Portions of the registrant’s definitive proxy statement to be issued in conjunction with registrant’s 2008 Annual Stockholder’s meeting.

CHORDIANT SOFTWARE, INC.

ANNUAL REPORT ON FORM 10-K

INDEX

PART 1
Item 1	BUSINESS	3
Item 1A.	RISK FACTORS	12
Item 1B.	UNRESOLVED STAFF COMMENTS	21
Item 2.	PROPERTIES	21
Item 3.	LEGAL PROCEEDINGS	21
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	22
PART II
Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES	23
Item 6.	SELECTED CONSOLIDATED FINANCIAL DATA	25
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	48
Item 8.	CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	49
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	82
Item 9A.	CONTROLS AND PROCEDURES	82
Item 9B.	OTHER INFORMATION	84
PART III
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND COPORATE GOVERNANCE	84
Item 11.	EXECUTIVE COMPENSATION	84
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	84
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	84
Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	84
PART IV
Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	85
SIGNATURES		92

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PART I

FORWARD-LOOKING INFORMATION

Except for the historical information contained herein, this Annual Report contains certain information that is forward-looking in nature. This information is based on our current expectations, assumptions, estimates and projections about our business and our industry, and involves known and unknown risks, uncertainties and other factors that may cause our or our industry’s results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in, or contemplated by the forward-looking statements. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “should,” “estimate,” “predict,” “guidance,” “potential,” “continue” or the negative of such terms or other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described under the caption “Risk Factors” and those discussed elsewhere in this document. These and many other factors could affect the future financial and operating results of Chordiant. Chordiant undertakes no obligation to update any forward-looking statement to reflect events after the date of this report. All references to “Chordiant”, “we”, “us”, or “the Company” means Chordiant Software, Inc. and its subsidiaries except where it’s made clear that the term means only the parent company.

ITEM 1. BUSINESS

Chordiant is an enterprise software company that delivers products and services that improve the “customer experience” in front-office processes for leading global companies primarily in the banking, insurance, healthcare, and telecommunications markets. Chordiant provides companies in these markets with innovative solutions that help them more effectively manage their customer interactions, offering “next best offers” for those customers based on pre-built business rules.

Our enterprise-scale software utilizes predictive decisioning, analytical modeling, and strategy formulation in real-time for decision management and execution at the point of sale. This capability enables organizations to improve the accuracy of marketing offers for retention, up-selling, cross selling, and modeling risk scenarios such as customer churn and the likelihood of default on payments.

We believe our solutions add business value and return-on-investment for our customers by reducing operational costs, and increasing employee productivity. These improvements are realized by automating key business processes and supporting organizational decision-making associated with the servicing, selling, marketing and fulfillment of customer requests across the enterprise. We offer solutions to our clients that include software applications, business processes, tools and services that will integrate their customer information and corporate systems to produce a real-time view of customers across multiple business channels. Our solutions offer businesses additional flexibility to create and set their policies and processes to control the quality of servicing, fulfillment and marketing offers to their customers.

On December 21, 2004, we acquired KiQ Limited, a privately held United Kingdom software company or KiQ, for an aggregate purchase price of approximately $20 million, which was comprised of $9.7 million in cash, $9.4 million in our common stock and approximately $0.9 million in associated transaction costs. Through this transaction, we acquired a decision management system that advances the state of analytics by exploiting the power of predictive data mining, analytical modeling, and strategy formulation into real-time decision management and execution. Products and patented technology acquired by us in this transaction enable organizations to significantly increase the accuracy of marketing offers for retention, up-selling, cross selling, and to model risk scenarios such as customer churn and likelihood to default on payments. With the addition of KiQ’s products and patented technology we are able to deliver a range of applications for real-time recommendation, retention, risk management and recruitment.

Product Solutions

Our products are designed for global enterprises seeking to optimize their customer experiences through effective decision analysis, marketing, selling and servicing efforts. We have designed our products to integrate customer information from different data sources and systems of record, automate business processes based on a customer’s specific profile and requests, and provide uniform service and information to customers across multiple communication channels. Our products are designed to enable companies to deliver appropriate recommendations (also known as “next best action”), services, offers and information to a targeted customer at the time of customer need while complying with relevant business policy and industry regulatory requirements.

Our solutions are designed to address the enterprise requirements of global consumer companies serving millions of customers across multiple business channels integrating multiple lines of business. The solution suite is typically licensed as an integrated set of software products that include one or more vertical market applications running on top of a common layer of

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foundational technology and supporting tools. Chordiant’s software is based on open systems software standards that are widely adopted by our industry and capable of deployment throughout an enterprise’s information technology infrastructure. Chordiant software is built to be highly scalable and adaptable to a customer’s specific business requirements or technology infrastructure.

Products and Solutions

Historically, our products have been categorized into three general groups: Enterprise solutions (including the “Cx” Enterprise Foundation and Call Center and Customer Service Desktop products), Decision Management products, and the Marketing Director Suite of products. Our solutions are designed to address a variety of business needs within our four target vertical markets of banking, insurance, healthcare, and telecommunications:

·   Call Center and Customer Service Desktop (Call Center Advisor – Browser Edition): This product is a browser-based guided desktop for the effective management of customer contacts, service requests, and customer case history in the call center channel. The desktop is integrated with leading computer telephony integration products, working with our own queue-based work management to deliver ‘universal queues’ to the enterprise. This product is used by customer services professionals across all our target markets. It is designed to meet the high volume transaction and business processes common in enterprise contact centers. The desktop also acts as a delivery channel for our decision management and marketing products together with the other business applications that Chordiant offers.

·   Marketing Director:  We provide applications for driving unified, personalized marketing campaigns and response management across multiple media types and multiple channels including email, web, phone, and mobile messaging (MMS/SMS). These products are used by marketing professionals across all our target markets to segment and target prospects and customers and deliver to them effective marketing campaigns. The Marketing Director suite of products integrates with our Decision Management products to provide an integrated campaign management system.

·   Recommendation Advisor: An application which provides flexible lead collection and routing in a common guided selling desktop, integrated with marketing campaigns and product fulfillment. Predictive and adaptive analytics guide staff toward best offers and “next best action” in the context of inbound or outbound customer interactions. This product is used by sales and service professionals across our target markets to manage leads and deliver highly effective sales messages.

·   Credit Card Disputes, Chargebacks and Fraud: These modular applications are designed to automate and optimize customer and mid-office functions associated with credit card dispute handling and fraud investigation and recovery. The products use Chordiant technology to implement the dispute and chargeback regulatory requirements of credit card associations to assist organizations in managing their compliance of these complex regulations. This application is used by customer service professionals in the credit card segment of banking to drive more cost effective, compliant handling of disputes and fraud cases.

·   Teller: A guided desktop product and supporting financial transaction components for retail bank tellers/cashiers or other cash-based desktop applications. This product is used in the banking and lending sectors by customer-facing staff in bank branches or stores to effectively process cash and related financial transactions on behalf of the customer. The solution utilizes the “Cx” (Customer Experience) Enterprise Foundation (described below) in providing company-wide case management, customer history, and work management between front office and back office operations.

·   Lending: Solutions and services which provide a common process-driven lending infrastructure across an organization to increase efficiency of loan originations, quoting, account opening and loan risk assessment and management such as required by Basel II. Our lending solutions are used in banking and lending by a variety of users and desktop applications.

·   Insurance: Solutions and services which provide a common process-driven insurance infrastructure and services across an organization to increase efficiency of case management, claims processing, quoting, and risk management. Our insurance solutions and services are used in the insurance sector by a variety of users and desktop applications.

·   Collections: This product is designed to deliver automation and operational efficiency to debt recovery and collections professionals. The first generally available release, consisting of core collections functions, was shipped in the third fiscal quarter of 2007. The product is designed to make extensive use of Chordiant’s Decision Management (CDM) technology to deliver real-time decisioning.

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Technology

Chordiant applications share a common technology platform and set of development and configuration tools through our Cx Enterprise Foundation. Chordiant technology is built to scale to tens of thousands of users and integrate seamlessly into our customer’s IT infrastructure. Chordiant technology is generally built based on standards as defined in Java 2 Enterprise Edition (J2EE). Chordiant technology works alongside third party J2EE Application Servers, such as those from International Business Machines Corporation (IBM) and BEA Systems Inc.

Chordiant technology is based on Service Oriented Architecture (SOA). This architecture provides a framework for large or growing businesses to provide multi-channel interaction and process orchestration across multiple lines of business. The Cx Enterprise Foundation framework provides a pre-integrated environment that supports the business applications required by these large scale organizations.  With predictive decisioning built-in, organizations can utilize Chordiant technology to obtain customer behavioral insight and use this to drive the most appropriate business processes, guide staff through the best tasks to increase responsiveness, reduce errors, shorten cycle times, and present the most relevant offers to customers in each interaction.

·   Cx Enterprise Foundation: Foundation Server, Café, and Tools Platform: Consisting of a family of products with enterprise-wide process orchestration and case management at its core, the Chordiant Cx Enterprise Foundation product family provides a common, highly scalable base platform for all Chordiant solutions. The product family incorporates industry standards such as J2EE, model driven development, AJAX high performance thin client desktops, Java Server Faces (JSF), and enterprise open source technologies including Hibernate, and Apache Trinidad. The products are supported by process development and administration tools that use the Eclipse integrated development environment.

The Enterprise Platform incorporates module ‘servers’ to deliver additional functionality as needed including business rules, decision management, telephony integration, connectivity to systems of record and interaction channel management. These allow organizations to implement only those functions that are required for their particular business requirement without interfering with future project requirements.

·   Decisioning: Consisting of flexible products and tools for adaptive decisioning, predictive decisioning, and rules, our Chordiant Decision Management (CDM) product family allows organizations to effectively drive application behavior based on industry or organizational models and logic. This capability allows business users advanced control over business priorities, and enables the business to refine offer and service management in real-time. CDM is a suite of products and comprises:

• Chordiant Data Preparation Director—Chordiant Data Preparation Director allows non-IT users to combine, manipulate and aggregate customer data using an easy to use visual interface.

• Chordiant Predictive Analytics Director—Chordiant Predictive Analytics Director provides marketing professionals functionality which enables in-depth analysis of significant amounts of customer information using data-mining and predictive analytical capabilities.

• Chordiant Strategy Director—Chordiant Strategy Director allows users to design customer interaction strategies and marketing offers based on decisions and rules that reflect customer behavior, preferences, legislation, corporate policies and  desired business outcomes. The resulting decision logic is executed in our campaign management solution for outbound communication or executed in real-time in multiple channels of communication.

• Chordiant Decision Monitor—Chordiant Decision Monitor provides management with insight into business results, measures data analysis effectiveness, and allows an organization to learn from current and future data models. It is a software module in which decisions are automatically logged and stored in a monitoring database together with the relevant data as well as subsequent customer information and behavior. This module can be integrated and analyzed by third party business intelligence tools.

• Chordiant Deployment Manager—Chordiant Deployment Manager provides the administrative function to prepare available data in the operational environment and implement the decision logic into production campaigns, business processes and applications.

• Chordiant Real-Time Decisioning Services—Chordiant Real-Time Decisioning Server generates a decisioning service that can be hosted in industry-standard application servers.

• Chordiant Database Decisioning Services—The Chordiant Database Decisioning Server provides an application for data mining, analysis, and modeling to create the optimal decision logic and the appropriate decisions outcomes.

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Chordiant Mesh Collaboration

Announced in fiscal year 2006, Chordiant Mesh is a collaborative development network where customers, partners, and Chordiant staff can work together on solutions to respond to customer initiatives. Chordiant Mesh is a development infrastructure layer that allows organizations to collaborate on a wide variety of solutions, components, and tools. By applying principles from open source projects to a member-driven high-end ecosystem, Chordiant Mesh facilitates far greater collaboration, agility, speed to market, transparency, and quality than customers are accustomed to receiving from traditional high-end enterprise software providers.

Key benefits of Chordiant Mesh are:

·   A fabric for the maintenance of infrastructure level code and reduction of customization and cost of ownership.

·   A set of tools and methodologies for building applications collaboratively with Chordiant and its partners.

·   Enables and enhances the IT systems “grid” to better support high value SOA − based applications.

·   Enhancement of the ability of IT departments to provide support, control and flexibility.

·   By leveraging open-source development models, Chordiant can take code revisions submitted by community members − customers, partners and Chordiant itself − and allow these to be incorporated into its products when appropriate.

This new Mesh development approach enables Chordiant to be in closer collaboration with its enterprise customers.

Strategic Direction

The Company is focused on solving problems for our global accounts through helping them improve the quality of the customer experience they deliver in the banking, insurance, healthcare, and telecommunications markets. Chordiant anticipates that it will increasingly deliver business-focused applications based on an open and adaptable core information technology, or IT, infrastructure that provides high levels of business agility and fast return on investment for enterprises by allowing rapid changes to their IT systems. Within the markets above, Chordiant will continue to develop domain-level solutions for these markets, focusing on the most mission-critical business processes facing our customers.

Customers

We target global brand leaders in our core markets. Our customers include: ING, Canada, Inc., HSBC Technology and Services (USA), Inc., Capital One Services, Inc., O2 (UK) Limited, Time Warner Cable, Inc., Covad Communication Company, 21st Century Insurance, T-Mobile, Lloyds TSB Bank plc, Bank of Ireland Group, The Royal Bank of Scotland plc, Metropolitan Life Insurance Company, Signal Iduna, Deutsche Bank AG, Canadian Tire Financial Services, Canadian Imperial Bank of Commerce, Halifax plc, British Telecommunications plc, Connecticut General Life Insurance Company, Citibank Credit Services Inc. (USA), and Sky Subscribers Services Limited. As we deploy new applications, we anticipate that a certain percentage of these and new customers will adopt these new applications and expand their investment in Chordiant products. For the year ended September 30, 2007, Citicorp Credit Services Inc. and IBM accounted for 23% and 16% of our total revenues, respectively.

Technology

Chordiant’s solutions and core technology are implemented using industry standard software that includes J2EE, XML, and Web Services. This industry standard set of development specifications leverages the strengths of the Java programming language to enable software applications that are easier to develop, configure and integrate with legacy and third party information technology systems.

Chordiant’s architecture leverages J2EE and Web Services extensively to provide a services oriented architecture for use by Chordiant applications and other systems. The business services and related business components use a data persistence foundation with built-in support for Oracle and DB2 databases as well as IBM WebSphere MQ messaging. Generally, our software is easily integrated with other data sources, including those built on the Java Connector Architecture (JCA).

Chordiant’s web browser technology delivers consistent self-service and agent-driven customer interaction processes using a rich web-based application platform that provides desktop interface behavior in a browser-based technology with high performance, low maintenance costs, and flexibility to meet the differing demands of a diverse user population.

Certain of our products use technology modules from third party technology providers including IBM, BEA Systems, Sun Microsystems, and certain other non-public entities. Our enterprise platform solutions support industry standard J2EE application servers including IBM WebSphere and BEA WebLogic. Our server software runs on UNIX server platforms from Sun Microsystems, IBM and Linux.

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Sales and Marketing

We license our solutions and sell services primarily through a direct sales organization that is complemented by selling and support efforts through business alliance partners such as IBM, Tata Consulting, Cap Gemini, BearingPoint, and Accenture, systems integrators and technology vendors. Our market focus is the business-to-consumer segment of the economy with a targeted effort on leading consumer focused industries and companies using multiple channels as the means of conducting business and serving customers.

The sales process generally ranges from six to eighteen months depending on the level of knowledge that prospective customers need about the use and benefits of our solutions and the involvement of systems integrators. During the sales process, we typically approach the senior management teams of the business and information technology departments of a prospective customer’s organization. We utilize sales teams consisting of sales and technical professionals who work with our systems integration partners to create company specific proposals, presentations and proof of concept demonstrations that address the needs of the business and its technology requirements.

Our corporate offices are located in Cupertino, California, and we maintain an applications development center in Bedford, New Hampshire. In Europe, we have offices in the greater metropolitan areas of London, Madrid, Amsterdam, and Munich. We have sales and support personnel in various additional locations in North America and Europe.

Our Services

We offer a comprehensive set of customer services including professional consulting services and product support and training services. We believe that providing high quality customer service is critical to achieving rapid product implementation and customer success.

Professional Services

We provide implementation consulting and customer support services to licensed customers through our worldwide professional services organization. Our professional services consulting teams often assist customers and systems integrator partners in the configuration and implementation of our software solutions.

Our professional services organization deploys consultants as part of the project team alongside systems integration partners and members of the customer’s internal team to provide subject matter expertise, technical knowledge, business engineering, project guidance and quality assessments during the entire solution lifecycle. In the design stage, we provide a variety of professional services that help determine a customer’s business processes and the technical requirements of the solutions implementation. In the implementation stage, we use a delivery methodology to assist customers and integration partners in planning and managing the implementation. Typically, systems integrators, supported by our consultants, provide overall program management and coordinate the implementation of our products with a customer’s existing communications, applications, databases and transaction systems. In the final phases of an implementation, the systems integrators provide deployment services to enable a customer’s internal team to implement the system, train internal users and provide first-level end-user support.

Although our primary strategy is to leverage our strategic systems integration partners for implementations, our internal professional services organization is often integral in implementing our enterprise platform software solutions for our customers. We believe that our consulting services enhance the use and administration of our software solutions, facilitate the implementation of our solutions and result in sharing best business practices with client and systems integrator project teams. In addition to implementing our software, our professional services organization works closely with our internal research and development organization to enhance existing software solutions.

In addition to our internal professional services organization, in calendar 2007, we renewed for one year our agreement with Ness Technologies Inc., Ness Global Services, Inc. and Ness Technologies India, Ltd. (collectively, “Ness”),  that we originally entered into in 2003. Ness provides Chordiant with resources focused on technical product support, sustaining engineering product testing and product development through their global technical resources and operations center in Bangalore, India. Ness is an independent contracting company with global technical resources. The agreement with Ness may be extended for additional one year terms at our discretion.  Our agreement with Ness enables them, at our direction, to attract, train, assimilate and retain sufficient highly qualified personnel to perform technical support and certain sustaining engineering functions.

Educational Services

We provide educational services to train and enable our systems integrators and customers to use our products and technologies. We offer a comprehensive series of training modules to provide the knowledge and skills to successfully deploy, use and maintain our products. These training courses focus on the technical aspects of our products as well as business issues and processes. We provide on-site customized training courses for a fee and, also, through classroom and lab instructions. In addition, we provide certification programs for our partners and customers.

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Customer Support

We provide our customers with unspecified support and maintenance services including telephone support, web-based support and updates to our products and documentation. We believe that providing a high level of technical support is critical to customer satisfaction. We also offer training programs to our customers and other companies with which we have relationships to accelerate the implementation and adoption of our solutions by the users within a company. Fees for our training services are typically charged separately from our software license, maintenance and consulting fees.

Our customers have a choice of support and maintenance options depending on the level of service desired. Our technical support services are available to clients by telephone, over the web, by email and on-site. Additionally, we provide unspecified product enhancement releases to all customers as part of our support and maintenance contracts. We use a customer service automation system to track each customer inquiry until it is resolved. We also make use of our website and a secured customer forum to provide product information and technical support information worldwide 24 hours a day, seven days a week.

Strategic Partnerships

Establishing partnerships and alliances with third parties that provide additional services and resources for implementing our solutions to enhance our sales and service organizations’ productivity is an important element of our strategy. These relationships and alliances fall into the following categories:

Consulting and System Integration Relationships. To enhance the productivity of our sales and service organizations, we have established relationships with systems integrators, complementary technology providers, and alternative service providers. We have established relationships and trained professionals at a number of systems integrators including: Accenture, IBM Global Services, Ness Technologies, Tata Consultancy Services, Patni Telecom Solutions (UK), LTD, and Infogain Corporation. We plan to expand these relationships to increase our capacity to license and implement our products. We believe that expanding our relationships with systems integrators and independent consulting firms will enable us to gain a greater share of our target markets.

Technology Partnerships. We make extensive use of industry platforms and embrace a number of core technologies in our solution offerings. We have formed partnerships with vendors of software and hardware technology platforms. We currently maintain technology relationships with vendors such as Avaya/Lucent, Alcatel/Genesys, BEA Systems, Cisco Systems, IBM, Oracle, and Sun Microsystems. Many of these companies voluntarily provide us with early releases of new technology platforms, education related to those platforms and limited access to their technical resources to facilitate adoption of their technology.

Product Development

We have made substantial investments in research and development through internal development, acquisitions and technology licensing. Our product development efforts are focused on extending our enterprise software solutions, application components, industry specific processes and business process functionality, and continued integration of industry-specific transaction systems and services. Our product development organization is responsible for new software products, product architecture, core technologies, product testing, quality assurance and enabling the compatibility of our products with third party hardware and software platforms.

Our product development resources are organized into a number of development teams including:

·   Cx Enterprise Platform, which includes Foundational Server, Tools, and Decision Management Products;

·   Operations, which includes Mesh, Fulfillment, Performance Labs, and Release Management;

·   Applications, which includes our vertical and Marketing Applications;

·   Product Test and Quality.

Our product development teams have experience in enterprise and distributed computing, J2EE and object oriented development, data management, process and workflow engineering, transaction system interfaces, Internet and Web-Services technologies. Our research and development expenditures were $27.5 million, $25.9 million and $20.3 million for the years ended September 30, 2007, 2006, and 2005, respectively.

Competition

The market for our products is competitive, rapidly evolving, and can be affected by new product introductions and other market activities of industry participants. The competitive landscape is quickly evolving to address the need for enterprise-wide

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integration of IT assets and the convergence of customer interaction applications, back-office systems and business processes. The most significant competition we face is from customers’ internal development efforts, custom system integration, as well as other software providers that offer integration and development platforms.

Internal Development

Many of our customers and potential customers have in the past attempted to develop customer service, call center, customer relationship management and new front-office systems in-house or with the help of systems integrators. Internal information technology departments have staffed projects to build their own systems utilizing a variety of tools. In some cases, such internal development projects have been successful in satisfying the needs of an organization. The cost of internal development and total cost-of-ownership have risen to become a primary concern of the business and management. We expect that internal development will continue to be a significant source of competition.

Custom System Integration Projects

Another source of competition results from systems integrators engaged to build a custom development application. The introduction of a systems integrator typically increases the likelihood of success for the customer. The competitive factors in this area require that we demonstrate to the customer the cost savings and advantages of configurable, upgradeable and commercially supported software products developed by a dedicated professional software organization.

We frequently rely on system consulting and systems integration firms for implementation and other global services, as well as recommendations of our products during the evaluation stage of the purchase process. Many of these third parties have similar and often more established relationships with our competitors. We cannot assure that these third parties, many of whom have significantly greater resources than us, will not market software products in competition with us.

Application Software Competitors

As discussed, our primary competition is from internal development at our customers and potential customers. However, other competitors include providers of traditional, first-generation customer relationship management, enterprise resources planning, call center, marketing automation software and sales force automation software. These vendors include, among others, companies such as: Oracle Corporation, SAP, Pegasystems, Inc., Unica Corporation, SSA Global Technologies, Inc., Fidelity National Information Systems, Inc., S1 Corporation, and Amdocs Limited.

Some of these companies have longer operating histories, greater financial, marketing and other resources, greater name recognition in other markets and a larger base of customers than we do. In addition, some companies have well-established relationships with our current and potential customers. As a result, these competitors may be able to devote greater resources to the development, promotion and sale of their products than we can.

We believe that we compete favorably in the industries we serve based on the following competitive advantages: process-driven solutions for servicing and selling; real-time and transactional processes; real-time decision management and vertical processes implemented in a multi-channel architecture. The technology advantages include: Chordiant architecture providing an open services oriented architecture providing for integration with multiple legacy systems, third party applications and communication channels and advanced browser based application environment for high volume call center, mid-office and branch operations.

There is no one competitor, nor are there a small number of competitors that are dominant in our market. There are many factors that may increase competition in the enterprise customer relationship management market, including (i) entry of new competitors, (ii) mergers and alliances among existing competitors, (iii) consolidation in the software industry and (iv) technological changes or changes in the use of the Internet. Increased competition may result in price reductions, reduced gross margins and loss of market share, any of which could materially and adversely affect our business, operating results and financial condition. Continuing consolidation in the software industry during 2007 may indicate that we will face new competitors in the future. Within the year Oracle announced the acquisitions of Agile Software, an enterprise solutions software maker and Hyperion Software, a business performance software maker. Also in 2007, IBM acquired Palisades, a provider of lending software to companies in the mortgage industry and SAP has made an offer to purchase Business Objects. In 2006, IBM acquired Webify, a provider of middleware to companies primarily in the insurance industry. In January 2006, Oracle acquired Siebel Systems, Inc., a maker of customer relationship management software products and acquired Portal Software, a provider of billing and revenue management solutions for the communications and media industry. Siebel Systems, Inc. was a competitor of ours. In September 2005, IBM had acquired DWL, a provider of middleware to companies in the banking, insurance, retail and telecommunications industries. In 2005, Oracle acquired I-flex Solutions, Ltd., a banking software maker headquartered in Mumbai, India. While we do not believe that Agile Software, Hyperion Software, Palisades, Webify, Portal Software, DWL, or I-flex Solutions have been significant competitors of Chordiant in the past, the acquisition of these companies by Oracle and IBM may indicate that we will face increased competition from significantly larger and more established entities in the future.

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We cannot assure that we will be able to compete successfully against current and future competitors or that the competitive pressure faced by us will not materially and adversely affect our business, operating results and financial condition.

Intellectual Property and Proprietary Rights

Our success is in part dependent upon our ability to develop and protect proprietary technology and intellectual proprietary rights. We rely primarily on a combination of contractual provisions, confidentiality procedures, patents pending, trade secrets, and copyright and trademark laws to protect our intellectual property and proprietary rights.

We license our products through non-exclusive license agreements that impose restrictions on customers’ ability to utilize the software. In addition, we seek to avoid disclosure of our trade secrets, including requiring employees, customers and others with access to our proprietary information to execute confidentiality agreements with us and restricting access to our source code. We also seek to protect our rights in our products, documentation and other written materials under trade secret and copyright laws. Due to rapid technological change, we believe factors such as the technological and creative skills of our personnel, new product developments and enhancements to our existing products are more important than the various legal protections of our technology to establishing and maintaining a technology leadership position.

We integrate third party software into our products. Costs associated with integrated technology provided by third parties historically accounts for approximately 2% to 5% of total license revenues. The third party software may not continue to be available on commercially reasonable terms or at all. If we cannot maintain licenses to key third party software, shipments of our products could be delayed until equivalent software is developed or licensed and integrated into our products. Moreover, although we are generally indemnified against claims if technology licensed from third parties infringes the intellectual property and proprietary rights of others, this indemnification is not always available for all types of intellectual property and proprietary rights and in some cases the scope of this indemnification is limited. There can be no assurance that infringement or invalidity claims arising from the incorporation of third party technology or claims for indemnification from our customers resulting from these claims will not be asserted or prosecuted against us. These claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources, in addition to potential product redevelopment costs and delays.

Despite our efforts to protect our proprietary rights, existing laws afford only limited protection. Attempts may be made to copy or reverse engineer aspects of our products or to obtain and use information that we regard as proprietary. There can be no assurance that we will be able to protect our proprietary rights against unauthorized third party copying or use. Use by others of our proprietary rights could materially harm our business. Furthermore, policing the unauthorized use of our products is difficult and expensive litigation may be necessary in the future to enforce our intellectual property rights.

Third parties may claim, and have claimed, that we have infringed, or currently infringe, their current or future products. We expect that software developers will increasingly be subject to infringement claims as the number of products in different industry segments overlap. Any claims, with or without merit, can be time-consuming, result in costly litigation, prevent product shipment, cause delays, or require us to enter into royalty or licensing agreements, any of which could harm our business. Patent litigation in particular has complex technical issues and inherent uncertainties. If an infringement claim against us was successful and we could not obtain a license on acceptable terms, license a substitute technology or redesign to avoid infringement, our business could be harmed.

For fiscal year 2007, Chordiant received 2 patents from the US Patent and Trademark Office.  The first patent was US Patent Number 7,178,109 for innovative user interface design, first introduced in its family of browser-based applications in 2003. The second was US Patent Number 7,194,380 covers the Decision Management Suite.

Employees

As of September 30, 2007, we employed 285 full time employees. Of that total, 85 were primarily engaged in product development, engineering or systems engineering, 85 were engaged in sales and marketing, 58 were engaged in professional services and 57 were engaged in operational, financial and administrative functions.

None of our employees are represented by a labor union and we have never experienced a work stoppage. We believe that our relations with our employees are good. We believe our future success will depend in part on our continued ability to recruit and retain highly skilled technical, sales, finance, management and marketing personnel.

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Financial Information About Geographic Areas

For a detailed description of our sales by geographic region, we incorporate by reference the information in Note 14 to our consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K. Although the Company’s revenues are not considered seasonal, our international operations do experience a slow down in the summer months and professional services provided on an hourly basis decline due to the holidays in the quarterly periods ended December 31. For information relating to the risks attendant to our foreign operations, we incorporate by reference the information under the headings “—Risk Factors—If we fail to adequately address the difficulties of managing our international operations, our revenues and operating expenses will be adversely affected” and “—Risk Factors—Fluctuations in the value of the U.S. Dollar relative to foreign currencies could make our products less competitive in international markets and could adversely affect our operating results and cash flows.”

Backlog

For a detailed discussion of backlog, we incorporate by reference the information in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading Financial Trends.

Available Information

We were incorporated in California in March 1991 and were reincorporated in Delaware in October 1997.

We maintain a site on the world-wide web at www.chordiant.com; however, information found on our website is not incorporated by reference into this Annual Report on Form 10-K. We make available free of charge on or through our website our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

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ITEM 1A. RISK FACTORS

The matters relating to the Audit Committee of the Board’s review of our historical stock option granting practices and the restatement of our consolidated financial statements have required us to incur substantial expenses, have resulted in litigation, and may result in additional litigation.

On July 24, 2006, the Company announced that the Audit Committee of the Company’s Board of Directors, with the assistance of independent legal counsel, was conducting a review of our stock option practices covering the time from the Company’s initial public offering in 2000 through June 2006. As described in Note 3 “Restatement of Previously Issued Consolidated Financial Statements” in Notes to Consolidated Financial Statements in the 2006 Form 10-K, the Audit Committee reached a conclusion that incorrect measurement dates were used for financial accounting purposes for stock option grants in certain prior periods. As a result, the Company has recorded additional non-cash stock-based compensation expense, and related tax effects, related to certain stock option grants, and the Company has restated certain previously filed financial statements included in the 2006 Annual Report on Form 10-K.

This review of our historical stock option granting practices has required us to incur substantial expenses for legal, accounting, tax and other professional services, has diverted our management’s attention from our business, and any litigation or future government enforcement actions could in the future adversely affect our business, financial condition, results of operations and cash flows.

Our historical stock option granting practices and the restatement of our prior financial statements have exposed us to greater risks associated with litigation proceedings. Several derivative complaints have been filed pertaining to allegations relating to stock option grants. We cannot assure you that these or future similar complaints or any future litigation or regulatory action will result in the same conclusions reached by the Audit Committee. The conduct and resolution of these matters will be time consuming, expensive and distracting from the conduct of our business.

We contacted the SEC regarding the Audit Committee’s review and, in July 2006, the SEC commenced an investigation into our historical stock option grant practices. In November 2006, a representative of the Audit Committee and its informal advisors met with the enforcement staff of the SEC and provided them with a report of the Audit Committee’s investigation and findings. In January 2007, the enforcement staff of the SEC notified the Company that its investigation had been terminated and no enforcement action had been recommended to the Commission.

The findings of the Audit Committee’s review are more fully described in Note 3 to the Consolidated Financial Statements and in Item 9A of the Annual Report on Form 10-K for the year ended September 30, 2006.

Prior to 2007, we were not profitable and we may incur losses in the future, which may raise vendor viability concerns thereby making it more difficult to close license transactions with new and existing customers.

While the Company was profitable in the amount of $6.0 million for the year ended September 30, 2007, we incurred losses of $16.0 million and $19.9 million for the years ended September 30, 2006 and 2005, respectively. As of September 30, 2007, we had an accumulated deficit of $226.9 million. We may incur losses in future periods and cannot be certain that we can generate sufficient revenues to maintain profitability. Continued losses may leave many customers reluctant to enter into new large value license transactions without some assurance that we will operate profitably. If we fail to enter into new large value license transactions due to viability concerns, our revenues will decline, which could further adversely affect our operating results.

Because a small number of customers account for a substantial portion of our revenues, the loss of a significant customer could cause a substantial decline in our revenues.

We derive a significant portion of our license and service revenues from a limited number of customers. The loss of a major customer could cause a decrease in revenues and net income. For the year ended September 30, 2007, Citicorp Credit Services, Inc. and International Business Machines (IBM) accounted for 23% and 16% of our total revenue, respectively. While our customer concentration has fluctuated, we expect that a limited number of customers will continue to account for a substantial portion of our revenues in any given period. As a result, if we lose a major customer, or if a contract is delayed or cancelled or we do not contract with new major customers, our revenues and net income would be adversely affected. In addition, customers that have accounted for significant revenues in the past may not generate revenues in any future period, causing our failure to obtain new significant customers or additional orders from existing customers to materially affect our operating results.

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If we fail to adequately address the difficulties of managing our international operations, our revenues and operating expenses will be adversely affected.

For the year ended September 30, 2007, international revenues were $58.8 million or approximately 47% of our total revenues. While North American revenues have increased recently as a percentage of our overall revenues, international revenues will continue to represent a significant portion of our total revenues in future periods. We have faced, and will continue to face, difficulties in managing international operations which include:

• Difficulties in hiring qualified local personnel;

• Seasonal fluctuations in customer orders;

• Longer accounts receivable collection cycles;

• Expenses associated with licensing products and servicing customers in foreign markets;

• Economic downturns and political uncertainty in international economies;

• Income tax withholding issues in countries in which we do not have a physical presence, resulting in non-recoverable tax payments;

• Complex transfer pricing arrangements between legal entities;

• Doing business and licensing our software to customers in countries with weaker intellectual property protection laws and enforcement capabilities; and

• Difficulties in commencing new operations in countries where the Company has not previously conducted business, including those associated with tax laws, employment laws, government regulation, product warranty laws and adopting to local customs and culture.

Any of these factors could have a significant impact on our ability to license products on a competitive and timely basis and could adversely affect our operating expenses and net income. Additionally, we closed our only French office in fiscal year 2007. The absence of a business office in France may harm our ability to attract and retain customers in that country.

Our known backlog of business may not result in revenue.

An increasingly material portion of our revenues has been derived from large orders, as major customers deployed our products. We define backlog as contractual commitments by our customers through purchase orders or contracts. Backlog is comprised of software license orders which have not been accepted by customers or have not otherwise met all of the required criteria for revenue recognition, deferred revenue from customer support contracts, and deferred consulting and education orders for services not yet completed or delivered. Backlog is not necessarily indicative of revenues to be recognized in a specified future period. There are many factors that would impact the Company’s filling of backlog, such as the Company’s progress in completing projects for its customers and Chordiant’s customers’ meeting anticipated schedules for customer-dependent deliverables. The Company provides no assurances that any portion of its backlog will be filled during any fiscal year or at all or that its backlog will be recognized as revenues in any given period. In addition, it is possible that customers from whom we expect to derive revenue from backlog will default and as a result we may not be able to recognize expected revenue from backlog.

Fluctuations in the value of the U.S. Dollar relative to foreign currencies could adversely affect our operating results and cash flows.

A significant portion of our sales and operating expenses result from transactions outside of the United States, often in foreign currencies. These currencies include the United Kingdom Pound Sterling, the Euro and the Canadian Dollar. Our international sales comprised 47% of our total sales for the year ended September 30, 2007. Our international sales comprised 38% of our total sales for the year ended September 30, 2006. Our future operating results will continue to be subject to fluctuations in foreign currency rates, especially if international sales grow as a percentage of our total sales, and we may be adversely impacted by fluctuations in foreign currency rates in the future. For the year ended September 30, 2007, we had an unrealized foreign currency transaction gain of approximately $0.6 million. See Item 7A for further discussion about foreign currency risk.

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Geopolitical concerns could make the closing of license transactions with new and existing customers difficult.

Our revenues may decrease in fiscal year 2008 or beyond if we are unable to enter into new large-scale license transactions with new and existing customers. The current state of world affairs and geopolitical concerns have left many customers reluctant to enter into new large value license transactions without some assurance that the economy both in the customer’s home country and worldwide will have some economic and political stability. Geopolitical instability will continue to make closing large license transactions difficult. In addition, we cannot predict what effect the U.S. military presence overseas or potential or actual political or military conflict have had or are continuing to have on our existing and prospective customers’ decision-making process with respect to licensing or implementing enterprise-level products such as ours. Our ability to enter into new large license transactions also directly affects our ability to create additional consulting services and post customer support revenues, on which we also depend.

Competition in our markets is intense and could reduce our sales and prevent us from achieving profitability.

Increased competition in our markets could result in price reductions for our products and services, reduced gross margins and loss of market share, any one of which could reduce our future revenues. The market for our products is intensely competitive, evolving and subject to rapid technological change. Historically, our primary competition has been from internal development, custom systems integration projects and application software competitors. In particular, we compete with:

• Internal information technology departments: in-house information technology departments of potential customers have developed or may develop systems that provide some or all of the functionality of our products. We expect that internally developed application integration and process automation efforts will continue to be a significant source of competition.

• Custom systems integration projects: we compete with large systems integrators who may develop custom solutions for specific companies which may reduce the likelihood that they would purchase our products and services.

• Point application vendors: we compete with providers of stand-alone point solutions for web-based customer relationship management and traditional client/server-based, call-center service customer and sales-force automation solution providers.

In addition, recent continuing consolidation in the software industry during 2007 may indicate that we will face new competitors in the future. Within the year Oracle announced the acquisitions of Agile Software, an enterprise solutions software maker and Hyperion Software, a business performance software maker. Also in 2007, IBM acquired Palisades, a provider of lending software to companies in the mortgage industry and SAP has made an offer to purchase Business Objects. In 2006, IBM acquired Webify, a provider of middleware to companies primarily in the insurance industry. In January 2006, Oracle acquired Siebel Systems, Inc., a maker of customer relationship management software products and acquired Portal Software, a provider of billing and revenue management solutions for the communications and media industry. Siebel Systems, Inc. was a competitor of ours. In September 2005, IBM had acquired DWL, a provider of middleware to companies in the banking, insurance, retail and telecommunications industries. In 2005, Oracle acquired I-flex Solutions, Ltd., a banking software maker headquartered in Mumbai, India. While we do not believe that Agile Software, Hyperion Software, Palisades, Webify, Portal Software, DWL, or I-flex Solutions have been significant competitors of Chordiant in the past, the acquisition of these companies by Oracle and IBM may indicate that we will face increased competition from significantly larger and more established entities in the future.

Many of our competitors have greater resources and broader customer relationships than we do. In addition, many of these competitors have extensive knowledge of our industry. Current and potential competitors have established, or may establish, cooperative relationships among themselves or with third parties to offer a single solution and to increase the ability of their products to address customer needs.

We may experience a shortfall in bookings, revenue, earnings, cash flow or otherwise fail to meet public market expectations, which could materially and adversely affect our business and the market price of our common stock.

Our revenues and operating results may fluctuate significantly because of a number of factors, many of which are outside of our control. Some of these factors include:

• Size and timing of individual license transactions;

• Delay or deferral of customer implementations of our products and subsequent impact on revenues;

• Lengthening of our sales cycle;

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• Potential deterioration and changes in domestic and foreign markets and economies;

• Success in expanding our global services organization, direct sales force and indirect distribution channels;

• Timing of new product introductions and product enhancements;

• Appropriate mix of products licensed and services sold;

• Levels of international transactions;

• Activities of and acquisitions by competitors;

• Product and price competition; and

• Our ability to develop and market new products and control costs.

One or more of the foregoing factors may cause our operating expenses to be disproportionately high during any given period or may cause our revenues and operating results to fluctuate significantly. Based upon the preceding factors, we may experience a shortfall in revenues and earnings or otherwise fail to meet public market expectations, which could materially and adversely affect our business, financial condition, results of operations and the market price of our common stock.

Our operating results and cash flows fluctuate significantly and delays in delivery or implementation of our products or changes in the payment terms with customers may cause unanticipated declines in revenues or cash flow, which could disappoint investors and result in a decline in our stock price.

Our quarterly revenues depend primarily upon product implementation by our customers. We have historically recognized a significant portion of our license and services revenue through the percentage-of-completion method, using labor hours incurred as the measure of progress towards completion of implementation of our products and we expect this practice to continue. The percentage of completion accounting method requires ongoing estimates of progress of complicated and frequently changing technology projects. Documenting the measure of progress towards completion of implementation is subject to potential errors and changes in estimates. As a result, even minor errors or minor changes in estimates may lead to significant changes in accounting results which may be revised in later quarters due to subsequent information and events. Thus, delays or changes in customer business goals or direction when implementing our software may adversely impact our quarterly revenue. Additionally, we may increasingly enter into term, subscription or transaction based licensing transactions that would cause us to recognize license revenue for such transactions over a longer period of time than we have historically experienced for our perpetual licenses. In addition, a significant portion of new customer orders have been booked in the third month of each calendar quarter, with many of these bookings occurring in the last two weeks of the third month. We expect this trend to continue and, therefore, any failure or delay in bookings would decrease our quarterly revenue and cash flows. The terms and conditions of individual license agreements with customers vary from transaction to transaction. Historically, the Company has been able to obtain prepayments for product in some cases. Other transactions link payment to the delivery or acceptance of products. If we are unable to negotiate prepayments of fees our cash flows and financial ratios with respect to accounts receivable would be adversely impacted. If our revenues, operating margins or cash flows are below the expectations of the investment community, our stock price is likely to decline.

If we fail to maintain and expand our relationships with systems integrators and other business partners, our ability to develop, market, sell, and support our products may be adversely affected.

Our development, marketing and distribution strategies rely on our ability to form and maintain long-term strategic relationships with systems integrators, in particular, our existing business alliance partners, IBM, and Accenture. These business relationships often consist of joint marketing programs, technology partnerships and resale and distribution arrangements. Although most aspects of these relationships are contractual in nature, many important aspects of these relationships depend on the continued cooperation between the parties. Divergence in strategy, change in focus, competitive product offerings or potential contract defaults may interfere with our ability to develop, market, sell, or support our products, which in turn could harm our business. If either IBM or Accenture were to terminate their agreements with us or our relationship were to deteriorate, it could have a material adverse effect on our business, financial condition and results of operations. In many cases, these parties have extensive relationships with our existing and potential customers and influence the decisions of these customers. A number of our competitors have stronger relationships with IBM and Accenture and, as a result, these systems integrators may be more likely to recommend competitors’ products and services. In addition, in September 2005, IBM had acquired DWL, a provider of middleware to companies in the banking, insurance, retail and telecommunications industries. In 2006, IBM acquired Webify, a

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provider of middleware to companies primarily in the insurance industry. In 2007, IBM acquired Palisades, a provider of lending software to companies in the mortgage industry and SAP has made an offer to purchase Business Objects. While we do not believe that either DWL, Webify, or Palisades had been a direct competitor of Chordiant in the past, IBM’s acquisition of DWL, Webify, and Palisades may indicate that IBM will become a competitor of ours in the future. While the Company currently has a good relationship with IBM, this relationship and the Company’s strategic relationship agreement with IBM may be harmed if the Company increasingly finds itself competing with IBM. Our relationships with systems integrators and their willingness to recommend our products to their customers could be harmed if the Company were to be subject to a take over attempt from a competitor of such systems integrators.

If systems integrators fail to properly implement our software, our business, reputation and financial results may be harmed.

We are increasingly relying on systems integrators to implement our products, and this trend may continue. As a result, we have less quality control over the implementation of our software with respect to these transactions and are more reliant on the ability of our systems integrators to correctly implement our software. If these systems integrators fail to properly implement our software, our business, reputation and financial results may be harmed.

Our primary products have a long sales and implementation cycle, which makes it difficult to predict our quarterly results and may cause our operating results to vary significantly.

The period between initial contact with a prospective customer and the implementation of our products is unpredictable and often lengthy, ranging from approximately three to twenty-four months. Thus, revenue and cash receipts could vary significantly from quarter to quarter. Any delays in the implementation of our products could cause reductions in our revenues. The licensing of our products is often an enterprise-wide decision that generally requires us to provide a significant level of education to prospective customers about the use and benefits of our products. The implementation of our products involves significant commitment of technical and financial resources and is commonly associated with substantial implementation efforts that may be performed by us, by the customer or by third party systems integrators. If we underestimate the resources required to meet the expectations we have set with a customer when we set prices, then the timing of revenue could be impacted. If this happens with a large customer engagement, then this could have a material adverse effect on our financial results. Customers generally consider a wide range of issues before committing to purchase our products, including product benefits, ability to operate with existing and future computer systems, vendor financial stability and longevity, ability to accommodate increased transaction volume and product reliability.

If we do not maintain effective internal controls over financial reporting, investors could lose confidence in our financial reporting and customers may delay purchasing decisions, which would harm our business and the market price of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our business could be harmed. We are a complex company with complex accounting issues and thus subject to related risks of errors in financial reporting which may cause problems in corporate governance, the costs of which may outweigh the costs of the underlying errors themselves. For example, the Audit Committee of the Company’s Board of Directors, with the assistance of outside legal counsel, conducted a review of our stock option practices covering the time from the Company’s initial public offering in 2000 through September 2006. The Audit Committee reached a conclusion that incorrect measurement dates were used for financial accounting purposes for stock option grants in certain prior periods. As a result, the Company has recorded additional non-cash stock-based compensation expense, and related tax effects, related to stock option grants and concluded that a material weakness surrounding the control activities relating to the stock option grants existed at September 30, 2006.To correct these accounting errors, we restated the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended September 30, 2006 and our Quarterly Report on Form 10-Q for the three months ended June 30, 2006. As a result of this need to restate financial statements, management and the Audit Committee determined that material weaknesses in our internal control over financial reporting existed as of September 30, 2006. These material weaknesses have contributed to increased expenses and efforts required for our financial reporting.

If we are not successful in implementing effective internal controls over financial reporting, customers may delay purchasing decisions or we may lose customers, create investor uncertainty, face litigation and the market price of our common stock may decline. For more information, please refer to the discussion under the heading “Item 9A. Controls and Procedures” in the 2006 Annual Report on Form 10-K.

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If we are not able to successfully manage our partner operations in India, our operations and financial results may be adversely affected.

In fiscal year 2003, we entered into an agreement with Ness Technologies Inc., Ness USA Inc. (formerly Ness Global Services, Inc.) and Ness Technologies India, Ltd. (collectively, “Ness”), an independent contracting company with global technical resources and an operations center in Bangalore, India and operations in other locations. The agreement provides for Ness, at our direction, to attract, train, assimilate and retain sufficient highly qualified personnel to perform staffing for consulting projects, technical support, product test and certain sustaining engineering functions. As of September 30, 2007, we use the services of approximately 146 consultants through Ness. In addition, as a result of the reduction in our workforce that took place in July 2005, and the reduction in our workforce that took place in October 2006, by approximately 10% in each instance, we are now more dependent on Ness. The expansion of this agreement is an important component of our strategy to address the business needs of our customers and manage our expenses. The success of this operation will depend on our ability and Ness’s ability to attract, train, assimilate and retain highly qualified personnel in the required periods. A disruption of our relationship with Ness could adversely affect our operations. Failure to effectively manage the organization and operations will harm our business and financial results.

If our products do not operate effectively in a company-wide environment, we may lose sales and suffer decreased revenues.

If existing customers have difficulty deploying our products or choose not to fully deploy our products, it could damage our reputation and reduce revenues. Our success requires that our products be highly scalable, and able to accommodate substantial increases in the number of users. Our products are expected to be deployed on a variety of computer software and hardware platforms and to be used in connection with a number of third party software applications by personnel who may not have previously used application software systems or our products. These deployments present very significant technical challenges, which are difficult or impossible to predict. If these deployments do not succeed, we may lose future sales opportunities and suffer decreased revenues. If we underestimate the resources required to meet the expectations we have set with a customer when we set prices, then the timing of revenue could be impacted. If this happens with a large customer engagement then this could have a material adverse effect on our financial results.

Defects in our products could diminish demand for our products and result in decreased revenues, decreased market acceptance and injury to our reputation.

Errors may be found from time-to-time in our new, acquired or enhanced products. Any significant software errors in our products may result in decreased revenues, decreased sales, and injury to our reputation and/or increased warranty and repair costs. Although we conduct extensive product testing during product development, we have in the past discovered software errors in our products as well as in third party products, and as a result have experienced delays in the shipment of our new products.

Because competition for qualified personnel is intense, we may not be able to retain or recruit personnel, which could impact the development and sales of our products.

If we are unable to hire or retain qualified personnel, or if newly hired personnel fail to develop the necessary skills or fail to reach expected levels of productivity, our ability to develop and market our products will be weakened. Our success depends largely on the continued contributions of our key management, finance, engineering, sales and marketing and professional services personnel. In particular in prior years, we have had significant turnover of our executives as well in our sales, marketing and finance organizations and many key positions are held by people who have less than two years of experience in their roles with one Company. If these people are not well suited to their new roles, then this could result in the Company having problems in executing its strategy or in reporting its financial results. Because of the dependency on a small number of large deals, we are uniquely dependent upon the talents and relationships of a few executives and have no guarantee of their retention. Changes in key sales management could affect our ability to maintain existing customer relationships or to close pending transactions. We have been targeted by recruitment agencies seeking to hire our key management, finance, engineering, sales and marketing and professional services personnel. In addition, in July 2005 and again in October of 2006, we reduced the size of our workforce by approximately 10% in each instance, which may have a negative effect on our ability to attract and retain qualified personnel.

To date, our sales have been concentrated in the banking, insurance, healthcare, and telecommunications markets, and if we are unable to continue sales in these markets or successfully penetrate new markets, or if these industries reduce their spending in reaction to the difficulties in the subprime lending market, our revenues may decline.

Sales of our products and services in five large markets—banking, insurance, healthcare, telecommunications and retail markets accounted for approximately 99% and 96 % of our total revenues for the year ended September 30, 2007 and 2006, respectively. We expect that revenues from these five markets will continue to account for a substantial portion of our total revenues for the foreseeable future. If we are unable to successfully increase penetration of our existing markets or achieve sales

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in additional markets, or if the overall economic climate of our target markets deteriorates, our revenues may decline. Some of our current or prospective customers, especially those in the banking and insurance industries are in businesses that have or could have exposure, directly or indirectly, to the residential mortgage sector or homebuilder sector which has recently been facing financial difficulties.  If this causes our current or prospective customers to reduce their spending on technology, then this could have an adverse impact on our sales and revenues

Low gross margin in services revenues could adversely impact our overall gross margin and operating results.

Our services revenues have had lower gross margins than our license revenues. Service revenues comprised 57% and 58% of our total revenues for the year ended September 30, 2007 and 2006, respectively. Gross margin on service revenues was 57% and 46% for the year ended September 30, 2007 and 2006, respectively. License revenues comprised 43% and 42% of our total revenues for the years ended September 30, 2007 and 2006, respectively. Gross margins on license revenues were 97% and 96% for the years ended September 30, 2007 and 2006, respectively.

As a result, an increase in the percentage of total revenues represented by services revenues, or an unexpected decrease in license revenues, could have a detrimental impact on our overall gross margins. An increase to services revenues would require us to expand our services organization, successfully recruit and train a sufficient number of qualified services personnel, enter into new implementation projects and obtain renewals of current maintenance contracts by our customers. Such an expansion could further reduce gross margins in our services revenues.

We may not have the workforce necessary to support our platform of products if demand for our products substantially increased, and, if we need to rebuild our workforce in the future, we may not be able to recruit personnel in a timely manner, which could adversely impact the development and sales of our products which would directly impact our operating results.

In July 2005 and again in October of 2006, we reduced the size of our workforce by approximately 10% in each instance. In the event that demand for our products increases, we may need to rebuild our workforce or increase outsourced functions to companies based in foreign jurisdictions and we may be unable to hire, train or retain qualified personnel in a timely manner, which may weaken our ability to market our products in a timely manner, adversely impacting our operations. Our success depends largely on ensuring that we have adequate personnel to support our platform of products as well as the continued contributions of our key management, finance, engineering, sales and marketing and professional services personnel.

If we fail to introduce new versions and releases of functional and scalable products in a timely manner, customers may license competing products and our revenues may decline.

If we are unable to ship or implement enhancements to our products when planned, or fail to achieve timely market acceptance of these enhancements, we may suffer lost sales and could fail to achieve anticipated revenues. We have in the past, and expect in the future, to derive a significant portion of our total revenues from the license of our primary product suite. Our future operating results will depend on the demand for the product suite by future customers, including new and enhanced releases that are subsequently introduced. If our competitors release new products that are superior to our products in performance or price, or if we fail to enhance our products or introduce new features and functionality in a timely manner, demand for our products may decline and we may not be able to recover our R&D expenditures from such products. We have in the past experienced delays in the planned release dates of new versions of our software products and upgrades. New versions of our products may not be released on schedule or may contain defects when released.

We depend on technology licensed to us by third parties, and the loss or inability to maintain these licenses could prevent or delay sales of our products.

We license from several software providers technologies that are incorporated into our products. We anticipate that we will continue to license technology from third parties in the future. This software may not continue to be available on commercially reasonable terms, if at all. While currently we are not materially dependent on any single third party for such licenses, the loss of the technology licenses could result in delays in the license of our products until equivalent technology is developed or identified, licensed and integrated into our products. Even if substitute technologies are available, there can be no guarantee that we will be able to license these technologies on commercially reasonable terms, if at all.

Defects in third party products associated with our products could impair our products’ functionality and injure our reputation.

The effective implementation of our products depends upon the successful operation of third party products in conjunction with our products. Any undetected defects in these third party products could prevent the implementation or impair the

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functionality of our products, delay new product introductions or injure our reputation. In the past, while our business has not been materially harmed, product releases have been delayed as a result of errors in third party software and we have incurred significant expenses fixing and investigating the cause of these errors.

Our customers and systems integration partners may have the ability to alter our source code and resulting inappropriate alterations could adversely affect the performance of our products, cause injury to our reputation and increase operating expenses.

Customers and systems integration partners may have access to the computer source code for certain elements of our products and may alter the source code. Alteration of our source code may lead to implementation, operation, technical support and upgrade problems for our customers. This could adversely affect the market acceptance of our products, and any necessary investigative work and repairs could cause us to incur significant expenses and delays in implementation.

If our products do not operate with the hardware and software platforms used by our customers, our customers may license competing products and our revenues will decline.

If our products fail to satisfy advancing technological requirements of our customers and potential customers, the market acceptance of these products could be reduced. We currently serve a customer base with a wide variety of constantly changing hardware, software applications and networking platforms. Customer acceptance of our products depends on many factors such as:

• Our ability to integrate our products with multiple platforms and existing or legacy systems; and,

• Our ability to anticipate and support new standards, especially Internet and enterprise Java standards.

A failure in our initial attempt to deploy our software through a Software as a Service (SaaS) model could cause injury to our reputation and impair our ability to develop, market and sell our products under a SaaS model.

We recently entered into a license with a third party that will allow that third party to develop and host in their data centers, applications based on our software to provide services to their customers, most of whom are in markets that we do not currently penetrate.  As we have no previous experience in deploying our software in a SaaS model, a failure of this effort could have a detrimental effect to our ability to attract other third parties to use our software in their SaaS businesses.

Our failure to successfully integrate with future acquired or merged companies and technologies could prevent us from operating efficiently.

Our business strategy includes pursuing opportunities to grow our business, both through internal growth and through merger, acquisition and technology and other asset transactions. To implement this strategy, we may be involved in merger and acquisition activity and additional technology and asset purchase transactions. Merger and acquisition transactions are motivated by many factors, including, among others, our desire to grow our business, acquire skilled personnel, obtain new technologies and expand and enhance our product offerings. Growth through mergers and acquisitions has several identifiable risks, including difficulties associated with successfully integrating distinct businesses into new organizations, the substantial management time devoted to integrating personnel, technology and entire companies, the possibility that we might not be successful in retaining the employees, undisclosed liabilities, the failure to realize anticipated benefits (such as cost savings and synergies) and issues related to integrating acquired technology, merged/acquired companies or content into our products (such as unanticipated expenses). Realization of any of these risks in connection with any technology transaction or asset purchase we have entered into, or may enter into, could have a material adverse effect on our business, operating results, cash balances, and financial condition.

If we become subject to intellectual property infringement claims, including patent infringement claims, these claims could be costly and time-consuming to defend, divert management’s attention, cause product delays and have an adverse effect on our revenues and net income.

We expect that software product developers and providers of software in markets similar to our target markets will increasingly be subject to infringement claims as the number of products and competitors in our industry grows and the functionality of products overlap. Any claims, with or without merit, could be costly and time-consuming to defend, divert our management’s attention or cause product delays. If any of our products were found to infringe a third party’s proprietary rights, we could be required to enter into royalty or licensing agreements to be able to sell our products. Royalty and licensing agreements, if required, may not be available on terms acceptable to us or at all.

In particular, if we were sued for patent infringement by a patent holding company, one which has acquired large numbers of patents solely for the purpose of bringing suit against alleged infringers rather than practicing the patents, it may be costly to

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defend such a suit. We have received a letter from one such patent holding company alleging that our products may infringe one or more of their patents.  If any of our products were found to infringe such patent, the patent holder could seek an injunction to enjoin our use of the infringing product. If we were not able to remove or replace the infringing portions of software with non-infringing software, and were no longer able to license some or all of our software products, such an injunction would have an extremely detrimental effect on our business. If we were required to settle such claim, it could be extremely costly. A patent infringement claim could have a material adverse effect on our business, operating results and financial condition.

The application of percentage of completion and completed contract accounting to our business is complex and may result in delays in the reporting of our financial results and revenue not being recognized as we expect.

Although we attempt to use standardized license agreements designed to meet current revenue recognition criteria under generally accepted accounting principles, we must often negotiate and revise terms and conditions of these standardized agreements, particularly in multi-product transactions. At the time of entering into a transaction, we assess whether any services included within the arrangement require us to perform significant implementation or customization essential to the functionality of our products. For contracts involving significant implementation or customization essential to the functionality of our products, we recognize the license and professional consulting services revenues using the percentage-of-completion method using labor hours incurred as the measure of progress towards completion. The application of the percentage of completion method of accounting is complex and involves judgments and estimates, which may change significantly based on customer requirements. This complexity combined with changing customer requirements could result in delays in the proper determination of our percentage of completion estimates and revenue not being recognized as we expect.

We have also entered into co-development projects with our customers to jointly develop new vertical applications, often over the course of a year or longer. In such cases we may only be able to recognize revenue upon delivery of the new application. The accounting treatment for these co-development projects could result in delays in the recognition of revenue. The failure to successfully complete these projects to the satisfaction of the customer could have a material adverse effect on our business, operating results and financial condition.

Changes in our revenue recognition model could result in short term declines to revenue.

Historically, a high percentage of license revenues have been accounted for on the percentage of completion method of accounting or recognized as revenue upon the delivery of product. If we were to enter into new types of transactions accounted for on a subscription or term basis, revenues might be recognized over a longer period of time. The impact of this change would make revenue recognition more predictable over the long term, but it might also result in a short term reduction of revenue as the new transactions took effect.

We may identify material weaknesses relating to internal control over financial reporting in the future, which may result in additional expenses and diversion of management’s time as a result of performing future system and process evaluation, testing and remediation required to comply with future management assessment and auditor attestation requirements.

In connection with the Company’s compliance with Section 404 under SOX for the fiscal years ended September 30, 2006 and 2005, we identified certain material weaknesses. In future periods, we will continue to document our internal controls to allow management to report on, and our independent registered public accounting firm to attest to, our internal control, over financial reporting as required by Section 404 of SOX, within the time frame required by Section 404. In the future, we may incur additional expenses and diversion of management’s time as a result of performing the system and process evaluation, testing and remediation required to comply with management’s assessment and auditor attestation requirements. If we are not able to timely comply with the requirements set forth in Section 404 in future periods, we might be subject to sanctions or investigation by the regulatory authorities. Any such action could adversely affect our business or financial results.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters are located in offices that are approximately 25,000 square feet in Cupertino, California pursuant to an office lease expiring in December 2008. We also lease office space in Mahwah, New Jersey and Bedford, New Hampshire. Outside of the United States, we have offices in the greater metropolitan areas of London, Madrid, Amsterdam, and Munich. We believe our existing facilities meet our current needs and that we will be able to obtain additional commercial space as needed.

ITEM 3. LEGAL PROCEEDINGS

Beginning in July 2001, the Company and certain of our officers and directors, or Individuals, were named as defendants in a series of class action stockholder complaints filed in the United States District Court for the Southern District of New York, now consolidated under the caption, “In re Chordiant Software, Inc. Initial Public Offering Securities Litigation, Case No. 01-CV-6222”. In the amended complaint, filed in April 2002, the plaintiffs allege that the Company, the Individuals, and the underwriters of our initial public offering, or IPO, violated section 11 of the Securities Act of 1933 and section 10(b) of the Exchange Act of 1934 based on allegations that our registration statement and prospectus failed to disclose material facts regarding the compensation to be received by, and the stock allocation practices of, our IPO underwriters. The complaint also contains claims against the Individuals for control person liability under Securities Act section 15 and Exchange Act section 20. The plaintiffs seek unspecified monetary damages and other relief. Similar complaints were filed in the same court against hundreds of other public companies, or Issuers, that conducted IPO’s of their common stock in the late 1990’s or in the year 2000 (collectively, the “IPO Lawsuits”).

In August 2001, all of the IPO Lawsuits were consolidated for pretrial purposes before United States Judge Shira Scheindlin of the Southern District of New York. In July 2002, the Company joined in a global motion to dismiss the IPO Lawsuits filed by all of the Issuers (among others). In October 2002, the Court entered an order dismissing the Individuals from the IPO Lawsuits without prejudice, pursuant to an agreement tolling the statute of limitations with respect to the Individuals. In February 2003, the court issued a decision denying the motion to dismiss against Chordiant and many of the other Issuers.

In June 2003, Issuers and plaintiffs reached a tentative settlement agreement that would, among other things, result in the dismissal with prejudice of all claims against the Issuers and Individuals in the IPO Lawsuits, and the assignment to plaintiffs of certain potential claims that the Issuers may have against the underwriters. The tentative settlement also provides that, in the event that plaintiffs ultimately recover less than a guaranteed sum of $1 billion from the IPO underwriters, plaintiffs would be entitled to payment by each participating Issuer’s insurer of a pro rata share of any shortfall in the plaintiffs’ guaranteed recovery. In September 2003, in connection with the possible settlement, those Individuals who had entered tolling agreements with plaintiffs (described above) agreed to extend those agreements so that they would not expire prior to any settlement being finalized. In June 2004, Chordiant and almost all of the other Issuers entered into a formal settlement agreement with the plaintiffs. On February 15, 2005, the Court issued a decision certifying a class action for settlement purposes, and granting preliminary approval of the settlement subject to modification of certain bar orders contemplated by the settlement. On August 31, 2005, the Court reaffirmed class certification and preliminary approval of the modified settlement in a comprehensive Order, and directed that Notice of the settlement be published and mailed to class members beginning November 15, 2005. On February 24, 2006, the Court dismissed litigation filed against certain underwriters in connection with the claims to be assigned to the plaintiffs under the settlement. On April 24, 2006, the Court held a Final Fairness Hearing to determine whether to grant final approval of the settlement. On December 5, 2006, the Second Circuit Court of Appeals vacated the lower Court's earlier decision certifying as class actions the six IPO Lawsuits designated as "focus cases." Thereafter, the District Court ordered a stay of all proceedings in all of the IPO Lawsuits pending the outcome of plaintiffs’ petition to the Second Circuit for rehearing en banc and resolution of the class certification issue. On April 6, 2007, the Second Circuit denied plaintiffs’ rehearing petition, holding that the actions could not be maintained as pled but clarifying that the plaintiffs may seek to certify a more limited class in the District Court. Accordingly, the settlement as originally negotiated will not be finally approved. Plaintiffs had until July 31, 2007 in which to file amended complaints against all Issuers, including Chordiant.

Plaintiffs filed amended complaints in the six focus cases on or about August 14, 2007.  In September 2007, the Company's named officers and directors again extended the tolling agreement with plaintiffs.  On or about September 27, 2007, plaintiffs moved to certify the classes alleged in the focus cases and to appoint class representatives and class counsel in those cases.  On or about November 13, 2007, Issuers in the focus cases filed a motion to dismiss the claims alleged against them in the amended complaints.  This action may divert the efforts and attention of our management and, if determined adversely to us, could have a material impact on our business, results of operations, financial condition or cash flows. 

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On August 1, 2006, a stockholder derivative complaint was filed in the United States District Court for the Northern District of California by Jesse Brown under the caption Brown v. Kelly, et al. Case No. C06-04671 JW (N.D. Cal.). On September 13, 2006, a second stockholder derivative complaint was filed in the United States District Court for the Northern District of California by Louis Suba under the caption Suba v. Kelly et al., Case No. C06-05603 JW (N.D. Cal.). Both complaints were brought purportedly on behalf of the Company against certain current and former officers and directors. On November 27, 2006, the court entered an order consolidating these actions and requiring the plaintiffs to file a consolidated complaint. The consolidated complaint was filed on January 11, 2007. The consolidated complaint alleges, among other things, that the named officers and directors: (a) breached their fiduciary duties as they colluded with each other to backdate stock options, (b) violated section 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder through their alleged actions, and (c) were unjustly enriched by their receipt and retention of such stock options. On May 21, 2007, the Company filed a motion to dismiss the entire action on the grounds that the plaintiffs failed to take the steps necessary to bring a derivative action. The individual defendants filed motions to dismiss as well. The parties have agreed that the plaintiffs' opposition to the motions to dismiss would not be due until October 25, 2007, in order to permit the parties an opportunity to explore a resolution of this dispute. The hearing on the motion to dismiss is set for November 26, 2007.  The Plaintiffs have recently informed Chordiant that they intend to file an amended derivative complaint.  This will render the currently filed motion to dismiss moot and a new motion to dismiss will have to be filed in response to the amended pleading. The parties have stipulated to a schedule for filing the amended complaint and for briefing motions to dismiss, but the court has not yet entered this stipulation as an order. 

In September 2006, the Company received a letter from Acacia Technologies Group, a patent holding company, suggesting that the Company may be infringing on two patents, designated by United States Patent Numbers 5,537,590 and 5,701,400, which are held by one of their patent licensing and enforcement subsidiaries.  The Company is currently reviewing the validity of these patents and whether the Company’s products may infringe upon them.  The Company has not formed a view of whether the Company may have liability for infringement of these patents. Any related claims, whether or not they have merit, could be costly and time-consuming to defend, divert our management’s attention or cause product delays. If any of our products were found to infringe such patents, the patent holder could seek an injunction to enjoin our use of the infringing product. If the Company was required to settle such a claim, it could have a material impact on our business, results of operations, financial condition or cash flows.

The Company is also subject to various other claims and legal actions arising in the ordinary course of business. The ultimate disposition of these various other claims and legal actions is not expected to have a material effect on our business, financial condition, results of operations or cash flows. However, litigation is subject to inherent uncertainties.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the Nasdaq Global Market under the symbol “CHRD.” The following table shows, for the periods indicated, the high and low per share sales prices of our common stock, as reported by the NASDAQ Global Market. The prices appearing in the tables below reflect over-the-counter market quotations, which reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions. The high and low per share prices reflects the 1 for 2.5 reverse stock split on February 20, 2007.

	High		Low
Year Ended September 30, 2007
First Quarter (October 1 - December 31)	$	8.27	$	6.95
Second Quarter (January 1 - March 31)	$	10.35	$	7.82
Third Quarter (April 1 - June 30)	$	16.02	$	10.37
Fourth Quarter (July 1 - September 30)	$	16.25	$	12.94
Year Ended September 30, 2006
First Quarter (October 1 - December 31)	$	7.50	$	6.22
Second Quarter (January 1 - March 31)	$	8.82	$	6.40
Third Quarter (April 1 - June 30)	$	9.00	$	7.15
Fourth Quarter (July 1 - September 30)	$	8.00	$	5.72

As of October 31, 2007, there were approximately 194 holders of record of our common stock who together held approximately 204,362 shares of our common stock. The remainder of our outstanding shares is held by brokers and other institutions on behalf of stockholders. We have never paid or declared any cash dividends and do not intend to pay dividends for the foreseeable future. We currently expect to retain working capital for use in the operation and expansion of our business and therefore do not anticipate paying any cash dividends.

In response to the SEC’s adoption of Rule 10b5-1 under the Securities Exchange Act of 1934, we approved amendments to our insider trading policy on July 20, 2001 to permit our directors, executive officers and certain key employees to enter into trading plans or arrangements for systematic trading in our securities. We have been advised that certain of our directors, officers and key employees have entered into trading plans for selling shares in our securities. As of September 30, 2007, the directors and executive officers who have entered into trading plans include Derek Witte, Frank Florence, and James D. St. Jean. We anticipate that, as permitted by Rule 10b5-1 and our insider trading policy, some or all of our directors, executive officers and employees may establish trading plans at some date in the future.

Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding our equity compensation plans, including both stockholder approved plans and non-stockholder approved plans, will be contained in our definitive Proxy Statement with respect to our Annual Meeting of Stockholders under the caption “Equity Compensation Plan Information,” and is incorporated by reference into this report.

Recent Sales of Unregistered Securities

None.

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PERFORMANCE MEASUREMENT COMPARISON

The following graph shows the five-year cumulative total stockholder return of an investment of $100 in cash on September 30, 2002 for:

(i)	Our common stock;
(ii)	The Nasdaq Stock Market (U.S.) Index;
(iii)	The Standard & Poor’s Application Software Index.

Historic stock price performance is not necessarily indicative of future stock price performance. All values assume reinvestment of the full amount of all dividends, of which there were none, and are calculated as of September 30 of each year.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

We derived the selected financial data as of September 30, 2007 and 2006 and for the years ended September 30, 2007, 2006, and 2005 from our audited consolidated financial statements and notes thereto appearing in this Form 10-K. We derived the selected financial data as of September 30, 2005 and for the nine-months ended September 30, 2004 from our 2006 Consolidated Financial Statements in the 2006 Annual Report on Form 10-K. The consolidated statements of operations data for the year ended December 31, 2003 and the consolidated balance sheets as of September 30, 2004 and December 31, 2003 have been restated to conform to the restated consolidated financial statements and are presented herein on an unaudited basis. The following selected financial data set forth below is not necessarily indicative of results of future operations, and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes thereto included in Item 8 of this Annual Report on Form 10-K to fully understand factors that may affect the comparability of the information presented below. The financial data below reflects the 1 for 2.5 reverse stock split on February 20, 2007.

	Years Ended September 30,									Nine Months Ended September 30,			Year Ended December 31,
		2007		2006			2005			2004			2003
													(unaudited)
	(amounts in thousands, except per share data)
Consolidated Statements of Operations Data:
Revenues	$	124,547	$	97,536		$	83,725		$	61,023		$	68,266
Net income (loss)		6,028		(16,001	)		(19,865	)		(1,371	)		(17,932	)
Net income (loss) per share—basic		0.19		(0.51	)		(0.67	)		(0.05	)		(0.76	)
Net income (loss) per share—diluted	$	0.18	$	(0.51	)	$	(0.67	)	$	(0.05	)	$	(0.76	)
Weighted average shares used in computing net income (loss) per share—basic		32,425		31,073			29,780			27,904			23,741
Weighted average shares used in computing net income (loss) per share—diluted		33,261		31,073			29,780			27,904			23,741
	As of September 30,												As of December 31,
		2007		2006			2005			2004			2003
										(unaudited)			(unaudited)
	(amounts in thousands)
Consolidated Balance Sheets Data:
Cash, cash equivalents, and marketable securities	$	90,146	$	45,278		$	38,546		$	59,748		$	36,399
Working capital		56,447		22,323			23,733			46,296			19,480
Total assets		164,815		111,503			107,250			115,340			83,811
Current and long term portion of capital lease obligations		—		95			309			508			—
Short-term and long-term deferred revenue		67,982		29,505			26,197			20,581			18,396
Stockholders’ equity	$	73,361	$	57,225		$	65,157		$	75,912		$	48,350

No dividends have been paid or declared since our inception. Effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 142, or SFAS 142, “Goodwill and Other Intangible Assets,” and ceased amortizing goodwill balances. Effective October 1, 2005, the Company adopted SFAS No. 123R as more fully described in Note 2 to the Consolidated Financial Statements contained in this Annual Report.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor

The following discussion and analysis contains forward-looking statements. These statements are based on our current expectations, assumptions, estimates and projections about our business and our industry, and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s results, levels of activity, performance or achievement to be materially different from any future results, levels of activity, performance or achievements expressed or implied in or contemplated by the forward-looking statements. Words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “should,” “estimate,” “predict,” “guidance,” “potential,” “continue” or the negative of such terms or other similar expressions, identify forward-looking statements. Our actual results and the timing of events may differ significantly from those discussed in the forward-looking statements as a result of various factors, including but not limited to, those discussed in Item 1 of this Form 10-K under the caption “Risk Factors” and those discussed elsewhere in this Annual Report and in our other filings with the Securities and Exchange Commission. Chordiant undertakes no obligation to update any forward-looking statement to reflect events after the date of this report.

Reverse Stock Split

On December 13, 2006, Chordiant’s Board of Directors approved a reverse two and a half to one stock split. On February 15, 2007 at a special meeting, stockholders approved the reverse stock split such that each outstanding two and one half (2.5) shares of common stock were combined into and became one (1) share of common stock. The reverse stock split was effective February 20, 2007. All share and per share amounts in this form 10-K has been retroactively adjusted to reflect the reverse stock split for all periods presented.

Executive Overview

As an enterprise software vendor, we generate substantially all of our revenues from the banking, insurance, healthcare, telecommunications, and retail industries. Our customers typically fund purchases of our software and services out of their lines of business and information technology budgets. As a result, our revenues are heavily influenced by our customers’ long-term business outlook and willingness to invest in new enterprise information systems and business applications.

In fiscal year 2007, we recorded revenue of $124.5 million. In fiscal year 2007, we generated $6.0 million of net income and ended the fiscal year with over $90.1 million in cash, cash equivalents and marketable securities as compared to $45.3 million for the year ended September 30, 2006.

Total revenue for the year ended September 30, 2007 increased 28% to $124.5 million from $97.5 million of the prior year. The growth in revenue was evenly distributed between license and service revenue, each increasing by $13.5 million. The increase in license revenue was primarily driven by an increase in the transaction size of license transactions in excess of $1 million as compared to the prior year. The increase in service revenue was primarily composed of an increase in consulting revenue of $5.2 million, an increase in support and maintenance revenue of $8.9 million and an increase of $0.5 million in expense reimbursement revenue offset by a decrease in training revenue of $1.0 million.

In the past an increase in license revenue has resulted in a related increase in consulting revenue as our customers request us to assist with their implementation efforts. The increase in support and maintenance revenue is expected to continue if we are able to add new licenses to our existing base of licenses at a rate greater than customers opting not to renew their annual support and maintenance contracts.

Software Industry Consolidation and Possible Increased Competition

The software industry in general is continuing to undergo a period of consolidation, and there has been recent consolidation in sectors of the software industry in which we operate. Within the year Oracle announced the acquisitions of Agile Software, an enterprise solutions software maker and Hyperion Software, a business performance software maker. Also in 2007, IBM acquired Palisades, a provider of lending software to companies in the mortgage industry and SAP has made an offer to purchase Business Objects. In 2006, IBM acquired Webify, a provider of middleware to companies primarily in the insurance industry. In January 2006, Oracle acquired Siebel Systems, Inc., a maker of customer relationship management software products and acquired Portal Software, a provider of billing and revenue management solutions for the communications and media industry. Siebel Systems, Inc. was a competitor of ours. In September 2005, IBM had acquired DWL, a provider of middleware to companies in the banking, insurance, retail and telecommunications industries. In 2005, Oracle acquired I-flex Solutions, Ltd., a banking software maker headquartered in Mumbai, India. While we do not believe that Agile Software, Hyperion Software, Palisades, Webify, Portal Software, DWL, or I-flex Solutions have been significant competitors of Chordiant in the past, the acquisition of these companies by Oracle and IBM may indicate that we will face increased competition from larger and more established entities in the future.

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Financial Trends

Backlog. An increasingly material portion of our revenues have been derived from large customer transactions. For some of these transactions, the associated professional services provided to the customer can span over a period greater than one year. If the services delivery period is over a prolonged period of time, it will cause the associated backlog to be recognized as revenue over a similar period of time. As of September 30, 2007 and 2006, we had approximately $75.4 million and $36.0 million in backlog, respectively, which we define as contractual commitments by our customers through purchase orders or contracts. This increase in backlog is partially reflected in the growth of deferred revenue recorded on our balance sheet. For the period ended September 30, 2006 to September 30, 2007 deferred revenue increased $38.4 million due to an increase of $20.6 million in short-term deferred revenue and a $17.8 million increase in long-term deferred revenue. The increase in long-term deferred revenue was primarily driven by entering into multi-year support and maintenance contracts with our customers. Backlog is comprised of:

• software license orders for which the delivered products have not been accepted by customers or have not otherwise met all of the required criteria for revenue recognition. This component includes billed amounts classified as deferred revenue;

• deferred revenue from customer support contracts;

• consulting service orders representing the unbilled remaining balances of consulting contracts not yet completed or delivered, plus deferred consulting revenue where we have not otherwise met all of the required criteria for revenue recognition.

Backlog is not necessarily indicative of revenues to be recognized in a specified future period. There are many factors that would impact Chordiant’s conversion of backlog as recognizable revenue, such as Chordiant’s progress in completing projects for its customers, Chordiant’s customers’ meeting anticipated schedules for customer-dependent deliverables and customers increasing the scope or duration of a contract causing license revenue to be deferred for a longer period of time.

Chordiant provides no assurances that any portion of its backlog will be recognized as revenue during any fiscal year or at all, or that its backlog will be recognized as revenues in any given period. In addition, it is possible that customers from whom we expect to derive revenue from backlog will default, and as a result, we may not be able to recognize expected revenue from backlog.

For the year ended September 30, 2007, we entered into several large customer orders resulting in a significant portion of our near term license revenues being recognized under the percentage-of-completion method of accounting such that our deferred revenue balance increased. These orders will require consulting services that are essential to the functionality of the respective licenses.

Implementation by Third Parties. Over time, as our products mature and system integrators become more familiar with our products, our involvement with implementations has diminished on some projects. If this trend continues to evolve, certain agreements with customers may transition from a contract accounting model (SOP 81-1) to a more traditional revenue model whereby revenues are recorded upon delivery.

Service Revenues. Service revenues as a percentage of total revenues were 57%, 58%, and 62% for the years ended September 30, 2007, 2006, and 2005, respectively. We expect that service revenues will represent between 50% and 60% of our total revenues in the foreseeable future.

Revenues from International Customers versus North America. For all periods presented, revenues were principally derived from customer accounts in North America and Europe. For the years ended September 30, 2007, 2006, and 2005, international revenues were $58.8 million, $37.5 million, and $42.0 million or approximately 47%, 38%, and 50% of our total revenues, respectively. We believe international revenues will continue to represent a significant portion of our total revenues in future periods. The significant increase in international revenue for year ended September 30, 2007, as compared to the prior fiscal year was due to an improved economy for the region as well as an improved sales production for the region resulting from the new management team that was put in place over the past several quarters. International revenues were favorably impacted for the year ended September 30, 2007, as compared to the year ended September 30, 2006, as both the British Pound and the Euro increased in average value by approximately 9% and 8%, respectively, as compared to the U.S. Dollar. International revenues were negatively impacted for the year ended September 30, 2006, as compared to the year ended September 30, 2005, as both the British Pound and the Euro decreased in average value by less than 1% and approximately 3%, respectively, as compared to the U.S. Dollar.

For the years ended September 30, 2007, 2006, and 2005, North America revenues were $65.7 million, $60.0 million, and $41.7 million or approximately 53%, 62%, and 50% of our total revenues, respectively. As the U.S. economy has remained

27

strong, we have seen an increase in North America revenues. Large customers have become more willing to invest in new enterprise infrastructure projects. We believe North America revenues will continue to represent 50% to 60% of our total revenues in the future.

Gross margins. Management focuses on license and service gross margin in evaluating our financial condition and operating performance. Gross margins on license revenues were 97%, 96%, and 97% for the years ended September 30, 2007, 2006, and 2005, respectively. The changes in gross margins are primarily related to the amortization expense associated with capitalized software development costs pertaining to a banking product. We expect license gross margin on current products to range from 95% to 97% in the foreseeable future. The margin will fluctuate with the mix of products sold. Historically, the enterprise solution products have higher associated third party royalty expense than the marketing solution products and decision management products.

Gross margins on service revenues were 57%, 46%, and 42% for the years ended September 30, 2007, 2006, and 2005, respectively. The increase in gross margins for the year ended September 30, 2007 is primarily due to improved consulting services utilization rates and increased support and maintenance revenue. We expect that gross margins on service revenue to range between 55% and 60% in the foreseeable future. Margins can be negatively impacted during, and immediately following, periods in which professional service department headcounts increase, as resources are not immediately billable.

Acquisition of KiQ Limited. On December 21, 2004, we acquired KiQ Limited, a privately-held United Kingdom software company with branch offices in the Netherlands, or KiQ, specializing in the development and sales of decision management systems. The year ended September 30, 2005 includes the revenue and expense of KiQ from the acquisition date, December 21, 2004, through the end of the fiscal year, September 30, 2005. The years ended September 30, 2007 and 2006 include the revenues and expenses of KiQ for the entire fiscal year.

Costs Related to Compliance with the Sarbanes-Oxley Act of 2002. Significant professional service expenses are included in general and administrative costs relating to efforts to comply with the Sarbanes-Oxley Act of 2002. For the years ended September 30, 2007, 2006, and 2005, these costs were $1.0 million, $1.8 million, and $4.5 million, respectively. While these costs are expected to continue into the next fiscal year, the decline in amount and timing of the costs through fiscal year 2008 is uncertain as compared to the costs incurred for the year ended September 30, 2007.

Costs Related to Stock Option Investigation. Significant outside professional services are included in general and administrative costs associated with the Company’s stock option investigation which began in July 2006 and was completed during the quarter ended March 31, 2007. This issue is more fully described in the in Note 3, “Restatement of Previously Issued Consolidated Financial Statements” in Notes to Consolidated Financial Statements of the Annual Report on Form 10-K for the fiscal year ended September 30, 2006. For the year ended September 30, 2007 and 2006, these costs were $1.8 and $1.2 million, respectively. We have not incurred any additional costs since the quarter ended March 31, 2007 and do not expect to incur such costs in future periods.

Cost to Amend Eligible Options. In July 2006, our Board of Directors (the “Board”) initiated a review of our historical stock option grant practices and appointed the Audit Committee to oversee the investigation. The Audit Committee determined that the correct measurement dates for a number of stock option grants made by us during the period 2000 to 2006, or Review Period, differ from the measurement dates previously used to account for such option grants. The Audit Committee identified errors related to the determination of the measurement dates for grants of options where the price of our common stock on the selected grant date was lower than the price on the actual grant date which would permit recipients to exercise these options at a lower exercise price. As such, these affected stock options are deemed, for accounting purposes, to have been granted at a discount. Based on the determination made for accounting purposes, the discounted options (for accounting purposes) may now be deemed to have been granted at a discount for tax purposes, which may expose the holders of these impacted stock option grants to potentially adverse tax treatment under Section 409A of the Internal Revenue Code and state law equivalents. As more fully described on Form SC TO-I filed with the SEC on March 29, 2007, Chordiant offered certain optionees the opportunity to increase the exercise price of the discounted options to limit the potential adverse personal tax consequences that may apply to those stock options under Section 409A of the Internal Revenue Code and state law equivalents. On April 26, 2007, eligible optionees finalized their elections under the offer and were awarded a future cash payment equal to the price differential of the Amended Options. These payments will be treated as bonus payments. These cash payments will be approximately $0.3 million and will be paid out in January 2008. The cost of these bonus payments were fully accrued as of September 30, 2007.

Reduction in Workforce. In October 2006, the Company initiated a restructuring plan intended to align its resources and cost structure with expected future revenues. The restructuring plan included a balancing of services resources worldwide, an elimination of duplicative functions internationally, and a shift in the U.S. field organization toward a focus on domain-based sales and pre-sales teams.

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The restructuring plan included an immediate reduction in positions of slightly more than ten percent of the Company's workforce, consolidation of our European facilities, and the closure of our France office. A majority of the positions eliminated were in Europe. The plan was committed to on October 24, 2006, and we began notifying employees on October 25, 2006.

We recorded a pre-tax cash restructuring expense of $6.1 million as calculated using the net present value of the related costs as required by SFAS 146. The expense was composed of $1.8 million for severance costs and $4.4 million for exiting excess facilities of which $1.0 million of the excess facility expense is associated with non-cash expenses for the write-off of leasehold improvements and the reversal of a favorable purchase price adjustment related to the France office lease. We anticipated that $5.1 million of the expense would result in cash expenditures. As of September 30, 2007, we have paid $2.7 million in cash payments and expect to pay the remaining $2.5 million during the first six months of fiscal year 2008. In November 2007, we expect to negotiate a break clause in the lease allowing for an early termination of the United Kingdom facility which will release us of any future rent liabilities subsequent to January 2008. As of September 30, 2007, we expect the current accrued restructuring balance to be sufficient in amount to cover all future rental and lease termination payments; therefore, we do not anticipate any incremental restructuring expenses to terminate this lease early. All obligations related to severance and benefits have been paid as of September 30, 2007.

In July 2005, we undertook an approximate 10% reduction in our workforce. In connection with this action, we incurred a one-time cash expense of approximately $1.0 million in the fourth quarter ended September 30, 2005 for severance benefits. As of September 30, 2007, $0.1 million of the cash charges remains outstanding.

During fiscal year 2002, we restructured several areas of the Company to reduce expenses and improve revenues. As part of this restructuring, we closed an office facility in Boston, Massachusetts and recorded an expense associated with the long-term lease which expires in January 2011. During the three months ended March 31, 2007, we completed a new sublease with a sub-lessee for the remaining term of our lease at a rate lower than that which was forecasted when the original restructuring expense was recorded in 2002. This change in estimate resulted in a $0.4 million restructuring expense for the year ended September 30, 2007.

Past Results may not be Indicative of Future Performance. We believe that period-to-period comparisons of our operating results should not be relied upon as indicative of future performance. Our prospects must be considered given the risks, expenses and difficulties frequently encountered by companies in new and rapidly evolving businesses. There can be no assurance we will be successful in addressing these risks and difficulties. Moreover, we may not achieve or maintain profitability in the future.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, we evaluate the estimates, including those related to our allowance for doubtful accounts, valuation of stock-based compensation, valuation of goodwill and intangible assets, valuation of deferred tax assets, restructuring expenses, contingencies, vendor specific objective evidence, or VSOE, of fair value in multiple element arrangements and the estimates associated with the percentage-of-completion method of accounting for certain of our revenue contracts. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting judgments and estimates are used in the preparation of our consolidated financial statements:

• Revenue recognition, including estimating the total estimated time required to complete sales arrangements involving significant implementation or customization essential to the functionality of our products;

• Estimating valuation allowances and accrued liabilities, specifically the allowance for doubtful accounts, and assessment of the probability of the outcome of our current litigation;

• Stock-based compensation expense;

• Accounting for income taxes;

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• Valuation of long-lived and intangible assets and goodwill;

• Restructuring expenses; and

• Determining functional currencies for the purposes of consolidating our international operations.

Revenue Recognition. We derive revenues from licenses of our software and related services, which include assistance in implementation, customization and integration, post-contract customer support, training and consulting. The amount and timing of our revenue is difficult to predict and any shortfall in revenue or delay in recognizing revenue could cause our operating results to vary significantly from quarter to quarter and could result in operating losses. The accounting rules related to revenue recognition are complex and are affected by interpretation of the rules and an understanding of industry practices, both of which are subject to change. Consequently, the revenue recognition accounting rules require management to make significant estimates based on judgment.

Software license revenue is recognized in accordance with Statement of Position No. 97-2 “Software Revenue Recognition,” as amended by Statement of Position No. 98-9 “Software Revenue Recognition with Respect to Certain Arrangements”, or collectively SOP 97-2.

For arrangements with multiple elements, we recognize revenue for services and post-contract customer support based upon the fair value VSOE of the respective elements. The fair value VSOE of  the services element is based upon the standard hourly rates we charge for the services when such services are sold separately. The fair value VSOE for annual post-contract customer support is generally established with the contractual future renewal rates included in the contracts, when the renewal rate is substantive and consistent with the fees when support services are sold separately. When contracts contain multiple elements and fair value VSOE exists for all undelivered elements, we account for the delivered elements, principally the license portion, based upon the “residual method” as prescribed by SOP 97-2. In multiple element transactions where VSOE is not established for an undelivered element, we recognize revenue upon the establishment of VSOE for that element or when the element is delivered.

At the time we enter into a transaction, we assess whether any services included within the arrangement related to significant implementation or customization essential to the functionality of our products. For contracts for products that do not involve significant implementation or customization essential to the product functionality, we recognize license revenues when there is persuasive evidence of an arrangement, the fee is fixed or determinable, collection of the fee is probable and delivery has occurred as prescribed by SOP 97-2. For contracts that involve significant implementation or customization essential to the functionality of our products, we recognize the license and professional consulting services revenue using either the percentage-of-completion method or the completed contract method as prescribed by Statement of Position No. 81-1, “Accounting for Performance of Construction-Type and Certain Product-Type Contracts”, or SOP 81-1.

The percentage-of-completion method is applied when we have the ability to make reasonably dependable estimates of the total effort required for completion using labor hours incurred as the measure of progress towards completion. The progress toward completion is measured based on the “go-live” date. We define the “go-live” date as the date the essential product functionality has been delivered or the application enters into a production environment or the point at which no significant additional Chordiant supplied professional service resources are required. Estimates are subject to revisions as the contract progresses to completion. We account for the changes as changes in accounting estimates when the information becomes known. Information impacting estimates obtained after the balance sheet date but before the issuance of the financial statements is used to update the estimates. Provisions for estimated contract losses, if any, are recognized in the period in which the loss becomes probable and can be reasonably estimated. When we sell additional licenses related to the original licensing agreement, revenue is recognized upon delivery if the project has reached the go-live date, or if the project has not reached the go-live date, revenue is recognized under the percentage-of-completion method. We classify revenues from these arrangements as license and service revenue based upon the estimated fair value of each element using the residual method.

The completed contract method is applied when we are unable to obtain reasonably dependable estimates of the total effort required for completion. Under the completed contract method, all revenue and related costs of revenue are deferred and recognized upon completion.

For product co-development arrangements relating to software products in development prior to the consummation of the individual arrangements where we retain the intellectual property being developed and intend to sell the resulting products to other customers, license revenue is deferred until the delivery of the final product, provided all other requirements of SOP 97-2 are met. Expenses associated with these co-development arrangements are accounted for under SFAS 86 and are normally expensed as incurred as they are considered to be research and development costs that do not qualify for capitalization or deferral.

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Revenue from subscription or term license agreements, which include software and rights to unspecified future products or maintenance, is recognized ratably over the term of the subscription period. Revenue from subscription or term license agreements, which include software, but exclude rights to unspecified future products and maintenance, is recognized upon delivery of the software if all conditions of recognizing revenue have been met including that the related agreement is non-cancelable, non-refundable and provided on an unsupported basis.

We recognize revenue for post-contract customer support ratably over the support period which ranges from one to five years.

Our training and consulting services revenues are recognized as such services are performed on an hourly or daily basis for time and material contracts. For consulting services arrangements with a fixed fee, we recognize revenue on a percentage-of-completion method.

For all sales we use either a signed license agreement or a binding purchase order where we have a master license agreement as evidence of an arrangement. Sales through our third party systems integrators are evidenced by a master agreement governing the relationship together with binding purchase orders or order forms on a transaction-by-transaction basis. Revenues from reseller arrangements are recognized on the “sell-through” method, when the reseller reports to us the sale of our software products to end-users. Our agreements with customers and resellers do not contain product return rights.

We assess collectibility based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. We generally do not request collateral from our customers. If we determine that the collection of a fee is not probable, we recognize revenue at the time collection becomes probable, which is generally upon the receipt of cash. If a transaction includes extended payment terms, we recognized revenue as the payments become due and payable.

Allowance for Doubtful Accounts. We must make estimates of the uncollectability of our accounts receivables. We specifically analyze accounts receivable and analyze historical bad debts, customer concentrations, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Generally, we require no collateral from our customers. Our gross accounts receivable balance was $28.5 million (including long-term accounts receivable of $0.9 million) with an allowance for doubtful accounts of $0.2 million as of September 30, 2007. Our gross accounts receivable balance was $19.1 million with an allowance for doubtful accounts of $0.1 million as of September 30, 2006. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required. To date, bad debts have not been material and have been within management’s expectations.

Stock-based Compensation Expense. Upon adoption of SFAS 123(R) on October 1, 2005, we began estimating the value of employee stock options on the date of grant using the Black-Scholes model. Prior to the adoption of SFAS 123(R), the value of each employee stock option was estimated on the date of grant using the Black-Scholes model for the purpose of the pro forma financial disclosure in accordance with SFAS 123. The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

With the adoption of SFAS 123(R) on October 1, 2005, we used the trinomial lattice valuation technique to determine the assumptions used in the Black-Scholes model. The trinomial lattice valuation technique was used to provide better estimates of fair values and meet the fair value objectives of SFAS 123(R). The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The expected volatility is based on the historical volatility of our stock.

As stock-based compensation expense recognized in the Consolidated Statement of Operations for fiscal year 2007 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience.

If factors change and we employ different assumptions in the application of SFAS 123(R) in future periods, the compensation expense that we record under SFAS 123(R) may differ significantly from what we have recorded in the current period. The estimated value of a stock option is most sensitive to the volatility assumption. Based on the September 30, 2007 variables, it is estimated that a change of 10% in either the volatility, expected life or interest rate assumption would result in a corresponding 7%, 5% or 1% change in the estimated value of the option being valued using the Black-Scholes model.

Accounting for Income Taxes. As part of the process of preparing our consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax

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 exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the Consolidated Statement of Operations.

We have recorded a valuation allowance equal to 100% of the deferred tax assets as of September 30, 2007, due to uncertainties related to our ability to utilize our net deferred tax assets, primarily consisting of certain net operating losses carried forward and research and development tax credits. Deferred tax assets have been fully reserved for in all periods presented. We were profitable for the quarters ended March 31, 2007, June 30, 2007, and September 30, 2007 and if we continue to be profitable in the near term, we will need to re-evaluate the 100% valuation allowance.

Valuation of Long-lived and Intangible Assets and Goodwill. We assess the impairment of identifiable intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Furthermore, we assess the impairment of goodwill annually. Factors we consider important which could trigger an impairment review include the following:

• Significant underperformance relative to expected historical or projected future operating results;

• Significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

• Significant negative industry or economic trends;

• Significant decline in our stock price for a sustained period;

• Market capitalization declines relative to net book value; and

• A current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

When one or more of the above indicators of impairment occurs we estimate the value of long-lived assets and intangible assets to determine whether there is impairment. We measure any impairment based on the projected discounted cash flow method, which requires us to make several estimates including the estimated cash flows associated with the asset, the period over which these cash flows will be generated and a discount rate commensurate with the risk inherent in our current business model. These estimates are subjective and if we made different estimates, it could materially impact the estimated fair value of these assets and the conclusions we reached regarding impairment. To date, we have not identified any triggering events noted above.

We are required to perform an impairment review of our goodwill balance on at least an annual basis. This impairment review involves a two-step process as follows:

Step 1—We compare the fair value of our reporting units to the carrying value, including goodwill, of each of those units. For each reporting unit where the carrying value, including goodwill, exceeds the unit’s fair value, we proceed on to Step 2. If a unit’s fair value exceeds the carrying value, no further work is performed and no impairment charge is necessary.

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

We determined that we have one reporting unit. We completed a goodwill impairment review for the period including September 30, 2007 and 2006 and performed Step 1 of the goodwill impairment analysis required by SFAS No. 142, “Goodwill and Other Intangible Assets,” and concluded that goodwill was not impaired as of September 30, 2007 and 2006 using the methodology described above. Accordingly, Step 2 was not performed. We will continue to test for impairment on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of our reporting units below their carrying amount.

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Restructuring Expenses. In the past five years, we have implemented cost-reduction plans as part of our continued effort to streamline our operations to reduce ongoing operating expenses. These plans resulted in restructuring expenses related to, among others, the consolidation of excess facilities. These charges relate to facilities and portions of facilities we no longer utilize and either seek to terminate early or sublease. Lease termination costs and brokerage fees for the abandoned facilities were estimated for the remaining lease obligations and were offset by estimated sublease income. Estimates related to sublease costs and income are based on assumptions regarding the period required to locate and contract with suitable sub-lessees and sublease rates which can be achieved using market trend information analyses provided by a commercial real estate brokerage retained by us. Each reporting period we review these estimates and to the extent that these assumptions change due to new agreements with landlords, new subleases with tenants, or changes in the market, the ultimate restructuring expenses for these abandoned facilities could vary by material amounts.

Determining Functional Currencies for the Purpose of Consolidation. We have several foreign subsidiaries that together account for a significant portion of our revenues, expenses, assets and liabilities.

In preparing our consolidated financial statements, we are required to translate the financial statements of the foreign subsidiaries from the currency in which they keep their accounting records, generally the local currency, into United States Dollars. This process results in exchange gains and losses which, under the relevant accounting guidance are either included within the Consolidated Statement of Operations or as a separate part of the Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) under the caption “accumulated other comprehensive income (loss).” Under the relevant accounting guidance, the treatment of these translation gains or losses is dependent upon management’s determination of the functional currency of each subsidiary. The functional currency is determined based on management’s judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary conducts a majority of its transactions, including billings, financing, payroll and other expenditures would be considered the functional currency but any dependency upon the parent and the nature of the subsidiary’s operations must also be considered.

If any subsidiary’s functional currency were deemed to be the local currency, then any gain or loss associated with the translation of that subsidiary’s financial statements would be included in cumulative translation adjustments. However, if the functional currency were deemed to be the United States Dollar then any gain or loss associated with the translation of these financial statements would be included within our Consolidated Statement of Operations. If we dispose of any of our subsidiaries, any cumulative translation gains or losses would be recognized in our Consolidated Statement of Operations. If we determine that there has been a change in the functional currency of a subsidiary to the United States Dollar, any translation gains or losses arising after the date of change would be included within our Consolidated Statement of Operations.

Based on our assessment of the factors discussed above, we consider the relevant subsidiary’s local currency to be the functional currency for each of our international subsidiaries. Accordingly, foreign currency translation gains and loses are included as part of accumulated other comprehensive income within our balance sheet for all periods presented.

The foreign currency gains or losses are dependent upon movements in the exchange rates of the foreign currencies in which we transact business against the United States Dollar. These currencies include the United Kingdom Pound Sterling, the Euro and the Canadian Dollar. Any future translation gains or losses could be significantly different than those reported in previous periods. At September 30, 2007, approximately $48.4 million of our cash and cash equivalents were held by our subsidiaries outside of the United States.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board, or FASB, issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, or SFAS 159. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company has evaluated the new pronouncement and has determined that it will not have a significant impact on the determination or reporting of our financial results.

In December 2006, the FASB issued Staff Position, or FSP, EITF 00-19-2, “Accounting for Registration Payment Arrangements.”  This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, “Accounting for Contingencies.” The guidance is effective for fiscal years beginning after December 15, 2006. The Company has evaluated the new pronouncement and has determined that it will not have a significant impact on the determination or reporting of our financial results.

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In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements”, or SAB 108.  SAB 108 provides guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement.  The guidance is applicable for fiscal years ending after November 15, 2006. The Company has evaluated the new statement and has determined that it will not have a significant impact on the determination or reporting of our financial results.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement”, or SFAS 157. SFAS 157 defines fair value, establishes a framework for measuring fair value, and also expands disclosures about fair value measurements.  The SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company has evaluated the new pronouncement and has determined that it will not have a significant impact on the determination or reporting of our financial results.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”, an interpretation of SFAS No. 109, “Accounting for Income Taxes” or FIN 48. FIN 48 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e. a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Upon adoption, the cumulative effect of applying the recognition and measurement provisions of FIN 48, if any, shall be reflected as an adjustment to the opening balance of retained earnings.

FIN 48 also requires expanded disclosures including identification of tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly change in the next twelve months, a description of tax years that remain subject to examination by major tax jurisdictions, a tabular reconciliation of the total amount of unrecognized tax benefits at the beginning and end of each annual reporting period, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate and the total amounts of interest and penalties recognized in the statements of operations and financial position. FIN 48 is effective for fiscal years beginning after December 15, 2006, and the Company expects to adopt this standard in the fiscal year commencing on October 1, 2007. The Company has not yet determined the impact of the recognition and measurement requirements of FIN 48 on our existing tax positions.

In May 2007, the FASB issued FSP FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48”, which provides guidance on how a company should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits.

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Results of Operations

The following table sets forth, in dollars (in thousands) and as a percentage of total revenues, consolidated statements of operations data for the periods indicated. This information has been derived from the consolidated financial statements included elsewhere in this Annual Report.

	Years Ended September 30,
	2007				2006					2005
Statements of Operations Data:
Revenues:
License	$	54,052	43	%	$	40,514		42	%	$	31,678		38	%
Service		70,495	57			57,022		58			52,047		62
Total revenues		124,547	100			97,536		100			83,725		100
Cost of revenues:
License		1,813	2			1,690		2			1,079		1
Service		30,329	24			30,566		31			30,155		36
Amortization of intangible assets		1,211	1			1,211		1			1,068		2
Total cost of revenues		33,353	27			33,467		34			32,302		39
Gross profit		91,194	73			64,069		66			51,423		61
Operating expenses:
Sales and marketing		32,597	26			33,616		34			29,561		36
Research and development		27,546	22			25,858		27			20,272		24
General and administrative		19,898	16			20,445		21			18,549		22
Amortization of intangible assets		—	—			—		—			117		—
Restructuring expense		6,543	6			—		—			1,052		1
Purchased in-process research and development		—	—			—		—			1,940		2
Total operating expenses		86,584	70			79,919		82			71,491		85
Income (loss) from operations		4,610	3			(15,850	)	(16	)		(20,068	)	(24	)
Interest income, net		2,198	2			1,120		1			755		1
Other income (expense), net		822	1			(627	)	—			(103	)	—
Income (loss) before income taxes		7,630	6			(15,357	)	(15	)		(19,416	)	(23	)
Provision for income taxes		1,602	1			644		1			449		1
Net income (loss)	$	6,028	5	%	$	(16,001	)	(16	)%	$	(19,865	)	(24	)%

Comparison of the Year Ended September 30, 2007 to the Year Ended September 30, 2006

Revenues

License Revenue.  The increase or decrease of license revenue occurring within the three different product groups is dependent on the timing of when a sales transaction is completed and whether a license transaction was sold with essential consulting services. Products licensed with essential consulting services are generally recognized as revenue under the percentage-of-completion method of accounting. The timing and amount of revenue for those transactions being recognized under the percentage-of-completion is influenced by the progress of work performed relative to the project length of customer contracts and the dollar value of such contracts. The following table sets forth our license revenue by product emphasis for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

	Years Ended September 30,
		2007		2006		Change		%
License Revenue:
Enterprise solutions	$	37,648	$	30,351	$	7,297		24	%
Marketing solutions		6,013		6,396		(383	)	(6	)
Decision management solutions		10,391		3,767		6,624		176
Total license revenue	$	54,052	$	40,514	$	13,538		33	%

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Total license revenue increased $13.5 million, or 33%, for the year ended September 30, 2007 compared to the same period of the prior year. A significant portion of this increase is attributable to a single customer that purchased a perpetual product license as part of a $20.0 million agreement. The value of this agreement has been allocated as follows: $12.2 million to license fees, $7.1 million to support and maintenance fees expected to be recognized over the next five year period, and $0.7 million to consulting fees. The license amount was recorded as deferred license revenue at the inception of the agreement and is being recognized on a percentage-of-completion basis due to the essential services required for the functionality of the software. For the year ended September 30, 2007, $11.3 million of license revenue has been recognized in connection with this agreement.

In addition to the revenue contribution from the aforementioned customer, the increase in license revenue for the year ended September 30, 2007 was primarily due to the growth in the absolute dollar size of transactions in excess of $1 million as compared to the same period of the prior year.

Service Revenue. Service revenue is primarily composed of consulting implementation and integration, consulting customization, training, post-contract customer support services, or PCS, and certain reimbursable out-of-pocket expenses. The increase or decrease of service revenue within the three different product emphases is primarily due to the timing of when license transactions are completed, whether or not the license was sold with essential consulting services, the sophistication of the customer’s application, and the expertise of the customer’s internal development team. For other service transactions, service revenue will lag in timing compared to the period of when the license revenue is recognized. The following table sets forth our service revenue by product emphasis for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

	Years Ended September 30,
		2007		2006		Change		%
Service Revenue:
Enterprise solutions	$	51,584	$	39,911	$	11,673		29	%
Marketing solutions		12,369		12,996		(627	)	(5	)
Decision management solutions		6,542		4,115		2,427		59
Total license revenue	$	70,495	$	57,022	$	13,473		24	%

Total service revenue increased $13.5 million or 24% for the year ended September 30, 2007 compared to the same period of the prior year. The $13.5 million increase is primarily related to increases of $8.9 million in PCS revenue, $5.2 million in consulting revenue, $0.5 million in reimbursement of out-of-pocket expense revenue offset by a decrease of $1.0 million in training revenue. The increase in PCS revenue is a function of the growth in new license bookings sold with PCS agreements combined with the renewal of existing PCS customers at a rate in excess of existing customers, declining the service in the year of renewal. The increase in consulting revenue is a direct result of the growth in license revenue as the majority of our customers will use some form of our consulting services in connection with their project.

Cost of Revenues

License. Cost of license revenues includes third party software royalties and amortization of capitalized software development costs. Royalty expenses can vary depending upon the mix of products sold within the period. The capitalized software development costs pertain to a banking product that was completed and available for general release in August 2005 and the third party costs associated with the porting of a product to a new platform. The porting project was completed in August 2007 and the aggregate costs capitalized were $0.5 million. Amortization expense for the banking product and porting project for the year ended September 30, 2007 were $0.9 million and less than $0.1 million, respectively. Amortization costs for the banking product are expected through 2008 and amortization costs of the porting project are expected through 2010. The following table sets forth our cost of license revenues for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

	Years Ended September 30,
		2007			2006			Change	%
Cost of license revenue	$	1,813		$	1,690		$	123	7	%
Percentage of total revenue		2	%		2	%

Cost of license revenues increased $0.1 million or 7% for the year ended September 30, 2007 as compared to the same period of the prior year. The primary reason for the increase was due to the growth of license revenue year-over-year leading to an increase in third party royalty costs.

Service. Cost of service revenues consists primarily of personnel, third party consulting, facility and travel costs incurred to provide consulting implementation and integration, consulting customization, training, PCS support services. The following table sets forth our cost of service revenues for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

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	Years Ended September 30,
		2007			2006			Change		%
Cost of service revenue	$	30,329		$	30,566		$	(237	)	(1	)%
Percentage of total revenue		24	%		31	%

Cost of service revenue decreased by $0.2 million or 1% for the year ended September 30, 2007 as compared to the same period of the prior year. This change is primarily due to a decrease in personnel and related costs of $2.5 million associated with a decrease in headcount which was offset by an increase in third party consulting costs of $2.1 million and third party PCS costs of $0.1 million. Service costs were able to remain constant while service revenue increased due to improved utilization of our internal consultant teams, replacing full time employees with third party consultants (converting a fixed cost to a variable cost) and increasing PCS revenue, which to a limited degree is not based on a variable cost model, so there is not a direct relationship of revenue to costs.

Amortization of Intangible Assets (included in Cost of Revenues). Amortization of intangible assets cost consists primarily of the amortization of amounts paid for developed technologies, customer lists and trade-names resulting from business acquisitions. The following table sets forth our costs associated with amortization of intangible assets for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

	Years Ended September 30,
		2007			2006			Change	%
Amortization of intangible assets	$	1,211		$	1,211		$	—	—	%
Percentage of total revenue		1	%		1	%

These costs are solely related to the $6.1 million of intangible assets associated with the acquisition of KiQ in December 2004. We expect amortization expense for intangible assets to be $1.2 million in fiscal year 2008, $1.2 million in fiscal year 2009 and $0.3 million in fiscal year 2010.

Operating Expenses

Sales and Marketing. Sales and marketing expenses is composed primarily of costs associated with selling, promoting and advertising our products, product demonstrations and customer sales calls. These costs consist primarily of employee salaries, commissions and bonuses, benefits, facilities, travel expenses and promotional and advertising expenses. The following table sets forth our sales and marketing expenses in terms of absolute dollars for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

	Years Ended September 30,
		2007			2006			Change		%
Sales and marketing costs	$	32,597		$	33,616		$	(1,019	)	(3	)%
Percentage of total revenue		26	%		34	%

Sales and marketing expenses decreased $1.0 million or 3% for the year ended September 30, 2007 as compared to the same period of the prior year. The primary reason for the decrease was due to a decrease of $1.5 million in personnel related costs and a decrease of $0.4 million in travel costs offset by an increase of $0.7 million in sales and marketing program costs. The decrease in personnel costs is mainly attributed to a 22% decrease in average headcount year-over-year.

Research and Development. Research and development expenses is composed primarily of costs associated with the development of new products, enhancements of existing products and quality assurance activities. These costs consist primarily of employee salaries and benefits, facilities, the cost of software and development tools and equipment and consulting costs, including costs for offshore consultants. The following table sets forth our research and development expenses in terms of absolute dollars for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

	Years Ended September 30,
		2007			2006			Change	%
Research and development costs	$	27,546		$	25,858		$	1,688	7	%
Percentage of total revenue		22	%		27	%

Research and development expense increased $1.7 million or 7% for the year ended September 30, 2007 as compared to the same period of the prior year. The primarily reason for the increase was due to a $3.4 million increase in personnel related expense offset by a decrease of $1.6 million in third party consulting costs and a decrease of $0.2 million in travel costs. The

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increase in personnel costs was driven by a 13% increase in average headcount for the comparative periods. Third party consulting costs decreased as the result of the completion of a large co-development project in September 2006 that utilized a large number of outside consultants.

General and Administrative. General and administrative expenses is composed primarily of costs associated with our executive and administrative personnel (e.g. the CEO, legal, human resources and finance personnel). These costs consist primarily of employee salaries, bonuses, stock compensation expense, benefits, facilities, professional fees, including costs for Sarbanes-Oxley Act of 2002 (SOX) consultants and the recently concluded stock option review. The following table sets forth our general and administrative expenses in terms of absolute dollars for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

	Years Ended September 30,
		2007			2006			Change		%
General and administrative costs	$	19,898		$	20,445		$	(547	)	(3	)%
Percentage of total revenue		16	%		21	%

General and administrative expense decreased $0.5 million or 3% for the year ended September 30, 2007 as compared to the same period of the prior year. This decrease is primarily due to a decrease of $0.6 million in professional fees and a decrease of $0.3 million in personnel and related costs offset by an increase of $0.4 million in other miscellaneous costs of which $0.2 million of the miscellaneous costs were related to U.S. state franchise taxes.

Restructuring Expense.  In October 2006, we initiated a restructuring plan that included an immediate reduction in positions of slightly more than ten percent of the Company's workforce, consolidation of our European facilities, and the closure of our French office. A majority of the positions eliminated were in Europe. We recorded a pre-tax cash restructuring expense of $6.1 million as calculated using the net present value of the related costs as required by SFAS 146. The expense was composed of $1.8 million for severance costs and $4.4 million for exiting excess facilities of which $1.0 million of the excess facility expense is associated with non-cash charges for the write-off of leasehold improvements and the reversal of a favorable purchase price adjustment related to the France office lease. We anticipated that $5.1 million of the expense would result in cash expenditures. As of September 30, 2007, we have paid $2.7 million in cash payments and expect to pay the remaining $2.5 million during the first six months of fiscal year 2008.

During fiscal year 2002, we restructured several areas of the Company to reduce expenses and improve revenues. As part of this restructuring, we closed an office facility in Boston, Massachusetts and recorded an expense associated with the long term lease which expires in January 2011. During 2007, we completed a new sublease for this facility with a new sub-tenant for the remaining term of our lease at a rate lower than that which was forecasted when the original restructuring expense was recorded in 2002. This change in estimate resulted in an additional $0.4 million in restructuring expenses for the year ended September 30, 2007.

Stock-based Compensation (included in individual Operating Expense and Cost of Revenue Categories). The following table sets forth our stock-based compensation expense in terms of absolute dollars and functional breakdown for the years ended September 30, 2007 and 2006 (in thousands):

	Years Ended September 30,
		2007		2006
Stock-based compensation expense:
Cost of revenues	$	313	$	248
Sales and marketing		744		2,327
Research and development		546		332
General and administrative		1,417		1,788
Total stock-based compensation expense	$	3,020	$	4,695

For the year ended September 30, 2007, the aggregate stock-based compensation cost included in cost of revenues and in operating expenses was $3.0 million which is a combination of $2.8 million related to stock options and $0.2 million associated with restricted stock awards. For the year ended September 30, 2006, the aggregate stock-based compensation cost included in cost of revenues and in operating expenses was $4.7 million which was a combination of $2.7 million related to stock options and $2.0 million associated with restricted stock awards. The decrease in total compensation expense of $1.7 million year-over-year is primarily attributed to a reduction in restricted stock expense of $1.8 million, of which $1.0 million of the reduction is due to the restricted stock associated with the KIQ acquisition which became fully amortized during 2007. The remaining decrease is the result of restricted stock cancellations granted in prior years to two key executives who left the company in the quarter ending December 2006.

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Interest Income, Net.  Interest income, net, consists primarily of interest income generated from our cash, cash equivalents and marketable securities, offset by interest expense incurred in connection with our capital leases and letters of credit and imputed under SFAS 146 restructuring accruals. The following table sets forth our interest income, net, in terms of absolute dollars for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

	Years Ended September 30,
		2007			2006			Change	%
Interest income, net	$	2,198		$	1,120		$	1,078	96	%
Percentage of total revenue		2	%		1	%

Interest income, net, increased $1.1 million or 97% for the year ended September 30, 2007 as compared to the same period of the prior year. This increase is primarily due to improved interest rates related to interest-bearing cash and cash equivalents accounts and a higher average cash balance during 2007 as compared to 2006. In addition, during the quarter ended June 30, 2007, a portion of our funds were transferred into marketable securities which earned a higher return of interest than other investments we utilized in the prior year. During the quarter ended June 30, 2007, the capital equipment lease obligations were paid in full and the associated interest expense was eliminated.

Other Income (Expense), Net.  These gains and losses are primarily associated with foreign currency transaction gains or losses and the re-measurement of our short-term intercompany balances between the U.S. and our foreign subsidiaries with different functional currencies than the U.S. Dollar. The following table sets forth our other income (expense), net in terms of absolute dollars for the years ended September 30, 2007 and 2006 (in thousands, except percentages):

	Years Ended September 30,
		2007			2006			Change	%
Other income (expense), net	$	822		$	(627	)	$	1,449	231	%
Percentage of total revenue		1	%		—	%

Other income increased $1.4 million or 231% for the year ended September 30, 2007 as compared to the same period of the prior year primarily due to transaction gains as well as gains associated with the re-measurement of our short-term intercompany balances. The intercompany gains are due to the majority of our subsidiaries holding net payable balances due to the U.S., denominated in U.S. Dollars; consequently, during the year as the Euro and the British Pound increased in strength against the U.S. Dollar, foreign currency gains resulted.

Provision for Income Taxes. Our provision for income taxes is $1.6 million and $0.6 million for the years ended September 30, 2007 and 2006, respectively. The $1.0 million increase in income taxes is primarily due to $0.8 million of unrecoverable withholding tax payments related to sales transactions that occurred in Turkey and Poland during the year ended September 30, 2007. The remainder of our provision is attributable to taxes on earnings from our foreign subsidiaries, U.S. federal alternative minimum taxes and certain U.S. state income taxes.

Our deferred tax assets primarily consist of net operating loss carryforwards, nondeductible allowances and research and development tax credits. We have recorded a valuation allowance for the full amount of our net deferred tax assets, as the future realization of the tax benefit is not considered by management to be more-likely-than-not.

Comparison of the Year Ended September 30, 2006 to the Year Ended September 30, 2005

Revenues

License Revenue.  The increase or decrease of license revenue occurring within the three different product emphases is dependent on the timing of when a sales transaction is completed and whether a license transaction was sold with essential consulting services. Products licensed with essential consulting services are generally recognized as revenue under the percentage-of-completion method of accounting. The timing and amount of revenue for those transactions being recognized under the percentage-of-completion is influenced by the progress of work performed relative to the project length of customer contracts and the dollar value of such contracts. The following table sets forth our license revenue by product emphasis for the years ended September 30, 2006 and 2005 (in thousands, except percentages):

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	Years Ended September 30,
		2006		2005		Change		%
License Revenue:
Enterprise solutions	$	30,351	$	24,587	$	5,764		23	%
Marketing solutions		6,396		2,450		3,946		161
Decision management solutions		3,767		4,641		(874	)	(19	)
Total license revenue	$	40,514	$	31,678	$	8,836		28	%

Total license revenue increased $8.8 million, or 28%, to $40.5 million for the year ended September 30, 2006 compared to $31.7 million for the year ended September 30, 2005. License revenues for enterprise solutions increased $5.8 million, or 23%, to $30.4 million for the year ended September 30, 2006 compared to $24.6 million for the year ended September 30, 2005. This increase was primarily due to an increase in value of the average customer transaction. License revenues for marketing solutions increased $3.9 million, or 161%, to $6.4 million for the year ended September 30, 2006 compared to $2.5 million for the year ended September 30, 2005. License revenues for decision management solutions relate to the products acquired in the KiQ transaction. License revenues for decision management solutions decreased $0.8 million, or 19% to 3.8 million for the year ended September 30, 2006 compared to $4.6 million for year ended September 30, 2005.

Service Revenue.  Service revenue is primarily composed of consulting implementation and integration, consulting customization, training, post-contract customer support services, and certain reimbursable out-of-pocket expenses. The increase or decrease of service revenue within the three different product emphases is primarily due to the timing of when license transactions are completed, whether or not the license was sold with essential consulting services, the sophistication of the customer’s application, and the expertise of the customer’s internal development team. For other service transactions, service revenue will lag in timing compared to the period of when the license revenue is recognized. The following table sets forth our service revenue by product emphasis for the years ended September 30, 2006 and 2005 (in thousands, except percentages):

	Years Ended September 30,
		2006		2005		Change		%
Service Revenue:
Enterprise solutions	$	39,911	$	40,441	$	(530	)	(1	)%
Marketing solutions		12,996		9,680		3,316		34
Decision management solutions		4,115		1,926		2,189		114
Total license revenue	$	57,022	$	52,047	$	4,975		10	%

Total service revenue, which includes reimbursement of out-of-pocket expenses, increased $5.0 million, or 10%, to $57.0 million for the year ended September 30, 2006 compared to $52.0 million for the year ended September 30, 2005. This increase is primarily related to a $2.3 million increase in support and maintenance revenue, a $2.1 million increase in training revenue and a $0.5 million increase in consulting revenue.  Service revenue associated with enterprise solution products decreased $0.5 million, or 1%, to $39.9 million for the year ended September 30, 2006 compared to $40.4 million for the year ended September 30, 2005. Service revenues associated with marketing solution products increased $3.3 million, or 34%, to $13.0 million for the year ended September 30, 2006 compared to $9.7 million for the year ended September 30, 2005. Service revenues associated with decision management solution products relate to the products acquired in the KiQ transaction. Service revenues associated with decision management increased $2.2 million or 114% to $4.1 million for the year ended September 30, 2006 compared to $1.9 million for the year ended September 30, 2005.

Reimbursement of out-of-pocket expenses (which are included in total service revenues) decreased $0.2 million, or 4%, to $3.3 million for the year ended September 30, 2006 compared to $3.5 million for the year ended September 30, 2005.

Cost of Revenues

License. Cost of license revenues includes third party software royalties and amortization of capitalized software development costs. Royalty expenses can vary depending upon the mix of products sold within the period. The capitalized software development costs pertain to a banking product that was completed and available for general release in August 2005. Annual amortization expense associated with this product is $0.9 million. Amortization of these costs is expected through 2008. The following table sets forth our cost of license revenues for the years ended September 30, 2006 and 2005 (in thousands, except percentages):

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	Years Ended September 30,
		2006			2005			Change	%
Cost of license revenue	$	1,690		$	1,079		$	611	57	%
Percentage of total revenue		2	%		1	%

Cost of license revenues increased $0.6 million, or 57%, to $1.7 million for the year ended September 30, 2006 compared to $1.1 million for the year ended September 30, 2005. This increase is primarily related to the fiscal year 2006 including a full year of amortization related to the banking product versus the prior year which included only 1.5 months of amortization. These costs resulted in license gross margins of approximately 96% and 97% for the years ended September 30, 2006 and 2005, respectively.

Service.  Cost of service revenues consists primarily of personnel, third party consulting, facility and travel costs incurred to provide consulting implementation and integration, consulting customization, training, PCS support services. The following table sets forth our cost of service revenues for the years ended September 30, 2006 and 2005 (in thousands, except percentages):

	Years Ended September 30,
		2006			2005			Change	%
Cost of service revenue	$	30,566		$	30,155		$	411	1	%
Percentage of total revenue		31	%		36	%

Cost of service revenues increased $0.4 million, or 1%, to $30.6 million for the year ended September 30, 2006 compared to $30.2 million for the year ended September 30, 2005. This increase in costs is primarily due to increases in personnel related costs of $0.7 million related to an increase in headcount, facility and information technology costs of $0.6 million, third party support and maintenance costs of $0.3 million offset by a decrease in third party consulting costs of $1.5 million. These costs resulted in service gross margins of approximately 46% and 42% for the years ended September 30, 2006 and 2005, respectively.

Amortization of Intangible Assets (included in Cost of Revenues). Amortization of intangible assets cost consists primarily of the amortization of amounts paid for developed technologies, customer lists and trade-names resulting from business acquisitions. The following table sets forth our costs associated with amortization of intangible assets for the years months ended September 30, 2006 and 2005 (in thousands, except percentages):

	Years Ended September 30,
		2006			2005			Change	%
Amortization of intangible assets	$	1,211		$	1,068		$	143	13	%
Percentage of total revenue		1	%		2	%

Amortization of intangible assets was $1.2 million for the year ended September 30, 2006 compared to $1.1 million for the year ended September 30, 2005. The amortization expense in the year ended September 30, 2006 is solely related to $6.1 million of intangible assets associated with the acquisition of KiQ in December 2004. The amortization for 2005 includes a partial year of KiQ related amortization. We expect to continue to amortize these assets through December 2009.

Operating Expenses

Sales and Marketing. Sales and marketing expenses is composed primarily of costs associated with selling, promoting and advertising our products, product demonstrations and customer sales calls. These costs consist primarily of employee salaries, commissions and bonuses, benefits, facilities, travel expenses and promotional and advertising expenses. The following table sets forth our sales and marketing expenses in terms of absolute dollars for the years ended September 30, 2006 and 2005 (in thousands, except percentages):

	Years Ended September 30,
		2006			2005			Change	%
Sales and marketing costs	$	33,616		$	29,561		$	4,055	14	%
Percentage of total revenue		34	%		36	%

Sales and marketing expenses increased $4.0 million, or 14%, to $33.6 million for the year ended September 30, 2006 compared to $29.6 million for the year ended September 30, 2005. The $4.0 million increase in these expenses was mainly attributable to an increase of $2.7 million in personnel related expenses, $1.0 million in sales events, and $0.3 million increase in legal contract and personnel costs.

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Research and Development. Research and development expenses is composed primarily of costs associated with the development of new products, enhancements of existing products and quality assurance activities. These costs consist primarily of employee salaries and benefits, facilities, the cost of software and development tools and equipment and consulting costs, including costs for offshore consultants. The following table sets forth our research and development expenses in terms of absolute dollars for years ended September 30, 2006 and 2005 (in thousands, except percentages):

	Years Ended September 30,
		2006			2005			Change	%
Research and development costs	$	25,858		$	20,272		$	5,586	28	%
Percentage of total revenue		27	%		24	%

Research and development expenses increased $5.6 million, or 27%, to $25.9 million for the year ended September 30, 2006 compared to $20.3 million for the year ended September 30, 2005. This increase was driven by two large co-development projects; one in North America and one in the United Kingdom. The United Kingdom project was completed in September 2006 and the North America project was completed in the second half of 2007. This $5.6 million increase in costs was primarily composed of $6.6 million in consulting expenses related to our outsourcing of technical support and certain sustaining engineering functions and $0.4 million in travel costs which were offset by decreases of $1.1 million in personnel costs and $0.3 million in information technology costs.

General and Administrative. General and administrative expenses is composed primarily of costs associated with our executive and administrative personnel (e.g. the CEO, human resources, legal and finance personnel). These costs consist primarily of employee salaries, bonuses, stock compensation expense, benefits, facilities, consulting costs, including costs for Sarbanes-Oxley Act of 2002 (SOX) consultants and the recently concluded stock option review. The following table sets forth our general and administrative expenses in terms of absolute dollars for the years ended September 30, 2006 and 2005 (in thousands, except percentages):

	Years Ended September 30,
		2006			2005			Change	%
General and administrative costs	$	20,445		$	18,549		$	1,896	10	%
Percentage of total revenue		21	%		22	%

General and administrative expenses increased $1.9 million, or 10%, to $20.4 million for the year ended September 30, 2006 compared to $18.5 million for the year ended September 30, 2005. The increase in costs is primarily due to increases of $3.4 million for personnel costs, $0.7 million for severance costs associated with two senior executives, offset by a reduction of $2.3 million in professional services for consultants. The increase in personnel costs and decrease in professional services was driven by the replacement of accounting consultants with permanent employees. The decrease in professional services was also due to a decrease in SOX consulting fees of $2.7 million which was offset by stock option review professional fees of $1.2 million during the year. We did not experience the same level of decrease in SOX costs in 2007 that we did in 2006. The costs associated with the stock option review continued in the first half of 2007.

Amortization of Intangible Assets (included in Operating Expenses). There was no amortization of intangible assets included in operating costs for 2006. All intangible assets attributable to operating expenses were fully amortized in 2005. Amortization of intangible assets included in operating expenses was $0.1 million for the year ended September 30, 2005. These intangible assets were the result of the Prime Response acquisition in March 2001.

Purchased in-process Research and Development. In-process research and development expense represents acquired technology that, on the date of acquisition, had not achieved technological feasibility and did not have an alternative future use, based on the state of development. Because the product under development may not achieve commercial viability, the amount of acquired in-process research and development was immediately expensed. The nature of the efforts required to develop the purchased in-process research and development into a commercially viable product principally relate to the completion of all planning, designing, prototyping, verification and testing activities that are necessary to establish that the product can be produced to meet its designed specifications, including functions, features and technical performance requirements. There was no purchased in-process research and development expense for the year ended September 30, 2006. For the year ended September 30, 2005, we recorded an expense of $1.9 million related to acquired in-process technology attributable to the acquisition of KiQ.

Restructuring Expenses. In July 2005, we announced a reduction in workforce and incurred a one-time cash expense of approximately $1.1 million in the year ended September 30, 2005. Please refer to Note 6 to the Consolidated Financial Statements for further discussion.

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Stock-based Compensation (included in Individual Operating Expense and Cost of Revenue Categories). The following table sets forth our stock-based compensation expense in terms of absolute dollars and functional breakdown for the years ended September 30, 2006 and 2005 (in thousands):

	Years Ended September 30,
		2006 (under SFAS 123®)		2005 (under SFAS 123/APB 25)
Stock-based compensation expense:
Cost of revenues	$	248	$	690
Sales and marketing		2,327		986
Research and development		332		843
General and administrative		1,788		512
Total stock-based compensation expense	$	4,695	$	3,031

For the year ended September 30, 2006, the aggregate stock-based compensation cost included in cost of revenues and in operating expenses was $4.7 million which is a combination of $2.7 million related to stock options and $2.0 million associated with restricted stock awards. Included in the restricted stock award compensation expense of $2.0 million is $1.2 million associated with the amortization of restricted stock awards attributable to the KiQ acquisition in December 2004.  Amortization of deferred stock-based compensation attributable to the acquisition of KiQ was expensed through June 2007.

For the year ended September 30, 2005, the aggregate stock-based compensation cost included in cost of revenues and in operating expenses was $3.0 million which was a combination of a $0.4 million benefit related to stock options and $3.4 million expense associated with restricted stock awards. Included in the restricted stock award compensation expense of $3.4 million is $2.7 million associated with the amortization of restricted stock awards attributable to the KIQ acquisition.

Interest Income, Net. Interest income, net, consists primarily of interest income generated from our cash and cash equivalents, offset by interest expense incurred in connection with our capital leases and letters of credit. The following table sets forth our interest income, net, in terms of absolute dollars for the years ended September 30, 2006 and 2005 (in thousands, except percentages):

	Years Ended September 30,
		2006			2005			Change	%
Interest income, net	$	1,120		$	755		$	365	48	%
Percentage of total revenue		1	%		1	%

Interest income, net, increased to approximately $1.1 million for the year ended September 30, 2006 from $0.8 million for the year ended September 30, 2005. This increase is primarily due to improved interest rates related to interest-bearing cash and cash equivalents accounts and a higher average cash balance during 2006 versus 2005.

Other Income (Expense), Net.  These gains and losses are primarily associated with foreign currency transaction gains or losses and the re-measurement of our short-term intercompany balances between the U.S. and our foreign denominated subsidiaries. The following table sets forth our other income (expense), net in terms of absolute dollars for the years ended September 30, 2006 and 2005 (in thousands, except percentages):

	Years Ended September 30,
		2006			2005			Change		%
Other income (expense), net	$	(627	)	$	(103	)	$	(524	)	(509	)%
Percentage of total revenue		—	%		—	%

Other expense was $0.6 million for the year ended September 30, 2006 as compared to $0.1 million for the same period in the prior year. The change is primarily attributable to currency exchange gains and losses recognized during the years ended September 30, 2006 and 2005. These gains and losses are primarily associated with our U.S. Dollar account balances held in Europe and the U.S. Dollar’s fluctuations in value against the Euro and U.K. Pound Sterling.

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Provision for Income Taxes. Our provisions for income taxes were $0.6 million and $0.4 million for the years ended September 30, 2006 and 2005, respectively. The provisions were attributable to taxes on earnings from our foreign subsidiaries and certain state income taxes.

Our deferred tax assets primarily consist of net operating loss carryforwards, nondeductible allowances and research and development tax credits. We have recorded a valuation allowance for the full amount of our net deferred tax assets, as the future realization of the tax benefit is not considered by management to be more-likely-than-not.

Liquidity and Capital Resources

Prior to the year ended September 30, 2007, we have not been profitable and we have financed any shortfall from our operating activities through the issuance of our common stock. Currently, in addition to generating profit for the year, we have generated $38.9 million cash from operations for the year ended September 30, 2007. It is anticipated that we will continue to generate cash from operations or financing activities in excess of the cash requirements in the near term.

Our cash, cash equivalents, restricted cash are principally held in operating accounts, money market accounts, commercial paper and certificates of deposit and our marketable securities are invested in corporate bonds and commercial paper. The balances of these accounts totaled $90.5 million and $45.8 million at September 30, 2007 and 2006, respectively, an increase of $44.7 million, or 98%.

Operating Activities

Cash provided by operating activities was $38.9 million during the year ended September 30, 2007, which consisted primarily of our net income of $6.0 million adjusted for non-cash items (depreciation, amortization, non-cash stock-based compensation expense, provision for doubtful accounts, loss on disposal of assets and other non-cash charges) aggregating approximately $7.8 million and the net cash inflow effect from changes in assets and liabilities of approximately $25.1 million. This net cash inflow effect from changes in assets and liabilities was primarily related to changes in deferred revenue of $36.6 million offset by changes in accounts receivable of $11.8 million The increase in deferred revenue is the result of sales transactions that were completed during the year ended September 30, 2007 for which revenue will not be recognized until subsequent periods.

Cash provided by operating activities was $3.2 million during the year ended September 30, 2006, which consisted primarily of our net loss of $16.0 million adjusted for non-cash items (depreciation, amortization, non-cash stock-based compensation expense, provision for doubtful accounts, loss on disposal of assets and other non-cash charges) aggregating approximately $8.2 million and the net cash inflow effect from changes in assets and liabilities of approximately $11.0 million. This net cash inflow was primarily caused by an increase in liability balances for accrued expenses and other liabilities of $6.1 million, accounts payable of $3.0 million and deferred revenue of $2.8 million offset by cash outflows related to an increase in prepaid expenses of $1.0 million. The increase in accrued expenses, other liabilities and accounts payable is primarily due to the timing of when the payments were made for these liabilities. The increase in deferred revenue was primarily due to an increase in deferred license revenue for the year.

Cash used in operating activities was $9.0 million during the year ended September 30, 2005, which consisted primarily of our net loss of $19.9 million adjusted for non-cash items (primarily the write off of in-process research and development costs associated with the KiQ acquisition, depreciation, amortization, non-cash stock-based compensation expense and other non-cash charges) aggregating approximately $7.9 million and the net cash inflow effect from changes in assets and liabilities of approximately $3.1 million. This net cash inflow was primarily caused by an increase in revenue and the collection of accounts receivable, offset by the payment of accounts payable and accrued expenses, and additions to prepaid expenses and other assets. The increase in deferred revenue is primarily attributable to two significant license agreements signed in the three month period ended June 30, 2005. These agreements were accounted for under the percentage of completion method of accounting.

Investing Activities

Cash used in investing activities during the year ended September 30, 2007 was $14.9 million. The cash was used primarily for the purchase of $18.0 million of marketable securities, the purchase of $2.8 million of property and equipment, and the capitalization of $0.3 million of software development costs associated with the porting an existing product to a new platform. This use of cash was offset by $6.0 million of proceeds from the maturity of marketable securities and the release of $0.2 million of restricted cash during the period. The majority of the property and equipment purchased was associated with the closure of the old European headquarters office and the opening of the new smaller European headquarters office during the period. The remainder of the property and equipment purchases was primarily computer equipment use in for day-to-day operations.

44

Cash used in investing activities during the year ended September 30, 2006 was less than $0.1 million. The cash used primarily related to the purchase of $1.7 million of property and equipment and the capitalization of $0.3 million of software development costs associated with the porting an existing product to a new platform. This use of cash was offset by the release of $1.9 million of restricted cash during the period.

Cash used in investing activities during the year ended September 30, 2005 was $8.8 million. This use of cash primarily related to the $9.8 million in funds used to acquire KiQ, $2.2 million in funds used to complete development of an acquired banking product offset by the $4.0 million in net proceeds from the sale of marketable securities. Property and equipment purchases also consumed $0.7 million of cash during the period.

Financing Activities

Financing activities were a source of cash in the amounts of $6.2 million, $2.0 million, and $1.0 million for the year ended September 30, 2007, 2006 and 2005, respectively.

For the year ended September 30, 2007, the amount relates to $6.2 million in proceeds from stock option exercises and $0.1 million from excess tax benefits from stock based compensation, offset by payments of $0.1 million on capital lease obligations. We paid off the remainder of the capital lease obligations during the year ended September 30, 2007.

For the year ended September 30, 2006, the amount relates to $2.2 million in proceeds from stock option exercises, offset by payments of $0.2 million on capital lease obligations.

For the year ended September 30, 2005, the amount relates to $1.2 million in proceeds from stock option exercises, offset by payments of $0.2 million on capital lease obligations. During the year ended September 30, 2005, we suspended our Employee Stock Purchase Plan, or ESPP. Historically, proceeds to us from the ESPP have been significant. The ESPP is not expected to be reinstated and, accordingly, we do not anticipate that we will receive proceeds from the ESPP in the near term.

Revolving Line of Credit

The Company’s revolving line of credit with Comerica Bank was amended and restated on March 8, 2006 and was extended to March 7, 2008. The terms of the agreement include a $5.0 million line of credit and require us to maintain (i) at least a $5.0 million cash balance in Comerica Bank accounts, (ii) a minimum quick ratio of 2 to 1, (iii) a liquidity ratio of at least 1 to 1 at all times, and (iv) subordinate any debt issuances subsequent to the effective date of the agreement, and certain other covenants. All assets of the Company have been pledged as collateral on the credit facility. Due to the Company’s failing to timely file its periodic reports on Form 10-K for the year ended September 30, 2006 and on Form 10-Q for the quarter ended June 30, 2006, the line of credit agreement was amended in August 2006, November 2006, and December 2006 to extend the deadline related to the filing of its periodic reports to February 20, 2007. As of February 14, 2007, the Company became current with its SEC regulatory filings and has remained current for filings thereafter.

The revolving line of credit contains a provision for a sub-limit of up to $5.0 million for issuances of standby commercial letters of credit. As of September 30, 2007, we had utilized $0.3 million of the standby commercial letters of credit limit of which $0.3 million serves as collateral for computer equipment leases for Ness (see Note 9 to the Consolidated Financial Statements). The revolving line of credit also contains a provision for a sub-limit of up to $3.0 million for issuances of foreign exchange forward contracts. As of September 30, 2007, we had not entered into any foreign exchange forward contracts. Pursuant to the amendment in March 2006, we are required to secure the standby commercial letters of credit and foreign exchange forward contracts through March 7, 2008. If these have not been secured to Comerica Bank’s satisfaction, our cash and cash equivalent balances held by Comerica Bank automatically secure such obligations to the extent of the then continuing or outstanding and undrawn letters of credit or foreign exchange contracts.

Borrowings under the revolving line of credit bear interest at the lending bank’s prime rate. Except for the standby commercial letters of credit, as of September 30, 2007, there was no outstanding balance on the revolving line of credit. Advances are available on a non-formula basis up to $5.0 million.

45

Contractual Obligations

We entered into an agreement with Ness Technologies Inc., Ness Global Services, Inc. and Ness Technologies India, Ltd. (collectively, “Ness”), effective December 15, 2003, pursuant to which Ness provides our customers with technical product support through a worldwide help desk facility, a sustaining engineering function that serves as the interface between technical product support and our internal engineering organization, product testing services and product development services (collectively, the “Services”). The agreement had an initial term of three years and was extended for two additional year terms. Under the terms of the agreement, we pay for services rendered on a monthly fee basis, including the requirement to reimburse Ness for approved out-of-pocket expenses. The agreement may be terminated for convenience by the Company, subject to the payment of a termination fee. In 2004, 2005, 2006 and 2007 we further expanded its agreement with Ness whereby Ness is providing certain additional technical and consulting services. The additional agreements can be cancelled at the option of the Company without the payment of a termination fee. The remaining minimum purchase commitment under these agreements, if Chordiant was to cancel the contracts, was approximately $0.7 million at September 30, 2007. In addition to service agreements, we also guaranteed certain equipment lease obligations of Ness (see Note 8 to the Consolidated Financial Statements).Ness may procure equipment to be used in performance of the Services, either through leasing arrangements or direct cash purchases, for which we are obligated under the agreement to reimburse them. In connection with the procurement of equipment, Ness has entered into a 36 month equipment lease agreement with IBM India and, in connection with the lease agreement we have an outstanding standby letter of credit in the amount of $0.3 million in guarantee of Ness’ financial commitments under the lease. Over the term of the lease, our obligation to reimburse Ness is approximately equal to the amount of the guarantee.

During the three months ended March 31, 2007, the Company paid the final payments on its remaining capital lease obligations. Operating lease payments in the table below include approximately $4.9 million for two facility operating lease commitments that are included in restructuring expenses. One of the leases is located in Boston, Massachusetts and the other is located in the United Kingdom. As of September 30, 2007, the Company has $0.9 million in sublease income contractually committed for future periods relating to the Boston, Massachusetts facility classified as an operating lease. See Note 6 to the Consolidated Financial Statements for further discussion.

In November 2007, we expect to negotiate a break clause in the in the United Kingdom facility lease allowing for an early termination of the respective facility which will release the Company of any future rent liabilities subsequent to January 2008. The scheduled lease payments shown in the table below reflect a payment of $2.5 million in fiscal year 2008 associated with the anticipated early termination of the United Kingdom lease.

We have asset retirement obligations, associated with commitments to return property subject to operating leases to original condition upon lease termination. As of September 30, 2007, the Company estimated that gross expected cash flows of approximately $0.3 million will be required to fulfill these obligations

We have no material commitments for capital expenditures and do not anticipate capital expenditures to fluctuate significantly from historic levels.

The following table presents certain payments due under contractual obligations as of September 30, 2007(in thousands):

	Payments due by period
	Total	Less than 1 Year	1-3 Years	3-5 Years	More than 5 years
Operating lease obligations	13,580	5,772	4,779	2,472	557
Asset retirement obligations	346	—	—	346	—
Total	13,926	5,772	4,779	2,818	557

We believe that the effects of our strategic actions implemented to improve revenue as well as to control costs will be adequate to generate sufficient cash flows from operations, which, when combined with existing cash balances, we anticipate will be sufficient to meet our working capital and operating resource expenditure requirements for the near term. If the global economy weakens, a decline could occur.

We anticipate that operating expenses will continue to be a material use of our cash resources. We may continue to utilize cash resources to fund acquisitions or investments in other businesses, technologies or product lines. In the long-term, we may require additional funds to support our working capital and operating expense requirements or for other purposes, and may seek to raise these additional funds through public or private debt or equity financings. There can be no assurance that this additional financing will be available, or if available, will be on reasonable terms. Failure to generate sufficient revenues or to control spending could adversely affect our ability to achieve our business objectives.

46

Indemnification

As permitted under Delaware law, we have agreements whereby we have indemnified our officers, directors and certain employees for certain events or occurrences while the employee, officer or director is, or was serving, at our request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have a Director and Officer insurance policy that limits our exposure and may enable us to recover a portion of any future amounts paid. Future payments may be required to defend current and former directors in the derivative class action lawsuits described in Note 10 to the Consolidated Financial Statements. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal. Accordingly, we have no liabilities recorded for these agreements as of September 30, 2007.

We have entered into standard indemnification agreements in our ordinary course of business. Pursuant to these agreements, we agreed to indemnify, defend, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally our business partners or customers, in connection with any patent, copyright or other intellectual property infringement claim by any third party with respect to our products. The term of these indemnification agreements is generally perpetual after execution of the agreement. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited. We have not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements. We believe the estimated fair value of these agreements is minimal.  Accordingly, we have no liabilities recorded for these agreements as of September 30, 2007.

We have entered into arrangements with our business partners, whereby the business partners agree to provide services as subcontractors for its implementations. We may, at its discretion and in the ordinary course of business, subcontract the performance of any of our services. Accordingly, we have entered into standard indemnification agreements with our customers, whereby we indemnify them for other acts, such as personal property damage by our subcontractors. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have general and umbrella insurance policies that may enable us to recover a portion of any amounts paid. We have not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements is minimal. Accordingly, we have no liabilities recorded for these agreements as of September 30, 2007.

When, as part of an acquisition, we acquire all of the stock or all of the assets and liabilities of a company, we may assume the liability for certain events or occurrences that took place prior to the date of acquisition. The maximum potential amount of future payments, if any, we could be required to make for such obligations is undeterminable at this time. Accordingly, we have no amounts recorded for these contingent liabilities as of September 30, 2007.

We warrant that our software products will perform in all material respects in accordance with our standard published specifications and documentation in effect at the time of delivery of the licensed products to the customer for a specified period of time. Additionally, we warrant that our maintenance and consulting services will be performed consistent with generally accepted industry standards. If necessary, we would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history, however, we have not incurred significant expense under our product or services warranties to date. As a result, we believe the estimated fair value on these warranties is minimal. Accordingly, we have no amounts recorded for these contingent liabilities as of September 30, 2007.

Off Balance Sheet Arrangements

None.

47

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of interest rate changes and foreign currency fluctuations.

The following table presents the amounts of restricted cash and marketable securities that are subject to interest rate risk by year of expected maturity and average interest rates as of September 30, 2007 (in thousands):

		September 30, 2007		Fair Value	Average Interest Rates
Restricted cash in short-term investments	$	311	$	311	2.8	%
Marketable securities		12,159		12,159	5.0	%
Total restricted cash and marketable securities	$	12,470	$	12,470	4.9	%

The following table presents the amounts of restricted cash that are subject to interest rate risk by year of expected maturity and average interest rates as of September 30, 2006 (in thousands):

		September 30, 2006		Fair Value	Average Interest Rates
Restricted cash in short-term investments	$	519	$	519	1.9	%
Total restricted cash in short-term investments	$	519	$	519

Interest Rate Risk. Our exposure to market rate risk for changes in interest rates relates primarily to money market accounts, commercial paper, short-term certificates of deposit and marketable securities. We invest our excess cash in money market accounts, commercial paper, certificates-of-deposit, and marketable securities with maturities of less than one year. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell our fixed rate securities which have declined in market value due to changes in interest rates.

To provide a meaningful assessment of the interest rate risk associated with the Company’s total restricted cash and marketable securities, the Company performed a sensitivity analysis to determine the hypothetical impact of a decrease in interest rate of 100 basis points. Assuming consistent investment levels as of September 30, 2007, interest income would decline by $0.1 million. Assuming consistent investment levels as of September 30, 2006, interest income would have declined by less than $0.1 million.

Foreign Currency Risk. International revenues accounted for approximately 47% of total revenues for the year ended September 30, 2007, compared to 38% of total revenues for the year ended September 30, 2006.  International revenues increased $21.3 million or 57% compared to the prior year.  The growth in our international operations has increased our exposure to foreign currency fluctuations.  Revenues and related expense generated from our international subsidiaries are generally denominated in the functional currencies of the local countries. Primary currencies include the United Kingdom Pound Sterling, the Euro and the Canadian Dollar. The Statement of Operations is translated into United States Dollars at the average exchange rates in each applicable period.  To the extent the United States Dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenues, operating expense, and net income for our international operations. Similarly, our revenues, operating expenses, and net income will increase for our international operations, if the United States Dollar weakens against foreign currencies. Using the average foreign currency exchange rates from 2007, our international revenues for 2007 would have been lower than we reported by approximately $0.1 million and our international income from operations would have not been materially different. Using the average foreign currency exchange rates from 2006, our international revenues for 2007 would have been lower than we reported by approximately $4.9 million and our international income from operations would have been lower than we reported by $0.8 million.

We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries and our investments in equity interests into United States dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into United States dollars will lead to a translation gain or loss which is recorded as a component of accumulated other comprehensive income which is a component of stockholders’ equity. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity’s functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. For the fiscal years ended September 30, 2007, 2006 and 2005, we recorded net foreign currency transaction gains and (losses), realized and unrealized, of approximately $0.6 million, ($0.5 million), and $0.1 million, respectively, which were recorded in Other income (expense), net, in the Consolidated Statements of Operations.

48

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Chordiant Software, Inc. and Subsidiaries: Consolidated Financial Statements for the Years Ended September 30, 2007, 2006 and 2005.

Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	50
Consolidated Balance Sheets as of September 30, 2007 and 2006	51
Consolidated Statements of Operations for the years ended September 30, 2007, 2006, and 2005	52
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the years ended September 30, 2007, 2006, and 2005	53
Consolidated Statements of Cash Flows for the years ended September 30, 2007, 2006, and 2005	54
Notes to Consolidated Financial Statements	55
Financial Statement Schedule:
Schedule II—Valuation and Qualifying Accounts for the years ended September 30, 2007, 2006, and 2005	85

All other schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto.

49

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Chordiant Software, Inc.

Cupertino, California

We have audited the accompanying consolidated balance sheets of Chordiant Software, Inc. (the “Company”) as of September 30, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended September 30, 2007.  We have also audited the financial statement schedule listed in the accompanying index.  These financial statements and schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chordiant Software, Inc. at September 30, 2007 and 2006, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2007, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the financial statement schedule presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Chordiant Software, Inc.’s internal control over financial reporting as of September 30, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated November 15, 2007 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

San Jose, California

November 15, 2007

50

CHORDIANT SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	September 30,
	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	77,987		$	45,278
Marketable securities		12,159			—
Restricted cash		46			185
Accounts receivable, net, including nil and $142 due from related parties at September 30, 2007 and 2006, respectively		27,381			19,025
Prepaid expenses and other current assets		5,306			5,210
Total current assets		122,879			69,698
Restricted cash		265			334
Property and equipment, net		3,638			2,630
Goodwill		32,044			32,044
Intangible assets, net		2,725			3,937
Other assets		3,264			2,860
Total assets	$	164,815		$	111,503
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, including nil and $132 due to related parties at September 30, 2007 and 2006, respectively	$	8,080		$	7,665
Accrued expenses		13,804			15,706
Deferred revenue, including related party balances of $116 and $112 at September 30, 2007 and 2006, respectively		44,548			23,909
Current portion of capital lease obligations		—			95
Total current liabilities		66,432			47,375
Deferred revenue—long-term		23,434			5,596
Restructuring costs, net of current portion		942			1,239
Other long-term liabilities		646			68
Total liabilities		91,454			54,278
Commitments and contingencies (Notes 6, 8, 9, and 10)
Stockholders’ equity:
Preferred stock, $0.001 par value; 51,000 shares authorized; none issued and outstanding at September 30, 2007 and 2006		—			—
Common stock, $0.001 par value; 120,000 shares authorized; 33,221 and 32,030 shares issued and outstanding at September 30, 2007 and 2006, respectively		33			32
Additional paid-in capital		295,650			286,440
Accumulated deficit		(226,915	)		(232,943	)
Accumulated other comprehensive income		4,593			3,696
Total stockholders’ equity		73,361			57,225
Total liabilities and stockholders’ equity	$	164,815		$	111,503

The accompanying notes are an integral part of these consolidated financial statements.

51

CHORDIANT SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Years Ended September 30,
	2007		2006			2005
Revenues:
License, including related party items aggregating nil, nil, and $5,612, for years ended September 30, 2007, 2006, and 2005, respectively	$	54,052	$	40,514		$	31,678
Service, including related party items aggregating $252, $663, and $2,443, for years ended September 30, 2007, 2006, and 2005, respectively		70,495		57,022			52,047
Total revenues		124,547		97,536			83,725
Cost of revenues:
License		1,813		1,690			1,079
Service, including related party items aggregating $72, $669, and nil, for the years ended September 30, 2007, 2006, and 2005, respectively		30,329		30,566			30,155
Amortization of intangible assets		1,211		1,211			1,068
Total cost of revenues		33,353		33,467			32,302
Gross profit		91,194		64,069			51,423
Operating expenses:
Sales and marketing		32,597		33,616			29,561
Research and development		27,546		25,858			20,272
General and administrative		19,898		20,445			18,549
Amortization of intangible assets		—		—			117
Restructuring expense		6,543		—			1,052
Purchased in-process research and development		—		—			1,940
Total operating expenses		86,584		79,919			71,491
Income (loss) from operations		4,610		(15,850	)		(20,068	)
Interest income, net		2,198		1,120			755
Other income (expense), net		822		(627	)		(103	)
Income (loss) before income taxes		7,630		(15,357	)		(19,416	)
Provision for income taxes		1,602		644			449
Net income (loss)	$	6,028	$	(16,001	)	$	(19,865	)
Net income (loss) per share:
Basic	$	0.19	$	(0.51	)	$	(0.67	)
Diluted	$	0.18	$	(0.51	)	$	(0.67	)
Weighted average shares used in computing net income (loss) per share:
Basic		32,425		31,073			29,780
Diluted		33,261		31,073			29,780

The accompanying notes are an integral part of these consolidated financial statements.

52

CHORDIANT SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Common Stock					Additional Paid-in Capital			Deferred Stock-Based Compensation			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Shares			Amount
Balance at September 30, 2004		29,014		$	29	$	270,571		$	(700	)	$	(197,077	)	$	3,089		$	75,912
Net loss		—			—		—			—			(19,865	)		—			(19,865	)
Foreign currency translation loss		—			—		—			—			—			(605	)		(605	)
Comprehensive loss		—			—		—			—			—			—			(20,470	)
Exercise of stock options		498			—		1,512			—			—			—			1,512
Stock-based compensation-stock options related to acquisitions		—			—		—			2,729			—			—			2,729
Stock-based compensation-stock options		—			—		—			(348	)		—			—			(348	)
Stock-based compensation-restricted stock		—			—		—			650			—			—			650
Cancellation of restricted stock		(38	)		—		(221	)		221			—			—			—
Unearned compensation on variable options		—			—		(411	)		411			—			—			—
Issuance of restricted stock		180			—		952			(952	)		—			—			—
Issuance of common stock, net of offering costs, and restricted stock related to acquisitions		1,741			2		9,305			(4,123	)		—			—			5,184
Warrants issued to customer		—			—		(12	)		—			—			—			(12	)
Balance at September 30, 2005		31,395			31		281,696			(2,112	)		(216,942	)		2,484			65,157
Net loss		—			—		—			—			(16,001	)		—			(16,001	)
Foreign currency translation gain		—			—		—			—			—			1,212			1,212
Comprehensive loss		—			—		—			—			—			—			(14,789	)
Exercise of stock options and warrants		513			1		2,025			—			—			—			2,026
Stock-based compensation-stock options related to acquisitions		—			—		756			—			—			—			756
Stock-based compensation-stock options		—			—		3,475			—			—			—			3,475
Stock-based compensation-restricted stock		—			—		463			—			—			—			463
Cancellation of restricted stock		(8	)		—		—			—			—			—			—
Issuance of restricted stock		130			—		—			—			—			—			—
Issuance of common stock, net of offering costs, and restricted stock related to acquisitions		—			—		137			—			—			—			137
Reclassification of deferred compensation due to adoption of SFAS 123R		—			—		(2,112	)		2,112			—			—			—
Balance at September 30, 2006		32,030			32		286,440			—			(232,943	)		3,696			57,225
Net income		—			—		—			—			6,028			—			6,028
Unrealized gain/loss on marketable securities, net		—			—		—			—			—			(2	)		(2	)
Foreign currency translation gain		—			—		—			—			—			899			899
Comprehensive income		—			—		—			—			—			—			6,925
Exercise of stock options		1,328			1		6,113			—			—			—			6,114
Cancellation of restricted stock		(137	)		—		—			—			—			—			—
Stock-based compensation-stock options		—			—		2,870			—			—			—			2,870
Stock-based compensation-restricted stock		—			—		150			—			—			—			150
Tax benefit from stock options		—			—		77			—			—			—			77
Balance at September 30, 2007		33,221		$	33	$	295,650		$	—		$	(226,915	)	$	4,593		$	73,361

The accompanying notes are an integral part of these consolidated financial statements.

53

CHORDIANT SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended September 30,
	2007			2006			2005
Cash flows from operating activities:
Net income (loss)	$	6,028		$	(16,001	)	$	(19,865	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		1,611			1,238			1,382
Purchased in-process research and development		—			—			1,940
Amortization of intangibles and capitalized software		2,133			2,111			1,335
Non-cash stock-based compensation expense		3,020			4,695			3,031
Excess tax benefits from stock-based compensation		(77	)		—			—
Provision (reversal) for doubtful accounts		82			(9	)		103
Warrants issued to customers		—			—			(12	)
Loss on disposal of assets		673			40			27
Accretion of discounts on investments		(131	)		—			—
Other non-cash charges		445			140			29
Changes in assets and liabilities:
Accounts receivable		(11,825	)		292			1,479
Prepaid expenses and other current assets		(59	)		(1,028	)		(988	)
Other assets		2,585			(136	)		250
Accounts payable		238			3,004			(3,893	)
Accrued expenses, other long term liabilities and restructuring		(2,383	)		6,106			743
Deferred revenue		36,573			2,793			5,489
Net cash provided by (used in) operating activities		38,913			3,245			(8,950	)
Cash flows from investing activities:
Property and equipment purchases		(2,809	)		(1,694	)		(726	)
Capitalized product development costs		(257	)		(250	)		(2,226	)
Proceeds from disposal of property and equipment		—			11			—
Cash used for acquisitions, net		—			—			(9,800	)
Proceeds from release of restricted cash		215			1,893			(12	)
Purchases of marketable securities and short term investments		(18,028	)		—			(100	)
Proceeds from maturities of short term investments		6,000			—			4,100
Net cash used in investing activities		(14,879	)		(40	)		(8,764	)
Cash flows from financing activities:
Proceeds from exercise of stock options		6,191			2,250			1,210
Payment on capital leases		(96	)		(213	)		(199	)
Excess tax benefits from stock-based compensation		77			—			—
Net cash provided by financing activities		6,172			2,037			1,011
Effect of exchange rate changes		2,503			1,490			(499	)
Net increase (decrease) in cash and cash equivalents		32,709			6,732			(17,202	)
Cash and cash equivalents at beginning of the year		45,278			38,546			55,748
Cash and cash equivalents at end of the year	$	77,987		$	45,278		$	38,546
Supplemental cash flow information:
Cash paid for interest	$	3		$	17		$	29
Cash paid for taxes	$	1,669		$	360		$	478
Supplemental non-cash investing and financing activities:
Receivable related to issuance of stock options	$	—		$	77		$	302
Fair value of assets acquired in acquisition, excluding acquired intangible assets	$	—		$	—		$	1,134
Liabilities assumed in acquisitions	$	—		$	—		$	477
Issuance of common stock in connection with acquisition	$	—		$	—		$	9,307
Cashless exercise of stock warrants	$	—		$	450		$	—

The accompanying notes are an integral part of these consolidated financial statements.

54

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—THE COMPANY

Chordiant Software, Inc., or the Company, or Chordiant, is an enterprise software vendor that offers software solutions for global business-to-consumer companies that seek to improve the quality of their customer interactions and to reduce costs through increased employee productivity and process efficiencies. The Company concentrates on serving global customers in banking, insurance, healthcare, telecommunications, retail and other consumer direct industries. The Company was incorporated in California in March 1991 and reincorporated in Delaware in October 1997.

The Company delivers customer solutions that include software applications and tools and services that enable businesses to integrate their customer information and corporate systems so that they can have an accurate, real-time view of their customers across multiple forms of customer interaction.

The Company believes its solutions offer flexibility to businesses to set business policies and processes to control the quality of servicing, fulfillment and marketing to their customers. The Company’s solutions enable its customers to control and change their business policies and processes. The Company believes that it is a leader in providing business process driven solutions for customer management.

The Company’s software solutions and architecture are based on leading industry standards that are widely adopted by business customers in the industries the Company serves. The Company believes these solutions are capable of being the foundation for contemporary distributed computing environments required by global business-to-consumer enterprises.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - Reverse Stock Split

On December 13, 2006, Chordiant’s Board of Directors approved a reverse two and a half to one stock split. On February 15, 2007 at a special meeting, stockholders approved the reverse stock split such that each outstanding two and one half (2.5) shares of common stock were combined into and became one (1) share of common stock. The reverse stock split was effective February 20, 2007. All share and per share amounts in these Consolidated Financial Statements and related notes have been retroactively adjusted to reflect the reverse stock split for all periods presented.

Principles of consolidation

The accompanying consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

On an on-going basis, the Company evaluates the estimates, including those related to our allowance for doubtful accounts, valuation of stock-based compensation, valuation of goodwill and intangible assets, valuation of deferred tax assets, restructuring expenses, contingencies, fair value of vendor specific objective evidence in multiple element arrangements and the estimates associated with the percentage-of-completion method of accounting for certain of our revenue contracts. The Company bases the estimates on historical experience and on various other assumptions that are believed to be reasonable. Actual results may differ materially from these estimates under different assumptions or conditions.

Reclassifications

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

55

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Cash, cash equivalents and marketable securities

Cash equivalents consist of highly liquid instruments purchased with an original maturity of three months or less. The Company invests primarily in money market funds as these investments are subject to minimal credit and market risks.

Historically the Company’s marketable securities have been classified as available-for-sale. In accordance with Statement of Financial Accounting Standards, or SFAS, No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” available-for-sale securities are carried at fair value with unrealized gains and losses included as a separate component of stockholder’s equity, net of any tax effect. Realized gains and losses and declines in value determined by management to be other than temporary on these investments are included in interest income and expense when held. The Company periodically evaluates these investments for other-than-temporary impairment. For the purposes of computing realized gains and losses, cost is identified on a specific identification basis. As of September 30, 2007 and 2006, there were $12.2 million and zero, respectively marketable securities held by the Company, respectively.

Restricted cash

At September 30, 2007 and 2006, interest bearing certificates of deposit were classified as restricted cash. These deposits serve as collateral for letters of credit securing certain lease obligations and post-contract customer support obligations. During the years ended September 30, 2007 and 2006, $0.2 million and $0.3 million, respectively of restricted cash for letters of credit related to lease obligations was released in accordance with the requirements of the lease agreement.

Fair value of financial instruments

The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and borrowings are carried at cost, which approximates fair value because of the short-term nature of these instruments. The reported amount of borrowings approximates fair value because of the market value interest rates that these debts bear.

During the years ended September 30, 2007, 2006 and 2005, the Company did not enter into any foreign currency forward exchange contracts.

Revenue Recognition

The Company derives revenue from licensing software and related services, which include assistance in implementation, customization and integration, post-contract customer support, training and consulting. All revenue amounts are presented net of sales taxes in the Company’s Consolidated Statements of Operations. The amount and timing of revenue is difficult to predict and any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from period to period and could result in operating losses. The accounting rules related to revenue recognition are complex and are affected by the interpretation of the rules and an understanding of industry practices, both of which are subject to change. Consequently, the revenue recognition accounting rules require management to make significant estimates based on judgment.

Software license revenue is recognized in accordance with Statement of Position No. 97-2 “Software Revenue Recognition,” as amended by Statement of Position No. 98-9 “Software Revenue Recognition with Respect to Certain Arrangements” (collectively “SOP 97-2”).

For arrangements with multiple elements, the Company recognizes revenue for services and post-contract customer support based upon the fair value Vendor Specific Objective Evidence (VSOE) of the respective elements. The fair value VSOE of the services element is based upon the standard hourly rates charged for the services when such services are sold separately. The fair value VSOE for annual post-contract customer support is generally established with the contractual future renewal rates included in the contracts, when the renewal rate is substantive and consistent with the fees when support services are sold separately. When contracts contain multiple elements and fair value VSOE exists for all undelivered elements, the Company accounts for the delivered elements, principally the license portion, based upon the “residual method” as prescribed by SOP 97-2. In multiple element transactions where VSOE is not established for an undelivered element, revenue is recognized upon the establishment of VSOE for that element or when the element is delivered.

56

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

At the time a transaction is entered into, the Company assesses whether any services included within the arrangement relate to significant implementation or customization essential to the functionality of our products. For contracts for products that do not involve significant implementation or customization essential to the product functionality, the Company recognizes license revenue when there is persuasive evidence of an arrangement, the fee is fixed or determinable, collection of the fee is probable and delivery has occurred as prescribed by SOP 97-2. For contracts that involve significant implementation or customization services essential to the functionality of our products, the license and professional consulting services revenue is recognized using either the percentage-of-completion method or the completed contract method as prescribed by Statement of Position No. 81-1, “Accounting for Performance of Construction-Type and Certain Product-Type Contracts”.

The percentage-of-completion method is applied when the Company has the ability to make reasonably dependable estimates of the total effort required for completion using labor hours incurred as the measure of progress towards completion. The progress toward completion is measured based on the “go-live” date. The “go-live” date is defined as the date the essential product functionality has been delivered or the application enters into a production environment or the point at which no significant additional Chordiant supplied professional service resources are required. Estimates are subject to revisions as the contract progresses to completion and these changes are accounted for as changes in accounting estimates when the information becomes known. Information impacting estimates obtained after the balance sheet date but before the issuance of the financial statements is used to update the estimates. Provisions for estimated contract losses, if any, are recognized in the period in which the loss becomes probable and can be reasonably estimated. When additional licenses are sold related to the original licensing agreement, revenue is recognized upon delivery if the project has reached the go-live date, or if the project has not reached the go-live date, revenue is recognized under the percentage-of-completion method. Revenue from these arrangements is classified as license and service revenue based upon the estimated fair value of each element using the residual method.

The completed contract method is applied when the Company is unable to obtain reasonably dependable estimates of the total effort required for completion. Under the completed contract method, all revenue and related costs of revenue are deferred and recognized upon completion.

For product co-development arrangements relating to software products in development prior to the consummation of the individual arrangements, where the Company retains the intellectual property being developed, and intends to sell the resulting products to other customers, license revenue is deferred until the delivery of the final product, provided all other requirements of SOP 97-2 are met. Expenses associated with these co-development arrangements are accounted for under SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed” and are normally expensed as incurred as they are considered to be research and development costs that do not qualify for capitalization or deferral.

Revenue from subscription or term license agreements, which include software and rights to unspecified future products or maintenance, is recognized ratably over the term of the subscription period. Revenue from subscription or term license agreements, which include software, but exclude rights to unspecified future products and maintenance, is recognized upon delivery of the software if all conditions of recognizing revenue have been met including that the related agreement is non-cancelable, non-refundable and provided on an unsupported basis.

Revenue for post-contract customer support is recognized ratably over the support period which ranges from one to five years.

Training and consulting services revenue is recognized as such services are performed on an hourly or daily basis for time and material contracts. For consulting services arrangements with a fixed fee, revenue is recognized on a percentage-of-completion basis.

For all sales, either a signed license agreement or a binding purchase order with an underlying master license agreement is used as evidence of an arrangement. Sales through third party systems integrators are evidenced by a master agreement governing the relationship together with binding purchase orders or order forms on a transaction-by-transaction basis. Revenues from reseller arrangements are recognized on the “sell-through” method, when the reseller reports to the Company the sale of software products to end-users. The Company’s agreements with customers and resellers do not contain product return rights.

Collectibility is assessed based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. Collateral is generally not requested from customers. If it is determined that the collection of a fee is not probable, the revenue is recognized at the time the collection becomes probable, which is generally upon the receipt of cash. If a transaction includes extended payment terms, the revenue is recognized as the payments become due and payable.

57

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Stock-based compensation

On October 1, 2005, the Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment,” or SFAS 123(R), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock awards and employee stock purchases related to the Employee Stock Purchase Plan, or ESPP, based on estimated fair values. SFAS 123(R) supersedes the Company’s previous accounting using the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, or APB 25. In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or SAB 107, which provided supplemental implementation guidance for SFAS 123(R). The Company has applied the provisions of SAB 107 in the adoption of SFAS 123(R).

The Company adopted SFAS 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of October 1, 2005, the first day of the Company’s fiscal year 2006. The consolidated financial statements for the years ended September 30, 2007 and 2006 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, the consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R).

SFAS 123(R) requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Consolidated Statement of Operations. Prior to the adoption of SFAS 123(R), the Company accounted for stock-based awards to employees and directors using the intrinsic value method in accordance with APB 25 as allowed under SFAS No. 123, “Accounting for Stock-Based Compensation”, or SFAS 123. Under the intrinsic value method, when the exercise price of the Company’s fixed stock options granted to employees and directors was equal to the fair market value of the underlying stock at the date of grant, no stock-based compensation was required to be recognized under APB 25.

Stock-based compensation expense recognized during the period under SFAS 123(R) is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized in the Company’s Consolidated Statement of Operations for the years ended September 30, 2007 and 2006 includes: (i) compensation expense for share-based payment awards granted prior to, but not yet vested as of September 30, 2005 based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS 123, and (ii) compensation expense for the share-based payment awards granted subsequent to September 30, 2005 based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). In conjunction with the adoption of SFAS 123(R), the Company changed the method of expense attribution from the vested graded to the straight-line method. Compensation expense for all share-based payment awards granted on or prior to September 30, 2005 will continue to be recognized using the vested graded method of expense attribution while compensation expense for all share-based payment awards granted subsequent to September 30, 2005 will be recognized using the straight-line method of expense attribution. As stock-based compensation expense recognized in the Consolidated Statement of Operations for the years ended September 30, 2007 and 2006 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Upon adoption of SFAS 123(R), the Company has continued to utilize the Black-Scholes option-pricing model, or Black-Scholes model. For additional information, see Note 12. The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Because changes in the subjective assumptions can materially affect the estimated value, in management’s opinion, the existing valuation models may not provide an accurate measure of the fair value of the Company’s employee stock options. Although the fair value of employee stock options is determined in accordance with SFAS 123(R) and SAB 107 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. Stock-based compensation expense recognized under SFAS 123(R) for the year ended 2007 was $3.0 million, which consisted of stock-based compensation expense of $2.8 million related to employee stock options and $0.2 million related to restricted stock awards, respectively.

There was no stock-based compensation expense related to the ESPP recognized during the years ended September 30, 2007, 2006 and 2005. See Note 12 for additional information.

58

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Concentrations of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, restricted cash, marketable securities and accounts receivable. To date, the Company has invested excess funds in money market accounts, commercial paper, corporate bonds, certificates-of-deposit, and marketable securities with maturities of less than one year. The Company has cash and cash equivalents and marketable securities with various high quality institutions domestically and internationally. The Company’s marketable securities are composed of investment instruments that are highly rated.

The Company’s accounts receivable are derived from sales to customers located in North America, Europe, and elsewhere in the world. The Company performs ongoing credit evaluations of customers’ financial condition and, generally, requires no collateral from customers. The Company maintains an allowance for doubtful accounts when deemed necessary. The Company estimates its allowance for doubtful accounts by analyzing accounts receivable for specific risk accounts as well as providing for a general allowance amount based on historical bad debt and billing dispute percentages. The estimate considers historical bad debts, customer concentrations, customer credit-worthiness and current economic trends. To date, bad debts have not been material and have been within management expectations. The following table summarizes the revenues from customers that accounted for 10% or more of total revenues:

	Year EndedSeptember 30,
	2007		2006		2005
Citicorp Credit Services, Inc.	23	%	12	%	*
IBM	16	%	*		*
Capital Once Services, Inc.	*		*		18	%

 *      Represents less than 10% of total revenues.

At September 30, 2007, Wellpoint, Inc., IBM and Citicorp Credit Services, Inc. accounted for approximately 28%, 17% and 15% of our accounts receivable, respectively. At September 30, 2006, IBM and Cash America International, Inc. accounted for approximately 26% and 14% of our accounts receivable, respectively.

Research and Development

Costs incurred in the research and development of new products and enhancements to existing products are charged to expense as incurred until the technological feasibility of the product or enhancement has been established. Technological feasibility of the product is determined after the completion of a detailed program design and a determination has been made that any uncertainties related to high-risk development issues have been resolved. If the process of developing the product does not include a detail program design, technological feasibility is determined only after completion of a working model. After establishing technological feasibility, additional development costs incurred through the date the product is available for general release to customers is capitalized and amortized over the estimated product life.

When technological feasibility is established through the completion of a working model the period of time between achieving technological feasibility and the general release of new product is generally short and software development costs qualifying for capitalization have historically been insignificant.

During the quarter ended September 30, 2006, technological feasibility to port an existing product to a new platform was established through the completion of a detailed program design. Costs aggregating $0.5 million associated with this product have been capitalized and included in Other Assets as of September 30, 2007. This product was completed in July 2007, accordingly, the capitalized costs are being amortized using the straight-line method over the remaining estimated economic life of the product which is 36 months. For the year ended September 30, 2007 amortization expense related to this product was less than $0.1 million.

During the quarter ended September 30, 2004, technological feasibility for an acquired banking product was established through the completion of a detailed program design. Costs aggregating $2.7 million associated with this product have been capitalized and included in Other Assets as of September 30, 2005. During the quarter ended September 30, 2005, the product became available for general release and, accordingly, the costs capitalized commenced to be amortized. The capitalized costs are being amortized using the straight-line method over the remaining estimated economic life of the product which is 36 months. For the years ended September 30, 2007 and 2006, amortization expense related to this product was $0.9 million and $0.9 million, respectively.

59

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Property and equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method based upon the estimated useful lives of assets, which range from three to seven years. Amortization of leasehold improvements is calculated using the straight-line method over the shorter of the economic life of the asset or the lease term. Purchased internal-use software consists primarily of amounts paid for perpetual licenses to third party software applications, which are amortized over their estimated useful lives, generally three years. Depreciation and amortization expense was approximately $1.5 million, $1.2 million and $1.4 million for the years ended September 30, 2007, 2006, and 2005, respectively.

As required by SFAS No.143 “Accounting for Asset Retirement Obligations”,  or SFAS 143, and Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143”, or FIN 47, the Company has recorded an Asset Retirement Obligation (ARO) of approximately $0.3 million and a corresponding increase in leasehold improvements. SFAS 143 and FIN 47 requires the recognition of a liability for the fair value of a legally required conditional asset retirement obligation when incurred, if the liability’s fair value can be reasonability estimated. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is amortized over the life of the asset.

The Company’s ARO is associated with leasehold improvements to facilities where the Company is the lessee and the lease agreement contains a reinstatement clause, which generally requires any leasehold improvements the Company makes to the leased property be restored to their original condition at the end of the lease. This amount represents the present value of the ARO and will be amortized over the term of the lease.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired.  Goodwill amounts are not amortized, but rather are tested for impairment at least annually. Intangible assets that are not considered to have an indefinite useful life are amortized over their useful lives, which range from one and one half to five years (See Note 3). The carrying amount of these assets is reviewed whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of these assets is measured on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in our current business model. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset.  The Company did not recognize any goodwill or intangible asset impairment charges in the years ended September 30, 2007, 2006, and 2005.

Royalties

The Company has certain royalty commitments associated with the shipment and licensing of certain products or components of products. Royalty expense is generally based on a percentage of the underlying revenue and subject to minimum and maximum amounts. Royalty expense was approximately $1.8 million, $1.5 million, and $1.5 million for the years ended September 30, 2007, 2006, and 2005, respectively. With respect to a licensed banking product, the Company obtained exclusive, irrevocable worldwide rights to the product. Under the terms of the agreement, if the Company did not achieve agreed upon annual minimum royalty targets, the licensor had the ability to cancel the exclusivity rights. During the year ended September 30, 2006, the minimum targets were not met and the rights to distribute the product are no longer exclusive.

Advertising costs

Advertising costs are expensed to sales and marketing expense as incurred. Advertising costs for the year ended September 30, 2007, 2006, and 2005 totaled approximately $0.5 million, $0.2 million, and $0.2 million, respectively.

Foreign currency translation

The functional currency of our foreign entities is their respective local currency. Foreign currency assets and liabilities are translated at the current exchange rates at each balance sheet date. Revenues and expenses are translated at weighted average exchange rates in effect during the year. The related unrealized gains and losses from foreign currency translation are recorded in Accumulated Other Comprehensive Income (Loss) as a separate component of stockholders’ equity. Net gains and losses resulting from foreign exchange transactions are included in Other Income (Expense).

60

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Income taxes

 Income taxes are accounted for using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current period and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. The measurement of current and deferred tax liabilities and assets is based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

Net income (loss) per share

The Company computes net income (loss) per share in accordance with SFAS 128, “Earnings per Share”, or SFAS 128. Under the provisions of SFAS 128, basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive shares outstanding during the period. Potentially dilutive shares, which consist of incremental shares issuable upon the exercise of stock options and unvested restricted stock (using the treasury stock method), are included in the calculation of diluted net income per share, in periods in which net income is reported, to the extent such shares are dilutive. The calculation of diluted net loss per share excludes potential common shares as their effect is anti-dilutive for the years ended September 30, 2006 and 2005.

The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated (in thousands, except for per share data):

	Years ended September 30,
	2007			2006			2005
Net income (loss) available to common stockholders	$	6,028		$	(16,001	)	$	(19,865	)
Denominator:
Weighted average common stock outstanding		32,650			31,476			30,548
Common stock subject to repurchase		(225	)		(403	)		(768	)
Denominator for basic calculations		32,425			31,073			29,780
Effect of dilutive potential common shares		836			—	(1)		—	(1)
Denominator for diluted calculations		33,261			31,073			29,780
Net income (loss) per share—basic	$	0.19		$	(0.51	)	$	(0.67	)
Net income (loss) per share—diluted	$	0.18		$	(0.51	)	$	(0.67	)

(1) – Dilutive potential common shares are excluded from the calculation of diluted net loss per share.

The following table sets forth the potential total common shares that are excluded from the calculation of diluted net loss per share as their effect is anti-dilutive as of the dates indicated (in thousands):

	September 30,
		2006	2005
Warrants outstanding		345	665
Employee stock options		4,105	3,385
Restricted stock		403	768
		4,853	4,818

61

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

NOTE 3— BALANCE SHEET COMPONENTS

Accounts receivable

Accounts receivable, net, consists of the following (in thousands):

	September 30,
		2007			2006
Accounts receivable, net:
Accounts receivable	$	27,546		$	19,108
Less: allowance for doubtful accounts		(165	)		(83	)
	$	27,381		$	19,025

Prepaid expenses and other current assets

Prepaid expense and other current assets consist of the following (in thousands):

	September 30,
		2007		2006
Prepaid expense and other current assets:
Prepaid commissions and royalties	$	3,104	$	3,265
Other prepaid expenses and current assets		2,202		1,945
	$	5,306	$	5,210

Property and equipment

Property and equipment, net, consists of the following (in thousands):

	September 30,
		2007			2006
Property and equipment, net:
Computer hardware (useful lives of 3 years)	$	4,167		$	3,313
Purchased internal-use software (useful lives of 3 years)		2,685			2,254
Furniture and equipment (useful lives of 3 to 7 years)		739			1,043
Computer equipment and software under capital leases (useful lives of 3 years)		—			549
Leasehold improvements (shorter of 7 years or the term of the lease)		2,883			2,729
		10,474			9,888
Accumulated depreciation and amortization		(6,836	)		(7,258	)
	$	3,638		$	2,630

62

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Intangible assets

Intangible assets, net, consist of the following (in thousands):

	September 30, 2007							September 30, 2006
		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets, net:
Developed technologies	$	6,904	$	(4,869	)	$	2,035	$	6,904	$	(3,972	)	$	2,932
Customer list and trade-names		2,731		(2,041	)		690		2,731		(1,726	)		1,005
	$	9,635	$	(6,910	)	$	2,725	$	9,635	$	(5,698	)	$	3,937

All of the Company’s acquired intangible assets are subject to amortization and are carried at cost less accumulated amortization. Amortization is computed on a straight-line basis over their estimated useful lives which are as follows: Developed technologies—one and one half to five years; trade-names—three to five years; customer list—three to five years. Aggregate amortization expense for intangible assets totaled $1.2 million, $1.2 million, and $1.2 million for the years ended September 30, 2007, 2006, and 2005, respectively. The Company expects amortization expense on acquired intangible assets to be $1.2 million in fiscal 2008, $1.2 million in fiscal 2009, and $0.3 million in fiscal 2010.

Other assets

Other assets consist of the following (in thousands):

	September 30,
		2007		2006
Other assets:
Long-term accounts receivable	$	984	$	—
Other assets		2,280		2,860
	$	3,264	$	2,860

The long-term accounts receivable balance represents a receivable from a single customer related to a sale transaction that occurred during the quarter ended December 31, 2006. This amount represents the third and final payment which is due in the quarter ending December 2008. All revenue associated with this receivable has been deferred and will not be recognized until the payment becomes due. As of September 30, 2007, an allowance has not been provided for this receivable based on the Company’s assessment of the underlying customer’s credit worthiness.

Accrued expenses

Accrued expenses consist of the following (in thousands):

	September 30,
		2007		2006
Accrued expenses:
Accrued payroll, payroll taxes and related expenses	$	6,781	$	7,627
Accrued restructuring expenses, current portion (Note 6)		3,044		655
Accrued third party consulting fees		1,264		1,491
Accrued income, sales and other taxes		1,143		2,545
Accrued professional fees		337		1,630
Other accrued liabilities		1,235		1,758
	$	13,804	$	15,706

63

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

NOTE 4—MARKETABLE SECURITIES

The Company has the following marketable securities (in thousands):

	September 30, 2007
		Amortized cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Marketable Securities:
Commercial paper	$	3,008	$	—	$	(1	)	$	3,007
Corporate bonds		9,153		3		(4	)		9,152
Total	$	12,161	$	3	$	(5	)	$	12,159

The Company had no marketable securities as of September 30, 2006. As of September 30, 2007, all marketable securities have maturity dates less than one year. For the year ended September 30, 2007, no gains or losses were realized on the sale of marketable securities.

NOTE 5—RECENT ACCOUNTING PRONOUNCEMENTS

In February 2007, the FASB, issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, or SFAS 159. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company has evaluated the new pronouncement and has determined that it will not have a significant impact on the determination or reporting of our financial results.

In December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for Registration Payment Arrangements.” This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, “Accounting for Contingencies.” The guidance is effective for fiscal years beginning after December 15, 2006. The Company has evaluated the new pronouncement and has determined that it will not have a significant impact on the determination or reporting of our financial results.

In September 2006, the SEC issued SAB 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements”. SAB 108 provides guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement.  The guidance is applicable for fiscal years ending after November 15, 2006. The Company has evaluated the new statement and has determined that it will not have a significant impact on the determination or reporting of our financial results.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurement”. SFAS 157 defines fair value, establishes a framework for measuring fair value, and also expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company has evaluated the new pronouncement and has determined that it will not have a significant impact on the determination or reporting of our financial results.

In July 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes”, an interpretation of SFAS No. 109, “Accounting for Income Taxes”. FIN 48 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (i.e. a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Upon adoption, the cumulative effect of applying the recognition and measurement provisions of FIN 48, if any, shall be reflected as an adjustment to the opening balance of retained earnings.

FIN 48 also requires expanded disclosures including identification of tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly change in the next twelve months, a description of tax years that remain subject to examination by major tax jurisdictions, a tabular reconciliation of the total amount of unrecognized tax benefits

64

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

at the beginning and end of each annual reporting period, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate and the total amounts of interest and penalties recognized in the statements of operations and financial position. FIN 48 is effective for fiscal years beginning after December 15, 2006, and the Company expects to adopt this standard in the fiscal year commencing on October 1, 2007. The Company has not yet determined the impact of the recognition and measurement requirements of FIN 48 on our existing tax positions.

 In May 2007,the FASB issued FSP FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48”, which provides guidance on how a company should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits.

NOTE 6—RESTRUCTURING

Restructuring Costs

Through September 30, 2007, the Company approved certain restructuring plans to, among other things, reduce its workforce and consolidate facilities. Restructuring and asset impairment expenses have been recorded to align the Company’s cost structure with changing market conditions and to create a more efficient organization. The Company’s restructuring expenses have been comprised primarily of: (i) severance and termination benefit costs related to the reduction of our workforce; and (ii) lease termination costs and costs associated with permanently vacating certain facilities. The Company accounted for each of these costs in accordance with SFAS No. 146, or SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities” or previous guidance under Emerging Issues Task Force 94-3 “Liabilities Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”, or EITF 94-3.

Retroactive application of SFAS 146 to periods prior to January 1, 2003, was prohibited; accordingly, the accrual relating to facilities vacated prior to the effective date of SFAS 146 continues to be accounted for in accordance with the guidance of EITF 94-3. Accruals for facilities that were restructured prior to 2003 do not reflect any adjustments relating to the estimated net present value of cash flows associated with the facilities.

For each of the periods presented herein, restructuring expenses consist solely of:

• Severance and Termination Benefits—These costs represent severance and payroll taxes related to restructuring plans.

• Excess Facilities—These costs represent future minimum lease payments related to excess and abandoned office space under leases, the disposal of property and equipment including facility leasehold improvements, and net of estimated sublease income.

As of September 30, 2007, the total restructuring accrual consisted of the following (in thousands):

		Current		Non-Current		Total
Severance and termination benefits	$	100	$	—	$	100
Excess facilities		2,944		942		3,886
Total	$	3,044	$	942	$	3,986

As of September 30, 2007 and 2006, $3.0 million and $0.7 million, respectively, of the restructuring reserve are included in the Accrued Expenses line item on the Consolidated Balance Sheets. The allocation between current portion and long term portion is based on the current lease agreements or the anticipated settlement dates.

The Company expects the remaining severance and termination benefit accrual will be substantially paid by September 30, 2008.

65

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The excess facilities reserve relates to two facilities: one located in the United Kingdom and one in Boston, Massachusetts. The Company expects to pay the excess facilities amounts related to the restructured or vacated leased office space as follows (in thousands):

Fiscal Year Ended September 30,		Total Future Minimum Lease Payments
2008	$	2,944
2009		415
2010		407
2011		120
Total	$	3,886

Included in the future minimum lease payments schedule above is an offset of $0.9 million of contractually committed sublease rental income for the Boston facility. In November 2007, the Company expects to negotiate a break clause in the United Kingdom lease allowing for an early termination of the respective facility which will release the Company of any future rent liabilities subsequent to January 2008. The scheduled lease payments shown in the table above reflect an expected payment of $2.5 million in fiscal year 2008 associated with the early termination of the United Kingdom lease.

Fiscal Year 2007 Restructuring

In October 2006, the Company initiated a restructuring plan intended to align its resources and cost structure with expected future revenues. The restructuring plan included a balancing of service resources worldwide, elimination of duplicative functions internationally, and a shift in the U.S. field organization toward a focus on domain–based sales and pre-sales teams. As a result of the restructuring plan, management undertook a reduction of 33 positions or approximately 10% of the Company’s workforce and consolidation of the European headquarters in the United Kingdom and the closure of the France office. In connection with this action, the Company incurred a one-time restructuring expense of $6.1 million for severance and termination benefits, and excess facilities expensed to Restructuring Expense in the Consolidated Statements of Operations. The Company accrued lease costs pertaining to the consolidation of excess facilities relating to lease terminations and non-cancelable lease costs. The Company was able to terminate the France facility lease during the year and as of the date of this Annual Report, expects to negotiate an early termination option for the United Kingdom lease that will terminate the lease by January 2008. Management believes the current restructure reserve amount is sufficient to meet all payments required as a result of the anticipated early termination.

The following table summarizes the activity related to the fiscal year 2007 restructuring (in thousands):

		Severance and Benefits			Excess Facilities			Total
Total expenses	$	1,752		$	4,378		$	6,130
Non-cash		4			(947	)		(943	)
Cash paid		(1,756	)		(905	)		(2,661	)
Reserve balance as of September 30, 2007	$	—		$	2,526		$	2,526

Fiscal Year 2005 Restructuring

In May 2005, the Company appointed a task force to improve profitability and control expenses. The goal of the task force was to create a better alignment of functions within the Company, to make full utilization of the Company’s India development center, to develop a closer relationship between the Company’s field operations and customers, to review the sales and implementation models, as well adjust as the organization model to flatten management levels, to review the Company’s product line, and to enhance the Company’s business model for profitability and operating leverage. This work resulted in an approximate 10% reduction in the Company’s workforce, and affected employees were notified in July 2005. In connection with this action, the Company incurred a one-time restructuring expense of $1.1 million in the fourth quarter ended September 30, 2005 for severance and termination benefits.

66

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table summarizes the activity related to the fiscal year 2005 restructuring (in thousands):

	Severance and Termination Benefits
Reserve balance at September 30, 2005	$	469
Non-Cash		1
Cash paid		(438	)
Reserve balance at September 30, 2006		32
Provision adjustment		60
Non-Cash		8
Cash paid		—
Reserve balance at September 30, 2007	$	100

Prior Restructurings

During fiscal year 2002, based upon the Company’s continued evaluation of economic conditions in the information technology industry and our expectations regarding revenue levels, the Company restructured several areas so as to reduce expenses and improve revenue per employee, or 2002 Restructuring. As part of 2002 Restructuring, the Company recorded a total workforce reduction expense relating to severance and termination benefits of approximately $2.0 million and $3.8 million for years ended December 31, 2003 and 2002, respectively. In addition to these costs, the Company accrued lease costs related to excess facilities of $0.2 million and $2.8 million during the years ended December 31, 2003 and 2002, respectively, pertaining to the consolidation of excess facilities relating to lease terminations and non-cancelable lease costs. This expense is net of estimated sublease income based on current comparable rates for leases in the respective markets.

During the year ended September 30, 2007, the Company entered into a new sublease for the last remaining facility lease associated with the 2002 Restructuring. As a result of this sublease rental income being lower than previously estimated as part of the restructure facility reserve, the Company recorded an additional $0.4 million of restructuring expense during the year ended September 30, 2007. The sublease term is through the entire remaining term of the Company’s lease obligation for the facility.

The following table summarizes the activity related to the 2002 Restructuring (in thousands):

		Excess Facilities
Reserve balance at September 30, 2005	$	2,497
Non-cash		(298	)
Cash paid		(337	)
Reserve balance at September 30, 2006		1,862
Provision adjustment		353
Non-cash		1
Cash paid		(856	)
Reserve balance at September 30, 2007	$	1,360

67

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

NOTE 7—RELATED PARTY TRANSACTIONS

In August 2005, the Company entered into a service provider agreement with Infogain Corporation, or Infogain. Samuel T. Spadafora, a former directors and executive officers of the Company, is a director of Infogain. Mr. Spadafora terminated his relationship with the Company in November 2006.

Charles E. Hoffman, a director of the Company, is the President and Chief Executive Officer of Covad Communications Group, Inc., or Covad, a customer of ours.

In January 2005, David A. Weymouth became a director of the Company. Through June 2005, Mr. Weymouth was the Corporate Responsibility Director of Barclay’s Group, a customer of ours. Mr. Weymouth terminated his relationship with Barclay’s Group and became an associate with Deloitte & Touche LLP, a prior provider of tax services to the Company.

The following presents the related party transactions balances (in thousands):

	Revenue						Cost of Revenues						Payments
	Year Ended September 30,
		2007		2006		2005		2007		2006		2005		2007		2006		2005
Infogain	$	—	$	426	$	—	$	72	$	669	$	—	$	204	$	952	$	—
Covad		252		237		1,102		—		—		—		—		—		—
Barclay’s Group		—				6,953		—		—		—		—		—		—
Deloitte & Touche LLP		—		—		—		—		—		—		—		98		547
	$	252	$	663	$	8,055	$	72	$	669	$	—	$	204	$	1,050	$	547

	Accounts Receivable				Accounts Payable				Deferred Revenue
	As of September 30,
		2007		2006		2007		2006		2007		2006
Infogain	$	—	$	2	$	—	$	132	$	—	$	—
Covad		—		140		—		—		116		112
	$	—	$	142	$	—	$	132	$	116	$	112

NOTE 8—BORROWINGS

Revolving Line of Credit

The Company’s revolving line of credit with Comerica Bank was amended and restated on March 8, 2006 and was extended to March 7, 2008. The terms of the agreement include a $5.0 million line of credit and require the Company to maintain (i) at least a $5.0 million cash balance in Comerica Bank accounts, (ii) a minimum quick ratio of 2 to 1, (iii) a liquidity ratio of at least 1 to 1 at all times, and (iv) subordinate any debt issuances subsequent to the effective date of the agreement, and certain other covenants. All assets of the Company have been pledged as collateral on the credit facility. Due to the Company’s failing to timely file its periodic reports on Form 10-K for the year ended September 30, 2006 and on Form 10-Q for the quarter ended June 30, 2006, the line of credit agreement was amended in August 2006, November 2006, and December 2006 to extend the deadline related to the filing of its periodic reports to February 20, 2007. As of February 14, 2007, the Company became current with its SEC regulatory filings and has remained current for filings thereafter.

The revolving line of credit contains a provision for a sub-limit of up to $5.0 million for issuances of standby commercial letters of credit. As of September 30, 2007, the Company had utilized $0.3 million of the standby commercial letters of credit limit of which $0.3 million serves as collateral for computer equipment leases for Ness (see Note 9). The revolving line of credit also contains a provision for a sub-limit of up to $3.0 million for issuances of foreign exchange forward contracts. As of September 30, 2007, the Company had not entered into any foreign exchange forward contracts. Pursuant to the amendment in March 2006, the Company is required to secure the standby commercial letters of credit and foreign exchange forward contracts through March 7, 2008. If these have not been secured to Comerica Bank’s satisfaction, the Company’s cash and cash equivalent balances held by Comerica Bank automatically secure such obligations to the extent of the then continuing or outstanding and undrawn letters of credit or foreign exchange contracts.

68

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Borrowings under the revolving line of credit bear interest at the lending bank’s prime rate. Except for the standby commercial letters of credit, as of September 30, 2007, there was no outstanding balance on the revolving line of credit. Advances are available on a non-formula basis up to $5.0 million.

NOTE 9—COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases its facilities and certain equipment under non-cancelable operating leases that expire on various dates through 2013. Rent expense is recognized on a straight line basis over the lease term.

Future minimum lease payments as of September 30, 2007 are as follows (in thousands):

		Operating Leases		Operating Sublease Income			Net Operating Leases
Fiscal year ended September 30:
2008	$	5,772	$	(277	)	$	5,495
2009		2,503		(283	)		2,220
2010		2,276		(294	)		1,982
2011		1,672		(85	)		1,587
2012		800		—			800
Thereafter		557		—			557
Total minimum payments	$	13,580	$	(939	)	$	12,641

During the three months ended March 31, 2007, the Company paid the final payments on its remaining capital lease obligations. Operating lease payments in the table above include approximately $4.9 million for two facility operating lease commitments that are included in restructuring expense. One of the leases is located in Boston, Massachusetts and the other is located in the United Kingdom. As of September 30, 2007, the Company has $0.9 million in sublease income contractually committed for future periods relating to the Boston, Massachusetts facility classified as an operating lease. See Note 6 for further discussion. The scheduled lease payments shown in the table above reflect a payment of $2.5 million in fiscal year 2008 associated with the early termination of the United Kingdom lease.

Rent expense for the years ended September 30, 2007, 2006, and 2005 totaled $2.5 million, $2.5 million, and $2.7 million, respectively. Certain operating leases included in the table above are part of our restructuring activities and lease payments on such leases are expensed against the restructuring accrual.

Asset Retirement Obligations

The Company’s asset retirement obligations are associated with commitments to return property subject to operating leases to original condition upon lease termination. As of September 30, 2007, the Company estimated that gross expected cash flows of approximately $0.3 million will be required to fulfill these obligations.

Asset retirement obligations payments as of September 30, 2007 are as follows (in thousands):

		Payments
Fiscal year ended September 30:
2008	$	—
2009		—
2010		—
2011		144
2012		202
Total	$	346

69

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Other Obligations

The Company entered into an agreement with Ness Technologies Inc., Ness USA, Inc. (formerly Ness Global Services, Inc.) and Ness Technologies India, Ltd. (collectively, “Ness”), effective December 15, 2003, pursuant to which Ness provides the Company’s customers with technical product support through a worldwide help desk facility, a sustaining engineering function that serves as the interface between technical product support and internal engineering organization, product testing services and product development services (collectively, the “Services”). The agreement had an initial term of three years and was extended for two additional year terms. Under the terms of the agreement, the Company pays for services rendered on a monthly fee basis, including the requirement to reimburse Ness for approved out-of-pocket expenses. The agreement may be terminated for convenience by the Company, subject to the payment of a termination fee. In 2004, 2005, 2006 and 2007 the Company further expanded its agreement with Ness whereby Ness is providing certain additional technical and consulting services. The additional agreements can be cancelled at the option of the Company without the payment of a termination fee. The remaining minimum purchase commitment under these agreements, if Chordiant was to cancel the contracts, was approximately $0.7 million at September 30, 2007. In addition to service agreements, the Company has also guaranteed certain equipment lease obligations of Ness (see Note 8).Ness may procure equipment to be used in performance of the Services, either through leasing arrangements or direct cash purchases, for which the Company is obligated under the agreement to reimburse them. In connection with the procurement of equipment, Ness has entered into a 36 month equipment lease agreement with IBM India and, in connection with the lease agreement the Company has an outstanding standby letter of credit in the amount of $0.3 million in guarantee of Ness’ financial commitments under the lease. Over the term of the lease, the Company’s obligation to reimburse Ness is approximately equal to the amount of the guarantee.

Indemnification

As permitted under Delaware law, the Company has agreements whereby the Company has indemnified our officers, directors and certain employees for certain events or occurrences while the employee, officer or director is, or was serving, at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a Director and Officer insurance policy that limits the Company’s exposure and may enable the Company to recover a portion of any future amounts paid. Future payments may be required to defend current and former directors in the derivative class action lawsuits described in Note 10. As a result of insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of September 30, 2007.

The Company enters into standard indemnification agreements in our ordinary course of business. Pursuant to these agreements, the Company agrees to indemnify, defend, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any patent, copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements. The Company believes the estimated fair value of these agreements is minimal.  Accordingly, the Company has no liabilities recorded for these agreements as of September 30, 2007.

The Company enters into arrangements with our business partners, whereby the business partners agree to provide services as subcontractors for the Company’s implementations. The Company may, at its discretion and in the ordinary course of business, subcontract the performance of any of these services. Accordingly, the Company enters into standard indemnification agreements with its customers, whereby the Company indemnifies them for other acts, such as personal property damage by its subcontractors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has general and umbrella insurance policies that may enable the Company to recover a portion of any amounts paid. The Company has not incurred significant costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of September 30, 2007.

When, as part of an acquisition, the Company acquires all of the stock or all of the assets and liabilities of a company, the Company may assume the liability for certain events or occurrences that took place prior to the date of acquisition. The maximum potential amount of future payments, if any, the Company could be required to make for such obligations is undeterminable at this time. Accordingly, the Company has no amounts recorded for these contingent liabilities as of September 30, 2007.

70

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The Company warrants that software products will perform in all material respects in accordance with standard published specifications and documentation in effect at the time of delivery of the licensed products to the customer for a specified period of time. Additionally, the Company warrants that maintenance and consulting services will be performed consistent with generally accepted industry standards. If necessary, the Company would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history, however, the Company has not incurred significant expense under product or services warranties to date. As a result, the Company believes the estimated fair value on these warranties is minimal. Accordingly, the Company has no amounts recorded for these contingent liabilities as of September 30, 2007.

NOTE 10—LITIGATION

Beginning in July 2001, the Company and certain of its officers and directors, or Individuals, were named as defendants in a series of class action stockholder complaints filed in the United States District Court for the Southern District of New York, now consolidated under the caption, “In re Chordiant Software, Inc. Initial Public Offering Securities Litigation, Case No. 01-CV-6222”. In the amended complaint, filed in April 2002, the plaintiffs allege that the Company, the Individuals, and the underwriters of the Company’s initial public offering, or IPO, violated section 11 of the Securities Act of 1933 and section 10(b) of the Exchange Act of 1934 based on allegations that the Company’s  registration statement and prospectus failed to disclose material facts regarding the compensation to be received by, and the stock allocation practices of, the Company’s IPO underwriters. The complaint also contains claims against the Individuals for control person liability under Securities Act section 15 and Exchange Act section 20. The plaintiffs seek unspecified monetary damages and other relief. Similar complaints were filed in the same court against hundreds of other public companies, or Issuers, that conducted IPO’s of their common stock in the late 1990’s or in the year 2000 (collectively, the “IPO Lawsuits”).

In August 2001, all of the IPO Lawsuits were consolidated for pretrial purposes before United States Judge Shira Scheindlin of the Southern District of New York. In July 2002, the Company joined in a global motion to dismiss the IPO Lawsuits filed by all of the Issuers (among others). In October 2002, the Court entered an order dismissing the Individuals from the IPO Lawsuits without prejudice, pursuant to an agreement tolling the statute of limitations with respect to the Individuals. In February 2003, the court issued a decision denying the motion to dismiss against Chordiant and many of the other Issuers.

In June 2003, Issuers and plaintiffs reached a tentative settlement agreement that would, among other things, result in the dismissal with prejudice of all claims against the Issuers and Individuals in the IPO Lawsuits, and the assignment to plaintiffs of certain potential claims that the Issuers may have against the underwriters. The tentative settlement also provides that, in the event that plaintiffs ultimately recover less than a guaranteed sum of $1 billion from the IPO underwriters, plaintiffs would be entitled to payment by each participating Issuer’s insurer of a pro rata share of any shortfall in the plaintiffs’ guaranteed recovery. In September 2003, in connection with the possible settlement, those Individuals who had entered tolling agreements with plaintiffs (described above) agreed to extend those agreements so that they would not expire prior to any settlement being finalized. In June 2004, Chordiant and almost all of the other Issuers entered into a formal settlement agreement with the plaintiffs. On February 15, 2005, the Court issued a decision certifying a class action for settlement purposes, and granting preliminary approval of the settlement subject to modification of certain bar orders contemplated by the settlement. On August 31, 2005, the Court reaffirmed class certification and preliminary approval of the modified settlement in a comprehensive Order, and directed that Notice of the settlement be published and mailed to class members beginning November 15, 2005. On February 24, 2006, the Court dismissed litigation filed against certain underwriters in connection with the claims to be assigned to the plaintiffs under the settlement. On April 24, 2006, the Court held a Final Fairness Hearing to determine whether to grant final approval of the settlement. On December 5, 2006, the Second Circuit Court of Appeals vacated the lower Court's earlier decision certifying as class actions the six IPO Lawsuits designated as "focus cases." Thereafter, the District Court ordered a stay of all proceedings in all of the IPO Lawsuits pending the outcome of plaintiffs’ petition to the Second Circuit for rehearing en banc and resolution of the class certification issue. On April 6, 2007, the Second Circuit denied plaintiffs’ rehearing petition, holding that the actions could not be maintained as pled but clarifying that the plaintiffs may seek to certify a more limited class in the District Court. Accordingly, the settlement as originally negotiated will not be finally approved. Plaintiffs had until July 31, 2007 in which to file amended complaints against all Issuers, including Chordiant.

Plaintiffs filed amended complaints in the six focus cases on or about August 14, 2007.  In September 2007, the Company's named officers and directors again extended the tolling agreement with plaintiffs.  On or about September 27, 2007, plaintiffs moved to certify the classes alleged in the focus cases and to appoint class representatives and class counsel in those cases.  On or about November 13, 2007, Issuers in the focus cases filed a motion to dismiss the claims alleged against them in the amended complaints.  This action may divert the efforts and attention of our management and, if determined adversely to us, could have a material impact on our business, results of operations, financial condition or cash flows. 

71

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

On August 1, 2006, a stockholder derivative complaint was filed in the United States District Court for the Northern District of California by Jesse Brown under the caption Brown v. Kelly, et al. Case No. C06-04671 JW (N.D. Cal.). On September 13, 2006, a second stockholder derivative complaint was filed in the United States District Court for the Northern District of California by Louis Suba under the caption Suba v. Kelly et al., Case No. C06-05603 JW (N.D. Cal.). Both complaints were brought purportedly on behalf of the Company against certain current and former officers and directors. On November 27, 2006, the court entered an order consolidating these actions and requiring the plaintiffs to file a consolidated complaint. The consolidated complaint was filed on January 11, 2007. The consolidated complaint alleges, among other things, that the named officers and directors: (a) breached their fiduciary duties as they colluded with each other to backdate stock options, (b) violated section 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder through their alleged actions, and (c) were unjustly enriched by their receipt and retention of such stock options. On May 21, 2007, the Company filed a motion to dismiss the entire action on the grounds that the plaintiffs failed to take the steps necessary to bring a derivative action. The individual defendants filed motions to dismiss as well. The parties have agreed that the plaintiffs' opposition to the motions to dismiss would not be due until October 25, 2007, in order to permit the parties an opportunity to explore a resolution of this dispute. The hearing on the motion to dismiss is set for November 26, 2007.  The Plaintiffs have recently informed Chordiant that they intend to file an amended derivative complaint.  This will render the currently filed motion to dismiss moot and a new motion to dismiss will have to be filed in response to the amended pleading. The parties have stipulated to a schedule for filing the amended complaint and for briefing motions to dismiss, but the court has not yet entered this stipulation as an order. 

In September 2006, the Company received a letter from Acacia Technologies Group, a patent holding company, suggesting that the Company may be infringing on two patents, designated by United States Patent Numbers 5,537,590 and 5,701,400, which are held by one of their patent licensing and enforcement subsidiaries.  The Company is currently reviewing the validity of these patents and whether the Company’s products may infringe upon them.  The Company has not formed a view of whether the Company may have liability for infringement of these patents. Any related claims, whether or not they have merit, could be costly and time-consuming to defend, divert management’s attention or cause product delays. If any of the Company’s products were found to infringe such patents, the patent holder could seek an injunction to enjoin use of the infringing product. If the Company was required to settle such a claim, it could have a material impact on our business, results of operations, financial condition or cash flows.

The Company is also subject to various other claims and legal actions arising in the ordinary course of business. The ultimate disposition of these various other claims and legal actions is not expected to have a material effect on our business, financial condition, results of operations or cash flows. However, litigation is subject to inherent uncertainties.

NOTE 11—INCOME TAXES

The components of income (loss) before income taxes are as follows (in thousands):

	Years ended September 30,
		2007			2006			2005
United States	$	(2,363	)	$	(16,759	)	$	(19,766	)
Foreign		9,993			1,402			350
	$	7,630		$	(15,357	)	$	(19,416	)

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CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Income tax expense (benefit) was comprised of the following (in thousands):

	Years ended September 30,
		2007		2006		2005
Current
United States	$	150	$	—	$	—
International		1,431		377		234
State		21		267		215
		1,602		644		449
Deferred
United States		—		—		—
International		—		—		—
State		—		—		—
		—		—		—
	$	1,602	$	644	$	449

The increase in the provision for the year ended September 30, 2007 when compared to the year ended September 30, 2006 is due primarily to $0.8 million of foreign withholding taxes paid during the year and an increase in United States alternative minimum tax.  The increase in the provision for the year ended September 30, 2006 when compared to the year ended September 30, 2005 is due to a combination of increases in both state tax expense and foreign income tax expense.

Deferred tax assets consist of the following (in thousands):

	September 30,
		2007			2006
Net operating loss carryforwards	$	64,239		$	67,691
Accrued expenses and provisions		1,486			3,731
Tax credit carryforwards		5,566			5,422
Deferred revenue		13,997			9,302
Stock-based compensation		1,087			544
Depreciation and amortization		2,524			2,227
Gross deferred tax assets		88,899			88,917
Deferred tax valuation allowance		(88,899	)		(88,917	)
Net deferred tax assets	$	—		$	—

The valuation allowance did not change substantially for the year ended September 30, 2007 and increased by $5.6 million for the year ended September 30, 2006.

We provide a valuation allowance for deferred tax assets when it is more likely than not that the net deferred tax assets will not be realized. Based on a number of factors, including the lack of a history of profits, future projected taxable income and the fact that the market in which we compete is intensely competitive and characterized by rapidly changing technology, we believe that there is sufficient uncertainty regarding the realization of deferred tax assets such that a full valuation allowance has been provided. At September 30, 2007, we had approximately $147.3 million and $18.9 million of net operating loss carryforwards for federal and state purposes, respectively, and net operating loss carryforwards of approximately $35.4 million in the United Kingdom. Approximately $36.4 million of the federal net operating loss carryforwards, representing net operating loss carryforwards acquired through our acquisition of Prime Response, are subject to change in control limitations, and, if utilized beyond such limitations will reduce goodwill and intangibles recorded at the date of acquisition before reducing the tax provision. Approximately $3.5 million of additional net operating loss carryforwards are related to stock option deductions which, if utilized, will be accounted for as an addition to equity rather than as a reduction of the provision for income taxes. These carryforwards are available to offset future federal and state taxable income and begin to expire in 2010 and 2008, respectively. At September 30, 2007, there are approximately $3.3 million of federal research and development credits and alternative minimum tax credits that begin to expire in 2010. At September 30, 2007, there were also California state credits of approximately $3.5 million that do not expire.

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CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Under the Tax Reform Act of 1986, the amounts of and the benefit from net operating losses that can be carried forward may be impaired or limited in certain circumstances. Under Section 382 of the Internal Revenue Code (IRC), as amended, a cumulative stock ownership change of more than 50% over a three-year period can cause such limitations. The Company has analyzed its historical ownership changes and removed any net operating loss carryforwards that will expire unutilized from its deferred tax balances.

The provision for income taxes differs from the amount computed by applying the statutory federal income tax as follows (in thousands):

	Years ended September 30,
		2007			2006			2005
Income (loss) before income taxes	$	7,630		$	(15,357	)	$	(19,416	)
Federal tax at 35 % statutory rate	$	2,670		$	(5,375	)	$	(6,796	)
State taxes, net of federal tax benefit		14			267			215
Stock-based compensation		531			1,643			1,062
In process R&D		—			—			679
Federal alternative minimum tax		150			—			—
Foreign tax at other than US rates		(2,067	)		377			234
Other items		322			—			—
Valuation allowance		(18	)		3,732			5,055
Provision for income taxes	$	1,602		$	644		$	449

NOTE 12—EMPLOYEE BENEFIT PLANS

Common Stock and Restricted Stock Awards

In February 2006, the Board of Directors approved a grant of 50,000 shares of the Company’s restricted stock to Samuel Spadafora, the Chairman of the Board at that time. In November 2006, Mr. Spadafora entered into a separation agreement with the Company. Based upon the separation agreement, the shares ceased to vest at the separation date. At the date of Mr. Spadafora’s termination, 24,000 shares had vested and 26,000 shares were cancelled.

In August 2005, the Board of Directors approved three grants of 80,000 shares of each restricted stock to Robert Mullen, President of Worldwide Field Operations at that time, to occur on August 2005, April 2006 and April 2007. In August 2006, Mr. Mullen entered into a separation agreement with the Company, whereby he continued as an employee until December 31, 2006 at which time vesting of his shares ceased. At the date of Mr. Mullen’s separation, 53,333 shares had vested and 106,667 shares were cancelled (the April 2007 80,000 shares were never granted).

In June 2005, the Company granted 50,000 shares of our restricted stock to Stephen Kelly, our Chief Executive Officer at that time, and 50,000 shares to Robert Mullen. These shares vested on April 1, 2006.

There were no repurchases of the Company’s common stock during the years ended September 30, 2007, 2006, and 2005. Cancellations of issued but unvested shares of restricted stock were approximately 136,775, 8,000, and 38,400 shares during the years ended September 30, 2007, 2006, and 2005, respectively.

2005 Equity Incentive Plan

The 2005 Equity Incentive Plan, or 2005 Plan, was approved at the annual meeting on September 27, 2005. The 2005 Plan replaces the 1999 Equity Incentive Plan, or 1999 Plan and provides for the grant of incentive stock options, nonstatutory stock options, stock purchase awards, restricted stock awards, and other forms of equity compensation (collectively, the “stock awards”). The option price shall not be less than the fair market value of the shares on the date of grant and no portion may be

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CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

exercised beyond ten years from that date. However, during the stock option review (see Note 3 in Notes to Consolidated Financial Statements of the 2006 Form 10-K), it was discovered that some options granted had the option price less than the fair market value of the shares on the date of grant. As more fully described on FormSC TO-I filed with the SEC on March 29, 2007, Chordiant amended these eligible options. Under the 2005 Plan, stock options generally vest over a period of four years in equal monthly installments with 25% of the shares vesting after one year, and the remainder vesting in equal monthly installments over the remaining three years. Stock option grant agreements allow for the early exercise of options granted to employees. Exercised but unvested shares are subject to repurchase by the Company at the initial exercise price. Beginning September27, 2005, no additional stock awards will be granted under the 1999 Plan. Shares remaining available for issuance pursuant to the exercise of options or settlement of stock awards under the 1999 Plan of approximately 0.5 million shares were added to the share reserve of the 2005 Plan and, as of September 27, 2005, became available for issuance pursuant to stock awards granted under the 2005 Plan. All outstanding stock awards granted under the 1999 Plan will remain subject to the terms of the 1999 Plan, except that the Board may elect to extend one or more of the features of the 2005 Plan to stock awards granted under the 1999 Plan. Any shares subject to outstanding stock awards granted under the 1999 Plan that expire or terminate for any reason prior to exercise or settlement shall be added to the share reserve of the 2005 Plan and become available for issuance pursuant to stock awards granted under the 2005 Plan. The 2005 Plan increases the number of shares available for issuance by 2.2 million shares of common stock from an aggregate total of approximately 0.5 million shares available under the 1999 Plan as of September 27, 2005, resulting in an aggregate of approximately 2.7 million shares available for future grant and issuance under the 2005 Plan. In January 2007, the Board amended the 2005 plan to increase the number of shares reserved for future issuance by 1.6 million shares. This amendment was approvedby the stockholders at the 2007 annual meeting of stockholders’ held on April 24, 2007.As of September 30, 2007, there were approximately 2.8 million shares reserved for future issuance and approximately 2.6 million options that were outstanding under the 2005 Plan.

2000 Nonstatutory Equity Incentive Plan

In March 2000, the Board adopted the 2000 Nonstatutory Equity Incentive Plan, or 2000 Plan. Stockholder approval of this plan was not required and has not been obtained by the Company. The 2000 Plan was in effect as of June 30, 2003. In April 2002 and October 2002, the Board approved increases to the number of shares reserved under the 2000 Plan from 0.4 million shares to 1.0 million shares and then to 1.8 million shares, also without stockholder approval as such approval was not required by the 2000 Plan or by applicable law. The 2000 Plan does not have a termination date, and will continue indefinitely until suspended or terminated by the Board. The 2000 Plan provides for the grant of nonstatutory stock options and the issuance of restricted stock and stock bonuses to employees (other than officers, directors, or beneficial owners of ten percent (10%) or more of the Company’s common stock and consultants who meet certain eligibility requirements. The terms and price of nonstatutory stock options granted under the 2000 Plan are determined by the Board (or a committee of the Board) and are set forth in each optionee’s option agreement. The exercise price of nonstatutory stock options granted under the 2000 Plan has been 100% of the fair market value on the date of grant, and the term of the options has been ten years. Generally, stock options under the 2000 Plan vest over a period of four years in equal monthly installments with 25% of the shares vesting after one year, and the remainder vesting in equal monthly installments over the remaining three years. In the future, stock options may have the same or different vesting terms as determined by the Board (or a committee of the Board). The Board (or a committee of the Board) sets the terms of stock bonuses and rights to purchase restricted stock. In January 2007, the Board amended the 2000 Plan to reduce the number of shares available for future issuance to zero. No additional stock options will be granted under the 2000 Nonstatutory Equity Incentive Plan. As of September 30, 2007, there were approximately 0.4 million shares outstanding under the 2000 Plan.

1999 Equity Incentive Plan

The 1999 Equity Incentive Plan, or 1999 Plan, provided for the grant to employees of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986 and for grants to employees, directors and consultants of nonstatutory stock options and stock purchase rights. Unless terminated sooner, the 1999 Plan will terminate automatically in 2009. The option price shall not be less than the fair market value of the shares on the date of grant and no portion may be exercised beyond ten years from that date. Under the 1999 Plan, stock options vest over a period that is limited to five years, but were typically granted with a four-year vesting period. Each option outstanding under the 1999 Plan may be exercised in whole or in part at any time. Exercised but unvested shares are subject to repurchase by us at the initial exercise price. As of September 27, 2005, approximately 0.5 million available shares under the 1999 Plan were added to the share reserve of the 2005 Plan. No additional stock options will be granted under the 1999 Plan subsequent to September 27, 2005. Any shares subject to outstanding stock awards granted under the 1999 Plan that expire or terminate for any reason prior to the exercise or settlement are added to the share reserve of the 2005 Plan and become available for issuance under the 2005 Plan.

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CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

1999 Non-Employee Director Option Plan

 The 1999 Non-Employee Director Stock Option Plan, or 1999 Director Plan, was adopted by the Board of Directors and became effective on the date of the initial public offering. The 1999 Director Plan provides for the automatic grant of anonstatutory option to purchase 10,000 shares of common stock to each new non-employee director on the date that such person becomes a director, vesting over a period of three years in equal monthly installments with 1/3% of the shares vesting after one year, and the remainder vesting in equal monthly installments over the remaining two years. Each current and future non-employee director will automatically be granted an additional nonstatutory option to purchase 3,000 shares on the day after each of our annual meetings of the stockholders, vesting in equal monthly installments over one year. Each director who is a member of a board committee will automatically be granted an additional nonstatutory option to purchase 2,000 shares, for each committee they serve on, on the day after each annual meeting of the stockholders, vesting in equal monthly installments over one year. The amount reserved under the 1999 Director Plan automatically increases on October 1st of each year by the greater of (1) 0.5% outstanding shares on such date or (2) the number of shares subject to stock awards made under the 1999 Director Plan during the prior year. This automatic increase is subject to reduction by the Board of Directors. Under the terms of the 1999 Director Plan, option prices may not be less than the fair market value of the shares on the date of grant and no portion may be exercised beyond ten years from that date. In January 2007, the Board amended and restated the 1999 Director Plan to decrease the number of shares reserved for future issuance to 0.3 million shares and to eliminate the automatic increase provision. This amendment was approved by the stockholders at the 2007 annual meeting of stockholders’ held on April 24, 2007. As of September 30, 2007, approximately 0.3 million shares of common stock have been reserved for issuance and 0.2 million are outstanding under the 1999 Director Plan.

Stock Option Activity

The following table summarizes stock option and restricted stock activity under the Company’s stock option plans (in thousands, except per share data):

			Options Outstanding
	Shares Available for Grant		Shares		Weighted Average Exercise Price
Balance at September 30, 2004	1,348		3,802		$	6.13
Authorized	2,264		—			—
Options granted	(834	)	834			5.20
Restricted stock granted	(180	)	—			—
Options exercised	—		(498	)		3.03
Cancellation of unvested restricted stock	38		—			—
Options cancelled/forfeited	742		(742	)		9.00
Options cancelled from expired plans	(130	)	(11	)		—
Balance at September 30, 2005	3,248		3,385			5.70
Authorized	122		—			—
Options granted	(1,505	)	1,505			7.63
Restricted stock granted	(130	)	—			—
Options exercised	—		(493	)		4.10
Cancellation of unvested restricted stock	178		—			—
Options cancelled/forfeited	708		(708	)		7.45
Balance at September 30, 2006	2,621		3,689			6.33
Authorized	1,766		—			—
Options granted	(1,354	)	1,354			9.11
Restricted stock granted	—		—			—
Options exercised	—		(1,328	)		4.57
Cancellation of unvested restricted stock	137		—			—
Options cancelled/forfeited	537		(537	)		8.86
Authorized reduction in shares from existing plans	(649	)	—			—
Balance at September 30, 2007	3,058		3,178		$	7.96

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CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table summarizes information about stock options outstanding and exercisable at September 30, 2007 (in thousands, except exercise prices and contractual life data):

	Options Outstanding and Exercisable								Options Vested
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Aggregate Intrinsic Value Closing Price at 09/30/2007 of $13.86		Number Exercisable		Weighted Average Exercise Price		Aggregate Intrinsic Value Closing Price at 09/30/07 of $13.86
$0.35 – 4.10		365		5.96	$	3.16	$	3,902		314	$	3.01	$	3,403
4.18 – 6.70		413		6.97		5.83		3,316		305		5.68		2,495
6.75 – 7.75		415		7.67		7.40		2,683		196		7.32		1,282
7.80 – 8.15		442		8.19		7.98		2,597		183		7.99		1,077
8.25 – 8.25		829		9.37		8.25		4,651		147		8.25		823
8.28 – 10.75		350		7.83		9.22		1,625		152		9.60		648
10.80 – 45.00		364		7.70		13.90		346		184		13.63		285
$0.35 – 45.00		3,178		7.92	$	7.96	$	19,120		1,481	$	7.26	$	10,013

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of $13.86 as of September 30, 2007, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options vested and exercisable as of September 30, 2007 was approximately 1.4 million. As of September 30, 2007, approximately 1.5 million outstanding options were vested and exercisable, and the weighted average exercise price was $7.26. The total intrinsic value of options exercised during the year ended September 30, 2007 was $8.5 million. The fair value of options vested was $3.3 million for the year ended September 30, 2007. As of September 30, 2007, total unrecognized compensation costs related to non-vested stock options was $5.2 million, which is expected to be recognized as expense over a weighted-average period of approximately 2.7 years.

The total intrinsic value of options exercised during the year ended September 30, 2006 was $1.8 million. The fair value of options vested was $5.0 million for the year ended September 30, 2006. As of September 30, 2006, total unrecognized compensation costs related to non-vested stock options was $4.2 million, which was expected to be recognized as expense over a weighted-average period of approximately 1.4 years.

The Company had zero unvested restricted stock awards as of September 30, 2007. Approximately 0.3 million shares of restricted stock vested during the year ended September 30, 2007. There were no shares of restricted stock awarded during the year ended September 30, 2007.

We had 1.0 million unvested restricted stock awards as of September 30, 2006. The total fair value of the unvested restricted stock awards at grant date was $2.4 million. The aggregate intrinsic value of the unvested restricted stock awards at September 30, 2006 was $3.1 million. During the year ended September 30, 2006, approximately 1.2 million shares vested related to restricted stock awards. There were approximately 0.3 million shares of restricted stock awarded during the year ended September 30, 2006. The weighted average fair value at grant date of the unvested restricted stock awards was $2.39 as of September 30, 2006. As of September 30, 2006, total unrecognized compensation costs related to unvested restricted stock awards was $0.9 million which was expected to be recognized as expense over a weighted average period of approximately one year.

The Company settles stock option exercises and restricted stock awards with newly issued common shares.

Valuation and Expense Information under SFAS 123(R)

On October 1, 2005, the Company adopted SFAS 123(R), which requires the measurement and recognition of compensation expense for all share-based payment awards made to the Company’s employees and directors including employee stock options, restricted stock awards and employee stock purchases related to the ESPP based on estimated fair values. The following table summarizes stock-based compensation expense related to employee stock options and restricted stock awards for years ended September 30, 2007, 2006, and 2005 which was allocated as follows (in thousands):

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CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

	Years Ended September 30,
		2007 (under SFAS 123(R))		2006 (under SFAS 123(R))		2005 (under SFAS 123 / APB 25)
Stock-based compensation expense:
Cost of revenues	$	313	$	248	$	690
Sales and marketing		744		2,327		986
Research and development		546		332		843
General and administrative		1,417		1,788		512
Total stock-based compensation expense	$	3,020	$	4,695	$	3,031

Stock-based compensation expense recognized under SFAS 123(R) for the year ended September 30, 2007 was $3.0 million which consisted of stock-based compensation expense related to employee stock options of $2.8 million and stock-based compensation expense related to restricted stock awards of $0.2 million. Stock-based compensation expense recognized under SFAS 123(R) for the year ended September 30, 2006 was $4.7 million which consisted of stock-based compensation expense related to employee stock options of $2.7 million and stock-based compensation expense related to restricted stock awards of $2.0 million.

The table below reflects net loss and basic and diluted net loss per share as if the fair value recognition provision of SFAS 123 had been applied for the year ended September 30, 2005 (in thousands except per-share amounts):

		Year Ended September 30, 2005
Net loss	$	(19,865	)
Add: Stock-based compensation included in reported net loss		3,031
Less: Stock-based compensation expense determined under fair value method		(5,988	)
Net loss—pro forma	$	(22,822	)
Basic and diluted net loss per share—as reported	$	(0.67	)
Basic and diluted net loss per share—pro forma	$	(0.77	)
Weighted average shares		29,780

Prior to the adoption of SFAS 123(R), the value of each employee stock option was estimated on the date of grant using the Black-Scholes model for the purpose of the pro forma financial disclosures in accordance with SFAS 123. The weighted-average estimated fair value of stock options granted for the year ended September 30, 2007, 2006, and 2005 was $4.41, $4.98, and 2.98 per share, respectively, using the Black-Scholes model with the following weighted-average assumptions:

	2007			2006			2005
Expected lives in years		3.5			3.9			2.6
Risk free interest rates		4.7	%		4.8	%		3.3	%
Volatility		63	%		88	%		98	%
Dividend yield		0	%		0	%		0	%

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted-average assumptions for volatility, expected term, and risk free interest rate. With the adoption of SFAS 123(R) on October 1, 2005, the Company uses the trinomial lattice valuation technique to determine the assumptions used in the Black-Scholes model. The trinomial lattice valuation technique was used to provide a better estimate of fair values and meet the fair value objectives of SFAS 123(R). The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of the Company’s stock price. The estimated value of a stock option is most sensitive to the volatility assumption. Based on the September 30, 2007 variables, it is estimated that a change of 10% in either the volatility, expected life or interest rate assumption would result in a corresponding 7%, 5% or 1% change in the estimated value of the option being valued using the Black-Scholes model.

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CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

As stock-based compensation expense recognized in the Consolidated Statement of Operations for the years ended September 30, 2007, 2006, and 2005 is based on awards ultimately expected to vest. Fiscal years 2007 and 2006 have been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company’s estimated forfeiture rate for the year ended September 30, 2007 was based on historical forfeiture experience.

During the quarter ended June 30, 2007, the Company completed its 409A tender offer which resulted in the modification of certain options. The Company increased the exercise price of options previously issued at a discount to limit the potential adverse personal tax consequences that may apply to those stock options under Section 409A of the Internal Revenue Code and state law equivalents. When combined with the related cash bonus to be paid to the option holders in connection with the exchange, the net charge to compensation expense for during the quarter was $0.1 million.

Accuracy of Fair Value Estimates

The Company uses third party analyses to assist in developing the assumptions based on a trinomial lattice valuation technique used in the Black-Scholes model. The Company is responsible for determining the assumptions used in estimating the fair value of share-based payment awards.

This determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. Because the Company’s employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management’s opinion, the existing valuation models may not provide an accurate measure of the fair value of the Company’s employee stock options and restricted stock awards. Although the fair value of employee stock options and restricted stock awards is determined in accordance with SFAS 123(R) and SAB 107 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

401(k) Savings Plan

The Company sponsors a 401(k) Savings Plan (the “Plan”) for full-time employees in the United States. Under the Plan, each participant may elect to contribute up to 15% of their pre-tax compensation. The Plan allows the Company to match up to 50% the employee contributions. For each of the years ended September 30, 2007, 2006, 2005, the Company matched up to 25% of the employee contributions. Employee contributions are fully vested, whereas vesting in the Company’s matching contributions occurs at a rate of 33.3% per year of employment. The Company’s contributions to the 401(k) Plan totaled approximately $0.4 million, $0.4 million, and $0.4 million for the years ended September 30, 2007, 2006, and 2005, respectively.

Defined Contribution Plan

The Company also sponsors a defined contribution pension plan for the employees of Canada, United Kingdom, Netherlands, and Germany. The Company’s contributions to the pension plan totaled approximately $0.4 million, $0.5 million, and $0.7 million for the years ended September 30, 2007, 2006, and 2005, respectively.

1999 Employee Stock Purchase Plan

The 1999 ESPP was adopted by the Board of Directors and became effective on February 14, 2000, the date of the Company’s initial public offering. Eligible employees may have up to 15% of their earnings withheld to be used to purchase shares of the Company’s common stock at 85% of the lower of the fair market value of the common stock on the commencement date of each nine-month offering period or the specified purchase date. The amount reserved under the 1999 ESPP automatically increases on October 1st of each year by the greater of (1) 2% outstanding shares on such date or (2) the number of shares subject to stock awards made under this plan during the prior year. However, the automatic increase is subject to reduction by the Board of Directors. Notwithstanding the foregoing, the aggregate number of shares that may be sold under the 1999 ESPP shall not exceed 5.2 million shares. There were no purchases of common stock under the ESPP for the years ended September 2007, 2006 and 2005, as the plan is currently suspended. In January 2007, the Board amended the ESPP to reduce the number of shares available for future issuance to 0.4 million.

79

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

NOTE 13—WARRANTS

On September 4, 2006, warrants issued to Accenture plc to purchase up to 0.2 million shares of common stock at $17.63 expired. On September 20, 2006, IBM exercised warrants in a cashless transaction resulting in 19,230 of the Company’s shares being issued to IBM. In December 2006, warrants issued to Accenture plc and General Atlantic Partners from the acquisition of Prime Response in 2001 to purchase up to 0.4 million shares of the Company expired. As of September 30, 2007, there were no remaining warrants outstanding.

NOTE 14—SEGMENT INFORMATION

The Company’s chief operating decision maker reviews financial information presented on a consolidated basis, accompanied by desegregated information about revenues by geographic region for purposes of making operating decisions and assessing financial performance. Accordingly, the Company has concluded that the Company has one reportable segment.

The following table summarizes license revenues by product emphasis (in thousands):

	Years Ended September 30,
		2007		2006		2005
License revenue
Enterprise solutions	$	37,648	$	30,351	$	24,587
Marketing solutions		6,013		6,396		2,450
Decision management solutions		10,391		3,767		4,641
Total	$	54,052	$	40,514	$	31,678

The following table summarizes service revenues by product emphasis consisting of consulting assistance and implementation, customization and integration, training, certain reimbursable out-of-pocket expense and post-contract customer support (in thousands):

	Years Ended September 30,
		2007		2006		2005
Service revenue
Enterprise solutions	$	51,584	$	39,911	$	40,441
Marketing solutions		12,369		12,996		9,680
Decision management solutions		6,542		4,115		1,926
Total	$	70,495	$	57,022	$	52,047

Foreign revenues are based on the country in which the customer order is generated. The following is a summary of total revenues by geographic area (in thousands):

	Years Ended September 30,
		2007		2006		2005
North America	$	65,701	$	60,008	$	41,697
Europe		58,846		37,528		41,939
Rest of World		—		—		89
Total	$	124,547	$	97,536	$	83,725

Included in foreign revenue results for Europe is revenue from the United Kingdom of $28.3 million, $16.1 million, and $22.5 million for the years ended September 30, 2007, 2006 and 2005, respectively.

80

CHORDIANT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Property and equipment information is based on the physical location of the assets. The following is a summary of property and equipment, net by geographic area (in thousands):

	Years Ended September 30,
		2007		2006
North America	$	2,346	$	1,844
Europe		1,292		786
Total	$	3,638	$	2,630

NOTE 15—QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables set forth a summary of the Company’s quarterly financial information for each of the four quarters for the years ended September 30, 2007 and 2006:

Year ended September 30, 2007:

	Quarters -Ended
	September30, 2007		June 30, 2007		March 31, 2007		December 31, 2006
	(in thousands, except per share data)
Revenues	$	32,082	$	36,761	$	32,765	$	22,939
Gross profit	$	23,446	$	26,775	$	26,257	$	14,716
Net income (loss)	$	5,349	$	6,453	$	4,975	$	(10,749	)
Net income (loss) per share:
Basic	$	0.16	$	0.20	$	0.15	$	(0.34	)
Diluted	$	0.16	$	0.19	$	0.15	$	(0.34	)
Weighted average shares used in computing net income (loss) per share:
Basic		33,066		32,743		32,153		31,725
Diluted		34,217		34,384		33,216		31,725

Year ended September 30, 2006:

	Quarters -Ended
	September 30, 2006			June 30, 2006			March 31, 2006			December 31, 2005
	(in thousands, except per share data)
Revenues	$	21,679		$	27,026		$	26,273		$	22,558
Gross profit	$	13,697		$	17,360		$	17,585		$	15,427
Net loss	$	(8,364	)	$	(3,682	)	$	(2,202	)	$	(1,753	)
Net loss per share—basic and diluted	$	(0.27	)	$	(0.12	)	$	(0.07	)	$	(0.06	)
Weighted average shares used in computing basic and diluted net loss per share		31,468			31,214			30,891			30,730

NOTE 16—SUBSEQUENT EVENTS

Equity Compensation

In 2007, the Company’s Board of Directors approved the grant to employees of 738,700 shares of Stock Options and 199,500 shares of Restricted Stock Units.

81

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (Disclosure Controls) as of September 30, 2007, the end of the period covered by this Form 10-K. The controls evaluation was conducted under the supervision and with the participation of management, including our CEO and CFO. Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (SEC’s) rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our quarterly evaluation of Disclosure Controls includes an evaluation of some components of our internal control over financial reporting, and internal control over financial reporting is also separately evaluated on an annual basis for purposes of providing the management report which is set forth below.

The evaluation of our Disclosure Controls included a review of the controls’ objectives and design, the company’s implementation of the controls and the effect of the controls on the information generated for use in this Form 10-K. In the course of the controls evaluation, we sought to identify any past instances of data errors, control problems or acts of fraud and sought to confirm that appropriate corrective actions, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including the CEO and CFO, concerning the effectiveness of the Disclosure Controls can be reported in our periodic reports on Form 10-Q and Form 10-K. Many of the components of our Disclosure Controls are also evaluated on an ongoing basis by our finance organization. The goals of these various evaluation activities are to monitor our Disclosure Controls, and to modify them as necessary. Our intent is to maintain the Disclosure Controls as dynamic systems that change as conditions warrant.

In this evaluation, unless otherwise indicated, a “significant deficiency” is defined as a control deficiency, or combination of deficiencies, that adversely affects the company’s ability to initiate, authorize, record, process or report external financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. A “material weakness” is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Changes Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such terms are defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2007 based on the guidelines established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with established policies or procedures may deteriorate.

In connection with the Company’s assessment of the effectiveness of internal control over financial reporting, our management has concluded that our internal over financial reporting was effective as of September 30, 2007.

BDO Seidman, LLP, our independent registered public accounting firm, audited management’s assessment and independently assessed the effectiveness of our internal control over financial reporting as of September 30, 2007. BDO Seidman, LLP has issued an attestation report on management’s assessment, which is included in Item 9A of this Form 10-K.

82

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Chordiant Software, Inc.

Cupertino, California

We have audited Chordiant Software, Inc.’s internal control over financial reporting as of September 30, 2007, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).  Chordiant Software, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Chordiant Software, Inc. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Chordiant Software, Inc. as of September 30, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended September 30, 2007 and our report dated November 15, 2007 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

San Jose, California

November 15, 2007

83

ITEM 9B. OTHER INFORMATION

None.

PART III

Certain information required by Part III is omitted from this Annual Report on Form 10-K because the registrant will file with the U.S. Securities and Exchange Commission a proxy statement pursuant to Regulation 14A in connection with the solicitation of proxies for the registrant’s Annual Meeting of Stockholders expected to be held not later 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and certain information included therein as incorporated by reference.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated herein by reference from the section entitled “Election of Directors” to be contained in our Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference from the section entitled “Executive Compensation” to be contained in our Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated herein by reference from the information from the section entitled “Securities Authorized for Issuance under Equity Compensation Plans” and “Security Ownership of Certain Beneficial Owners and Management” to be contained in our Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDANCE

The information required by this Item is incorporated herein by reference from the section entitled “Transactions with Related Persons” to be contained in our Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated herein by reference from the section entitled “Ratification of Selection of Independent Auditors” to be contained in our Proxy Statement.

84

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

1. Index to Financial Statements

Please see the accompanying Index to Consolidated Financial Statements, which appears on page 49 of this report. The Report of Independent Registered Public Accounting Firm, Financial Statements and Notes to Financial Statements which are listed in the Index to Financial Statements and which appear beginning on page 55 of this report are included in Item 8 above.

2. Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts for the years ended September 30, 2007, 2006, and 2005 are as follows (in thousands):

	Balance at Beginning of Period		Charged to Expenses			Deductions			Balance at End of Period
Allowance for doubtful accounts
2007	$	83	$	82		$	—		$	165
2006	$	214	$	(9	)	$	(122	)	$	83
2005	$	111	$	103		$	—		$	214
Deferred tax asset valuation allowance
2007	$	88,917	$	—		$	(18	)	$	88,899
2006	$	83,350	$	5,567		$	—		$	88,917
2005	$	63,615	$	19,735		$	—		$	83,350

Schedules not listed have been omitted because the information required to be set forth therein is not applicable or is included in the Financial Statements or notes thereto.

3. Exhibits

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
2.1	Stock Purchase Agreement, dated July 19, 2000, between Chordiant Software, Inc., White Spider Software, Inc. and the Sellers of capital stock of White Spider Software, Inc..	8-K	8/3/2000
2.2	Agreement and Plan of Merger and Reorganization, dated as of January 8, 2001, by and among Chordiant Software, Inc., Puccini Acquisition Corp. and Prime Response, Inc..	Form S-4 (No. 333-54856)	2/26/2001
2.3	Agreement and Plan of Merger and Reorganization, dated as of March 28, 2002, by and among Chordiant Software, Inc., OnDemand Acquisition Corp. and OnDemand, Inc..	8-K	4/12/2002
2.4	Share Purchase Agreement, dated December 8, 2004, between Chordiant Software International, Inc. and the persons named therein (1).	8-K	12/27/2004
2.5	Deed of Trust, dated December 8, 2004, between Chordiant Software International, Inc. and KiQ Limited.	Form 8-K	12/27/2004

85

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
3.1	Amended and Restated Certificate of Incorporation of Chordiant Software, Inc..	Form S-1 (No. 333-92187)	2/6/1999
3.2	Amended and Restated Bylaws of Chordiant Software, Inc..	Form 8-K	2/2/2006
4.1	Specimen Common Stock Certificate.	Form S-11 (No. 333-92187)	2/7/2000
4.2	Warrant agreement, dated August 12, 2002, by and between Chordiant Software, Inc. and International Business Machines Corporation (“IBM”).	Form 10-Q	5/15/2003
4.3	Registration Rights Agreement, dated January 22, 2004, by and between Chordiant Software, Inc., and Acqua Wellington Opportunity I Limited.	Form 8-K	1/26/2004
4.4	Warrant, dated February 28, 1999, issued to GAP Coinvestment Partners II, L.P..	Form S-1 (No. 333-92461)	12/10/1999
4.5	Warrant, dated December 9, 1999, issued to General Atlantic Partners 52, L.P..	Form S-1 (No. 333-92461)	12/10/1999
4.6	Warrant, dated December 9, 1999, issued to Accenture (Formerly known as Andersen Consulting), L.P..	Form S-1 (No. 333-92461)	12/10/1999
4.7	Warrant, dated December 9, 1999, issued to Accenture (Formerly known as Andersen Consulting), L.P..	Form S-1 (No. 333-92461)	12/10/1999
4.8	Warrant, dated December 9, 1999, issued to Accenture (Formerly known as Andersen Consulting), L.P..	S-1 (No. 333-92461)	12/10/1999
4.9	Warrant, dated September 4, 2001, issued to Accenture plc.	Form 10-K/T	3/29/2005
10.1*	1999 Equity Incentive Plan and Form of Stock Option Agreement.	Form S-1 (No. 333-92187)	12/6/1999
10.2*	1999 Employee Stock Purchase Plan.	Form S-1 (No. 333-92187)	12/6/1999
10.3*	Amended and Restated 1999 Non-Employee Directors' Plan as amended and restated.	Schedule 14A	3/15/2007
10.4*	Form of Stock Option Agreement of 1999 Non-Employee Directors' Plan.	Form S-1 (No. 333-92187)	1/19/2000
10.5*	2000 Nonstatutory Equity Incentive Plan.	S-8 (No. 333-42844)	8/2/2000
10.6*	Employment Letter Agreement of Samuel T. Spadafora dated April 24, 1998, by Chordiant Software, Inc. and agreed to and accepted by Samuel T. Spadafora.	Form S-1 (No. 333-92187)	1/19/2000
10.7	Cupertino City Center Net Office Lease, dated June 19, 1998, by and between Cupertino City Center Buildings, as Lessor, and Chordiant Software, Inc., as Lessee.	Form S-1 (No. 333-92187)	1/19/2000

86

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
10.8	Amended and Restated Loan and Security Agreement dated August 31, 2000, by and between Chordiant Software, Inc. and Imperial Bank.	Form 10-Q	5/15/2002
10.9	First Amendment to Amended and Restated Loan and Security Agreement, dated October 19, 2001, by and between Chordiant Software, Inc. and Comerica Bank-California, successor in interest to Imperial Bank.	Form 10-Q	5/15/2002
10.10*	Change of Control Agreement, dated April 27, 2001, by and between Chordiant Software, Inc. and Stephen P. Kelly.	Form 10-Q	5/15/2002
10.11*	Change of Control Agreement, dated September 10, 2001, by and between Chordiant Software, Inc. and Samuel T. Spadafora.	Form 10-Q	5/15/2002
10.12*	Separation Agreement, dated October 20, 2003, by and between Chordiant Software, Inc. and Steve G. Vogel.	Form 10-K/A	3/30/2004
10.13*	Form of Indemnification Agreement, by and between Chordiant Software, Inc. and certain officers and directors of Chordiant Software, Inc..	Form 10-Q	5/15/2002
10.14*	Employment Letter, dated November 14, 2002, between Chordiant Software, Inc. and Stephen P. Kelly.	Form 10-Q	11/14/2002
10.15*	Amendment to Change of Control Agreement dated January 10, 2003, by and between Chordiant Software, Inc. and Stephen P. Kelly.	Form 10-K	3/28/2003
10.16*	Amendment to Change of Control Agreement dated February 27, 2004, by and between Chordiant Software, Inc. and Samuel T. Spadafora.	Form 10-K	3/8/2004
10.17	Second Amendment to Amended and Restated Loan and Security Agreement by and between Chordiant Software, Inc. and Comerica Bank-California, successor in interest to Imperial Bank, dated March 28, 2003.	Form 10-Q	8/14/2003
10.18	First amendment to Cupertino City Center Net Office Lease, dated December 10, 2003, by and between Cupertino City Center Buildings, as Lessor, and Chordiant Software, Inc., as Lessee.	10-K	3/8/2004
10.19	Purchase Agreement by and between Chordiant and Acqua Wellington Opportunity I Limited, dated January 22, 2004.	Form S-3/A	3/30/2004
10.20*	Offer letter dated November 16, 2004 to George A. de Urioste.	Form 8-K	2/2/2005
10.21*	Change of Control Agreement dated January 31, 2005 by and between Chordiant Software, Inc. and George A. de Urioste.	Form 10-K/T	3/29/2005
10.22*	Terms of employment for Robert U. Mullen as of March 31, 2004.	Form 10-K/T	3/29/2005
10.23*	Change of Control Agreement dated April 24, 2003 by and between Chordiant Software, Inc. and Robert U. Mullen.	Form 10-K/T	3/29/2005
10.24*	Separation Agreement, dated August 16, 2004, by and between Chordiant Software, Inc. and Michael J. Shannahan.	Form 10-K/T	3/29/2005

87

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
10.25*	Form of Director Agreement by and between Chordiant Software, Inc. and certain officers and directors of Chordiant Software, Inc..	Form 10-K/T	3/29/2005
10.26*	Compromise Agreement by and between Chordiant Software International Limited and Allen Swann dated October 28th 2004.	Form 10-K/T	3/29/2005
10.27+	Master Services Agreement By and Between Chordiant Software, Inc. and Ness Technologies, Inc., Ness Global Services, Inc. and Ness Technologies India Ltd., dated December 15, 2003, as amended.			X
10.28*	A description of certain compensation arrangements between Chordiant Software, Inc. and its executive officers.	Form 8-K	6/8/2005
10.29*	Offer Letter dated October 17, 2005 for Derek P. Witte.	Form 8-K	10/26/2005
10.30*	Change of Control Agreement dated October 20, 2005 by and between Chordiant Software, Inc. and Derek P. Witte.	Form 8-K	10/26/2005
10.31*	2005 Equity Incentive Plan, as amended.	Schedule 14A	3/15/2007
10.32*	A description of certain compensation arrangements between Chordiant Software, Inc. its executive officers.	Form 8-K	2/2/2006
10.33*	Offer Letter dated January 31, 2006 for Steven R. Springsteel.	Form 8-K	2/2/2006
10.34*	Form of Stock Option Agreement for Steven R. Springsteel.	Form 8-K	2/2/2006
10.35*	Amendment dated August 29, 2005 to April 24, 1998 Letter Agreement by and between Chordiant Software, Inc. and Samuel Spadafora.	Form 10-Q	2/9/2006
10.36*	Board Member Agreement dated March 7, 2006 for Richard Stevens	Form 8-K	3/10/2006
10.37	Second Amended and Restated Loan and Security Agreement by and between Chordiant Software, Inc. and Comerica Bank-California, successor in interest to Imperial Bank, dated March 8, 2006.	Form 10-Q	5/4/2006
10.38*	Separation Agreement dated March 1, 2006, by and between Chordiant Software, Inc. and Stephen Kelly.	Form 10-Q	5/4/2006
10.39*	Separation Agreement dated March 8, 2006, by and between Chordiant Software, Inc. and George A. de Urioste.	Form 10-Q	5/4/2006
10.40*	Separation Agreement dated August 8, 2006, by and between Chordiant Software, Inc. and Robert Mullen.	Form 8-K	8/11/2006
10.41	Addendum A to Master Services Agreement dated September 11, 2006 by and between Chordiant Software, Inc. and Ness USA, Inc..	Form 10-K	2/9/2007
10.42+	Order Form Agreement dated September 28, 2006 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007

88

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
10.43+	Software License and Services Agreement dated September 28, 2006 by and between Chordiant Software, Inc. and Connecticut General Life Insurance Company.			X
10.44	Master Agreement for Subcontracted Services dated June 14, 2002 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007
10.45	Amendment Number One dated May 31, 2005 to the Master Agreement for Subcontracted Services dated June 14, 2006 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007
10.46	Amendment Number Two dated October 12, 2006 to the Master Agreement for Subcontracted Services dated June 14, 2006 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007
10.47+	Statement of Work dated September 28, 2006 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007
10.48*	Separation Agreement dated November 30, 2006, by and between Chordiant Software, Inc. and Samuel Spadafora.	Form 8-K	11/30/2006
10.49+	Master Software License and Support Agreement dated March 21, 2006 by and between Chordiant Software, Inc. and Citicorp Credit Services, Inc. (USA).	Form 10-K	2/9/2007
10.50	Master Professional Services Agreement dated May 7, 2006 by and between Chordiant Software, Inc. and Citicorp Credit Services, Inc. (USA).	Form 10-K	2/9/2007
10.51+	License Schedule #5 dated December 8, 2006 to the Master Software License and Support Agreement dated March 21, 2006 by and between Chordiant Software and Citicorp Credit Services, Inc. (USA).			X
10.52	Amendment No. 1 to the Master Software License and Support Agreement dated March 21, 2006 by and between Chordiant Software and Citicorp Credit Services, Inc. (USA).	Form 10-K	2/9/2007
10.53	Order Form Agreement dated December 19, 2006 by and between Chordiant Software International GmbH and IBM Deustchland GmbH.	Form 10-K	2/9/2007
10.54	Software License and Services Agreement dated December 19, 2006 by and between Chordiant Software International GmbH and Deutsche Angestellten Krankenkasse.	Form 10-K	2/9/2007
10.55*	Change of Control Agreement dated November 1, 2005 by and between Chordiant Software, Inc. and Peter Norman.	Form 10-Q	4/30/2007
10.56*	Change of Control Agreement dated November 11, 2005 by and between Chordiant Software, Inc. and James St. Jean.	Form 10-Q	4/30/2007
10.57*	Change of Control Agreement dated May 26, 2006 by and between Chordiant Software, Inc. and Frank Florence.	Form 10-Q	4/30/2007

89

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
10.58*	Change of Control Agreement dated April 13, 2007 by and between Chordiant Software, Inc. and PK Karnik.	Form 10-Q	4/30/2007
10.59+	Master Agreement dated June 28, 2007 by and between WellPoint, Inc. and Chordiant Software, Inc..	Form 10-Q	8/10/2007
10.60*+	Fiscal Year 2008 Executive Incentive Bonus Plan.			X
10.61*+	Fiscal Year 2008 General Counsel Incentive Bonus Plan.			X
10.62*+	Fiscal Year 2008 Compensation Plan for Worldwide Vice President, Professional Services.			X
10.63*+	Fiscal Year 2008 Bonus Plan for Worldwide Vice President, Sales.			X
10.64*	Fiscal Year 2008 Compensation Plan for Worldwide Vice President, Sales.			X
10.65*	Offer Letter dated October 31, 2007 for David Cunningham.			X
10.66*+	2008-2009 Performance Share Unit Program.			X
10.67*	Form of 2008-2009 Performance Share Unit Program Award Grant Notice.			X
10.68	Addendum A to the Master Services Agreement dated October 25, 2007 by and between Chordiant Software, Inc. and Ness USA, Inc.			X
18.1	Preferability letter from BDO Seidman, LLP, Independent Registered Public Accounting Firm.	Form 10-K	12/9/2005
21.1	Subsidiaries of Chordiant Software, Inc..	10-Q	5/16/2005
23.1	Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm.			X
24.1	Power of Attorney (included on the signature pages hereto).			X
31.1	Certification required by Rule 13a-14(a) or Rule 15d-14(a).			X
31.2	Certification required by Rule 13a-14(a) or Rule 15d-14(a).			X
32.1#	Certification required by Rule 13a-14(a) or Rule 15d-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).			X

* Management contract or compensatory plan or arrangement.

+ Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

(1) Chordiant has omitted Schedules 2-4 and 709 to the Share Purchase Agreement pursuant to Item 601(b)(2) of Regulation S-K. A brief description of the omitted schedules is contained in Exhibit 2.4. Chordiant hereby undertakes to provide the SEC with copies of the omitted schedules upon request.

90

# The certification attached as Exhibit 32.1 is not deemed filed with the Securities and Exchange Commission and is not incorporated by reference into any filing of Chordiant Software, Inc., whether made before or after the date of this Form 10-K irrespective of any general incorporation language contained in such filing.

91

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report on Form 10-K to be signed on our behalf by the undersigned, thereunto duly authorized, in the City of Cupertino, State of California, on November 15, 2007.

CHORDIANT SOFTWARE, INC
By:	/s/  STEVEN R. SPRINGSTEEL
	Steven R. Springsteel Chairman, President, and CEO

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints STEVEN R. SPRINGSTEEL and PETER S. NORMAN, and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report on Form 10-K has been signed by the following persons on behalf of the Registrant and of the capacities and on the dates indicated.

Signature	Title	Date
/s/ STEVEN R. SPRINGSTEEL	Chairman, President, and Chief Executive Officer	November 15, 2007
Steven R. Springsteel
/s/ PETER S. NORMAN	Chief Financial Officer and Principal Accounting	November 15, 2007
Peter S. Norman	Officer
/s/ RICHARD G. STEVENS	Director	November 15, 2007
Richard G. Stevens
/s/ DAVID R. SPRINGETT	Director	November 15, 2007
David R. Springett
/s/ WILLIAM J. RADUCHEL	Director	November 15, 2007
William J. Raduchel
/s/ DAVID A. WEYMOUTH	Director	November 15, 2007
David A. Weymouth
/s/ CHARLES E. HOFFMAN	Director	November 15, 2007
Charles E. Hoffman

92

EXHIBIT INDEX

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
2.1	Stock Purchase Agreement, dated July 19, 2000, between Chordiant Software, Inc., White Spider Software, Inc. and the Sellers of capital stock of White Spider Software, Inc..	8-K	8/3/2000
2.2	Agreement and Plan of Merger and Reorganization, dated as of January 8, 2001, by and among Chordiant Software, Inc., Puccini Acquisition Corp. and Prime Response, Inc..	Form S-4 (No. 333-54856)	2/26/2001
2.3	Agreement and Plan of Merger and Reorganization, dated as of March 28, 2002, by and among Chordiant Software, Inc., OnDemand Acquisition Corp. and OnDemand, Inc..	8-K	4/12/2002
2.4	Share Purchase Agreement, dated December 8, 2004, between Chordiant Software International, Inc. and the persons named therein (1).	8-K	12/27/2004
2.5	Deed of Trust, dated December 8, 2004, between Chordiant Software International, Inc. and KiQ Limited.	Form 8-K	12/27/2004
3.1	Amended and Restated Certificate of Incorporation of Chordiant Software, Inc..	Form S-1 (No. 333-92187)	2/6/1999
3.2	Amended and Restated Bylaws of Chordiant Software, Inc..	Form 8-K	2/2/2006
4.1	Specimen Common Stock Certificate.	Form S-11 (No. 333-92187)	2/7/2000
4.2	Warrant agreement, dated August 12, 2002, by and between Chordiant Software, Inc. and International Business Machines Corporation (“IBM”).	Form 10-Q	5/15/2003
4.3	Registration Rights Agreement, dated January 22, 2004, by and between Chordiant Software, Inc., and Acqua Wellington Opportunity I Limited.	Form 8-K	1/26/2004
4.4	Warrant, dated February 28, 1999, issued to GAP Coinvestment Partners II, L.P..	Form S-1 (No. 333-92461)	12/10/1999
4.5	Warrant, dated December 9, 1999, issued to General Atlantic Partners 52, L.P..	Form S-1 (No. 333-92461)	12/10/1999
4.6	Warrant, dated December 9, 1999, issued to Accenture (Formerly known as Andersen Consulting), L.P..	Form S-1 (No. 333-92461)	12/10/1999
4.7	Warrant, dated December 9, 1999, issued to Accenture (Formerly known as Andersen Consulting), L.P..	Form S-1 (No. 333-92461)	12/10/1999
4.8	Warrant, dated December 9, 1999, issued to Accenture (Formerly known as Andersen Consulting), L.P..	S-1 (No. 333-92461)	12/10/1999
4.9	Warrant, dated September 4, 2001, issued to Accenture plc.	Form 10-K/T	3/29/2005
10.1*	1999 Equity Incentive Plan and Form of Stock Option Agreement.	Form S-1 (No. 333-92187)	12/6/1999

93

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
10.2*	1999 Employee Stock Purchase Plan.	Form S-1 (No. 333-92187)	12/6/1999
10.3*	Amended and Restated 1999 Non-Employee Directors' Plan as amended and restated.	Schedule 14A	3/15/2007
10.4*	Form of Stock Option Agreement of 1999 Non-Employee Directors' Plan.	Form S-1 (No. 333-92187)	1/19/2000
10.5*	2000 Nonstatutory Equity Incentive Plan.	S-8 (No. 333-42844)	8/2/2000
10.6*	Employment Letter Agreement of Samuel T. Spadafora dated April 24, 1998, by Chordiant Software, Inc. and agreed to and accepted by Samuel T. Spadafora.	Form S-1 (No. 333-92187)	1/19/2000
10.7	Cupertino City Center Net Office Lease, dated June 19, 1998, by and between Cupertino City Center Buildings, as Lessor, and Chordiant Software, Inc., as Lessee.	Form S-1 (No. 333-92187)	1/19/2000
10.8	Amended and Restated Loan and Security Agreement dated August 31, 2000, by and between Chordiant Software, Inc. and Imperial Bank.	Form 10-Q	5/15/2002
10.9	First Amendment to Amended and Restated Loan and Security Agreement, dated October 19, 2001, by and between Chordiant Software, Inc. and Comerica Bank-California, successor in interest to Imperial Bank.	Form 10-Q	5/15/2002
10.10*	Change of Control Agreement, dated April 27, 2001, by and between Chordiant Software, Inc. and Stephen P. Kelly.	Form 10-Q	5/15/2002
10.11*	Change of Control Agreement, dated September 10, 2001, by and between Chordiant Software, Inc. and Samuel T. Spadafora.	Form 10-Q	5/15/2002
10.12*	Separation Agreement, dated October 20, 2003, by and between Chordiant Software, Inc. and Steve G. Vogel.	Form 10-K/A	3/30/2004
10.13*	Form of Indemnification Agreement, by and between Chordiant Software, Inc. and certain officers and directors of Chordiant Software, Inc..	Form 10-Q	5/15/2002
10.14*	Employment Letter, dated November 14, 2002, between Chordiant Software, Inc. and Stephen P. Kelly.	Form 10-Q	11/14/2002
10.15*	Amendment to Change of Control Agreement dated January 10, 2003, by and between Chordiant Software, Inc. and Stephen P. Kelly.	Form 10-K	3/28/2003
10.16*	Amendment to Change of Control Agreement dated February 27, 2004, by and between Chordiant Software, Inc. and Samuel T. Spadafora.	Form 10-K	3/8/2004
10.17	Second Amendment to Amended and Restated Loan and Security Agreement by and between Chordiant Software, Inc. and Comerica Bank-California, successor in interest to Imperial Bank, dated March 28, 2003.	Form 10-Q	8/14/2003

94

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
10.18	First amendment to Cupertino City Center Net Office Lease, dated December 10, 2003, by and between Cupertino City Center Buildings, as Lessor, and Chordiant Software, Inc., as Lessee.	10-K	3/8/2004
10.19	Purchase Agreement by and between Chordiant and Acqua Wellington Opportunity I Limited, dated January 22, 2004.	Form S-3/A	3/30/2004
10.20*	Offer letter dated November 16, 2004 to George A. de Urioste.	Form 8-K	2/2/2005
10.21*	Change of Control Agreement dated January 31, 2005 by and between Chordiant Software, Inc. and George A. de Urioste.	Form 10-K/T	3/29/2005
10.22*	Terms of employment for Robert U. Mullen as of March 31, 2004.	Form 10-K/T	3/29/2005
10.23*	Change of Control Agreement dated April 24, 2003 by and between Chordiant Software, Inc. and Robert U. Mullen.	Form 10-K/T	3/29/2005
10.24*	Separation Agreement, dated August 16, 2004, by and between Chordiant Software, Inc. and Michael J. Shannahan.	Form 10-K/T	3/29/2005
10.25*	Form of Director Agreement by and between Chordiant Software, Inc. and certain officers and directors of Chordiant Software, Inc..	Form 10-K/T	3/29/2005
10.26*	Compromise Agreement by and between Chordiant Software International Limited and Allen Swann dated October 28th 2004.	Form 10-K/T	3/29/2005
10.27+	Master Services Agreement By and Between Chordiant Software, Inc. and Ness Technologies, Inc., Ness Global Services, Inc. and Ness Technologies India Ltd., dated December 15, 2003, as amended.			X
10.28*	A description of certain compensation arrangements between Chordiant Software, Inc. and its executive officers.	Form 8-K	6/8/2005
10.29*	Offer Letter dated October 17, 2005 for Derek P. Witte.	Form 8-K	10/26/2005
10.30*	Change of Control Agreement dated October 20, 2005 by and between Chordiant Software, Inc. and Derek P. Witte.	Form 8-K	10/26/2005
10.31*	2005 Equity Incentive Plan, as amended.	Schedule 14A	3/15/2007
10.32*	A description of certain compensation arrangements between Chordiant Software, Inc. its executive officers.	Form 8-K	2/2/2006
10.33*	Offer Letter dated January 31, 2006 for Steven R. Springsteel.	Form 8-K	2/2/2006
10.34*	Form of Stock Option Agreement for Steven R. Springsteel.	Form 8-K	2/2/2006
10.35*	Amendment dated August 29, 2005 to April 24, 1998 Letter Agreement by and between Chordiant Software, Inc. and Samuel Spadafora.	Form 10-Q	2/9/2006
10.36*	Board Member Agreement dated March 7, 2006 for Richard Stevens	Form 8-K	3/10/2006

95

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
10.37	Second Amended and Restated Loan and Security Agreement by and between Chordiant Software, Inc. and Comerica Bank-California, successor in interest to Imperial Bank, dated March 8, 2006.	Form 10-Q	5/4/2006
10.38*	Separation Agreement dated March 1, 2006, by and between Chordiant Software, Inc. and Stephen Kelly.	Form 10-Q	5/4/2006
10.39*	Separation Agreement dated March 8, 2006, by and between Chordiant Software, Inc. and George A. de Urioste.	Form 10-Q	5/4/2006
10.40*	Separation Agreement dated August 8, 2006, by and between Chordiant Software, Inc. and Robert Mullen.	Form 8-K	8/11/2006
10.41	Addendum A to Master Services Agreement dated September 11, 2006 by and between Chordiant Software, Inc. and Ness USA, Inc..	Form 10-K	2/9/2007
10.42+	Order Form Agreement dated September 28, 2006 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007
10.43+	Software License and Services Agreement dated September 28, 2006 by and between Chordiant Software, Inc. and Connecticut General Life Insurance Company.			X
10.44	Master Agreement for Subcontracted Services dated June 14, 2002 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007
10.45	Amendment Number One dated May 31, 2005 to the Master Agreement for Subcontracted Services dated June 14, 2006 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007
10.46	Amendment Number Two dated October 12, 2006 to the Master Agreement for Subcontracted Services dated June 14, 2006 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007
10.47+	Statement of Work dated September 28, 2006 by and between Chordiant Software, Inc. and International Business Machines Corporation.	Form 10-K	2/9/2007
10.48*	Separation Agreement dated November 30, 2006, by and between Chordiant Software, Inc. and Samuel Spadafora.	Form 8-K	11/30/2006
10.49+	Master Software License and Support Agreement dated March 21, 2006 by and between Chordiant Software, Inc. and Citicorp Credit Services, Inc. (USA).	Form 10-K	2/9/2007
10.50	Master Professional Services Agreement dated May 7, 2006 by and between Chordiant Software, Inc. and Citicorp Credit Services, Inc. (USA).	Form 10-K	2/9/2007

96

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
10.51+	License Schedule #5 dated December 8, 2006 to the Master Software License and Support Agreement dated March 21, 2006 by and between Chordiant Software and Citicorp Credit Services, Inc. (USA).			X
10.52	Amendment No. 1 to the Master Software License and Support Agreement dated March 21, 2006 by and between Chordiant Software and Citicorp Credit Services, Inc. (USA).	Form 10-K	2/9/2007
10.53	Order Form Agreement dated December 19, 2006 by and between Chordiant Software International GmbH and IBM Deustchland GmbH.	Form 10-K	2/9/2007
10.54	Software License and Services Agreement dated December 19, 2006 by and between Chordiant Software International GmbH and Deutsche Angestellten Krankenkasse.	Form 10-K	2/9/2007
10.55*	Change of Control Agreement dated November 1, 2005 by and between Chordiant Software, Inc. and Peter Norman.	Form 10-Q	4/30/2007
10.56*	Change of Control Agreement dated November 11, 2005 by and between Chordiant Software, Inc. and James St. Jean.	Form 10-Q	4/30/2007
10.57*	Change of Control Agreement dated May 26, 2006 by and between Chordiant Software, Inc. and Frank Florence.	Form 10-Q	4/30/2007
10.58*	Change of Control Agreement dated April 13, 2007 by and between Chordiant Software, Inc. and PK Karnik.	Form 10-Q	4/30/2007
10.59+	Master Agreement dated June 28, 2007 by and between WellPoint, Inc. and Chordiant Software, Inc..	Form 10-Q	8/10/2007
10.60*+	Fiscal Year 2008 Executive Incentive Bonus Plan.			X
10.61*+	Fiscal Year 2008 General Counsel Incentive Bonus Plan.			X
10.62*+	Fiscal Year 2008 Compensation Plan for Worldwide Vice President, Professional Services.			X
10.63*+	Fiscal Year 2008 Bonus Plan for Worldwide Vice President, Sales.			X
10.64*	Fiscal Year 2008 Compensation Plan for Worldwide Vice President, Sales.			X
10.65*	Offer Letter dated October 31, 2007 for David Cunningham.			X
10.66*+	2008-2009 Performance Share Unit Program.			X
10.67*	Form of 2008-2009 Performance Share Unit Program Award Grant Notice.			X
10.68	Addendum A to the Master Services Agreement dated October 25, 2007 by and between Chordiant Software, Inc. and Ness USA, Inc.			X
18.1	Preferability letter from BDO Seidman, LLP, Independent Registered Public Accounting Firm.	Form 10-K	12/9/2005

97

		Incorporated by Reference
Exhibit Number	Description of Document	Form	Date	Filed Herewith
21.1	Subsidiaries of Chordiant Software, Inc..	10-Q	5/16/2005
23.1	Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm.			X
24.1	Power of Attorney (included on the signature pages hereto).			X
31.1	Certification required by Rule 13a-14(a) or Rule 15d-14(a).			X
31.2	Certification required by Rule 13a-14(a) or Rule 15d-14(a).			X
32.1#	Certification required by Rule 13a-14(a) or Rule 15d-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).			X

* Management contract or compensatory plan or arrangement.

+ Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

(1) Chordiant has omitted Schedules 2-4 and 709 to the Share Purchase Agreement pursuant to Item 601(b)(2) of Regulation S-K. A brief description of the omitted schedules is contained in Exhibit 2.4. Chordiant hereby undertakes to provide the SEC with copies of the omitted schedules upon request.

# The certification attached as Exhibit 32.1 is not deemed filed with the Securities and Exchange Commission and is not incorporated by reference into any filing of Chordiant Software, Inc., whether made before or after the date of this Form 10-K irrespective of any general incorporation language contained in such filing.

98

EX-10.27

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 10.27

MASTER SERVICES AGREEMENT

This Master Services Agreement (the “Agreement”), dated as of December 15, 2003, is between Chordiant Software, Inc., a Delaware corporation (“Chordiant”), on the one hand, and Ness Global Services, Inc. a Pennsylvania corporation (“Ness Global”), Ness Technologies India Ltd. (“Ness India”), an India company, and Ness Technologies, Inc., a Delaware corporation, (collectively, “Supplier”) on the other.

Recitals

Whereas, Supplier desires to provide to Chordiant, and Chordiant desires to obtain from Supplier, the services described in this Agreement on the terms and conditions set forth in this Agreement; and

Whereas, Chordiant and Supplier have engaged in extensive negotiations and discussions that have culminated in the formation of the relationship described in this Agreement.

Now, Therefore, for and in consideration of the agreements set forth below, Chordiant and Supplier agree as follows:

1.   Definitions and Construction

1.1Definitions.  The terms used in this Agreement with initial capital letters have the meanings set forth in Exhibit 1.

1.2Interpretation.

(a)The Exhibits attached to this Agreement are hereby incorporated into and deemed part of this Agreement.  All references to “Agreement” herein include the Exhibits to this Agreement.  All references to “Exhibits” herein include the attachments to such Exhibits.

(b)The headings preceding the text of Articles, Sections and the headings to Exhibits, the table of contents and the table of Exhibits included in or attached to this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(c)Any reference to an Exhibit, Section or Article shall be to such Exhibit, Section or Article of this Agreement, unless otherwise expressly provided.

(d)References to any Law refer to such Law in changed or supplemented form, or to a newly adopted Law replacing a previous Law.

(e)The use of the terms “including,” “include” or “includes” shall in all cases herein mean “including without limitation,” “include without limitation” or “includes without limitation,” respectively.

(f)Words conveying the singular include the plural and vice versa where the context so requires.

(g)The Parties acknowledge and agree that they have mutually negotiated the terms and conditions of this Agreement and that any provision contained herein with respect to which an issue of interpretation or construction arises shall not be construed to the detriment of the drafter on the basis that such Party or its professional advisor was the drafter, but shall be construed according to the intent of the Parties as evidenced by the entire Agreement.

1.3Order of Precedence.  Except as otherwise expressly set forth in the body of this Agreement or in an Exhibit, in the event of a conflict, ambiguity or inconsistency between the provisions in the body of this Agreement and any Exhibit, the provisions in the body of this Agreement shall prevail.

2.   Term

2.1Initial Term. The initial term of this Agreement shall commence on the Effective Date and continue until either the Initial Agreement Expiration Date, the last day of the final Extension Period, or such earlier date upon which this Agreement is terminated in accordance with its terms (the “Initial Term”).

2.2Renewal and Extension.  Chordiant, in its sole discretion, upon no less than ninety (90) days advance notice prior to the end of the Initial Term and each extension thereof, may elect to extend the Initial Term for additional one year periods (each an “Extension Period”) on the terms, conditions and pricing in effect as of the date of the notice of extension.

3.   Services

3.1Base Services Defined.  The Base Services means the services, functions and responsibilities of Supplier, as they may evolve, be supplemented, enhanced, modified, or replaced (e.g., to keep pace with technological advancements and improvements in the methods of delivering Services) during the Term, including the following:

(a)The services, functions and responsibilities that relate to each Line of Business described in this Agreement, the Transition Plan and any Statement of Work;

(b)The services, functions and responsibilities routinely performed prior to the Effective Date by the Affected Employees and the Affected Contractors or such other Chordiant employees and contractors whose services, functions or responsibilities were displaced or transitioned to Supplier as a result of this Agreement, even if such service, function or responsibility is not specifically described in this Agreement; provided that such service, function or responsibility is reasonably related to the Services described in this Agreement;

(c)The services, functions, and responsibilities that are of a nature and type that would ordinarily be performed by the organization or part of the organization performing services similar to the Services within a company in the software industry, even if not specifically described in this Agreement;

(d)Any services, functions or responsibilities required for the proper performance and delivery of the Services, whether or not expressly identified or described in this Agreement;

(e)The Refresh of the Systems provided by Supplier; and

(f)The joint development of a plan to extend the Software Engineering Institute’s Capability Maturity Model (SEI CMM) quality certifications of Supplier to Chordiant’s product line as soon as reasonably practicable after the Effective Date.

3.2Provision of Services. 

(a)Commencement Dates; Transition Services.  Beginning on the Effective Date, Supplier shall provide the Transition Services as specified in the Transition Plan.  The Transition Plan sets forth a number of Commencement Dates, and specifies which Services correspond to such Commencement Dates.  Beginning on each Commencement Date, Supplier shall provide the Services that correspond with such Commencement Date.  Chordiant shall have the right to set priorities regarding scheduling the performance of Services in accordance with the procedures set forth in the Policies and Procedures Manual.

(b)Base Services.  Supplier shall provide the Base Services as set forth in this Agreement, the Transition Plan and in each Statement of Work.

(c)Increase in Personnel.  If Chordiant requests additional services under a Line of Business (or multiple Lines of Business) that Supplier cannot provide with the aggregate number of EDC Personnel at the time of the request, then within [ * ] (or such time as agreed by the Parties) of the receipt of such request, Supplier will provide Chordiant with an estimate of the number of resources required to provide such services (the “Additional Personnel”).  If Chordiant desires to add the Additional Personnel, the Parties will reflect the agreed upon additional EDC Personnel in a writing authorized by the Steering Committee, and Supplier will provide the Additional Personnel in accordance with the terms and prices set forth in this Agreement.  Chordiant shall not be obligated to pay for any Additional Personnel unless approved in writing by Chordiant.  Any increase in the EDC Personnel in accordance with this section shall be in Chordiant’s sole discretion and shall not be considered a New Line of Business.

(d)Decrease in Personnel.  Upon no less than six (6) weeks prior written notice, at any time after the [ * ] from the Effective Date, Chordiant shall be entitled to reduce the number of EDC Personnel in any quarter by up to [ * ] of the average EDC Personnel for the prior quarter, or [ * ] EDC Personnel, whichever is greater.  The fees under this Agreement will be reduced to reflect the reduction in EDC Personnel, effective as of the effective date of the EDC Personnel reduction.  There shall be no penalty or other fee associated with any such decrease.

(e)Insourcing.  Chordiant may insource, obtain from a third party, or otherwise remove from scope all or any portion of the Services then being provided by Supplier.

(f)Suppliers.  Supplier shall provide the Services to Chordiant and the Chordiant Affiliates in accordance with this Agreement.  With respect to Supplier’s obligations and license grants contained in this Agreement, the term “Chordiant” shall include Chordiant and the Chordiant Affiliates.

(g)Resources.  Except as expressly provided otherwise in this Agreement, Supplier shall provide all facilities, assets, and resources (including personnel, communications lines, Equipment, and Software) necessary for delivering the Services and otherwise meeting its obligations under this Agreement.  In addition, Supplier shall provide the shared common services set forth in Exhibit 13.  The location of and standards for the facility(ies) shall be set forth in Exhibit 7.  Supplier shall provide Chordiant with complete access (including any necessary security passes, keys, passwords, etc.) to all portions of Supplier Service Locations in which Supplier is providing the Services (not including other EDCs) and common areas, such that Chordiant may enter and access any part of such facilities, and all assets and resources in such facilities, at any time.

(h)Delivery and Acceptance.  Supplier shall deliver those Deliverables specified in a Statement of Work to Chordiant in accordance with the terms set forth in the Statement of Work.  To the extent that a Statement of Work includes acceptance criteria for a Deliverable (the “Acceptance Criteria”), such Deliverable shall comply with such criteria in all material respects.  If no Acceptance Criteria are stated in the Statement of Work, the Acceptance Criteria will conform with all specifications and Chordiant instructions for the Deliverables.  Prior to delivery, Supplier shall test the Deliverables and immediately report to Chordiant any non-conformance with the Acceptance Criteria, and any other deficiency or defect in the Deliverable, including specifics regarding the nature of the failure thereof.  Chordiant shall have the right to test the Deliverables [ * ].  Supplier shall, at no cost to Chordiant (i.e., without applying toward billable time), correct any deficiencies that prevent such Deliverable from conforming to the Acceptance Criteria [ * ], unless otherwise agreed.  In the event that the Deliverable does not conform to the Acceptance Criteria within this time, and in accordance with Supplier’s Right to Cure, Chordiant may [ * ].

3.3Improved Technology.  In providing the Services to Chordiant, at no additional cost and in addition to the Supplier’s obligations set forth in Exhibit 14, Supplier shall: (a) actively seek and identify opportunities to implement new technologies and methodologies advantageous to Chordiant’s business operations and, upon Chordiant’s approval, implement such technologies and methodologies; (b) maintain a level of technology used to provide the Services that (i) allows Chordiant to take advantage of technological advances in order to remain competitive, (ii) is at least current with the level of technology that Supplier uses in providing services to its other customers, and (iii) is at least current with the level of technology generally adopted from time to time in Chordiant’s industry (provided that the foregoing clause does not expand Supplier’s Refresh obligations specified in Exhibit 14); (c) provide to Chordiant Improved Technology for Chordiant’s evaluation in connection with the Services; and (d) meet with Chordiant periodically, at least once during every 180-day period (and more often if appropriate due to changes or improvements in the information technology industry or any technology relating to the Services), in accordance with procedures agreed upon by the Chordiant Account Executive, to inform Chordiant of any new information processing technology Supplier is developing or information technology trends and directions of which Supplier is otherwise aware that could reasonably be expected to have an impact on Chordiant or Chordiant’s business.

3.4Governmental Approvals.  Supplier shall, at its own cost and expense, obtain and maintain all Governmental Approvals, and provide any notice to any Governmental Authority, that Supplier is required by Supplier Laws to obtain, maintain, or provide as a result of the provision or receipt of the Services. Upon request by either Party, the other Party shall provide to the requesting Party reasonable cooperation and assistance in obtaining Governmental Approvals hereunder.

3.5Changes in Law

(a)Changes in Laws.  Chordiant shall monitor and promptly identify and notify Supplier of all changes in Laws applicable to Chordiant and its jurisdictions that relate to the provision or receipt of the Services, other than Supplier Laws (“Chordiant Laws”).  Supplier shall monitor and promptly identify and notify Chordiant of all changes in Laws applicable to Supplier and its jurisdictions that relate to the provision or receipt of the Services, including any such Laws related to data security, privacy, immigration and visas (“Supplier Laws”).

(b)Effect of Changes in Laws.

(i)Chordiant Laws.  Supplier and Chordiant shall work together to identify the effect of changes in Laws on the provision or receipt of the Services.  With respect to changes in Chordiant Laws, the Parties shall discuss modifications to the Services, if any, necessary to comply with such changes.  Supplier shall promptly thereafter propose any adjustment to the applicable Fees associated with such modifications.  Upon Chordiant’s consent, Supplier shall implement such modifications to the Services in a timely manner.  

(ii)Supplier Laws.  With respect to changes in Supplier Laws,  Supplier shall implement in a timely manner, at its own cost and expense (except with respect to Laws governing immigration and prevailing wages, or as otherwise provided in Exhibit 4), any changes in the Services required to comply with such changes; provided, that if such changes have a material effect on the cost, provision or receipt of the Services, Supplier shall obtain Chordiant’s consent before implementing such changes.

(iii)Reduction in Services. If any change in Law, or change in the Services required to conform to any change in Law, for reasons beyond either Party’s reasonable control, results in a reduction (whether temporary or permanent) in the EDC Personnel greater than that allowed under Section 3.2(d), then Chordiant may elect either to (i) negotiate and implement an equitable adjustment to the applicable Fees, or (ii) terminate the affected portion of the Services as of the date specified by Chordiant in its notice of termination without payment of any Termination Fee, provided that Chordiant provides Supplier as much notice as reasonably practicable under the circumstances.

3.6Existing Technology; Architecture and Standards.  Supplier shall (i) obtain the minimum hardware and software configuration and support all of the technologies identified in Exhibit 8, (ii) comply with Chordiant’s information management technical architecture and product standards as the same may be modified by Chordiant from time to time, and (iii) obtain and maintain the minimum dedicated communication lines identified in Exhibit 8.

3.7Knowledge Sharing.  [ * ], and upon Chordiant’s request, Supplier shall meet with representatives of Chordiant in order to (a) explain how the Deliverables and other products developed work and are operated, (b) explain the test methodologies and scripts, (c) explain how the technical stack development process works, (d) explain how the Services are provided, and (e) provide such training and documentation that Chordiant may require for Chordiant to understand and operate the Systems and provide the Services after the expiration or termination of this Agreement [ * ].

3.8Reports. Supplier shall provide to Chordiant, in a timely manner and a form acceptable to Chordiant, the reports set forth in Exhibit 9, any other reports identified in this Agreement, and any reports Chordiant requests from time to time.

3.9Schedule Management.  Supplier and Chordiant will jointly develop and maintain management plans for all Services, which will be made available to Chordiant at Chordiant’s request in an agreed upon format.  Supplier will use industry established methodologies to track progress against plan milestones and will give Chordiant regular status updates on a weekly basis for the first two (2) quarters, and then monthly or as set forth in the Policies and Procedures Manual.

3.10Procurement.  Unless otherwise agreed by the Parties, if Chordiant requests that Supplier obtain any New Equipment, then Supplier shall identify the most favorable terms (including the lowest cost) available to Supplier for any New Equipment, and in Chordiant’s sole discretion, either: (i) Chordiant shall loan the equipment to Supplier for its use solely on Chordiant’s behalf; or (ii) Supplier shall acquire the New Equipment on the most favorable terms as set forth in (x), (y) or (z) below.  Supplier shall make available to Chordiant the benefit of any discounts or other favorable purchasing or lease arrangements it may enjoy through its relationships with third parties.  Supplier shall, upon Chordiant’s request, (x) purchase the New Equipment on its own behalf or on behalf of Chordiant, (y) lease, or arrange for a third party to lease such New Equipment to Supplier or Chordiant, or (z) license, or arrange for a third party to license such New Equipment to Supplier or Chordiant.  Prior to entering into any agreement with respect to the acquisition of New Equipment, Supplier shall provide Chordiant with all terms thereof, which shall be subject to Chordiant’s prior approval.  Supplier agrees that it shall follow the process agreed upon by the Parties for such approval.  Whichever Party manages the transportation of the New Equipment shall bear all risk of loss or damage thereto during transit.  Chordiant shall pay to Supplier, the supplier, third party lessor or third party licensor, as applicable, the actual purchase, lease or license fees, and transportation costs, as applicable, for the New Equipment.  Except as otherwise agreed by the Parties or as otherwise provided in this Agreement (1) all rights in and title to any New Equipment purchased by Supplier on behalf of Chordiant and paid for by Chordiant shall belong to Chordiant and Supplier shall take such measures as reasonably necessary for Chordiant to obtain and maintain title to New Equipment, (2) all New Equipment shall be new, and (3) Supplier shall bear all risk of loss or damage to all New Equipment located in a Supplier Service Location.  All third party warranties with respect to New Equipment purchased on behalf of or leased or licensed to Chordiant shall run to and be for the express benefit of Chordiant.  Upon notice at any time, Supplier, at Chordiant’s cost, shall return New Equipment owned by Chordiant to Chordiant at Chordiant’s request.

4.   Transition; Acquisitions and Divestitures; Cooperation.

4.1Transition Services.  Supplier shall perform all services, functions, and responsibilities necessary to accomplish the transition to Supplier of the Services to be provided by Supplier under the Lines of Business (the “Transition Services”), which shall last [ * ].  Supplier shall perform the Transition Services in accordance with the Transition Plan and without causing a material disruption to Chordiant’s business.  Exhibit 16 shall serve as the base for the final Transition Plan, which the Parties shall complete jointly no later than January 31, 2004.  Supplier shall designate an individual who shall be responsible for managing and implementing the Transition Services (the “Supplier Transition Manager”), as well as individuals for each of Chordiant’s facilities and functions affected by the transition who shall be responsible for managing and implementing the Transition Services specific to such facilities and functions. Until the completion of the applicable Transition Services, the Supplier Transition Manager and each individual shall review with the Chordiant Account Executive the status of the Transition Services as often as may be reasonably requested by the Chordiant Account Executive.

4.2Transition Milestones.  Supplier shall meet the Transition milestones relating to Supplier’s obligations under the Transition Plan.  If Supplier fails to achieve any Critical Transition Milestone by the completion date specified for such milestone in the Transition Plan, subject to Supplier’s Right to Cure, Chordiant may elect to terminate the Line of Business in which the failure has occurred as of the date specified by Chordiant in its notice of termination without payment of any Termination Fee.  Chordiant shall provide Supplier with as much advance notice as reasonably possible (including at Steering Committee Meetings) of any failures to achieve Critical Transition Milestones.

4.3Transitioned Personnel.  Supplier shall use its best efforts to hire and employ Chordiant employees transitioned to Supplier under this Agreement (“Transitioned Personnel”) [ * ].

4.4Acquisitions, New Chordiant Affiliates, and Divestitures

(a)New Entities.  With respect to Chordiant’s acquisition of other entities, the acquisition of Chordiant, or Chordiant’s inclusion of additional Chordiant Affiliates (collectively, “New Entities”), to the extent providing such services to the New Entities does not cause Supplier to violate its noncompete obligations to another existing customer, Supplier shall, as requested by Chordiant, provide support services as necessary to incorporate the New Entities’ information technology systems into the Systems, including those services specified in Exhibit 2, and provide the Services, whether all or a portion specified by Chordiant, to the New Entities in accordance with this Agreement.

(b)Divestitures.  If Chordiant divests itself of a business unit or entity, or removes a Chordiant Affiliate (collectively, “Divested Entities”), Supplier shall continue to provide, at Chordiant’s request, the Services to the Divested Entity for up to [ * ] under the then-current terms, conditions and pricing of this Agreement, including, without limitation, Supplier’s rights under Section 24.3(c).  In addition, with respect to any such divestitures, Supplier shall provide support services to Chordiant, the Divested Entity, and the acquiring entity as necessary to transfer the Divested Entities’ information technology systems to a third party or enable such entity to provide information technology services to itself, including those services specified in Exhibit 2.

(c)Additional Costs.  Chordiant shall pay any [ * ]; provided that Supplier obtains Chordiant’s prior approval for the type and amount of such costs.

4.5Cooperation with Third Parties.  Chordiant may from time to time hire subcontractors, consultants, or other third parties ("Chordiant Third Party Contractors") to perform services or provide products to Chordiant.  Supplier shall cooperate with and work in good faith with any Chordiant Third Party Contractors as requested by Chordiant, including by providing the following:

(a)in writing, to the extent available, applicable requirements, standards and policies applicable to the Services so that the goods and services provided by the Chordiant Third Party Contractor may work in conjunction with or be integrated with the Services;

(b)in writing, the applicable requirements of any required interfaces for the Chordiant Third Party Contractor’s work product;

(c)in writing, the applicable requirements of any necessary modifications to the Systems;

(d)Supplier’s quality assurance, and its development and performance acceptance testing, for the Chordiant Third Party Contractor’s work product;

(e)assistance and support services to Chordiant, the Chordiant Third Party Contractor or any other third party, including Supplier’s participation as required to permit Supplier, Chordiant, Chordiant Third Party Contractors or any other third party to acquire the knowledge necessary to efficiently operate and maintain the Chordiant Third Party Contractor’s work product as part of the Systems; and

(f)subject to Supplier approval, which will not be unreasonably withheld, access to the Software, Equipment and facilities used to provide the Services, to the extent that such access is required for the services provided by the Chordiant Third Party Contractor; provided that, upon advance notice by Supplier[ * ].

5.   New Lines of Business.

5.1New Lines of Business.  Chordiant may from time to time during the Term and the Termination Assistance Period request that Supplier perform services under a New Line of Business.  Within ten (10) days after receipt of such a request from Chordiant (or such other time as Chordiant and Supplier may agree), Supplier shall provide Chordiant with a written proposal for providing services under such New Line of Business (a “New Line of Business Proposal”) which shall include:

(a)a description of the services, functions and responsibilities Supplier anticipates performing in connection with such New Line of Business;

(b)a schedule for commencing and completing (if applicable) such services under the New Line of Business;

(c)Supplier’s estimate of personnel resource requirements for providing services under such New Line of Business, including a detailed breakdown of the allocation of such resources;

(d)when appropriate, a description of any new Software or Equipment to be provided by Supplier in connection with such New Line of Business;

(e)when appropriate, the Software and Equipment and run-time requirements necessary to develop and operate any new Software;

(f)a description of the human resources necessary to provide services under the New Line of Business;

(g)when appropriate, a list of any existing Software or Equipment included in or to be used in connection with such New Line of Business;

(h)when appropriate, acceptance test criteria and procedures for any new Software or any products, packages or services; and

(i)such other information requested by Chordiant.

Supplier shall not begin performing any services under a New Line of Business until Chordiant and Supplier have agreed upon the terms for such services and the Chordiant Account Executive has provided Supplier with written authorization by executing the New Line of Business Proposal to perform services thereunder.  Any services under a New Line of Business performed by Supplier without such advance agreement to terms and authorization shall be deemed part of the Base Services without incremental charge.

5.2Fees for A New Line of Business. Supplier’s charges and fees specified in any New Line of Business Proposal shall be no more than the charges and fees Chordiant is paying at that time for the Services Supplier is providing under this Agreement.  The charges and fees for services under a New Line of Business shall take into account resources and expenses of Supplier for then-existing Services that would no longer be required if the services thereunder were performed by Supplier.

5.3Third Party Services.  In the event Chordiant contracts with a third party, which is not a direct competitor of Supplier’s, to perform any services under a New Line of Business, Supplier shall cooperate in good faith with Chordiant and any such third party with respect to the provision or receipt of such service, including as specified in Section 4.5.

6.   Chordiant Responsibilities.

6.1Chordiant Account Executive.  Chordiant shall appoint an individual (the “Chordiant Account Executive”) who from the Effective Date of this Agreement shall serve as the primary Chordiant representative under this Agreement.  The Chordiant Account Executive shall (a) have overall responsibility for managing and coordinating the performance of Chordiant’s obligations under this Agreement, and (b) be authorized to act for and on behalf of Chordiant with respect to all matters relating to this Agreement.  Notwithstanding the foregoing, the Chordiant Account Executive may, upon notice to Supplier, delegate such of his or her responsibilities to other Chordiant employees, as the Chordiant Account Executive deems appropriate.

6.2Chordiant Resources.  

(a)Facilities.  Beginning on each applicable Commencement Date (with respect to that portion of the Services that Supplier shall begin providing on such date, as specified in the Transition Plan) and continuing only as long as Supplier requires the same for the performance of the Services, Chordiant shall provide to Supplier[ * ] subject to this Article 6, the use of the space in the Chordiant Service Locations required for Supplier to perform such portion of the Services (as such space is identified in Exhibit 7), together with reasonable office furnishings, janitorial services, land-line telephones (excluding non-Service related inter-lata and long-distance charges), parking, access to computers, servers, printers (excluding paper and toner cartridges), and utilities, in each case to the same extent that Chordiant otherwise provides such supplies and services to subcontractors performing similar work for Chordiant at such facilities.  For clarity, Chordiant shall not provide personal productivity tools to Supplier, including local printers, Blackberry-type devices, cell phones or similar items.  The Chordiant Service Locations are made available to Supplier on an “as-is, where-is” basis.

(b)Systems.  If Chordiant grants Supplier access to any Chordiant systems, such access shall be solely for purposes of performing the Services, and Supplier’s access shall be limited to those specific systems identified in this Agreement and the time periods and personnel designated by Supplier and agreed to by Chordiant and Supplier.  Supplier’s access shall be subject to such business control and information protection policies, standards, and guidelines as may be provided to supplier by Chordiant from time to time.  Any other use by Supplier of any other Chordiant assets or property or systems is prohibited.

6.3Use of Chordiant Facilities. Supplier shall use the Chordiant Service Locations for the sole and exclusive purpose of providing the Services. Use of such facilities by Supplier does not constitute a leasehold interest in favor of Supplier or any of Supplier’s customers.

(a)Supplier shall comply with the requirements related to Chordiant Facilities contained in this Article 6 and Exhibit 7.

(b)Supplier and Supplier Agents shall use the Chordiant Service Locations in an efficient manner.  [ * ].

(c)Supplier and Supplier Agents shall keep the Chordiant Service Locations in good order, not commit or permit waste or damage to such facilities, not use such facilities for any unlawful purpose or act and comply with all of Chordiant’s standard and site-specific policies and procedures as in effect from time to time, including procedures for the physical security of the Chordiant Service Locations.  Supplier shall be responsible for damages to and penalties or fines levied on the Chordiant Service Locations that are caused by Supplier, Supplier Agents, or their respective employees or invitees.

(d)Supplier shall permit Chordiant and Chordiant Agents to enter into those portions of the Chordiant Service Locations occupied by Supplier’s staff at any time to perform facilities-related services.

(e)Supplier shall not make any improvements or changes involving structural, mechanical or electrical alterations to the Chordiant Service Locations without Chordiant’s written approval.  Any such improvements or changes shall become the property of Chordiant or its lessors.

(f)When the Chordiant Service Locations are no longer required for performance of the Services, Supplier shall return such locations to Chordiant in substantially the same condition as when Supplier began using such locations, subject to ordinary wear and tear.

6.4Chordiant Performance.  Wrongful actions by Chordiant or failure by Chordiant to perform any of its responsibilities set forth in this Agreement (other than Chordiant's failure to pay undisputed amounts under Section 17) shall not (a) be deemed to constitute a material breach of the Agreement, (b) otherwise be deemed to be grounds for termination by Supplier, or (c) permit any non-performance by Supplier; provided, however, that Supplier's non-performance of its obligations under this Agreement shall be excused if and to the extent (i) such Supplier non-performance results from Chordiant's wrongful actions or failure to perform its responsibilities, (ii) Supplier provides Chordiant with reasonable written notice of such non-performance, and (iii) Supplier uses all commercially reasonable efforts to perform notwithstanding Chordiant's wrongful actions or failure to perform.

7.   {This Section Has Intentionally Been Left Blank}.

8.   Service Levels.  

8.1Service Levels.  Supplier shall perform the Services in accordance with the Service Levels set forth in Exhibit 3 and the applicable Statement of Work.  Each Statement of Work may indicate that certain Service Levels are or Exhibit 3 is not applicable to such Statement of Work.  Supplier shall perform all Services that do not have defined Service Levels in a manner consistent with industry standards and at levels that equal or exceed the level of service being provided by Chordiant prior to the Commencement Date applicable to such service, to the extent Chordiant has provided Supplier with such data.

8.2Review of Service Levels.  In addition to the Service Level adjustments specified in Exhibit 3, upon Chordiant’s request, the Steering Committee shall review the Service Levels for the preceding twelve (12) months during the last calendar quarter of every Contract Year, and, with respect to any Service Levels that are no longer appropriate because of an increase, decrease or change to the Services, or for any other reason, subject to mutual agreement between the Parties, shall adjust such Service Levels for the subsequent Contract Year.  In addition, Chordiant may, at any time upon notice to Supplier, initiate a review to adjust any Service Level which Chordiant believes is inappropriate at the time.

8.3Root-Cause Analysis.  With respect to each Supplier failure to provide the Services in accordance with the applicable Service Levels, Supplier shall, as soon as reasonably practicable but not later than [ * ] after such failure, (a) perform a root-cause analysis to identify the cause of such failure, (b) provide Chordiant with a report detailing the cause of, and procedure for correcting, such failure, (c) upon Chordiant’s approval of such corrective procedure, implement such procedure, and (d) provide Chordiant with assurance satisfactory to Chordiant that such failure shall not recur following the completion of the implementation of the procedure.  If Supplier, using it best efforts, cannot complete its obligations under clauses (a) through (d) above within the [ * ] period, Supplier shall, on a regular basis until such obligations are completed, review with Chordiant Supplier’s progress in completing such obligations (and provide written summaries thereof and a schedule for completion).  Supplier shall address and resolve any concerns raised by Chordiant in connection with such reviews.

8.4Measurement and Monitoring Tools.  As of the Commencement Date applicable to a portion of the Services, Supplier shall implement the measurement and monitoring Tools and procedures agreed upon by the Parties, which are required to measure and report Supplier’s performance of such portion of the Services against the applicable Service Levels. Such measurement and monitoring Tools and procedures shall (a) permit reporting at a level of detail sufficient to verify compliance with the Service Levels, and (b) be subject to audit by Chordiant or its designee.  A list of approved measurement and monitoring Tools that Supplier shall use to measure Supplier’s performance as of each applicable Commencement Date is set forth in Exhibit 3.  Supplier shall provide Chordiant and its designees with information and access to such measurement and monitoring Tools and procedures upon request, for inspection and verification purposes.  Supplier shall ensure that the Systems used by Supplier to support the Services shall be interoperable with the Software and Equipment used by Chordiant which may deliver records to, receive records from, or otherwise interact with such Systems.

8.5Continuous Improvement and Best Practices.  In addition to Supplier’s obligation in Exhibit 3, Supplier shall on a continuous basis, (a) identify opportunities to implement new technologies that shall improve the Services and the Service Levels, and (b) identify and apply proven techniques and tools from other installations within its operations that would benefit Chordiant.  Supplier shall, from time to time, include updates with respect to such improvements, techniques and tools in the reports provided to Chordiant pursuant to Section 3.9.

8.6Performance Credits.  If Supplier fails to provide the Services in accordance with applicable Service Levels, Supplier shall adjust its invoices in accordance with the Performance Credits as specified in Exhibit 3.    Provided, however, that in the event Supplier gives Chordiant notice (within five (5) days of a failure) that its failure to meet the applicable Service Level was as a direct result of Chordiant’s refusal to allocate sufficient EDC Personnel to perform the applicable Services, within five (5) days of notice of the dispute, the Parties shall utilize the Dispute Resolution procedures set forth in Section 23.1 to reach an agreement as to whether the Performance Credit is due.  The Performance Credits shall not limit Chordiant’s right to recover, in accordance with and as limited by this Agreement, other damages Chordiant incurs as a result of such failure.

9.   Customer Satisfaction and Benchmarking. 

9.1Customer Satisfaction Surveys.  Within one-hundred eighty (180) days after the Effective Date, the Parties shall agree upon (i) the identity of a third party unaffiliated with Supplier or Chordiant that shall conduct customer satisfaction surveys of Chordiant’s customers in accordance with Exhibit 10, and (ii) the process for conducting such customer satisfaction surveys.  Supplier shall oversee that third party’s completion of an initial baseline customer satisfaction survey within 180 days of the Effective Date, the content of which Supplier shall submit to Chordiant for review and approval before such survey is conducted.  Chordiant may elect to include the results of any initial customer satisfaction surveys as a baseline for measurement of the performance improvements described in Exhibit 3.  Additional customer satisfaction surveys will be performed each January (or other time agreed by the Parties) in accordance with Exhibit 10 by either the Supplier or by a Chordiant-approved third party, at Chordiant’s option.  Supplier agrees that (i) [ * ] and (ii) Chordiant may elect to include customer satisfaction as a measured Service Level in Exhibit 3.  Chordiant shall be responsible for all third party costs associated with conducting customer satisfaction surveys.

9.2Disputes.  In the event that Chordiant disputes the results of a customer satisfaction survey, Chordiant may, at its expense, engage a third party unaffiliated with Chordiant to conduct another customer satisfaction survey in accordance with this Section 9, and the results of such survey shall be binding on the Parties.

9.3Benchmarking Overview.  The Benchmarking Process may be conducted by a Benchmarker chosen by Chordiant from the list of Benchmarkers specified on Exhibit 17, and Chordiant shall pay the fees charged by the Benchmarker to conduct the Benchmarking Process.  If the Benchmarkers are no longer providing the services required to conduct the Benchmarking Process at the time Chordiant elects to conduct the Benchmarking Process, or if Chordiant and Supplier agree that an alternative Benchmarker should be used, the Parties shall promptly designate a replacement Benchmarker.  If the Parties do not agree within fifteen (15) business days on a replacement Benchmarker, Chordiant shall designate the Benchmarker in its sole discretion.  Supplier shall at its expense cooperate with and assist the Benchmarker and any other third parties involved in the Benchmarking Process, including providing data relating to the provision of the Services, as requested by Chordiant or the Benchmarker.  

9.4Benchmarking Process.  The Benchmarker may conduct the Benchmarking Process at any time after the second year of the Agreement and with regard to any portion or all of the Services specified by Chordiant in its sole discretion.

9.5Benchmark Results, Review and Adjustments.  Chordiant and Supplier shall review the Benchmark Results during the Benchmark Review Period.  If any Fees paid by Chordiant to Supplier are higher than the applicable fees contained in the Benchmark Results, Supplier shall then reduce the Fees in a manner that eliminates such variance.  In addition, if any Service Levels are lower than the applicable service levels contained in the Benchmark Results, Supplier shall, in Chordiant’s sole discretion, either increase the Service Levels to match the applicable service levels contained in the Benchmark Results, or reduce its Fees proportionately to adjust for the difference between the Service Levels and the applicable service levels contained in the Benchmark Results.

10.   Service Locations. 

10.1Service Locations.  The Services shall be provided to Chordiant from (a) the Supplier Service Locations, (b) the Chordiant Service Locations, and (c) any other location, all as specified in Exhibit 2 and Exhibit 7, or for which Chordiant has given Supplier approval, to be given in Chordiant’s sole discretion (except as set forth in Section 10.2).  Supplier and Supplier Agents may not provide or market services to a third party or to itself from a Chordiant Service Location without Chordiant’s consent, to be given in Chordiant’s sole discretion.

10.2New Service Locations.  If Supplier requests Chordiant’s approval to provide Services from a location other than a location described in Section 10.1, Supplier shall provide to Chordiant a written relocation proposal that sets forth a description of the proposed new location, the reasons for the proposed relocation, how the relocation will be beneficial to Chordiant in terms of performance and other relevant measures, as well as any other information requested by Chordiant.  Supplier shall specify in the relocation proposal the amount of Supplier’s cost reductions resulting from the relocation that Supplier will pass-through to Chordiant in the form of reduced Fees.  Chordiant may, in its sole discretion, approve or reject any proposal submitted by Supplier pursuant to this Section 10.2; provided, however, that Supplier shall have the right, without Chordiant’s approval, to change or add a Supplier Service Location within [ * ], upon reasonable advance notice to Chordiant, and provided that such change or addition does not have an adverse impact on Chordiant.  Any incremental expenses incurred by Chordiant as a result of a relocation to, or use of, any location other than the locations described in Section 10.1 shall be paid by Supplier or reimbursed to Chordiant by Supplier.

10.3Safety and Security Procedures.  Supplier shall maintain and enforce at all Service Locations safety and security procedures that are at least equal to those set forth in Exhibit 7A, which shall be at least as stringent as the following: (a) industry standards for locations similar to the applicable Service Locations; (b) the procedures in effect at locations of other Supplier customers; (c) those procedures in effect at each Chordiant Service Locations, including the safety and security procedures set forth in Exhibit 7B; and (d) any higher standard otherwise agreed upon by the Parties.  Chordiant shall bear any additional cost for Supplier’s compliance with (d).  Without limiting the foregoing, Supplier shall at all times comply with the safety and security procedures applicable to the Chordiant Service Locations.

10.4Data Security.  Supplier shall establish and maintain environmental, security, and other safeguards against the destruction, loss, alteration, and unauthorized access to Chordiant Data in the possession of Supplier and during the electronic transmission, storage, and shipping thereof (the “Data Safeguards”) that comply with all Chordiant data security policies, standards, requirements and specifications and that are at least equal to the highest of the following:  (a) industry standards for locations similar to the applicable Service Location, (b) those data security policies in effect as of the Effective Date at each Chordiant Service Location and Supplier Service Location, (c) the data security procedures set forth in Exhibit 12, and (d) any higher standard agreed upon by Chordiant and Supplier.  In addition, such safeguards shall be no less rigorous than required by Law.  Supplier shall revise and maintain the Data Safeguards at Chordiant’s request. In the event Supplier intends to implement a change to the Data Safeguards (including pursuant to Chordiant’s request), Supplier shall notify Chordiant and, upon Chordiant’s approval, implement such change.  In the event Supplier or Supplier Agents discover or are notified of a breach or potential breach of security relating to Chordiant Data, Supplier shall immediately (y) notify the Chordiant Account Executive of such breach or potential breach, and (z) (i) investigate and remediate the effects of the breach or potential breach, and (ii) provide Chordiant with assurance satisfactory to Chordiant that such breach or potential breach shall not recur.  Chordiant may establish backup security for Chordiant Data and maintain backup and files for such data.

10.5Protection of Chordiant Data and Chordiant Confidential Information.  Supplier shall develop and, subject to Chordiant’s prior approval, implement policies to (i) segregate all Chordiant Data from that of any other client, and (ii) restrict access to Chordiant’s Confidential Information so that Supplier’s employees or Supplier Agents providing services to any business that is competitive with Chordiant do not have access to Chordiant Confidential Information, all as further described in Exhibit 12.

11.   Supplier Staff. 

11.1General Staffing.  Supplier is solely responsible for the recruitment, hiring and training of its personnel, which it shall effect in accordance with the terms and conditions set forth in Exhibit 5.  Before assigning an individual to an EDC Personnel position, whether as an initial assignment or as replacement, Supplier shall (i) notify Chordiant of the proposed assignment, (ii) introduce the individual to appropriate representatives of Chordiant, (iii) provide Chordiant with a resume and any information regarding the individual that may be reasonably requested by Chordiant, and (iv) obtain Chordiant’s written approval for such assignment.  Supplier shall not remove or change the assignment of any EDC Personnel, for reasons within its reasonable control, without Chordiant’s prior approval.  Supplier will regularly propose to Chordiant, and implement at Supplier’s expense, agreed upon measures to minimize EDC Personnel turnover.

11.2Supplier Account Executive.  Supplier shall appoint an individual (the “Supplier Account Executive”) who shall serve, from the Effective Date of this Agreement on a full-time basis, as the primary Supplier representative under this Agreement.  The Supplier Account Executive shall (a) have overall responsibility for managing and coordinating the performance of Supplier’s obligations under this Agreement, and (b) be authorized to act for and on behalf of Supplier with respect to all matters relating to this Agreement.

11.3Key Supplier Personnel.  With respect to the Key Supplier Personnel, the Parties agree as follows:

(a)Chordiant shall identify all Key Supplier Personnel;

(b)Supplier shall maintain backup procedures and conduct replacement procedures for Key Supplier Personnel as necessary to assure an orderly succession for Key Supplier Personnel removed from the account for any reason.  Upon Chordiant’s request, Supplier shall make such procedures available to Chordiant.

(c)Supplier shall make the Key Supplier Personnel available for meetings with Chordiant personnel in accordance with the Policies and Procedures Manual and otherwise upon Chordiant’s request.

11.4EDC Personnel. 

(a)Appointment.  Supplier shall appoint as EDC Personnel only individuals with suitable training and skills to perform the Services.  EDC Personnel shall include the skill mix set forth in the Statements of Work and, unless otherwise agreed, shall be dedicated to the Chordiant account on a full-time basis.  Supplier shall provide Chordiant with a list of all EDC Personnel and their respective job titles every ninety (90) days.  Upon Chordiant’s request, to the extent such information is commercially available, Supplier shall conduct, and certify that it has conducted, a reasonable background check that includes, at a minimum, a credit check, reference check, and criminal history report, with respect to each member of the EDC Personnel that will work at a Chordiant Service Location for five (5) days or more prior to such individual’s assignment to work at a Chordiant Service Location.  Supplier shall supply a copy of the results of the background check upon Chordiant’s request.

(b)Allocation.  Chordiant shall have the right, in its sole discretion, to allocate the EDC Personnel with respect to the Lines of Business as it requires.  All EDC Personnel shall be dedicated to providing Services to Chordiant on a full-time basis.  Except as otherwise approved by Chordiant (in its sole discretion), those Supplier personnel located on Chordiant’s premises may only provide services on such premises that support Chordiant’s operations.  Supplier shall ensure that each member of the EDC Personnel who performs work under this Agreement is informed of Supplier’s confidentiality obligations and executes a Chordiant approved confidentiality and proprietary invention assignment agreement that is enforceable to the maximum extent permitted by Law in the jurisdiction(s) where such individual is employed.

(c)Removal.  Supplier shall notify Chordiant as soon as possible after dismissing or reassigning any member of the EDC Personnel.  For clarity, nothing in this section requires Supplier to terminate the employment of any Supplier personnel.

(i)Chordiant shall have the right to request that Supplier remove any personnel performing services at a Chordiant site and any personnel designated as Key Supplier Personnel.  Upon request, Supplier will remove such personnel immediately and shall replace such personnel as soon as reasonably practicable.

(ii)Chordiant shall have the right to require Supplier to remove, for cause, any member of the EDC Personnel from working on the Chordiant account.  Upon request, Supplier will remove such personnel within twenty-four (24) hours and shall replace such personnel as soon as reasonably practicable.

(iii)Chordiant shall have the right to request Supplier to remove any EDC Personnel for non-performance.  Supplier shall be entitled to propose a remedy as an alternative to removal of the personnel, which Chordiant may accept or reject in its sole discretion, and which shall provide for at least [ * ] of non-billable time.  In the absence of an agreed-upon remedy, Supplier will remove the non-performing personnel immediately upon request by Chordiant and shall replace such personnel as soon as reasonably practicable.

(d)Hiring by Chordiant.  Beginning [ * ] from the Commencement Date of the applicable Line of Business, Chordiant shall have the right to hire up to [ * ] of the average number of EDC Personnel performing Services under each Line of Business during the prior [ * ] period by paying Supplier, upon hiring, the sum of [ * ] billing per hired EDC Personnel.  Further, beginning [ * ] from the Commencement Date of the Product Support Line of Business, upon the occurrence of either:

(i)A Force Majeure Event that prevents Supplier from providing the Services under the Product Support Line of Business; or

(ii)An event or events that give rise to Chordiant’s right to terminate the Agreement pursuant to Section 24.3(b)(ii)), after the Parties have unsuccessfully pursued the Dispute Resolution procedures set forth in Section 23.1;

Chordiant shall have the right to hire up to [ * ] of the average number of EDC Personnel performing Services under the Product Support Line of Business over the prior six (6) months by paying Supplier, upon hiring:

(iii)[ * ]/EDC Personnel hired if during [ * ] from the Commencement Date for the Product Support Line of Business; or

(iv)[ * ]/EDC Personnel hired if after the [ * ] from the Commencement Date for the Product Support Line of Business;

Supplier shall assist Chordiant in all reasonable ways with the transfer of such EDC Personnel to Chordiant.  Upon the transfer of EDC Personnel to Chordiant pursuant to this Section 11.4(d), Supplier shall be relieved of any obligations and liabilities for the services provided by such EDC Personnel after the date of such transfer.

(e)Staff Training.  [ * ], all EDC Personnel shall complete a four (4) week training session to commence immediately after such EDC Personnel are initially selected by the Parties to perform Services.  In addition, Supplier will train all Buffer Resources and replacement staff prior to their provision of any Services [ * ] for a period not to exceed four (4) weeks.

(f)Staffing Levels.  The staffing levels shall be set forth in the Transition Plan and Statements of Work.  Any change in staffing levels shall be in accordance with the terms in Section 3.2, and not without Chordiant’s prior written consent.  The Parties will discuss staffing levels at the Steering Committee Meeting every calendar quarter, taking into account the average monthly worked hours in their determination of the appropriate staffing levels as set forth in Attachment 4-A to Exhibit 4.

11.5Supplier Benefits. Supplier shall be solely responsible for payment of compensation, all federal and state income tax withholding, social security taxes, and unemployment insurance applicable to its personnel, and shall bear sole responsibility for any health or disability insurance, retirement benefits, or other welfare or pension benefits, if any, to which such personnel may be entitled.  Neither Supplier nor any of its employees or agents is entitled to any benefits that Chordiant may make available to its employees.  Because Supplier is an independent contractor, Chordiant will not withhold or make payments for social security, make unemployment insurance or disability insurance contributions, or obtain workers’ compensation insurance on behalf of Supplier or any of its employees or agents.

11.6Supplier Buffer Resources.  Supplier shall provide Buffer Resources for each Line of Business [ * ].  Such Buffer Resources will be available to provide Services as promptly as needed to meet Chordiant’s requirements.

11.7Subcontractors. 

(a)Supplier shall directly render all Services exclusively through its employees and independent subcontractors under its control who are authorized in accordance with this Agreement; provided, however, that Supplier may subcontract for the ancillary services – such as maintenance, cleaning, security, and other non-substantive services – for which Chordiant prior approval shall not be required.  It is expected that Supplier shall not subcontract for any Services (other than ancillary services).  Prior to subcontracting any of the Services, Supplier shall notify Chordiant of the proposed subcontract and shall obtain Chordiant’s written approval of such subcontract, which approval may be given in Chordiant’s sole discretion.  Any subcontract must be consistent with and at least as protective of Chordiant’s rights as this Agreement and shall disclaim all liability of Chordiant.  Prior to amending, modifying or otherwise supplementing any subcontract relating to the Services, Supplier shall notify Chordiant of the proposed amendment, modification, or supplement and shall obtain Chordiant’s approval thereof.

(b)No subcontracting shall release Supplier from its responsibility for its obligations under this Agreement.  Supplier shall be responsible for the work and activities of each of the Supplier Agents, including compliance with the terms of this Agreement.  Supplier shall be responsible for all payments to its subcontractors.

(c)Supplier shall promptly pay for all services, materials, equipment and labor used by Supplier in providing the Services and Supplier shall keep Chordiant’s premises free of all liens and encumbrances.

11.8Conduct of Supplier Personnel.  While at the Chordiant Service Locations, Supplier and Supplier Agents shall (a) comply with the requests, standard rules and regulations of Chordiant regarding safety and health, personal and professional conduct (including adhering to general safety practices or procedures) generally applicable to such Chordiant Service Locations, and (b) otherwise conduct themselves in a businesslike manner.  Supplier shall cause the EDC Personnel to maintain and enforce the confidentiality provisions of this Agreement. If Chordiant notifies Supplier that a particular member of the EDC Personnel is not conducting himself or herself in accordance with this Section, Supplier shall promptly (y) investigate the matter and take appropriate action which may include (i) removing the applicable person from the EDC Personnel and providing Chordiant with prompt notice of such removal, and (ii) replacing the applicable person with a similarly qualified individual, or (z) take other appropriate disciplinary action to prevent a recurrence.  In the event of multiple violations of this Section by a particular member of the EDC Personnel, Supplier shall promptly remove the individual from the EDC Personnel.

11.9Assignment to Competitors.  Supplier shall not assign any Key Supplier Personnel to the account of any competitor of Chordiant, including those competitors set forth on Exhibit 18, without Chordiant’s prior consent (a) while such Key Supplier Personnel is assigned to the Chordiant account and (b) for a period of [ * ] following the date that such Key Supplier Personnel last performs any Services under this Agreement.  Supplier shall not assign any EDC Personnel to the account of any competitor of Chordiant, including those competitors set forth on Exhibit 18, without Chordiant’s prior consent (a) while such EDC Personnel is assigned to the Chordiant account, and (b) for a period of [ * ] following the date that such EDC Personnel last performs any Services under this Agreement.

12.   Management and Control. 

12.1Governance.  Chordiant and Supplier shall implement a governance structure as specified in Exhibit 6 that includes the content and purpose of various governance committees, the roles and responsibilities of governance committee members, and the type, content and frequency of governance meetings.  The Steering Committee shall have the authority to manage the general operations of the EDC as further set forth in Exhibit 6.  Unless otherwise specified, governance activities shall not count as billable time.  All governance meetings will be hosted at a time, manner and location acceptable to Chordiant.  Chordiant may replace or reassign its governance committee members upon notice to Supplier.  Supplier shall not replace or reassign its governance committee members unless Chordiant consents to such replacement or reassignment.  Before assigning an individual to a governance committee, Supplier shall notify Chordiant of the proposed assignment, introduce the individual to appropriate Chordiant personnel, provide Chordiant with any information regarding the individual that may be reasonably requested by Chordiant, and obtain Chordiant’s approval for such assignment.

12.2Policies and Procedures Manual.  Supplier shall provide the Policies and Procedures Manual, including the quality process for the EDC, and Change Control Procedures therein, to Chordiant for Chordiant’s review and approval in accordance with Exhibit 6.  The Change Control Procedures shall provide, at a minimum, that:

(a)No Change shall be implemented without Chordiant’s approval, except as may be necessary on a temporary basis to maintain the continuity of the Services.

(b)With respect to all Changes, Supplier shall (i) other than those Changes made on a temporary basis to maintain the continuity of the Services, schedule Changes so as not to unreasonably interrupt Chordiant’s business operations, (ii) prepare and deliver to Chordiant each month a rolling schedule for ongoing and planned Changes for the next 90-day period, and (iii) monitor the status of Changes against the applicable schedule.

(c)With respect to any Change made on a temporary basis to maintain the continuity of the Services, Supplier shall document and provide to Chordiant notification of the Change no later than the next business day after the Change is made.

Supplier shall update the Change Control Procedures as necessary and shall provide such updated Change Control Procedures to Chordiant for its approval.

13.   Proprietary Rights. 

13.1Ownership of Background Technology.  Supplier shall have and retain exclusive ownership of all of Supplier’s Background Technology and Intellectual Property Rights therein.  Chordiant shall have and retain exclusive ownership of all of Chordiant’s Background Technology and Intellectual Property Rights therein.  All rights not expressly granted herein with respect to Background Technology are reserved to the owner thereof.

13.2Supplier Software and Tools.  Supplier shall provide Chordiant with access to the Supplier Software and Supplier Tools during the Term and during the Termination Assistance Period.  Chordiant shall have the right to approve any Supplier Software and Supplier Tools prior to Supplier’s use of such Supplier Software or Supplier Tools to provide the Services, and any agreements relating to Supplier’s use of third party software or tools prior to Supplier’s use of such third party software or third party tools to provide the Services.  Subject to the terms and conditions of this Agreement, Supplier hereby grants to Chordiant a global, perpetual, irrevocable, fully-paid, royalty-free, non-exclusive license to Use, and sublicense through multiple levels of sublicensees and permit a third party to Use the Supplier Software and Supplier Tools (with respect to third party Software and Tools, solely to the extent allowed by such third party) solely (a) during the Term and the Termination Assistance Period, in connection with Chordiant’s use of the Services, and (b) during and after the Term and the Termination Assistance Period in perpetuity, as reasonably required for Chordiant and/or Successors’ continued operation and maintenance of any Work Product and continued performance of the services, tasks, and responsibilities performed by Supplier and Supplier Agents during the Term and Termination Assistance Period. The foregoing sublicense and third party Use rights granted to Chordiant shall not violate, nor be deemed to violate, any non-disclosure or exclusivity provisions that would be otherwise applicable under this Agreement or any other agreement.  Prior to using any Supplier Third-Party Software in the performance of the Services, Supplier shall obtain for Chordiant and Successor the right to purchase maintenance and support directly from the applicable third-party vendor on a most favored customer basis.  Upon Chordiant’s request, Supplier shall provide Chordiant with a list of all Supplier Software and Supplier Tools being used to provide the Services as of the date of such request.  All rights not expressly granted to Chordiant in this Agreement with respect to the Supplier Proprietary Software and Supplier Tools are reserved to Supplier.

13.3Work Product.  Supplier agrees that all Work Product will be the sole and exclusive property of Chordiant.  Chordiant will exclusively own all Intellectual Property Rights in all Work Product upon its creation.  Except for Supplier’s Intellectual Property Rights in Supplier’s Background Technology, Supplier hereby does, and shall cause all Supplier Agents to, irrevocably and unconditionally assign to Chordiant without further consideration all right, title, and interest worldwide in and to the Work Product and all Intellectual Property Rights thereto.  Supplier understands and agrees that Supplier has no right to use the Work Product except as necessary to perform the Services for Chordiant.  If any Intellectual Property Rights, including artist’s rights and moral rights, in the Work Product, cannot (as a matter of law) be assigned by Supplier or Supplier Agents to Chordiant as provided above, then Supplier unconditionally and irrevocably does, and shall cause all Supplier Agents to, waive the enforcement of such rights and all claims and causes of action of any kind against Chordiant with respect to such rights.  In addition, (a) to the extent Supplier or Supplier Agents cannot (as a matter of law) make such waiver, and (b) to the extent that any Work Product contains any Background Technology, Supplier unconditionally grants, and shall cause all Supplier Agents to grant, to Chordiant a perpetual, irrevocable, worldwide, fully-paid, royalty-free, transferable license, with the right to sublicense through multiple levels of sublicensees, under any and all such rights (i) to reproduce, create derivative works of, distribute, publicly perform, publicly display, digitally perform, and otherwise use and exploit the Work Product in any medium or format, whether now known or hereafter discovered, (ii) to use, make, have made, sell, offer to sell, import, and otherwise exploit any product or service based on, embodying, incorporating, or derived from the Work Product, and (iii) to exercise any and all other present or future rights not yet known in the Work Product.  With respect to Background Technology embedded in the Work Product and Supplier’s Intellectual Property Rights therein, the foregoing license is non-exclusive.  With respect to all other portions of or rights in the Work Product, the foregoing license is exclusive (without reservation).  The foregoing sublicense and third party Use rights granted to Chordiant shall not violate, nor be deemed to violate, any non-disclosure or exclusivity provisions that would be otherwise applicable under this Agreement or any other agreement.  Supplier agrees that Supplier will not include in any Work Product any Background Technology of Supplier or Supplier Agents unless Supplier identifies such Background Technology to Chordiant in advance and in writing and Chordiant agrees in advance and in writing.  Supplier hereby assigns, and shall cause all Supplier Agents to assign, to Chordiant any and all claims, past, present, or future, of any nature whatsoever, Supplier or Supplier Agents may have for infringement, misappropriation, or violation of any Intellectual Property Right assigned to or exclusively licensed to Chordiant in or pursuant to this Agreement.  Supplier shall follow Chordiant’s standard procedures (as communicated by Chordiant to Supplier) for delivery and back-up of all Work Product.

13.4Chordiant Software.  Subject to the terms and conditions of this Agreement, Chordiant hereby grants to Supplier, during the Term and the Termination Assistance Period or until such date Chordiant terminates this license right, which Chordiant may do at any time for any reason, solely for EDC Personnel to provide the Services to Chordiant, a non-exclusive, non-assignable, non-transferable, non-sublicensable, royalty-free, limited right to have access to and (a) Use the Chordiant Proprietary Software, (b) Use, to the extent permissible under the applicable third party agreements, the Chordiant Third Party Software, and (c) Use, to the extent permissible under the applicable third party agreements, any related Documentation in Chordiant’s possession on or after the Effective Date.  All rights not expressly granted to Supplier in this Agreement with respect to the Chordiant Proprietary Software are reserved to Chordiant.  Supplier agrees that it will incorporate third-party materials into the Systems as requested or directed by Chordiant.  Chordiant will be responsible for incremental costs related to the use of such third-party materials.

13.5Restrictions.  Except as expressly permitted by this Agreement or a Statement of Work, Supplier agrees that it shall not, and shall not permit any third party to (a) permit access to or use of the Chordiant Software unless by EDC Personnel, (b) modify, adapt, alter, translate, or create derivative works from the Chordiant Software; (c) merge the Chordiant Software; (d) sublicense, distribute, sell, use for service bureau use or as an application service provider, lease, rent, loan, or otherwise transfer the Chordiant Software to any third party; (e) reverse engineer, decompile, disassemble, or otherwise attempt to derive the source code for the Chordiant Software; (f) remove, alter, cover or obfuscate any copyright notices or other proprietary rights notices included in the Chordiant Software; or (g) otherwise use or copy the Chordiant Software except as expressly permitted under this Agreement.  Supplier shall notify Chordiant immediately of any unauthorized use or disclosure of the Chordiant Software.

13.6Further Assurances. Supplier shall, and shall cause all Supplier Agents to: (a) cooperate with and assist Chordiant and its designees, both during and after the Term, in perfecting, maintaining, and enforcing Chordiant’s or its designees’ rights in all right, title, and interest in any Chordiant-Owned Materials, including all Intellectual Property Rights thereto, and (b) execute and deliver to Chordiant any documents or take any other actions as may reasonably be necessary, or as Chordiant may reasonably request, to perfect, maintain, protect, or enforce Chordiant’s or its designees’ rights in such materials or otherwise carry out the purpose of this Article 13.  Supplier hereby does, and shall cause all Supplier Agents to, irrevocably designate and appoint Chordiant and its duly authorized officers and agents as Supplier’s and Supplier Agents’ agent and attorney-in-fact to act for and in Supplier’s and Supplier Agents’ behalf to execute, deliver, and file any and all documents with the same legal force and effect as if executed by Supplier, if Chordiant or its designee after reasonable efforts is unable for any reason to secure Supplier’s or the applicable Supplier Agent’s signature on any document needed in connection with the actions described in this Section 13.6.  Supplier acknowledges and shall cause all Supplier Agents to acknowledge that this appointment is coupled with an interest.

13.7Identification.  Supplier shall separately identify in Exhibit 19, which it shall keep updated in a timely manner by amendment, all (a) Supplier Background Technology, (b) third party materials, and (c) open source code included in the Deliverables.

13.8Web Development.  In the event that Supplier performs any work in connection with the development of Web pages or other online content under this Agreement, Chordiant will have sole control over the appearance, design, layout, look-and-feel, branding, advertising (if any), content, and URLs of such Web pages or other online content.  All such Web pages, and the appearance, design, layout, look-and-feel, branding, advertising (if any), and content thereof that may be furnished by Chordiant shall be Work Product.  Supplier will ensure that all URLs for any Web pages or online content developed or hosted by Supplier will be owned by Chordiant and registered in Chordiant’s name.

13.9Source Code Delivery and Escrow.  Upon Chordiant’s request, Supplier shall deposit and maintain the Escrow Materials for any or all Software and all other materials that are licensed, or to be licensed, to Chordiant under this Agreement and that are used by Supplier in providing the Services, with a third-party escrow agent selected by Chordiant to be held, released to Chordiant, and licensed to Chordiant in accordance with an escrow agreement satisfactory to Chordiant.  Chordiant shall pay the associated escrow fees.  If an escrow arrangement with such a third party is not in place on the Effective Date, Supplier will establish such arrangement within thirty (30) days after Chordiant’s request.

13.10Support.  On mutually agreed upon and reasonable terms (including fees not to exceed the monthly pricing at the end of the Term), at Chordiant’s request, Supplier shall provide support for the Deliverables after expiration or termination of the Agreement.

14.   Data. 

14.1Ownership and Use of Chordiant Data.  All Chordiant Data is, or shall be, and shall remain the property of Chordiant. Without Chordiant’s approval (in its sole discretion), Chordiant Data shall not be, (a) used by Supplier or Supplier Agents other than as required to provide the Services, (b) disclosed, sold, assigned, leased or otherwise provided to third parties by Supplier or Supplier Agents, (c) monitored, analyzed, individualized, anonymized, aggregated, stored, or copied, or (d) commercially exploited in any form (including any individualized, anonymized, or aggregated form) by or on behalf of Supplier or Supplier Agents. Supplier hereby irrevocably assigns, transfers and conveys, and shall cause Supplier Agents to assign, transfer and convey, to Chordiant without further consideration all of its and their right, title and interest in and to Chordiant Data.   Upon request by Chordiant, Supplier shall execute and deliver, and shall cause Supplier Agents to execute and deliver, any financing statements or other documents that may be necessary or desirable under any Law to preserve, or enable Chordiant to enforce, its rights with respect to Chordiant Data.

14.2Correction and Reconstruction. 

(a)Supplier shall promptly correct any errors or inaccuracies in the reports delivered to Chordiant under this Agreement.

(b)Supplier shall develop and maintain procedures for the reconstruction of lost Chordiant Data, and Supplier shall correct any errors in, or destruction, loss, or alteration of, any Chordiant Data caused by Supplier or Supplier Agents.  At Chordiant’s request and expense, Supplier shall promptly correct any other errors in, or destruction, loss, or alteration of, Chordiant Data.

14.3Provision of Data.  Upon request by Chordiant for any reason and at any time during the Term and Termination Assistance Period, Supplier shall (a) promptly provide to Chordiant, in the format and on the media requested by Chordiant, all or any part of Chordiant Data, and (b) erase or destroy all or any part of Chordiant Data in Supplier’s possession, in each case to the extent so requested by Chordiant. Any archival tapes containing Chordiant Data shall be used by Supplier and Supplier Agents solely for back-up purposes.  Supplier shall not withhold any Chordiant Data as a means of resolving any dispute.

14.4Data Privacy.  Supplier shall, and shall cause Supplier Agents to, comply with all applicable Laws regarding the handling, collection, and transfer of personal information, including compliance with the obligations set forth on Exhibit 12C that may be required for compliance with the European Union Directive on Data Protection.

15.Consents.  Supplier shall, at its own cost and expense, obtain, maintain and comply with all of the Consents.  If Supplier is unable to acquire a Consent despite using its best efforts to do so, Supplier shall implement, at its cost and expense, and subject to Chordiant's prior approval, alternative methods as necessary to provide the Services in accordance with this Agreement without such Consent.  

16.Continued Provision of Services. 

16.1Disaster Recovery Plan .  As soon as possible, but no later than within the first ninety (90) days of the Term, the Parties shall create and agree to the DRP, which shall be set forth in Exhibit 11.  Supplier shall comply with the business continuity and disaster recovery requirements and the procedural requirements contained in Exhibit 11.  Supplier shall (a) update and test (and re-test as necessary) the operability of the DRP in accordance with Exhibit 11, provided that notwithstanding such schedule Supplier shall complete the initial test of and report on the DRP no later than 180 days from the Effective Date; and (b) certify to Chordiant [ * ] that the DRP is fully operational.  Supplier shall immediately notify Chordiant of any disaster and implement the DRP upon the occurrence of a disaster.  In the event of a disaster[ * ].  For purposes of this Agreement, a disaster is any event that renders the EDC incapable of providing the Services.  Notwithstanding anything to the contrary herein, in the event of a disaster, Supplier shall use its best efforts to reinstate its provision of the Services under the Product Support Line of Business by, among other things, sending EDC Personnel to alternate locations designated by Chordiant as quickly as possible.  The allocation of the costs and expenses associated with the measures taken to assure the continuity of the Product Support Line of Business in the event of a disaster shall be as follows:

(a)[ * ];

(b)[ * ]; or

(c)[ * ].

16.2Force Majeure.  If and to the extent that a Party’s performance of any of its obligations pursuant to this Agreement is prevented, hindered or delayed by fire, flood, earthquake, elements of nature or acts of God, acts of war, terrorism, riots, civil disorders, rebellions or revolutions, or any other similar cause beyond the reasonable control of such Party (but specifically excluding labor and union-related activities, and failures of Supplier Agents) (each, a “Force Majeure Event”), and such non-performance, hindrance or delay could not have been prevented by reasonable precautions undertaken by the Party claiming a Force Majeure Event, then such Party shall be excused for such non-performance, hindrance or delay of those obligations affected by the Force Majeure Event for as long as such Force Majeure Event continues and such Party continues to use its best efforts to recommence performance whenever and to whatever extent possible without delay, including through the use of alternate sources, workaround plans and other means. The Party whose performance is prevented, hindered or delayed by a Force Majeure Event shall immediately notify the other Party of the occurrence of the Force Majeure Event and describe in reasonable detail the nature of the Force Majeure Event. The occurrence of a Force Majeure Event does not excuse, limit or otherwise affect Supplier’s obligation to provide either normal recovery procedures or any other disaster recovery services described in Section 16.1. [ * ].

16.3No Payment for Unperformed Services.  Except as provided in Section 16.2, nothing in this Article 16 shall limit Chordiant’s obligation to pay any Fees; provided, however, that if Supplier fails to provide the Services in accordance with this Agreement due to the occurrence of a Force Majeure Event, the Fees shall be adjusted in a manner such that [ * ].

16.4Allocation of Resources.  Whenever a Force Majeure Event or a disaster causes Supplier to allocate limited resources between or among Supplier’s customers, Supplier shall not provide to any other customers of Supplier priority over Chordiant. In addition, Supplier shall not redeploy or reassign any Key Supplier Personnel to another account in the event of a Force Majeure Event.

17.Payments. 

17.1Fees.  Chordiant shall pay the Fees as specified in Exhibit 4 and this Article 17.  Supplier shall invoice Chordiant on a monthly basis, which invoice shall be payable net thirty (30) days from receipt of the invoice, unless otherwise stated in Exhibit 4.  Initial fees will be based on an agreed upon flat full-time, per person, per month rate as set forth in Exhibit 4.  Within six (6) months of the Effective Date, Supplier will provide a proposed schedule of skills-based monthly rates for each Line of Business (the “Skills Based Rate”).  [ * ] Chordiant shall have the option of electing to pay fees based on the Skills Based Rate for any or all Lines of Business.  For purposes of clarification, where Supplier is to provide any Services under this Agreement at its own cost and/or no cost to Chordiant, time spent providing such Services shall not count toward billable time as described in Exhibit 4.

17.2Adjustments.  Once per year, the Parties will discuss in good faith an adjustment to rates to compensate for increases based upon generally prevailing labor costs and the Benchmark Results (“COLA Adjustment”).  Any COLA Adjustment must be mutually agreed upon, and will not exceed [ * ] per year over the previous year’s rate.  Rate increases, if any, will be assessed every year in December, beginning December 1, 2004, to be effective no sooner than January the following year.  If Supplier must obtain visas for any EDC Personnel at Chordiant Service Locations and pay rates substantially higher than the agreed upon rates, the Parties will negotiate in good faith an equitable rate adjustment, taking into account the published Department of Labor prevailing wages or other surveys acceptable to the applicable governmental authorities, as well as alternative visa arrangements, that may reduce the cost to Chordiant.

17.3Expenses.  Chordiant shall pay all pre-approved actual travel and travel-related expenses incurred in accordance with Chordiant’s and Supplier’s travel and expense policy set forth in Exhibit 4, for which Supplier shall invoice Chordiant and supply supporting documentation.  Chordiant shall pre-pay to Supplier all pre-approved actual Equipment, Software, and communication link-related expenses incurred by Supplier as set forth in Exhibit 4 and in accordance with the vendor’s payment terms as agreed upon by the Parties pursuant to Section 3.10, for which Supplier shall invoice Chordiant and supply supporting documentation.

17.4Fee Disputes. Chordiant may withhold and offset invoiced amounts that Chordiant disputes in good faith, as well as any amounts Supplier is obligated to pay or credit to Chordiant.  Chordiant shall notify Supplier of all such disputes in writing within thirty (30) days of the receipt of the invoice.  Undisputed invoice amounts that are overdue will be subject to ½% interest per month.

17.5Pass-Through Savings.  The Supplier will pass through to Chordiant reductions in the cost of delivery of the Services resulting from changes in (a) geographic region from which Supplier provides the Services, or (b) actual cost of Equipment or Software for which Chordiant is paying at cost, neither of which could have been foreseen as of the Effective Date but which occur during the Term and are applicable to Supplier's provision of the Services.

17.6Rights of Set-Off.  With respect to any amount that (a) should be reimbursed to Chordiant by Supplier or (b) is otherwise payable to Chordiant by Supplier pursuant to this Agreement, Chordiant may deduct the entire amount owed to Chordiant against the Fees or against the expenses owed by Chordiant to Supplier under this Agreement.

17.7Refundable Items; Prepaid Expenses.  In the event Supplier receives during the Term any refund, credit or other rebate (including deposits) in connection with fees for a Supplier third party contract that Chordiant has paid, then Supplier shall promptly (a) notify Chordiant of such refund, credit or rebate and (b) pay to Chordiant the full amount of such refund, credit, or rebate.

17.8Due Diligence.  Supplier hereby acknowledges and agrees that Chordiant has delivered or made available to Supplier all information and documents Supplier has deemed necessary for Supplier to commit to its obligations under this Agreement in accordance with its terms.  Supplier shall not be relieved of any of its obligations under this Agreement, or alter, increase or add any fees or charges related to this Agreement, as a result of (a) its failure to review the foregoing information and documents or any documents referred to therein, (b) any inaccuracies, errors, or omissions contained in such information or documents or in any documents referred to therein, or (c) its failure to request any information or documents from Chordiant.

17.9Additional Fund.  Chordiant shall establish a fund of up to [ * ] per EDC employee per month to be used, at joint recommendation from Supplier and Chordiant program managers and with Steering Committee approval, towards special recognition awards, variable compensation or bonuses, or to manage attrition of EDC Personnel.  On a quarterly basis, Chordiant shall have the right, in its discretion, to remove any amounts in such fund not distributed within the prior three (3) month period.

17.10No Other Charges. Except as expressly set forth in this Agreement, all costs and expenses relating to Supplier’s performance of the Services (including all costs and expenses related to the acquisition, maintenance and enhancement of Software and Equipment, travel and lodging, document reproduction and shipping, computers and office equipment used by EDC Personnel, and telephone charges) are included in the Fees and shall not be charged to or reimbursed by Chordiant.

17.11Most Favored Customer.  Supplier agrees that Chordiant shall be treated as a most favored customer of Supplier and to this end Supplier shall promptly provide to Chordiant Supplier’s best pricing, service availability, service quality, and service responsiveness and new service offerings, consistent with what Supplier provides for services similar in size and scope.

18.Taxes. 

18.1Taxes.  All fees, payments or reimbursements under this Agreement and any instrument or agreement required hereunder shall include any and all present and future Taxes: (i) based upon or measured by Supplier's cost in acquiring or providing equipment, materials, supplies, or services furnished or used by Supplier in performing or furnishing the Services, including all personal property and sales or use taxes on the Supplier Equipment, or (ii) assessed on the provision or use of the Services or on Supplier's charges to Chordiant under this Agreement or payment thereof however levied or assessed. Chordiant will not be responsible for any tax payments on any basis. To the extent that any Tax is required by Law to be separately identified in Supplier's billings to Chordiant, the Supplier shall separately identify the Tax and assume any and all responsibility or non-compliance, including additional tax, interest and penalty assessments.  Chordiant shall be responsible for any taxes it may incur as a result of establishing an Affiliate in India.

18.2Tax Indemnity.  The Supplier indemnifies Chordiant for the full amount of Taxes attributable to the provision of products, equipment, materials, supplies, or services under this Agreement, and any liabilities (including penalties, interest and expenses) arising from such Taxes.  Upon Chordiant’s request, Supplier shall provide evidence that all applicable Taxes have been paid by the Supplier to the appropriate taxing authority by delivering to Chordiant receipts or notarized copies thereof within thirty (30) days after the due date for such tax payments.

18.3Relocation of Services.  Notwithstanding Section 18.1, any Taxes assessed on the provision of the Services for a particular site resulting from Supplier’s relocating or rerouting the delivery of Services for Supplier’s convenience to, from or through a location other than the Service Location used to provide the Services as of the Effective Date shall be paid by Supplier.

18.4Other Taxes.  Chordiant and Supplier shall each bear sole responsibility for all taxes, assessments and other real property-related levies on its respective owned or leased real property.

18.5Segregation of Fees.  Supplier shall segregate the Fees into the following separate payment streams: (a) those for taxable Services; (b) those for nontaxable Services; (c) those for which a sales, use or other similar tax has already been paid; and (d) those for which Supplier functions merely as a paying agent for Chordiant in receiving goods, supplies, or services (including leasing and licensing arrangements) that otherwise are nontaxable or have previously been subject to tax.  In addition, Chordiant and Supplier shall cooperate to (x) provide any information necessary and not otherwise reasonably available to determine accurately each Party’s tax liability; (y) resolve tax issues raised upon audit by a Governmental Authority; (z) minimize such tax liability to the extent commercially reasonable and legally permissible, provided that neither Party will be required to take any position or action that (i) is inconsistent with advice given by such Party’s internal or external advisors or (ii) would result in an adverse tax or financial consequence to such Party.  Each Party shall provide and make available to the other Party any resale certificates, information regarding out-of-state sales or use of equipment, materials, or services, and any other exemption certificates or information requested by a Party related to Supplier’s provision of the Services.

18.6Tax Disclosures.  Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure; provided however, that such disclosure may not be made to the extent reasonably necessary to comply with any applicable federal or state securities laws.  For the purposes of the foregoing sentence, (a) the “tax treatment” of a transaction means the purported or claimed federal income tax treatment of the transaction, and (b) the “tax structure” of a transaction means any fact that may be relevant to understanding the purported or claimed federal income tax treatment of the transaction.

19.Audits. 

19.1Services.  Upon reasonable notice from Chordiant, Supplier and Supplier Agents shall provide Chordiant, Chordiant Agents, and any of Chordiant’s regulators with access to and any assistance that they may require for the purpose of performing audits or inspections of the Services, the Service Locations, the Systems, and the business of Supplier relating to the Services (including to verify performance of the Services, the Fees, and the use of Chordiant resources in accordance with the terms of this Agreement).  If any audit results in Supplier being notified that Supplier or Supplier Agents are not in compliance with any Law or audit requirement, Supplier shall, and shall cause Supplier Agents to, promptly take actions to comply with such Law or audit requirement.

19.2Fees.  Upon notice from Chordiant, Supplier shall provide Chordiant and Chordiant Agents with access to such financial records and supporting documentation as may be requested by Chordiant, and Chordiant or Chordiant Agents may audit the Fees to determine if such Fees are accurate and in accordance with this Agreement.

(a)If, as a result of such audit, Chordiant determines that Supplier has overcharged Chordiant, Chordiant shall notify Supplier of the amount of such overcharge and Supplier shall promptly pay to Chordiant the amount of the overcharge, plus ½% interest per month calculated from the date of receipt by Supplier of the overcharged amount until the date of payment to Chordiant.

(b)In addition to Chordiant’s rights set forth in this Section 19.2, in the event any audit reveals an overcharge to Chordiant of 5% or more for the audited period, Supplier shall reimburse Chordiant for the cost of such audit.

19.3Other Audits.  Supplier shall make available to Chordiant or Chordiant Agents the results of any reviews or audits conducted by the Supplier, its Affiliates or any of Supplier’s subcontractors, agents or representatives (including internal and external auditors), relating to the Supplier’s operating practices and procedures to the extent relevant to the Services.

19.4Record Retention.  Supplier shall retain records and supporting documentation sufficient to satisfy the requirements set forth in this Article 19 and to document the Services and the Fees paid or payable by Chordiant under this Agreement in accordance with Chordiant’s retention policies and procedures as in effect from time to time, as required by Law, and in any event for at least three (3) years after the later of the termination or expiration of this Agreement and the end of the Termination Assistance Period.

19.5Facilities.  Supplier shall provide to Chordiant and Chordiant Agents, on Supplier’s premises (or, if the audit is being performed on a Supplier Agent, the Supplier Agent’s premises if necessary), space, office furnishings (including lockable cabinets), and utilities as Chordiant or such Chordiant Agents may reasonably require to perform the audits described in this Article 19.

20.Confidentiality. 

20.1General Obligations.  All Confidential Information relating to or obtained from Chordiant shall be protected from unauthorized use and disclosure by Supplier in compliance with Chordiant’s requirements, and to the same extent and in at least the same manner as Supplier protects its own confidential information of a similar nature (and in no event with less than reasonable care), and Supplier shall not use the Confidential Information of Chordiant except as necessary to provide the Services.  Supplier shall not disclose, publish, release, transfer or otherwise make available Confidential Information of, or obtained from, Chordiant in any form to, or for the use or benefit of, any third person or entity without Chordiant’s consent.  Supplier shall, however, be permitted to disclose relevant aspects of Chordiant’s Confidential Information to its officers, directors, agents, professional advisors, contractors (including the Benchmarker), subcontractors and employees and to the officers, directors, agents, professional advisors, contractors, subcontractors and employees of its affiliates, to the extent such disclosure is not restricted under any Consents or any Laws or Governmental Approvals and only to the extent that such disclosure is reasonably necessary for the performance of its duties and obligations or the determination, preservation or exercise of its rights and remedies under this Agreement; provided, however, that Supplier shall take all reasonable measures to ensure that Confidential Information is not disclosed or duplicated in contravention of the provisions of this Agreement by such officers, directors, agents, professional advisors, contractors, subcontractors and employees.  The obligations in this Section shall not restrict any disclosure as required by any Law (provided that the recipient shall give prompt notice to the disclosing Party of such requirement).  Supplier will return to Chordiant any or all Confidential Information promptly upon request.

20.2Additional Protective Measures.  Supplier shall strictly comply with the security procedures set forth in Exhibit 12.  Supplier shall limit access to the Confidential Information to EDC Personnel who have a need to know for providing the Services and who have signed the nondisclosure agreement set forth in Section 11.4(b) (“Authorized EDC Personnel”).  Supplier agrees to maintain a log which contains a list of all employees who actually have had access to the Confidential Information.  Supplier shall not provide any other party, including any other employees or agents of Supplier, with access to the Confidential Information.  Supplier may designate additional persons as Authorized EDC Personnel upon (i) written notice to Chordiant of the identity of such additional parties, and (ii) Chordiant’s express written acceptance of such additional persons, which may be given or withheld in Chordiant’s sole discretion.  In addition, Supplier shall access Chordiant’s source code only on Authorized CPUs (as defined in Exhibit 12) on a Secure Computer System.  To further assure the confidentiality of the Confidential Information:

(a)Supplier shall ensure that all Confidential Information received from Chordiant, and any copies thereof made by Supplier, will be properly marked or otherwise appropriately identified as Confidential Information before being made available to Authorized EDC Personnel.  Supplier shall instruct Authorized EDC Personnel not to copy Confidential Information and not to disclose Confidential Information to anyone not authorized to receive it.

(b)Supplier shall take prompt and appropriate action to prevent unauthorized use or disclosure of Confidential Information.

(c)Without limiting the foregoing, Supplier will use the same degree of care to prevent the unauthorized use, dissemination, or publication of the Confidential Information as Supplier uses to protect its own confidential information of a like nature, but in no event may the safeguards for protecting such Confidential Information be less than a reasonably prudent business would exercise under similar circumstances.

(d)Supplier agrees that Chordiant representatives may inspect the access log for the Confidential Information and the record of the copies made of the Confidential Information at any time.

20.3Unauthorized Acts.  Without limiting Chordiant’s rights with respect to a breach of this Article 20, Supplier shall:

(a)promptly notify Chordiant of any unauthorized possession, use or knowledge, or attempt thereof, of Chordiant’s Confidential Information by any person or entity that may become known to Supplier;

(b)promptly furnish to Chordiant full details of the unauthorized possession, use or knowledge, or attempt thereof, and assist Chordiant in investigating or preventing the recurrence of any unauthorized possession, use or knowledge, or attempt thereof, of Confidential Information;

(c)cooperate with Chordiant in any litigation and investigation against third parties deemed necessary by Chordiant to protect its proprietary rights; and

(d)promptly use its best efforts to prevent a recurrence of any such unauthorized possession, use or knowledge, or attempt thereof, of Confidential Information.

Supplier shall bear the cost it incurs as a result of compliance with this Section.

21.   Representations and Warranties.  

21.1By Chordiant.  Chordiant represents and warrants that:

(a)Chordiant is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware;

(b)Chordiant has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement;

(c)The execution, delivery and performance of this Agreement by Chordiant has been duly authorized by Chordiant; and

(d)Chordiant is in compliance with all Laws applicable to Chordiant’s obligations under this Agreement and has obtained all applicable permits and licenses required of Chordiant in connection with its obligations under this Agreement.

21.2By Supplier.  Supplier represents and warrants that:

(a)Supplier is a corporation duly incorporated, validly existing and in good standing under the Laws of the [ * ];

(b)Supplier has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement;

(c)The execution, delivery and performance of this Agreement by Supplier (a) has been duly authorized by Supplier and (b) shall not conflict with, result in a breach of, or constitute a default under any other agreement to which Supplier is a party or by which Supplier is bound;

(d)Supplier is duly licensed, authorized or qualified to do business and is in good standing in every jurisdiction in which a license, authorization or qualification is required for the ownership or leasing of its assets or the transaction of business of the character transacted by it, except where the failure to be so licensed, authorized or qualified would not have a material adverse effect on Supplier’s ability to fulfill its obligations under this Agreement;

(e)Supplier is in compliance with all Laws applicable to Supplier’s obligations under this Agreement and has obtained all applicable permits and licenses required of Supplier in connection with its obligations under this Agreement;

(f)There is no outstanding (or to Supplier’s knowledge, pending or threatened) litigation, arbitrated matter or other dispute to which Supplier is a party which, if decided unfavorably to Supplier, would reasonably be expected to have a material adverse effect on Supplier’s ability to fulfill its obligations under this Agreement;

(g)Supplier and Supplier Agents have full power and authority to grant Chordiant the rights granted herein without the consent of any other party and any materials developed or furnished by Supplier and Supplier Agents to Chordiant are free of any and all restrictions, settlements, judgments or adverse claims.

(h)Supplier has not violated Chordiant policies of which it is aware, or any Laws, regarding the offering of inducements in connection with this Agreement;

(i)Each of the EDC Personnel who will perform work toward the development of any Work Product have executed a proprietary rights invention assignment agreement as agreed in Section 11.4(b);

(j)None of the Services, the Work Product, the Supplier Software, the Supplier Equipment, any enhancements or modifications to the Chordiant Software performed by Supplier or Supplier Agents or any other resources or items provided to Chordiant by Supplier or Supplier Agents shall, and Chordiant’s receipt and use of the foregoing as contemplated under this Agreement shall not, infringe upon the Intellectual Property Rights of any third party;

(k)The Work Product and all other materials and items provided by Supplier hereunder shall be free from material errors in materials, design, workmanship, operation and performance, shall comply with the applicable documentation and specifications, and shall provide the functions and features and operate in the manner described in the applicable Line of Business and/or Statement of Work, or other documentation agreed to by the Parties following the installation, testing and acceptance of such materials by Chordiant and/or its customers;

(l)The Work Product shall be free and clear of any liens, claims, charges, debts or other encumbrances; and

(m)Neither Supplier, nor any part of the Work Product or other Intellectual Property furnished to Chordiant hereunder, is subject to any "copyleft" or other obligation or condition (including any obligation or condition under any "open source" license such as the GNU Public License, Lesser GNU Public License, or Mozilla Public License) that would require, or condition the use or distribution of such Work Product or Intellectual  Property on, the disclosure, licensing, or distribution of any part of such Work Product or Intellectual Property.

21.3DISCLAIMER.  EXCEPT AS SPECIFIED IN SECTION 21.1 AND SECTION 21.2, NEITHER CHORDIANT NOR SUPPLIER MAKES ANY OTHER WARRANTIES WITH RESPECT TO THE SERVICES OR THE SYSTEMS OR EQUIPMENT AND EACH EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

22.ADDITIONAL COVENANTS.  

22.1By Chordiant.  Chordiant covenants and agrees with Supplier that during the Term and the Termination Assistance Period:

(a)Chordiant shall comply with all Laws applicable to Chordiant, and, except as otherwise provided in this Agreement, shall obtain all applicable permits and licenses required of Chordiant in connection with its obligations under this Agreement; and

(b)The Chordiant Proprietary Software shall not infringe upon the proprietary rights of any third party (except as may have been caused by a modification by Supplier or Supplier Agents).

22.2By Supplier.  Supplier covenants and agrees with Chordiant that during the Term and the Termination Assistance Period:

(a)Supplier shall provide the Services with promptness, diligence and in a professional manner, in accordance with the terms of the Lines of Business, Statements of Work and practices and professional standards used in well-managed operations performing services similar to the Services, and Supplier shall use adequate numbers of qualified individuals with suitable training, education, experience and skill to perform the Services;

(b)Supplier shall comply with all Laws applicable to Supplier in the performance of this Agreement and shall obtain all applicable permits and licenses required of Supplier in connection with its obligations hereunder;

(c)The Deliverables, Services, Supplier Software, Supplier Tools, Supplier Equipment, Work Product and any other resources or items used by Supplier or furnished to Chordiant by Supplier or Supplier Agents in providing the Services shall not infringe upon the proprietary rights of any third party;

(d)The Deliverables, Services, Supplier Software, Supplier Tools, Supplier Equipment, Work Product and any other resources or items used by Supplier or furnished to Chordiant by Supplier or Supplier Agents in providing the Services shall be free from material defects in design, workmanship, operation and performance, shall comply with the applicable documentation and specifications, and shall provide the functions and features and operate in the manner described in the applicable Statement of Work or other documentation agreed to by the Parties for 180 days following the acceptance of such materials by Chordiant and shall be free and clear of any liens, claims, charges, debts or other encumbrances;

(e)Supplier shall promptly notify Chordiant if Supplier learns of any claim, pending or threatened, or any fact upon which a claim could be made, that asserts that the Deliverables, Services, Supplier Software, Supplier Tools, Supplier Equipment, Work Product and any other resources or items used by Supplier or furnished to Chordiant by Supplier or Supplier Agents, or Chordiant’s receipt and use of the foregoing as contemplated under this Agreement may infringe upon the proprietary rights of any third party;

(f)Supplier shall ensure that no viruses, locks, trap doors, back doors or similar items whose knowing or intended purpose is to damage or interfere with the operation of the computer system containing the code, program or sub program, or to interfere with the operation of the Systems (or any portion thereof), including any code, program, or sub-program, or any device, method, or token that permits any person to circumvent the normal security of the Systems (or any portion thereof) or the system containing the code are coded or introduced into the Systems, and Supplier agrees that, in the event a virus or similar item is found to have been introduced into the Systems, Supplier shall use best efforts to mitigate the effects of the virus or similar item and, if the virus or similar item causes a loss of operational efficiency or loss of data, to assist Chordiant to the same extent to mitigate and restore such losses;

(g)Supplier shall not insert into the Software used to provide the Services any code that would have the effect of disabling or otherwise shutting down all or any portion of the Systems or Services; and

(h)Neither Supplier nor any Supplier Agents shall make any unauthorized representations on Chordiant’s behalf or about Chordiant, nor commit or bind Chordiant other than as specifically authorized in writing.

23.Dispute Resolution.  

23.1Resolution Procedures.  Except as otherwise provided below, the Parties shall attempt to resolve any dispute arising under or related to this Agreement (a “Dispute”) in accordance with the procedures set forth in this Section 23.1.

(a)Contract Managers.  Within five (5) business days after either Party furnishes to the other notice of a Dispute, the Chordiant Account Executive and Supplier Account Executive shall consider the Dispute in person or by telephone and shall attempt in good faith to resolve the Dispute for a period of five (5) business days.  If the Dispute is not resolved, as agreed by the Parties in writing, within such 5-business-day period, the Dispute shall be escalated in accordance with Section 23.1(b) below.

(b)Executive Vice Presidents.  If a Dispute is not resolved in accordance with Section 23.1(a) above, an Executive Vice President level executive or Chief Executive Officer of Chordiant and the Chief Executive Officer of Ness Technologies, Inc. shall consider the Dispute in person or by telephone and shall attempt in good faith to resolve the Dispute for a period of five (5) business days.  Unless such executives otherwise agree in writing, either Party may pursue its rights and remedies under this Agreement after the expiration of such 5-business-day period.

23.2Arbitration.  With respect to any dispute or claim involving Ness India, arising out of or in connection with this Agreement, Chordiant shall have the right to have such dispute or claim be finally settled by binding arbitration in Santa Clara County, California under the Commercial Rules of the American Arbitration Association by one arbitrator appointed in accordance with said rules.  Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

23.3Exclusions.  Notwithstanding the foregoing, no Dispute relating to Section 14.3, Article 20, or Article 27 shall be subject to Section 23.1.  In addition, nothing in this Agreement shall limit either Party’s right to seek immediate injunctive or other equitable relief whenever the facts or circumstances would permit a Party to seek such relief in a court of competent jurisdiction.

23.4Continuity of Services.  Supplier acknowledges that the timely and complete performance of its obligations pursuant to this Agreement is critical to the business and operations of Chordiant.  Accordingly, in the event of a dispute between Chordiant and Supplier, other than with respect to Supplier’s rights under Section 24.3(c), Supplier shall continue to so perform its obligations under this Agreement in good faith during the resolution of such dispute unless and until this Agreement is terminated in accordance with the provisions hereof.

24.Termination. 

24.1Termination for Convenience.  Upon notice, Chordiant may immediately terminate this Agreement, in whole or in part, for convenience effective as of any time after the Effective Date, which shall be subject to the Termination Fee set forth in Exhibit 4.  Decreases in EDC Personnel in accordance with Section 3.2(d) and/or the termination of a Line of Business or multiple Lines of Business shall not constitute a termination for convenience.

24.2Termination for Change in Control of Supplier.  In the event of a Change in Control of Supplier, Chordiant may terminate this Agreement by giving Supplier notice of the termination at least ninety (90) days prior to the termination date specified in the notice, provided that Chordiant reasonably believes that the Change in Control will materially and adversely affect Chordiant's business.

24.3Termination for Cause. 

(a)For those Supplier performance failures that are curable, Supplier shall have thirty (30) days (or such other period as the Parties agree) (the “Cure Period”) from receipt of notice (the “Supplier Default Notice”) to cure such failure (“Right to Cure”).  Any such cure shall be subject to Chordiant’s acceptance in its reasonable discretion.

(b)Chordiant may, without limiting Chordiant’s other rights or remedies under this Agreement, by giving notice to Supplier, terminate this Agreement, in whole or in part, as of the termination date specified in the notice and without payment of any termination fee, under the following circumstances:

(i)If Chordiant is entitled to a Performance Credit due to Supplier’s failure to meet three (3) Critical Service Level failures in [ * ]; or

(ii)Subject to its Right to Cure, if Supplier fails to perform any of its other obligations under this Agreement in any material respect that adversely effects Chordiant’s business, or repeatedly fails to perform any of its obligations under this Agreement and the cumulative effect thereof  materially and adversely effects Chordiant’s business.

(c)If Chordiant fails to make undisputed payments and does not cure such default within sixty (60) days after receipt (the “Chordiant Default Cure Period”) of a notice of default from Supplier (the “Chordiant Default Notice”), then Supplier may, by giving notice to Chordiant, suspend providing Services to Chordiant under the Line of Business for which Chordiant is in default as of the suspension date specified in the Chordiant Default Notice.  The foregoing is the only circumstance in which Supplier may suspend providing Services under this Agreement, and termination by Supplier for any other reason shall be void and of no force or effect.

24.4Termination in Case of Insolvency or Adverse Financial Change.  If (a) Supplier (i) shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due or (ii) shall (A) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or a substantial part of its property or assets, (B) make a general assignment for the benefit of its creditors, (C) commence a voluntary case under the U.S. Bankruptcy Code, (D) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of debts, (E) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code; or (F) take any corporate, partnership or other action for the purpose of effecting any of the foregoing, or if (b) (i) a proceeding or case shall be commenced, without the application or consent of Supplier, in any court of competent jurisdiction seeking (A) its reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (B) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of Supplier or of all or any substantial part of its property or assets or (C) similar relief with respect to Supplier under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue un-dismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue un-stayed and in effect, for a period of sixty (60) or more days or (ii) an order for relief against Supplier shall be entered in an involuntary case under the Bankruptcy Code, then Chordiant may, by giving notice thereof to Supplier, terminate this Agreement as of the date specified in such termination notice without payment of any Termination Fee. In addition, if either Moody’s Investors Service, Standard & Poors or Dun & Bradstreet lowers the Supplier’s credit rating from the rating as of the Effective Date by more than two (2) steps, or if Chordiant has reasonable cause to doubt Supplier’s financial stability, then Chordiant may, by giving notice thereof to Supplier, terminate this Agreement as of the date specified in such termination notice without payment of any Termination Fee.

25.Termination Fees.

25.1Termination Fees.Exhibit 4 sets forth the Termination Fees that shall be payable to Supplier if this Agreement is terminated for convenience.  Any Termination Fees payable in accordance with Exhibit  4 shall be due and payable on the End Date.

25.2Termination Fees.  Except for the Termination Fees specified in Exhibit 4, no termination fee or other charge shall be payable by Chordiant in connection with the termination of this Agreement.  In addition, Supplier shall not charge Chordiant more than once for any amount included in any fee owed pursuant to Exhibit 4 that relates to any resource for which Supplier has already received or shall receive payment.

26.Termination Assistance and Exit Rights. 

26.1Termination Assistance.  Upon Chordiant’s request at any time during the Termination Assistance Period, Supplier shall provide, and shall cause Supplier Agents to provide, the Termination Assistance Services necessary to continue without interruption or adverse effect and to facilitate the orderly transfer of the Services to Chordiant and/or its designee (the “Successor”) during the Termination Assistance Period, regardless of the reason for the termination, expiration or cessation of Services.  The quality and level of performance of the Services during the Termination Assistance Period shall be consistent with the quality and level of performance of the Services during the Term generally.

26.2Payment.  Supplier [ * ] Supplier’s time related to (i) cleanup of the EDC, (ii) administrative matters, and (iii) return of the Software and Equipment (not including transportation costs, which Chordiant shall pay).  Chordiant shall have the right to designate those EDC Personnel to Provide Termination Assistance Services [ * ]  For Termination Assistance Services provided by Supplier after the last day of the Term, Supplier shall provide such services (a) in the case of Termination Assistance Services that are Services[ * ], and (b) for Termination Assistance Services for which no rates exist immediately prior to such termination or expiration[ * ].  Termination Assistance Services provided after the last day of the Term shall be subject to the provisions of the Agreement as such provisions would have been applicable to the Services prior to the effective date of termination or expiration.  After the expiration of the Termination Assistance Period, Supplier shall (y) answer questions from Successors regarding the Services at Supplier’s then standard billing rates, and (z) deliver to Chordiant or Successor any remaining Chordiant-owned reports and documentation still in Supplier’s possession.  If Chordiant requests Termination Assistance Services after this Agreement has been terminated for Chordiant’s breach, Chordiant shall pay for such services in advance.  

26.3Exit Rights.

(a)Return of Chordiant Software, Equipment and Tools.  At Chordiant’s request at any time during the Termination Assistance Period, Supplier shall, and shall cause Supplier Agents to, deliver to Chordiant, all Chordiant Equipment and a current copy of the Chordiant Software, Chordiant Tools, Chordiant-Owned Materials and Work Product in the form used to provide the Services as of the time of Chordiant’s request (including in object code and source code form in the case of any of the foregoing that are Software) or, if such request is made after the last day of the Term, then used to provide the Services as of the last day of the Term.  Chordiant shall be responsible for penalties/fees associated with such termination as set forth in Exhibit 4.  The rights granted to Supplier and Supplier Agents in Section 13.1, Section 13.2, and Section 13.4 shall immediately terminate on the End Date, and Supplier shall, and shall cause Supplier Agents to, destroy or erase all copies of the Chordiant Software, Chordiant Tools, and Chordiant-Owned Materials then in Supplier’s or Supplier Agents’ possession. Supplier shall, upon Chordiant’s request, certify to Chordiant that all Equipment has been returned and such copies of the Chordiant Software, Chordiant Tools, and Chordiant-Owned Materials have been destroyed or erased.

(b)Supplier Intellectual Property and Support.  Supplier shall deliver to Chordiant a copy of all Supplier Intellectual Property used to provide the Services upon Chordiant’s request (including object code and source code form in the case of any of the foregoing that constitute Software).  Upon Chordiant’s request, Supplier shall provide to Chordiant or Successor support and maintenance services for any Supplier Proprietary Software, Supplier Tools, and Work Product licensed or otherwise provided under this Agreement on terms, conditions, and prices agreed upon by Supplier and Chordiant or Successor, as applicable, which shall in no event be less favorable to Chordiant or Successor than Supplier’s most favorable terms, conditions, and prices for such services provided to similar customers.

(c)Supplier Third Party Software and Tools.

(i)Supplier shall, and shall cause Supplier Agents to, (a) assign to Chordiant or Successor, at Chordiant’s option, the license agreements for Software and Tools not otherwise commercially available, which Supplier obtained assignment rights pursuant to Section 13.2 applicable to such Software and Tools, and at Chordiant’s request, (b) use their best efforts to transfer, assign or sublicense all such Third Party Software and Tools not subject to assigned agreements under clause (a) above to Chordiant or Successor at no cost such that (y) Chordiant may Use, and sublicense to third parties the right to Use, such Software and Tools in connection with Chordiant’s use, provision (to itself) or receipt from Successor of services similar to the Services, or (z) Successor may Use, and sublicense to third parties the right to Use, such Software and Tools in connection with the provision of services similar to the Services to Chordiant.  Upon Chordiant’s request, Supplier shall assist Chordiant or Successor in obtaining directly from third parties any Software or substitute therefor for which Chordiant or Successor does not assume the applicable third party agreements.  Supplier shall assist Chordiant and Successor in exercising the rights obtained by Supplier pursuant to Section 13.2 to purchase maintenance and support for all Supplier Third-Party Software on a most favored customer basis.

(ii)With respect to license agreements for Third Party Software and Tools subject to Section 26.3(c)(i), subject to Chordiant’s approval, Chordiant shall pay actual costs of obtaining any assignment or other permission necessary for Chordiant to continue using such Software and Tools after the Termination Assistance Period.

(d)Remote Access.  Upon Chordiant’s request, with respect to any Software or Tools used to provide the Services as of the time of Chordiant’s request, or, if such request is made during the Termination Assistance Period, then used to provide the Services as of the last day of the Term, and that Supplier or Supplier Agents operate on Equipment located at one or more Supplier Service Locations, during the Termination Period, Supplier shall, and shall cause Supplier Agents to, provide to Chordiant or Successor remote access to and use of such Software and Tools together with all hosting, maintenance, support and other services required for Chordiant or Successor to use such Software and Tools to enable Chordiant to receive services similar to the Services, all on terms, conditions, and prices agreed upon by Supplier and Chordiant or Successor, which shall in no event be less favorable to Chordiant or Successor than Supplier’s then-current standard terms, conditions, and prices for such services provided to similar customers.

(e)Agreements.  Upon Chordiant’s request at any time during the Termination Assistance Period, Supplier shall, and shall reasonably request or make efforts such that Supplier Agents, (i) assign to Chordiant or its designee leases for some or all of the Equipment used primarily to provide the Services as of the last day of the Term; (ii) assign to Chordiant any contracts for services provided by third parties and used to provide Services; and (iii) sell to Chordiant, at the lesser of the Supplier's then-current book value or depreciated value, some or all of the Equipment owned by Supplier or Supplier Agents and used primarily to provide the Services (and all user and other documentation in its possession that relates to such Equipment) free and clear of all liens, security interests or other encumbrances.  Upon Chordiant’s request, Supplier shall, and shall reasonably request or make efforts such that Supplier Agents, assist Chordiant or Successor in obtaining directly from third parties any third party services for which Chordiant or Successor does not elect to assume the applicable third party agreements.

(f)Network Services.  To the extent that Supplier has incorporated Chordiant’s network into any Supplier network, Supplier shall, and shall cause Supplier Agents to, continue to provide network services during the Termination Assistance Period at the then current rates in the Agreement for such service as requested by Chordiant, in order to permit Chordiant or Successor to establish its own network in an orderly manner.

27.Indemnities.

27.1Indemnity by Chordiant.  Chordiant shall indemnify Supplier from, and defend and hold Supplier harmless from and against, any Losses suffered, incurred or sustained by Supplier or to which Supplier becomes subject, resulting from, arising out of or relating to any third party claim:

(a)that the Chordiant Proprietary Software infringes upon the proprietary rights of any third party (except as may have been caused by a modification by Supplier or Supplier Agents);

(b)relating to the inaccuracy, untruthfulness or breach of any representation or warranty made by Chordiant in Section 21.1;

(c)relating to Chordiant’s or Chordiant Agents’ failure to obtain, maintain or comply with the Chordiant Governmental Approvals;

(d)relating to personal injury (including death) or property loss or damage resulting from Chordiant’s acts or omissions; and

(e)relating to a breach of any of the covenants in Section 22.1.

27.2Indemnity by Supplier.  Supplier shall indemnify Chordiant from, and defend and hold Chordiant harmless from and against, any Losses suffered, incurred or sustained by Chordiant or to which Chordiant becomes subject, resulting from, arising out of or relating to any claim:

(a)that the Services, Supplier Software, Supplier Tools, Supplier Equipment, Work Product and any other resources or items used by Supplier or furnished to Chordiant by Supplier or Supplier Agents in providing the Services infringe upon the proprietary or other rights of any third party;

(b)the Supplier’s or Supplier’s Agents’ interview, hiring and/or personnel transfer processes or claims arising out of the employer-employee relationship (including termination) between the Supplier or a Supplier Agent and any Transitioned Personnel after his or her start date;

(c)relating to the Services or this Agreement brought by a Supplier Agent or personnel thereof;

(d)Supplier is required to insure against under this Agreement;

(e)by a third party that does not arise out of or relate to a relationship with Chordiant but arises from or relates to the actions of the Supplier or a Supplier Agent;

(f)by a third party arising from Services or Systems provided by Supplier or Supplier Agents from a Service Location that is shared with other customers of Supplier;

(g)relating to the inaccuracy, untruthfulness or breach of any representation or warranty made by Supplier in Section 21.2;

(h)relating to Supplier’s or Supplier Agents’ failure to obtain, maintain or comply with the Consents and Supplier Governmental Approvals;

(i)relating to (i) a violation of Law for the protection of persons or members of a protected class or category of persons by Supplier or Supplier Agents, including unlawful discrimination, (ii) work-related injury, except as may be covered by Supplier’s workers’ compensation plan, or death caused by Supplier or Supplier Agents, (iii) accrued employee benefits not expressly retained by Chordiant, (iv) any representations, oral or written, made by Supplier or Supplier Agents to Chordiant employees or contractors, including the Affected Employees and Affected Contractors and (v) any other aspect of the Affected Employees’ or Affected Contractors’ employment or other relationship with Supplier or termination thereof by Supplier (including claims for breach of an express or implied contract of employment);

(j)relating to Supplier’s breach of Section 10.3, 10.4, or 10.5;

(k)relating to any amounts, including taxes, interest and penalties, assessed against Chordiant that are the obligation of Supplier pursuant to Article 18;

(l)relating to personal injury (including death) or property loss or damage resulting from Supplier’s or Supplier Agents’ acts or omissions;

(m)relating to a breach of Supplier’s obligations with respect to Chordiant Data (including Article 14);

(n)relating to a breach of Article 20; and

(o)relating to a breach of any of the covenants in Section 22.2.

Supplier shall indemnify Chordiant from any costs and expenses incurred in connection with the enforcement of this Section 27.2.

27.3Obligation to Replace.  In the event that any use of the Services, any technology used to provide the Services, or any item provided to Chordiant by Supplier or Supplier Agents, is, or in Chordiant’s opinion is likely to be, (i) found to infringe upon or misappropriate the Intellectual Property Rights of any third party or (ii) enjoined, Supplier shall, with Chordiant’s consent and at Supplier’s own cost and expense and in such a manner as to minimize disturbance to Chordiant’s business activities:

(a)obtain for Chordiant the right to continue using the Services, any technology used to provide the Services, or any item provided to Chordiant by Supplier or Supplier Agents; or

(b)modify the Services, any technology used to provide the Services, or any item provided to Chordiant by Supplier or Supplier Agents, so that it is no longer infringing (provided that such modification does not adversely affect Chordiant’s intended use as contemplated by this Agreement); or

(c)replace the Services, any technology used to provide the Services, or any item provided to Chordiant by Supplier or Supplier Agents with a non-infringing functional equivalent.

In addition to the remedies set forth above, Supplier shall remain responsible for providing Services in accordance with this Agreement.  If Supplier is unable to provide Services or to implement a work around for the provision of Services, then Chordiant may, upon notice to Supplier, obtain from a third party or itself provide those Services which Supplier failed to provide, and an equitable adjustment shall be made to the Fees.

27.4Indemnification Procedures.  If any third party claim is commenced against a person or entity entitled to indemnification under Section 27.1 or Section 27.2 (the “Indemnified Party”), notice thereof shall be given to the Party that is obligated to provide indemnification (the “Indemnifying Party”) as promptly as practicable.  If, after such notice, the Indemnifying Party shall acknowledge that this Agreement applies with respect to such claim, then the Indemnifying Party shall be entitled, if it so elects, in a notice promptly delivered to the Indemnified Party, but in no event less than ten (10) days prior to the date on which a response to such claim is due, to immediately take control of the defense and investigation of such claim and to employ and engage attorneys reasonably acceptable to the Indemnified Party to handle and defend the same, at the Indemnifying Party’s sole cost and expense. The Indemnified Party shall cooperate, at the cost of the Indemnifying Party, in all reasonable respects with the Indemnifying Party and its attorneys in the investigation, trial and defense of such claim and any appeal arising therefrom; provided, however, that the Indemnified Party may, at its own cost and expense, participate, through its attorneys or otherwise, in such investigation, trial and defense of such claim and any appeal arising therefrom. No settlement of a claim that involves a remedy other than the payment of money by the Indemnifying Party shall be entered into without the consent of the Indemnified Party. After notice by the Indemnifying Party to the Indemnified Party of its election to assume full control of the defense of any such claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses incurred thereafter by such Indemnified Party in connection with the defense of that claim. If the Indemnifying Party does not assume full control over the defense of a claim subject to such defense as provided in this Section, the Indemnifying Party may participate in such defense, at its sole cost and expense, and the Indemnified Party shall have the right to defend the claim in such manner as it may deem appropriate, at the cost and expense of the Indemnifying Party.

28.Damages.

28.1Damages.  In no event shall Chordiant or Supplier be liable for any indirect, incidental, special, or consequential damages, arising out of or relating to its performance or failure to perform under this Agreement, even if advised of the possibility of such damages. Notwithstanding the foregoing, the liability of Chordiant, whether based on an action or claim in contract, equity, negligence, tort or otherwise, for any event, act or omission [ * ].

28.2Basis of the Bargain.  Each Party acknowledges that the foregoing limitations are an essential element of the Agreement between the Parties and that in the absence of such limitations the pricing and other terms set forth in this Agreement would be substantially different.

28.3Exclusions.  The limitations or exculpations of liability set forth in Section 28.1 shall not apply to (a) the failure of (i) Chordiant to make payments of Fees, or (ii) Supplier to issue credits (including Performance Credits) or otherwise make payments due under this Agreement, (b) indemnification claims, as set forth in Article 27, (c) breaches of Article 20, (d) Supplier obligations with respect to Chordiant Data (including Article 14), (e) liability resulting from the fraud, gross negligence, recklessness, or intentional or willful misconduct of Supplier, (f) damages occasioned by Supplier’s wrongful termination of the Agreement, abandonment of work performed or to be performed, or willful refusal to provide the Services, and (g) cost of cover (including costs of reconstructing and loading data, costs of implementing work-arounds, costs to procure replacement products or services from an alternate source, overtime, straight time, and related expenses and allocated overhead (including travel, lodging, and wages) incurred by Chordiant as a result of Supplier’s breach.

29.Insurance. 

29.1Documentation.  Supplier shall provide to Chordiant within ten (10) business days after the Effective Date evidence of all insurance required hereunder, and thereafter at any time any insurance policy covered in this Article 29 is renewed, or upon request by Chordiant, during the Term and the Termination Assistance Period (except with respect to “claims made” policies for which Supplier shall provide evidence of insurance for three (3) years after the End Date).  The insurance companies providing such insurance must have an A.M. Best rating of A- or better and be licensed or authorized to conduct business in all states in which Chordiant does business.  All policies and certificates of insurance shall be written as primary policies with respect to Services performed and products supplied by Supplier and Supplier Agents and not written as policies contributing to, or to be used in excess of the Chordiant insurance policies or any self-insurance program in which Chordiant may participate with respect to such Services and products, unless due to the gross negligence or willful misconduct of Chordiant.  The provisions of this Article 29 shall in no way limit the liability of Supplier.  The obligations under this Article 29 are mandatory; failure of Chordiant to request certificates of insurance or insurance policies shall not constitute a waiver of Supplier’s obligations and requirements to maintain the minimal coverages specified.  Supplier shall maintain, in its files, evidence of all subcontractors' insurance coverage.

29.2Types and Amounts.  During the Term and the Termination Assistance Period, and at its own cost and expense, Supplier shall, and shall cause all Supplier Agents to, obtain and maintain the following insurance coverage:

(i)Commercial General liability insurance with a combined single annual aggregate limit of not less than [ * ].

(ii)Errors and Omission insurance in an amount not less than [ * ] per claim and not less than [ * ] in the aggregate.

(iii)Workers' compensation insurance and other insurance as required by statute in the state in which the work shall be performed.  Coverage shall include Employers Liability with a limit not less that [ * ] for each occurrence.

(iv)Automobile Liability insurance covering owned and unowned vehicles with a combined single limit of not less than [ * ].

(v)All risk property insurance covering all risk of physical loss or damage, including as a result of flood or earthquake, for the replacement value of any Chordiant owned or leased property and papers on Supplier’s premises.

(vi)If Supplier purchases "claims made" insurance, all acts and omissions of Supplier and its representatives and agents, shall be, during the Term and the Termination Assistance Period, "continually covered" notwithstanding the termination of this Agreement or the provisions of this Agreement allowing Supplier to purchase "claims made" insurance coverage.  In order for the acts and omissions of Supplier and its representatives and agents to be "continually covered" there must be insurance coverage for the entire period commencing on the Effective Date of this Agreement and ending on the date that is at a minimum three (3) years after the End Date, and such insurance must satisfy the liability coverage requirements provided for in this Agreement.  Supplier acknowledges and agrees that the provisions of this Article 29 may require Supplier to purchase "tail insurance" if its coverage lapses or "nose insurance" and/or "tail insurance" if Supplier changes insurance carriers, even after this Agreement is terminated.

29.3Policy Requirements.  Chordiant shall be listed on all such insurance policies (except workers’ compensation insurance) obtained by Supplier and Supplier Agents as "Additional Insureds" up to the amount required of Supplier under this Agreement.  If a "claims made" policy is purchased, then Supplier shall also purchase adequate "tail coverage" for claims made against Chordiant after such policy has lapsed or been canceled or this Agreement is no longer in effect.  The provisions of Section 28.1 shall not be deemed to limit the liability of Supplier hereunder, or limit any rights that Chordiant may have including, without limitation, rights of indemnity or contribution.

29.4Risk of Loss.  Supplier is responsible for the risk of loss of, or damage to, any property of Chordiant at a Supplier Service Location, unless such loss or damage was caused by the acts or omissions of Chordiant or a Chordiant Agent.

30.Transfer Option. 

30.1Exercise. At any time after [ * ], Chordiant will have the option to acquire Supplier’s resources and associated infrastructure for providing the Services and hire the EDC Personnel on terms and conditions set forth in this Agreement.  The Transfer Agreement will include agreed upon terms, conditions, covenants, and warranties covering the transferred business, which the Parties agree to negotiate in good faith.

30.2Terms.  The terms for the transfer are set forth in Exhibit 22, which the Parties acknowledge and agree includes all components of compensation to Supplier for the transfer.

31.MISCELLANEOUS PROVISIONS. 

31.1Noncompete.  During the term of this Agreement, Supplier will not provide services similar to those it is providing under this Agreement to Chordiant’s competitors listed in Exhibit 18 (“Competitors”).  In addition, Supplier will not perform any work of any kind for a Competitor in the same physical facility where it is performing Chordiant Services, or by any Supplier staff who has performed Services for Chordiant during the previous six (6) months.  Supplier will provide Chordiant with prompt written notice in the event that it is engaged by a Competitor.

31.2Assignment.  Neither Party shall, without the consent of the other Party, assign this Agreement or any amounts payable pursuant to this Agreement, except that Chordiant may assign this Agreement, in whole or in part, to (i) an Affiliate or another entity or business unit of Chordiant, or (ii) pursuant to a Change in Control of Chordiant, a reorganization of Chordiant, or a transfer or sale of any business unit, line of business, product line, or substantial portion of its assets, without such consent.  Upon Chordiant’s assignment of this Agreement, Chordiant shall be released from any obligation or liability under this Agreement.  The consent of a Party to any assignment of this Agreement shall not constitute such Party’s consent to further assignment. This Agreement shall be binding on the Parties and their respective successors and permitted assigns. Any assignment in contravention of this subsection shall be void and of no force or effect.

31.3Notices.  Except as otherwise specified in this Agreement, all notices, requests, consents, approvals, agreements, authorizations, acknowledgements, waivers and other communications required or permitted under this Agreement shall be in writing.  Wherever under this Agreement one Party is required to give notice to the other, such notice shall be deemed effective:  (a) three (3) calendar days after deposit in the United States Mail, postage prepaid, certified or registered mail, return receipt requested; (b) one (1) business day after deposit with a national overnight courier; (c) if given by facsimile, that day such facsimile is sent, provided confirmation of such notice is also sent by national overnight courier or delivered in person; or (d) upon delivery if delivered in person or by messenger, in each case, addressed to the following addresses (or such other address as either Party may be notified of as described above):

To Chordiant:                                             [ * ], VP and General Counsel

20400 Stevens Creek Blvd.

Cupertino, CA 95014

U.S.A.

Main Telephone: (408) 517-6100

Facsimile Number: (408) 517-0270

With a copy to:                                           [ * ], Chief Financial Officer

20400 Stevens Creek Blvd.

Cupertino, CA 95014

U.S.A.

Main Telephone: (408) 517-6100

Facsimile Number: (408) 517-0270

To Supplier:                                             [ * ]

Executive Vice President, Managed Labs

Ness Global Services, Inc.

2001 Gateway Place

Suite 610 West

San Jose, CA 95110

U.S.A.

Main Telephone: (408) 467-9340

Facsimile Number: (408) 452-0299

With a copy to:                                           [ * ]

General Counsel

Ness Global Services, Inc.

160 Technology Drive

Canonsburg, PA 15317

U.S.A.

Main Telephone: (724) 745-7100

Facsimile Number: (724) 745-6494

Either Party may change its address or telecopy number for notification purposes by giving the other Party ten (10) days notice of the new address or telecopy number and the date upon which it shall become effective.

31.4Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one single agreement between the Parties.  The Parties agree that for documents related to the Agreement requiring execution, including this Agreement, each will accept facsimile signatures, followed by originals within five (5) business days.

31.5Relationship.  The Parties intend to create an independent contractor relationship and nothing contained in this Agreement shall be construed to make either Chordiant or Supplier partners, joint venturers, principals, agents (except as expressly set forth in Article 6.4) or employees of the other.  No officer, director, employee, agent, affiliate or contractor retained by Supplier to perform work on Chordiant’s behalf under this Agreement shall be deemed to be an employee, agent or contractor of Chordiant. Neither Party shall have any right, power or authority, express or implied, to bind the other.

31.6Non-Exclusivity.  Nothing in this Agreement shall be construed as a requirements contract, and notwithstanding anything to the contrary contained herein, this Agreement shall not be interpreted to prevent Chordiant from obtaining from third parties, or providing to itself, any of the Services described in this Agreement (whether Base Services, services under a New Line of Business, or otherwise) or services similar thereto.

31.7Consents, Approvals and Requests.  Except as specifically set forth in this Agreement, all consents and approvals to be given by either Party under this Agreement shall not be unreasonably withheld or delayed and each Party shall make only reasonable requests under this Agreement.

31.8Severability.  If any provision of this Agreement is held by a court of competent jurisdiction to be contrary to Law, then the remaining provisions of this Agreement, if capable of substantial performance, shall remain in full force and effect.

31.9Waivers.  No delay or omission by either Party to exercise any right or power it has under this Agreement shall impair or be construed as a waiver of such right or power. A waiver by any Party of any breach or covenant shall not be construed to be a waiver of any succeeding breach or any other covenant. All waivers must be signed by the Party waiving its rights.

31.10Timing and Cumulative Remedies.  Supplier acknowledges and agrees that time is of the essence with respect to its performance of its obligations under this Agreement.  No right or remedy herein conferred upon or reserved to either Party is exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy under this Agreement, or under applicable law, whether now or hereafter existing.

31.11Entire Agreement.  This Agreement and the Exhibits to this Agreement represent the entire agreement between the Parties with respect to its subject matter, and there are no other representations, understandings or agreements between the Parties relative to such subject matter.

31.12Amendments.  No amendment to, or change, waiver or discharge of, any provision of this Agreement shall be valid unless in writing and signed by, in the case of Chordiant, the Chordiant Account Executive, and in the case of Supplier, the Supplier Account Executive.

31.13Survival.  The terms of Articles 1, 13, 14, 18, 19, 20, 23, 26, 27, 28, and 31 (except 31.1) shall survive the expiration or termination of this Agreement.

31.14Third Party Beneficiaries.  Except with respect to the Chordiant Affiliates, each Party intends that this Agreement shall not benefit, or create any right or cause of action in or on behalf of, any person or entity other than the Parties.

31.15Governing Law and Venue. The rights and obligations of the Parties under this Agreement shall be governed in all respects by the laws of the United States and the State of California, without regard to conflicts of laws principles that would require the application of the laws of any other jurisdiction.  Supplier (including, for purposes of this section, its Affiliates) agrees that it shall only bring any action or proceeding arising from or relating to this Agreement in a federal court in the Northern District of California or in state court in Santa Clara County, California, and Supplier irrevocably submits to the personal jurisdiction and venue of any such court in any such action or proceeding or in any action or proceeding brought in such courts by Chordiant.  Supplier further irrevocably consents to the service of process from any of the aforesaid courts by mailing copies thereof by registered or certified mail, postage prepaid, to Supplier at its address designated pursuant to this Agreement, with such service of process to become effective thirty (30) days after such mailing. 

31.16Injunctive Relief.  The Parties acknowledge and agree that monetary damages may be inadequate to compensate for a breach of the provisions contained in Article 13, 14, 16, or 20, or other provisions of this Agreement that would give rise to irreparable harm.  In the event of such breach, Chordiant may be entitled to seek injunctive relief and any and all other remedies available at law or in equity.  This Section in no way limits the liability or damages that may be assessed against Supplier in the event of a breach by Supplier of any of the provisions of this Agreement.  Supplier further acknowledges and agrees that in the event Chordiant brings an action seeking injunctive relief in India, such action shall have no bearing on the Parties’ agreement with respect to jurisdiction and venue set forth in Section 31.15, and Chordiant does not thereby submit to jurisdiction in India.

31.17Supplier Authority.  Ness Technologies, Ness Global and Ness India hereby agree that Ness Global has full right, power, and authority to grant approvals and consents under this Agreement, to amend this Agreement, and to otherwise act under this Agreement, for and on behalf of Ness Technologies, Ness Global and Ness India.  Unless otherwise approved by Chordiant, Ness Global shall act for Supplier under this Agreement and shall be Chordiant’s single point of contact for all approvals, consents, and other matters relating to this Agreement.  Ness Technologies, Ness Global and Ness India hereby agree that they are jointly and severally liable for all responsibilities and liabilities of Supplier arising out of or relating to this Agreement.

31.18Covenant of Further Assurances.  Chordiant and Supplier covenant and agree that, subsequent to the execution and delivery of this Agreement and, without any additional consideration, each of Chordiant and Supplier shall execute and deliver any further legal instruments and perform any acts that are or may become necessary to effectuate the purposes of this Agreement.

31.19Bankruptcy.  The Parties acknowledge and agree that the intellectual property provisions of this Agreement constitute licenses of an intellectual property right by Supplier to Chordiant as such term is used in Section 365(n) of Title 11 of the United States Code.

31.20Export.  Chordiant and Supplier shall not knowingly export or re-export any personal computer system, part, technical data or sub-elements under this Agreement, directly or indirectly, to any destinations prohibited by the United States Government. The term “technical data” in this context, means such data as is defined as technical data by applicable United States export regulations.

31.21Conflict of Interest.  Supplier shall not pay any salaries, commissions, fees or make any payments or rebates to any employee of Chordiant, or to any designee of such employee, or favor any employee of Chordiant, or any designee of such employee, with gifts or entertainment of significant cost or value or with services or goods sold at less than full market value. Supplier agrees that its obligation to Chordiant under this Section shall also be binding upon Supplier Agents. Supplier further agrees to insert the provisions of this Section in each contract with a Supplier Agent.

31.22Publicity.  Each Party shall (a) submit to the other all advertising, written sales promotions, press releases and other publicity matters relating to this Agreement in which the other Party’s name or mark is mentioned or which contains language from which the connection of said name or mark may be inferred or implied, and (b) not publish or use such advertising, sales promotions, press releases or publicity matters without the other Party’s consent.

31.23Good Faith and Fair Dealing.  In entering into this Agreement, Chordiant and Supplier each acknowledge and agree that all aspects of the worldwide business relationship and dealings between Chordiant and Supplier contemplated by this Agreement shall be governed by the fundamental principle of good faith and fair dealing except as otherwise explicitly provided herein.

In Witness Whereof, each of Chordiant and Supplier has caused this Agreement to be signed and delivered by its duly authorized representative.

Chordiant Software, Inc.

By:/s/ Donald Morrison                                                                          

Name:  Donald Morrison

Title:  Executive Vice President

Ness Technologies, Inc.

By:/s/ Steven I. Farbman                                                                          

Name:  Steven I. Farbman

Title:  General Counsel

Ness Global Services, Inc.

By:/s/ Steven I. Farbman                                                                          

Name:  Steven I. Farbman

Title:  General Counsel

Ness Technologies India Ltd.

By:/s/ Steven I. Farbman                                                                          

Name:  Steven I. Farbman

Title:  General Counsel

      

                  [ * ]            = Certain Confidential Information Contained In This Document, Marked By Brackets,           Has Been Omitted And Filed Separately W           ith The Securities And Exchange Commission Pursuant To Rule 24b-2 Of The Securities Exchange Act Of 1934, As Amended.               

           

MASTER SERVICES AGREEMENT

By and Between

Chordiant Software, Inc.

And

Ness Technologies, Inc.

Ness Global Services, Inc.

Ness Technologies India Ltd.

December 15, 2003

      

                  [ * ]            = Certain Confidential Information Contained In This Document, Marked By Brackets,            Has Been Omitted And           Filed            Separately            With The Securities And Exchange Commission Pursuant To Rule 24b-2 Of The Securities Ex           change Act Of 1934, As Amended.               

    

Table of Exhibits and Attachments

Exhibit 1                                           Definitions

Exhibit 2.1                                                      Product Support Line of Business (LoB) Description

(Attachment 2.1-A                                           Product Support LoB SOW)

Exhibit 2.2                                                      Product Sustaining Line of Business Description

(Attachment 2.2-A                                           Product Sustaining LoB SOW)

Exhibit 2.3                                                      Product Test Line of Business Description

(Attachment 2.3-A                                           Product Test LoB SOW)

Exhibit 2.4                                                      Development Line of Business Description

(Attachment 2.4-A                                           Development LoB SOW)

Exhibit 3                                           Service Levels

(Attachment 3-A                                           Product Support SLA)

(Attachment 3-B                                           Product Sustaining SLA)

(Attachment 3-C                                           Product Test SLA)

(Attachment 3-D                                           Development SLA)

Exhibit 4                                           Pricing

(Attachment 4-A                                           Service Fees)

(Attachment 4-B                                           Travel and Expense Policy)

(Attachment 4-C                                           Termination Fee)

Exhibit 5                                           Human Resources

(Attachment 5-A                                           EDC Personnel, Key Supplier Personnel)

(Attachment 5-B                                           Resource Ramp-up Plan)

(Attachment 5-C                                           Resource Skill Profile)

(Attachment 5-D                                           Form of PIIA)

Exhibit 6                                           Governance

(Attachment 6-A                                           Committee Relationships & Memberships)

(Attachment 6-B                                           Policies & Procedures Manual)

Exhibit 7                                           Facility Locations and Standards, Chordiant Affiliates

(Attachment 7-A                                           Chordiant Sites)

(Attachment 7-B                                           Supplier Sites)

(Attachment 7-C                                           Infrastructure Lab Standards)

(Attachment 7-D                                           Chordiant Affiliates)

Exhibit 8                                           Infrastructure

(Attachment 8-A                                           Hardware Requirements)

(Attachment 8-B                                           Software Requirements)

(Attachment 8-C                                           Communications Requirements)

Exhibit 9                                           Reports

(Attachment 9-A                                           Form of Project Report)

Exhibit 10                                                      Customer Satisfaction Surveys

(Attachment 10-A                                           Sample Customer Survey)

Exhibit 11                                                      Disaster Recovery Plan

Exhibit 12                                                      Security

(Attachment 12-A                                           Data Security)

(Attachment 12-B                                           Physical Security)

(Attachment 12-C                                           European Directive on Data Protection)

Exhibit 13                                                      Shared Common Services

Exhibit 14                                                      Refresh Standards

Exhibit 15                                                      {Intentionally Left Blank}

Exhibit 16                                                      Transition Plan

Exhibit 17                                                      Benchmarkers

Exhibit 18                                                      Competitors

Exhibit 19                                                      Deliverables

(Attachment 19-A                                           Supplier Background Technology)

(Attachment 19-B                                           Third Party Materials)

(Attachment 19-C                                           Open Source Code)

Exhibit 20                                                      {Intentionally Left Blank}

Exhibit 21                                                      {Intentionally Left Blank}

Exhibit 22                                                      Transfer Option

      

                  [ * ]            = Certain Confidential Information Contained In This Document, Marked By Brackets,            Has Been Omitted And Filed Separately With            The Securities And Exchange Commission Pursuant To Rule 24b-2 Of The Securities Exchange Act Of 1934, As Amended.               

               

                

                  --                

              

           

1. DEFINITIONS AND CONSTRUCTION  1

1.1 Definitions  1

1.2 Interpretation.  1

1.3 Order of Precedence.  2

2. TERM  2

2.1 Initial Term.  2

2.2 Renewal and Extension.  2

3. SERVICES  2

3.1 Base Services Defined  2

3.2 Provision of Services  3

3.3 Improved Technology  4

3.4 Governmental Approvals  5

3.5 Changes in Law  5

3.6 Existing Technology; Architecture and Standards  6

3.7 Knowledge Sharing  6

3.8 Reports  6

3.9 Schedule Management  6

3.10 Procurement  6

4. TRANSITION; ACQUISITIONS AND DIVESTITURES; COOPERATION  7

4.1 Transition Services  7

4.2 Transition Milestones  7

4.3 Transitioned Personnel  7

4.4 Acquisitions, New Chordiant Affiliates, and Divestitures7

4.5 Cooperation with Third Parties.  8

5. NEW LINES OF BUSINESS  9

5.1 New Lines of Business  9

5.2 Fees for A New Line of Business.  10

5.3 Third Party Services  10

6. CHORDIANT RESPONSIBILITIES  10

6.1 Chordiant Account Executive  10

6.2 Chordiant Resources  10

6.3 Use of Chordiant Facilities  11

6.4 Chordiant Performance  11

7. {THIS SECTION HAS INTENTIONALLY BEEN LEFT BLANK}  11

8. SERVICE LEVELS  12

8.1 Service Levels  12

8.2 Review of Service Levels  12

8.3 Root-Cause Analysis  12

8.4 Measurement and Monitoring Tools  12

8.5 Continuous Improvement and Best Practices  13

8.6 Performance Credits  13

9. CUSTOMER SATISFACTION AND BENCHMARKING  13

9.1 Customer Satisfaction Surveys  13

9.2 Disputes.  13

9.3 Benchmarking Overview  13

9.4 Benchmarking Process  14

9.5 Benchmark Results, Review and Adjustments  14

10. SERVICE LOCATIONS  14

10.1 Service Locations  14

10.2 New Service Locations  14

10.3 Safety and Security Procedures  14

10.4 Data Security  15

10.5 Protection of Chordiant Data and Chordiant Confidential Information  15

11. SUPPLIER STAFF  15

11.1 General Staffing  15

11.2 Supplier Account Executive  16

11.3 Key Supplier Personnel  16

11.4 EDC Personnel  16

11.5 Supplier Benefits  18

11.6 Supplier Buffer Resources  18

11.7 Subcontractors  18

11.8 Conduct of Supplier Personnel  19

11.9 Assignment to Competitors  19

12. MANAGEMENT AND CONTROL  19

12.1 Governance  19

12.2 Policies and Procedures Manual.  20

13. PROPRIETARY RIGHTS  20

13.1 Ownership of Background Technology  20

13.2 Supplier Software and Tools  20

13.3 Work Product  21

13.4 Chordiant Software  22

13.5 Restrictions  22

13.6 Further Assurances  22

13.7 Identification  22

13.8 Web Development  23

13.9 Source Code Delivery and Escrow  23

13.10Support23

14. DATA  23

14.1 Ownership and Use of Chordiant Data  23

14.2 Correction and Reconstruction  23

14.3 Provision of Data  24

14.4 Data Privacy  24

15. CONSENTS  24

16. CONTINUED PROVISION OF SERVICES  24

16.1 Disaster Recovery Plan  24

16.2 Force Majeure  25

16.3 No Payment for Unperformed Services  25

16.4 Allocation of Resources  25

17. PAYMENTS  25

17.1 Fees  25

17.2 Adjustments  26

17.3 Expenses  26

17.4 Fee Disputes  26

17.5 Pass-Through Savings  26

17.6 Rights of Set-Off  26

17.7 Refundable Items; Prepaid Expenses  26

17.8 Due Diligence.  27

17.9 Additional Fund  27

17.10 No Other Charges                                      27

           17.11 Most Favored Customer             < font id="TAB2" style="LETTER-SPACING: 9pt;">           27

18. TAXES   27

18.1 Taxes  27

18.2 Tax Indemnity  27

18.3 Relocation of Services  28

18.4 Other Taxes  28

18.5 Segregation of Fees  28

18.6 Tax Disclosures  28

19. AUDITS  28

19.1 Services  28

19.2 Fees  29

19.3 Other Audits.  29

19.4 Record Retention  29

19.5 Facilities  29

20. CONFIDENTIALITY  29

20.1 General Obligations  29

20.2 Additional Protective Measures  30

20.3 Unauthorized Acts  31

21. REPRESENTATIONS AND WARRANTIES  31

21.1 By Chordiant  31

21.2 By Supplier  31

21.3 DISCLAIMER  33

22. ADDITIONAL COVENANTS  33

22.1 By Chordiant  33

22.2 By Supplier  33

23. DISPUTE RESOLUTION  34

23.1 Resolution Procedures  34

23.2 Arbitration  35

23.3 Exclusions  35

23.4 Continuity of Services  35

24. TERMINATION  35

24.1 Termination for Convenience  35

                 25.3 Termination for Change in Control of Vendor                                                                                                                                                                      
60;                       35

24.3 Termination for Cause  35

24.4 Termination in Case of Insolvency or Adverse Financial Change  36

25. TERMINATION FEES  37

25.1 Termination Fees  37

25.2 Termination Fees  37

26. TERMINATION ASSISTANCE AND EXIT RIGHTS  37

26.1 Termination Assistance  37

26.2 Payment  37

26.3 Exit Rights  38

27. INDEMNITIES  39

27.1 Indemnity by Chordiant  39

27.2 Indemnity by Supplier  40

27.3 Obligation to Replace  41

27.4 Indemnification Procedures  42

28. DAMAGES  42

28.1 Damages  42

28.2 Basis of the Bargain  42

28.3 Exclusions  43

29. INSURANCE  43

29.1 Documentation  43

29.2 Types and Amounts  43

29.3 Policy Requirements  44

29.4 Risk of Loss  44

30. TRANSFER OPTION  44

30.1 Exercise  44

30.2 Terms  44

31. MISCELLANEOUS PROVISIONS  45

31.1 Noncompete  45

31.2 Assignment  45

31.3 Notices  45

31.4 Counterparts  46

31.5 Relationship  46

31.6 Non-Exclusivity  46

31.7 Consents, Approvals and Requests  46

31.8 Severability  47

31.9 Waivers  47

   31.10 Timing and Cumulative Remedies                                47

   31.11 Entire Agreement                          47

   31.12 Amendments             & #160;                   47

   31.13 Survival             
60;              47

   31.14 Third Party Beneficiaries             0;            47

   31.15 Governing Law and Venue                         47

   31.16 Injunctive Relief                            48

 31.17 Supplier Authority                         48

 31.18 Covenant of Further Assurances            &# 160;        48

 31.19 Bankruptcy             & #160;             48

 31.20 Export               ;              48

 31.21 Conflict of Interest                       48

 31.22 Publicity             &# 160;             48

 31.23 Good Faith and Fair Dealing            & #160;         49

      

                  [ * ]            = Certain Confidential Information Contained In This Document, Marked By Brackets,           Has Been Omitted And Filed Separately           With The Securities And Exchange Commission Pursuant To Rule 24b-2 Of The Securities Exchange Act Of 1934, As Amended.               

    

Exhibit 1

Definitions

“Acceptance Criteria” shall have the meaning specified in Section 3.2.

“Affected Contractors” means those Chordiant contractors performing services related to the Services for Chordiant prior to the Effective Date.

“Affected Employees” means those Chordiant employees performing services related to the Services for Chordiant prior to the Effective Date.

“Affiliate” means any entity that now or in the future (i) is Controlling, Controlled by, or under common Control with the party to whom it refers, (ii) is managed or operated by such party, or (iii) is owned through stock ownership, in whole or in part, by a shareholder of such party.

“Authorized User” means users of the Services, including Chordiant employees, business units, contractors, and Chordiant’s suppliers and customers that interact with Chordiant in the course of providing goods and services to, or receiving goods and services from, Chordiant.

“Background Technology” of a Party means all Intellectual Property that (a) is (i) owned by such Party and (ii) is in existence in electronic or written form on or prior to the Effective Date or (b) is developed, acquired, or licensed by such Party after the Effective Date independently of the work undertaken pursuant to this Agreement.

“Base Charges” means the fees for the Base Services.

“Base Services” shall have the meaning set forth in Section 3.1, and shall include any Services under a New Line of Business incorporated into this Agreement in accordance with Article 5.

“Benchmark Results” means the final results of the Benchmarking Process delivered by the Benchmarker in a written report to each of Chordiant and Supplier, including any supporting documentation requested by Chordiant or Supplier to analyze the results of the Benchmarking Process.

“Benchmark Review Period” means the [ * ] following receipt by Chordiant and Supplier of the Benchmark Results.

“Benchmarker” means a third party specified on Exhibit 17 that shall conduct the Benchmarking Process.

“Benchmarking Process” means the objective measurement and comparison process established by the Parties, which shall be designed to measure the performance and cost to Chordiant of the Services against the performance and cost of similar services in the industry.

“Buffer Resources” means Supplier personnel who are not EDC Personnel but are readily available, and have the skills and qualifications, to provide the Services.

“Change Control Procedures” means the written description of the change control procedures applicable to any Changes under this Agreement, as specified in the Policies and Procedures Manual.

“Change in Control” means any event or series of events that results directly or indirectly in a change in the management or Control of a Party.  Without limiting the generality of the foregoing, the following shall be considered a Change in Control:  the (a) consolidation or merger of a Party with or into any entity, (b) sale, transfer or other disposition of all or substantially all of the assets of a Party or (c) any change in the beneficial ownership of [ * ]  of the outstanding voting securities or other ownership interests of a Party; and (d) the resignation, removal appointment or election of [ * ] members of a Party’s board of directors or management team.

“Change(s)” means any change to (i) the Services, (ii) the Software used to provide the Services, or (iii) the Equipment used to provide the Services, that would alter in any material respect the functionality, performance standards or technical environment of the Software used to provide the Services or the Equipment used to provide the Services, the manner in which the Services are provided, the composition of the Services, or the cost to Chordiant of the Services.

“Chordiant Account Executive” shall have the meaning set forth in Section 6.1.

“Chordiant Affiliate” means a Chordiant Affiliate as designated by Chordiant from time to time.

“Chordiant Agents” means the agents, subcontractors and representatives of Chordiant, other than Supplier and Supplier Agents.

“Chordiant Data” means (a) all data and information (i) submitted to Supplier or Supplier Agents by or on behalf of Chordiant, (ii) obtained, developed or produced by Supplier or Supplier Agents in connection with this Agreement, or (iii) to which Supplier or Supplier Agents have access in connection with the provision of the Services, and (b) all derivatives of any of the foregoing.

“Chordiant Default Cure Period” shall have the meaning set forth in Section 24.4(b).

“Chordiant Default Notice” shall have the meaning set forth in Section 24.4(b).

“Chordiant Derivative Works” means any modifications, enhancements or derivative works of Chordiant Software, Chordiant Tools and associated Documentation developed pursuant to this Agreement by or on behalf of Supplier or Supplier Agents, whether developed independently or jointly with Chordiant, Chordiant Agents, or Chordiant Affiliates.

“Chordiant-Owned Materials” means the Chordiant Proprietary Software, Chordiant Derivative Works, Chordiant Background Technology and Work Product.

“Chordiant Proprietary Software” means the Software owned, acquired or developed by Chordiant and used in connection with the provision of the Services, including the Software set forth in Exhibit 8 and any associated Documentation.

“Chordiant Service Location(s)” means the Chordiant Service Locations identified in Exhibit 7.

“Chordiant Software” means the Chordiant Proprietary Software, the Chordiant Third Party Software, and the Chordiant Derivative Works, collectively.

“Chordiant Third Party Software” means the Software that is licensed or leased by Chordiant from a third party and used in connection with the provision of the Services, including the Software set forth in Exhibit 8 and Documentation.

“COLA Adjustment” shall have the meaning set forth in Section 17.2.

“Commencement Date” means, with respect to any portion of the Base Services, the date upon which Supplier shall begin providing such portion of the Base Services to Chordiant, as such portion of the Base Services and such date are specified, in each case, in the Transition Plan and/or a Statement of Work.

“Competitor” means a company specified on Exhibit 18.

“Confidential Information” means all information and documentation of Chordiant, whether disclosed to or accessed by Supplier in connection with this Agreement, including (a) all Chordiant Data and all information of Chordiant or their respective customers, suppliers, contractors and other third parties doing business with Chordiant, (b) the terms of this Agreement, and (c) any information developed by reference to or use of Chordiant’s Confidential Information; provided, however, that except to the extent otherwise provided by Law, the term “Confidential Information” shall not include information that (i) is independently developed by the recipient, as demonstrated by the recipient’s written records, without violating the disclosing Party’s proprietary rights, (ii) is or becomes publicly known (other than through unauthorized disclosure), (iii) is already known by Supplier at the time of disclosure (other than through unauthorized disclosure), as demonstrated by Supplier’s written records, and Supplier has no obligation of confidentiality other than pursuant to this Agreement or any confidentiality agreements between Chordiant and Supplier entered into before the Effective Date, or (iv) is rightfully received by Supplier free of any obligation of confidentiality.

“Consents” means all licenses, consents, permits, approvals and authorizations that are necessary to allow: (a) Supplier and Supplier Agents to use (i) Chordiant’s owned and leased assets, (ii) the services provided for the benefit of Chordiant under Chordiant’s third party services contracts, (iii) the Chordiant Software and Chordiant Tools, (iv) the Supplier Software and Supplier Tools, and (v) any assets owned or leased by Supplier; (b) Supplier and Supplier Agents to (i) use any third party services retained by Supplier to provide the Services during the Term and the Termination Assistance Period, and (ii) grant to Chordiant the rights (including assignments of Intellectual Property Rights) in the Chordiant-Owned Materials and other Intellectual Property transferred or licensed to Chordiant hereunder; and (c) either Party to fulfill its obligations under Article 27.

“Contract Year” means each twelve (12) month period commencing, in the case of the first Contract Year, on the Effective Date and thereafter upon the completion of the immediately preceding Contract Year.

“Control” means, with respect to any entity, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities (or other ownership interest), by contract or otherwise.

“Critical Affected Personnel” shall have the meaning specified in Exhibit 16.

“Critical Service Level”means a Service Level described as a Critical Service Level in Exhibit 3.

“Critical Transition Milestone” means any milestone in the Transition Plan designated as a “critical” milestone.

“Cure Period” shall have the meaning set forth in Section 24.3.

“Data Safeguards” shall have the meaning set forth in Section 10.4.

“Deliverable” means all materials delivered by Supplier to Chordiant in connection with the Services, including, but not limited to, the Supplier Derivative Works, Work Product, and Chordiant Derivative Works.

“Developed Software” means any Software, modifications or enhancements to Software and related Documentation developed pursuant to this Agreement by or on behalf of (a) Supplier, (b) Supplier Agents, (c) Supplier and Chordiant or Chordiant Agents jointly, (d) Supplier Agents and Chordiant or Chordiant Agents jointly, or (e) Supplier, Supplier Agents, Chordiant and Chordiant Agents jointly.

“Disaster Recovery Plan” or“DRP” means the disaster recovery plan developed by Supplier pursuant to Section 16.1 set forth in Exhibit 11.

“Documentation” means, with respect to Software and Tools, all materials, documentation, specifications, technical manuals, user manuals, flow diagrams, file descriptions and other written information that describes the function and use of such Software or Tools.

“EDC Personnel” means the personnel of Supplier and Supplier Agents who provide the Services.

“Effective Date” means December 15, 2003.

“End Date” means the last day on which Supplier provides any Services to Chordiant under this Agreement.

“Equipment” means computers and related equipment, including central processing units and other processors, controllers, modems, communications and telecommunications equipment (voice, data and video), cables, storage devices, printers, terminals, other peripherals and input and output devices, and other tangible mechanical and electronic equipment intended for the processing, input, output, storage, manipulation, communication, transmission and retrieval of information and data.

“Escrow Materials” means all Intellectual Property embodied in or required for the use of Software and all other materials that are licensed, or to be licensed to Chordiant under this Agreement.  Escrow Materials includes, without limitation, source code, flow charts, decision tables, schematics, drawings, specifications, documentation, design details, developer notes and build instructions necessary to understand the design, structure and production plans to convert the intellectual property into the proprietary technology.  The Escrow Materials shall hold sufficient data and instructions to allow an engineer having ordinary skill in the art to reproduce the commercial product from the Intellectual Property.

 “Extended Development Center” or “EDC” means the Supplier facilities where the Services are performed.

“Extension Period” shall have the meaning set forth in Section 2.2.

“Fees” means the Base Charges, the Additional Resource Charges and any other amounts payable by Chordiant to Supplier pursuant to this Agreement.

“Force Majeure Event” shall have the meaning set forth in Section 16.2.

“Governmental Approvals” means all licenses, consents, permits, approvals and authorizations of any Governmental Authority, or any notice to any Governmental Authority, the granting of which is required by Law, including Regulatory Requirements, for the consummation and performance of the transactions contemplated by this Agreement or the provision of Services under this Agreement.

“Governmental Authority” means any Federal, state, municipal, local, territorial, or other governmental department, regulatory authority, or judicial or administrative body, whether domestic, foreign, or international.

“Improved Technology” means any information processing technology developments, including new developments in Software and Equipment, that could reasonably be expected to have an impact on Chordiant or Chordiant’s business.

“Indemnified Party” shall have the meaning set forth in Section 27.4.

“Indemnifying Party” shall have the meaning set forth in Section 27.4.

“Initial Agreement Expiration Date” means three (3) years from the Effective Date.

“Initial Agreement Term” has the meaning specified in Section 2.1.

“Intellectual Property Rights” means all past, present, and future rights of the following types, which may exist or be created under the laws of any jurisdiction in the world: (a) rights associated with works of authorship, including exclusive exploitation rights, copyrights, moral rights, and mask works; (b) trademark and trade name rights and similar rights; (c) trade secret rights; (d) patents and industrial property rights; (e) other proprietary rights in intellectual property of every kind and nature; and (f) rights in or relating to registrations, renewals, extensions, combinations, divisions, and reissues of, and applications for, any of the rights referred to in subsections (a) through (e) of this sentence.

“Intellectual Property” means all algorithms, APIs, apparatus, circuit designs and assemblies, Confidential Information, databases and data collections, designs, diagrams, documentation, drawings, flow charts, formulae, ideas and inventions (whether or not patentable or reduced to practice), know-how, materials, marketing and development plans, marks (including brand names, product names, logos, and slogans), methods, models, network configurations and architectures, procedures, processes, protocols, schematics, software code (in any form including source code and executable or object code), specifications, subroutines, techniques, tools, uniform resource identifiers, user interfaces, web sites, works of authorship, and other forms of technology and intellectual property.  

“Key Supplier Personnel” means the Supplier Account Executive and such other members of the EDC Personnel designated by Chordiant as Key Supplier Personnel on Exhibit 6, which exhibit Chordiant may revise from time to time.

“Law” means any declaration, decree, directive, legislative enactment, order, ordinance, regulation, rule or other binding restriction of or by any Governmental Authority, including any such Law in modified or supplemented form and any newly adopted Law replacing a previous Law.

“Line of Business” means, individually, Product Support, Product Sustaining, Tech Stack Sustaining, Product Test, and Product Development, all as defined in Exhibit 2, as well as any New Line of Business for which Supplier provides Services pursuant to Section 5 of the Agreement.

“Losses” means any and all damages, fines, penalties, deficiencies, losses, liabilities (including settlements and judgments) and expenses (including interest, court costs, reasonable fees and expenses of attorneys, accountants and other experts and professionals or other reasonable fees and expenses of litigation or other proceedings or of any claim, default or assessment).

“New Entities” shall have the meaning specified in Section 4.4(a).

“New Equipment” means any Equipment or Software specialized for Chordiant’s business needs (not including infrastructure Equipment, Software, or Equipment or Software used by Supplier regularly in its business, or Equipment or Software used regularly by suppliers of services comparable to the Services) obtained by Supplier on behalf of Chordiant, as requested by Chordiant pursuant to Section 3.10.

“New Line of Business” means any service requested by Chordiant that does not fall under a Line of Business, and that requires resource types not already provided for under the Agreement, and where the existing pricing cannot be applied.

“Parties” means Chordiant and Supplier, collectively.

“Party” means either Chordiant or Supplier, as the case may be.

“Performance Credits” means the performance credits set forth in Exhibit 3.

“Policies and Procedures Manual” shall have the meaning set forth in Section 12.2.

"Refresh" means the upgrading and/or replacing of Equipment and Software in accordance with Exhibit 14.

“Regulatory Requirements” means the Laws to which Chordiant is required to submit, or voluntarily submits, from time to time.

“Right to Cure” shall have the meaning set forth in Section 24.3(b)(ii).

“Secure Computer System” means a computer system used by Supplier to access Chordiant’s source code.  Such Secure Computer System must consist of an isolated network containing one or more computer workstations and personal computers contained in a single building.  All such Secure Computer Systems will be housed in secure sites according to the provisions set forth in Exhibit 12.

“Service Levels” means the performance standards associated with the Services and set forth in Exhibit 3.

“Service Location(s)” means any Chordiant Service Location or Supplier Service Location, as applicable.

“Services” means, collectively, the Base Services, the Transition Services, and, during the Termination Assistance Period, the Termination Assistance Services.

“Skills Based Rate” shall have the meaning specified in Section 17.1.

“Software” means the source code and object code versions of any applications programs, operating system software, computer software languages, utilities, other computer programs and Documentation, in whatever form or media, including the tangible media upon which such applications programs, operating system software, computer software languages, utilities, other computer programs and Documentation are recorded or printed, together with all corrections, improvements, updates and releases thereof.

“Statement of Work” means the attachments to Exhibit 2, as well as any supplemental statement(s) of work the Parties may execute from time to time.

“Steering Committee” shall have the meaning set forth in Exhibit 6.

“Successor” has the meaning specified in Section 26.1.

“Supplier Account Executive” shall have the meaning specified in Section 11.2.

“Supplier Agents” means the agents, subcontractors and representatives of Supplier.

“Supplier Default Notice” shall have the meaning set forth in Section 24.3.

“Supplier Derivative Works” means any modifications, enhancements or derivative works of Supplier Software, Supplier Tools and associated Documentation developed pursuant to this Agreement by or on behalf of Supplier or Supplier Agents.

“Supplier Equipment” means those Equipment leased or owned by Supplier and Supplier Agents that are used by Supplier and Supplier Agents to provide the Services.

“Supplier Proprietary Software” means the Software and associated Documentation owned, acquired or developed by or on behalf of Supplier and used in connection with the Services or with any Supplier Software or Chordiant Software, including the Software set forth on Exhibit 8.

“Supplier Service Location(s)” means the Supplier Service Locations identified in Exhibit 7.

“Supplier Software” means the Supplier Proprietary Software, the Supplier Third Party Software, and the Supplier Derivative Works, collectively.

“Supplier Transition Manager” shall have the meaning set forth in Section 4.1.

“Supplier Third Party Software” means the Software and Documentation licensed, leased or otherwise obtained by Supplier from a third party that is used in connection with the Services or with any Supplier Software or Chordiant Software.

“Systems” means the Software, Tools, processes and the Equipment, collectively, used to provide the Services.

“Taxes” means all taxes, levies, imposts, duties, fines or other charges of whatsoever nature however imposed by any country or any subdivision or authority thereof in any way connected with this Agreement or any instrument or agreement required hereunder, and all interest, penalties or similar liabilities with respect thereto.

“Term” means the Initial Agreement Term and any Extension Periods.

“Termination Assistance Period” means a period of time designated by Chordiant, commencing on a date designated by Chordiant, after Chordiant has determined that there shall be a termination or expiration of the Agreement or any other cessation of all or any part of the Services (including due to a divestiture or partial termination by Chordiant), in each case no less than [ * ]  after the last day of the Term, and which may be extended by mutual agreement of the Parties, during which Supplier shall provide the Termination Assistance Services with respect to any part of the Services being terminated in accordance with Article 26.

“Termination Assistance Services” means Supplier’s (and Supplier Agents’) provision of: (a) the Services (and any replacements thereof or substitutions therefore); (b) cooperation with Chordiant and Successor as necessary to facilitate the smooth and orderly transition of the Services to Successor; (c) information relating to the number and function of each of the EDC Personnel; (d) subject to the approval of Chordiant, a plan for the smooth and orderly transition of the performance of the Services from Supplier to Chordiant or Successor, (e) reasonable training for personnel of Successor in the performance of the Services being transitioned to Successor, (f) reasonable access to the EDC Personnel so that Chordiant or its designees may extend offers of employment to such staff (subject to the terms of the Agreement); waivers of any prohibitions in any employment agreements with such individuals that may restrict such individuals from accepting offers from Chordiant or Successor; cooperation with Successors efforts to hire such staff, including not making counter offers; (g) information related to the Services that will assist Chordiant in drafting requests for proposals relating to the Services, and cooperation with, and due diligence information for, recipients of such request for proposal; (h) delivery of all Chordiant related materials and data; (i) return of Chordiant hardware, software and other assets; (j) required Consents for transfer of assets and licenses; and (k) other services and rights requested by Chordiant necessary to facilitate the transfer of Services.  

“Termination Fee” means a fee specified in Exhibit 4 that Chordiant shall pay to Supplier in the event Chordiant terminates this Agreement pursuant to Section 24.1.

“Tools” means any Software development and performance testing tools, and related know-how, methodologies, processes, technologies or algorithms.

“Transfer Agreement” means the contract that may be executed by Chordiant and Supplier providing for the transfer of the business in accordance with the terms and conditions set forth in Section 30 of the Agreement.

“Transition Period” means the period after the Effective Date during which Supplier is providing Transition Services with respect to a portion of the Services (as such portion of the Services is identified in the Transition Plan) prior to the Commencement Date for such portion of such Services.

“Transition Plan” means the transition plan set forth in Exhibit 16.

“Transition Schedule” means the schedule for the transition of services and functions to Supplier from Chordiant, as set forth in the Transition Plan.

“Transition Services” shall have the meaning set forth in Section 4.1.

“Transition Services Manager” shall have the meaning set forth in Section 4.1.

“Transitioned Personnel” shall have the meaning set forth in Section 4.3.

“Use” means the right to load, execute, store, distribute, perform, display, reproduce, maintain, modify, enhance, create derivative works of, import, make and have made.

“Work Product” means all (a) Developed Software, other deliverables (e.g., documentation, manuals, training materials, reports, diagrams, architecture, data models, formulas, schematics and similar items), and other Intellectual Property, in any stage of development, that Supplier or Supplier Agents conceive, create, develop, or reduce to practice in connection with performing the Services, and (b) all tangible embodiments (including, models, prototypes, and samples) of each of the items described in clause (a) of this sentence.

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 2.1

Product Support Line of Business Description

1.           INTRODUCTION

Chordiant’s application software runs at the heart of many of the world’s leading Financial Services and Insurance companies, where the term “mission critical” is aptly applied. Consequently, Chordiant Customers demand the highest level of service to support and maintain their applications.

EDC Product Support’s purpose is to provide all Chordiant Customers globally with a level of support, commensurate with their contracted service levels with Chordiant, with a stated objective to attain 100% reference-ability. This goal can be measured against the 7 critical support dimensions –

·   Responsive

·   Effective

·   Consistent

·   Easy to Work With

·   Efficient

·   Knowledgeable

·   Proactive

That is, to provide a World Class Support service.

EDC Product Support addresses this requirement through the provision of a 24-hr manned desk, staffed with Engineers able to support the full Chordiant product portfolio, extending Chordiant’s support capacity to provide a full and scalable World-wide Services organisation to encompass all geographies and time-zones.  EDC Product Support will be supported by local skilled resources  (Onshore Product Support Field Specialists) in the key geographies of North America and EMEA

EDC Product Support will provide Product Support services to contracted customers on a 24 x 7 basis, 52 weeks a year with the Service Levels defined in the Product Support Line of Business Service Levels in Attachment 3-A.

This document defines the key roles, responsibilities, processes and underlying interfaces between Onshore Product Support and EDC Product Support that make up Chordiant Product Support

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

2.           Service Summary

[ * ]

3.           Organisation

Chordiant Product Support is divided between Onshore Product Support and the EDC Product Support. The overall Product Support Strategy is managed by the Chordiant Head of Product Support (onshore).  The delivery of Product Support Service is managed and delivered by EDC Product Support.  In addition Onshore Product Support Field Specialists based in the Cupertino, CA and Brentford, UK offices provide an escalation point for EDC Product Support in critical situations.

3.1           EDC Product Support Structure

[ * ]

3.2          Chordiant On-shore Product Support Field Specialists

[ * ]

3.3          EDC Inter-Team Staff Rotation

[ * ]

3.4   Support Languages & Channels

Chordiant provides Product Support Services in English only.  EDC Product Support may provide additional local language support direct to the Customer but any formal interaction with Chordiant or Customers must be conducted in English, including all relevant data provisioned to assists the case (i.e. call logging form, logs, scripts, diagrams).

Product Support Services  is provided to Customers through the following channels:

a)   Telephone

b)   E-mail

c)   Web, and

d)   Dial-in (remote) access to Customer system.

Note: See Section “Contacting Chordiant Product Support” for details on the above.

4.           EDC PRODUCT SUPPORT SERVICES - OBJECTIVES AND SCOPE

4.1           Objectives

The technical support provided through EDC Product Support has three main objectives:

·   To assist Customers in maintaining and/or regaining an operational state by commercially reasonable efforts.

·   To provide in due course the correction of any underlying errors.

·   And to do so within the contract SLA.

4.2           Scope

The minimum scope of technical support provided by EDC Product Support is:

-   Problem prevention

o   Notification of availability of generally-available software releases

-   Problem identification

o   Clarification of Chordiant error messages;

o   Assistance in identifying and verifying the causes of suspected errors; and

o   Advice on bypassing identified errors (providing workarounds) in the supported software.

-   Problem resolution

o   Reporting and tracking product defects and enhancement requests;

o   Resolution of defects via workaround, maintenance release or, in exceptional circumstances, emergency patches; and

o   Notification of status on issues, including escalation when required.

5.           SUPPORT LEVEL OWNERSHIP

It is important to distinguish principal levels (or tiers) of Support that are owned respectively by EDC Product Support and Onshore Product Support.

EDC Product Support

i)   Tier 2 Product Support Center – Help Desk

[ * ]

ii)   Tier 2 Product Support  – EDC Product Support Engineer

[ * ]

iii)   Tier 3 Product Sustaining

[ * ]

Chordiant

i)   Onshore Product Support Field Specialist

Should EDC Product Support be unable to achieve the tasks above successfully (after reasonable efforts) or where the case concerns a Chordiant Legacy Application, the case can be passed to an Onshore Product Support Field Specialist, together with call logging form (CLF), logs etc. together with details of the tasks undertaken to resolve issue.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

[ * ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

EDC PRODUCT SUPPORT RESPONSIBILITIES

[ * ]

CUSTOMER DESIGNATED SUPPORT CONTACTS

[ * ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

PATH TO SUPPORT

[ * 2 pages of text omitted ]

COMMUNICATIONS TO EDC PRODUCT SUPPORT

[ *  ]

CHORDIANT PRODUCT SUPPORT WEBSITE

[ * ]

LIFECYCLE OF A SUPPORT CALL

[ * ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

Customer Reporting an Issue to EDC Product Support

[ * ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

Priority classifications and response times

[ * 1 page of text omitted]

Researching a Product Support Issue

[ * ]

Closing an Product Support Issue

[ * ]

EDC-TO-ONSHORE PRODUCT SUPPORT COMMUNICATION FREQUENCY AND POLICIES

[ * ]

Product Support with Product Sustaining

[ * ]

EDC-to-Onshore Product Support Interaction

[ * ]

EDC Product Support Manager to Head of Product Support

[ * ]

REMOTE DIAL-IN ANALYSIS

[ * ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

ESCALATION PROCESS

[ * ]

Priority 1 Issue

[ * ]

Priority 2 Issues

[ * ]

Priority 3 Issues

[ * ]

REPORTING

[ * ]

Onshore <-> Chordiant SLA

[ * ]

Onshore <-> Customer SLA

[ * ]

Project Dashboard

[ * ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

GLOSSARY

“Designated Center” means the computer hardware, operating system, customer-specific application(s), customer-specific relational database(s) and Customer Geographic Location designated on the relevant Purchase Order or Order Form.

“Designated Support Contact” shall mean the contact person or group designated by Customer (or Offshore) and agreed to by Chordiant Product Support (EDC or Onshore PS irrespectively) who has been trained in the use of the Software and who keeps current their knowledge of same through regular use of the Software and/or additional training, and who will coordinate all Support requests to Chordiant Product Support.

“Documentation” means the user guides and manuals for installation and use of the Software. Documentation is provided in CD-ROM or bound form, whichever is generally available.

“Error” shall mean a reproducible defect in the Supported Program or Documentation when operated on a Supported Environment which causes the Supported Program not to operate substantially in accordance with the Documentation.

“Resolution” shall mean a modification or workaround to the Supported Program and/or Documentation and/or other information provided by Chordiant Product Support to a Customer intended to resolve an Error.

“Supported Environment” shall mean the configurations of hardware and releases of the operating software and RDBMS platforms that Chordiant states in writing that the Current Release of the Software will run on and for which Chordiant states in writing it provides Support for use with the Supported Program.

“Update” means a subsequent release of the Software that Chordiant generally makes available for Supported Software licensees at no additional license fee other than shipping and handling charges. Update shall not include any release, option or future product that Chordiant licenses separately.  Chordiant will provide Updates for the Supported Programs as and when developed for general release in Chordiant’s sole discretion.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

APPENDIX 1 – PRODUCT SUPPORT PROBLEM ESCALATION PROCESS

[ * 1 PAGE OF TEXT OMITTED]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

Appendix 2

[ * 4 pages of text omitted]

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 2.1-A

Product Support LoB Statement of Work

Attachment to Exhibit 2.1 Product Support Line of Business Description

This Product Support Line of Business Statement of Work is incorporated into the Master Services Agreement dated December 15, 2003 by and between Supplier and Chordiant (for the purposes of this Statement of Work, the “Agreement”).  This Statement of Work describes Services and Deliverables to be performed and provided by Supplier under the Product Support Line of Business pursuant to the Agreement.  All capitalized terms used and not expressly defined in this Statement of Work will have the meanings given to them in the Agreement.

1.Scope of Project.  [ * ]

2.Estimated EDC Resources Required.

3.Project Schedule/Milestones.

4.Business, Technical and Other Specifications.

5.Deliverables.  [ * ]

6.Acceptance Criteria and Testing.

7.Estimated Expenses.

8.Project Management and Reporting Responsibilities.

9.Key Personnel Required.

10.Assumptions, Dependencies and Exclusions.

Chordiant Signed:                                                                      Name:                                                                      Title:                                                                      Dated:                                                                    Supplier Signed:                                                                      Name:                                                                      Title:                                                                      Dated:                                                                   

      

                  [            *           ] = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 2.2

Product Sustaining and Technical Stack Sustaining

Line of Business Description

1.         INTRODUCTION

This document outlines the operation and services to be provided for the Product Sustaining and Technical Stack Sustaining (PSTS) Line of Business. It outlines the Responsibilities, Service levels, interfaces to other departments, and functions of the PSTS team.  PSTS comprises two specific services: EDC Product Sustaining and EDC Technical Stack sustaining as described below.

[ * ]

2.         SUMMARY OF SERVICES

[ * 2 pages of text omitted]

3.         PRODUCT SUSTAINING

[ * ]

3.1         Opening an issue

[ * ]

3.1.1                                Severity / Priority

[ * 2 pages of text omitted ]

3.1.2                                Response Times

Response times are as defined in the Service Level Agreement for the EDC Product Sustaining Line of Business (see Attachment 3-B)

3.1.3                                Review Procedures

[ * ]

3.2         Support & Maintenance strategy

Product Sustaining does not own the decision process for determining support and maintenance strategy.  This is the responsibility of Product Management and the Chordiant Engineering Management team. As such, the frequency for functional, maintenance, and other releases is outside the scope of this group.  However Product Sustaining will provide input and recommendation on the need for pure maintenance releases for a given product or set of products. The Product Sustaining Team is responsible for producing pure maintenance releases as agreed by the Product Management and Engineering management teams.

3.3         Patches & Back Ports

All communication on patches and back ports will be pushed out and communicated by EDC Product Sustaining. The Chordiant Product Sustaining Manager  will approve all patch releases and backports.  This communication will consist of availability and the criticality of such a release, indicating implication of not applying so that EDC Product Support may assess the requirement to recommend/communicate to support and field.

The work involved in producing a patch and back port is the repsonsibility of EDC Product Sustaining.

3.4         Enhancements

In addition to issue escalation, issue reporting, and query responses, EDC Product Sustaining will also facilitate a communication interface for enhancement processing.  While EDC Product Sustaining will not be directly involved in prioritizing or delivering enhancements, this group will facilitate the communication and escalation of these items through to Product Management, Product Team, and Engineering.  The medium for this communication will be the defect tracking system.  Any required escalation may be done via email.  Product Management, in accordance with decisions made by the Product Team, is the primary arbiter and owner of enhancement requests. This includes “harvesting” of field-developed enhancements.

3.5         Product Support Notes and Product Information Notes

In addition to patches and maintenance releases, EDC Product Sustaining will also produce Product Support Notes (some accompanying patches) outlining a product issue and how to over come that issue and Product Information Notes. Product Information Notes provide useful product information on commonly found problems or issues. It is expected that each EDC Sustaining Engineer should produce one product information note per month.

3.6         Out of Hours Service

[ * ]

3.7         SLA Escalation

[ * ]

3.8         Roles & Responsibilities

[ * ]

3.8.1                      Product Sustaining email groups

Email groups will be established to enable communication between Product Support and Product Sustaining on product issues. These will be defined during the transition planning

3.8.2                      Product-line email groups

For each Product line there will be an email group managed by an identified Chordiant Engineering Manager.  These email groups will enable discussion and communication on product related issues between Product Sustaining and Engineering.

4.         TOOLS

[ * ]

5.         HARDWARE AND SOFTWARE ENVIRONMENTS

Within EDC Product Sustaining some EDC Sustaining Engineers will be designated as responsible for System set up and management for the sustaining systems. While it is expected that some engineers will have specific skills, it is expected that engineers be generally familiar with setting up and configuring Operating systems, applications servers and databases. During the transition planning an systems management methodology will be agreed for all Lines of Business.

6.         REPORTS & METRICS

A fundamental goal of EDC Product Sustaining is the delivery of a common set of reports and metrics that allow management, support, engineering, and account management to make informed decisions on the state of all products, support loads, and delivery schedules.  EDC Product Sustaining will publish a set of standard reports that fulfill these requirements.  It is intended that these reports will be delivered from the unified defect tracking system.  The following represent a starting point set, but may be added to:

6.1         Customer Raised Issue

[ * ]

6.2         Faults Outstanding

[ * ]

6.3         Faults not fixed – by severity

[ * ]

6.4         Submitted vs. Cleared

[ * ]

6.5         Notable Changes

[ * ]

6.6         External Metrics

A number of reports detailing product sustaining engagements against all customer requests would be valuable.  The information required for these reports is not captured in the Defect Tracking system but in the Case Management system, and therefore requires an external interface with EDC Product Support.

6.6.1                      Defect type Analysis

[ * ]

7.         PRODUCT TECHNICAL STACK SUSTAINING

[ * 1 page of text omitted]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 2.2-A

Product Sustaining LoB Statement of Work

Attachment to Exhibit 2.2 Product Sustaining Line of Business Description

This Product Sustaining Line of Business Statement of Work is incorporated into the Master Services Agreement dated December 15, 2003 by and between Supplier and Chordiant (for the purposes of this Statement of Work, the “Agreement”).  This Statement of Work describes Services and Deliverables to be performed and provided by Supplier under the Product Sustaining Line of Business pursuant to the Agreement.  All capitalized terms used and not expressly defined in this Statement of Work will have the meanings given to them in the Agreement.

11.Scope of Project.  [ * ]

12.Estimated EDC Resources Required.

13.Project Schedule/Milestones.

14.Business, Technical and Other Specifications.

15.Deliverables.  [ * ]

16.Acceptance Criteria and Testing.

17.Estimated Expenses.

18.Project Management and Reporting Responsibilities.

19.Key Personnel Required.

20.Assumptions, Dependencies and Exclusions.

Chordiant Signed:                                                                      Name:                                                                      Title:                                                                      Dated:                                                                    Supplier Signed:                                                                      Name:                                                                      Title:                                                                      Dated:                                                                   

      

                  [            *            ] = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 2.3

Product Test Line of Business Description

1.         Introduction

This document outlines the operation and services to be provided for the Product Test Line of Business – referred to as EDC Product Test. It outlines the Responsibilities, Service levels, interfaces to other departments, and functions of EDC Product Test.

2.         Summary of Service

[ * ]

3.         Product Test Operation

[ * ]

3.1         Product Test

[ * ]

3.2Product Test within the Product Lifecycle

[ * ]

3.3         Test Script Development and Automation

[ * ]

4.   Roles & Responsibilities

[ * ]

5.         Tools

[ * ]

6.         Reports & Metrics

[ * ]

7.         Chordiant Standard Release Criteria

[ * ]

8.         Hardware and Software Environments

[ * ]

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 2.3-A

Product Test LoB Statement of Work

Attachment to Exhibit 2.3 Product Test Line of Business Description

This Product Test Line of Business Statement of Work is incorporated into the Master Services Agreement dated December 15, 2003 by and between Supplier and Chordiant (for the purposes of this Statement of Work, the “Agreement”).  This Statement of Work describes Services and Deliverables to be performed and provided by Supplier under the Product Test Line of Business pursuant to the Agreement.  All capitalized terms used and not expressly defined in this Statement of Work will have the meanings given to them in the Agreement.

21.Scope of Project.  [ * ]

22.Estimated EDC Resources Required.

23.Project Schedule/Milestones.

24.Business, Technical and Other Specifications.

25.Deliverables.  [ * ]

26.Acceptance Criteria and Testing.

27.Estimated Expenses.

28.Project Management and Reporting Responsibilities.

29.Key Personnel Required.

30.Assumptions, Dependencies and Exclusions.

Chordiant Signed:                                                                      Name:                                                                      Title:                                                                      Dated:                                                                    Supplier Signed:                                                                      Name:                                                                      Title:                                                                      Dated:                                                                   

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 2.4

Development Line of Business Description

1.       Introduction

This document outlines the operation and services to be provided for the Development Line of Business. It outlines the Responsibilities, Service levels, interfaces to other departments, and functions of EDC Development.

2.       Summary of Service

[ * ]

3.       EDC Development Operation

[ * ]

3.1                  Development Organization

[ * ]

4.       Roles & Responsibilities

[ * ]

5.       Tools

The development environment depends upon the application under development. For [ * ] the following tools will be used:

[ * ]

[ * ] is used for Defect tracking and management

(Chordiant uses the [ * ] for the management of all test activities.)

[ * ] is used for Project Planning

[ * ] are used for script coverage reporting (as an extension to Test Manager) and for Effort reporting against plan

Standard project report templates for [ * ].

Dashboard style reporting as per vendor standard.

5.1                  Source Code Management and Daily Builds

[ * ]

6.         Reports & Metrics

[ * ]

7.       Chordiant Standard Release Criteria

[ * ]

8.       Hardware and Software Environments

[ * ]

9.       [ * ] Product Overview

This section provides a high level overview of the [ * ], its architecture and components; it does not provide a detailed functional overview.

[ * ]. While packaged for sale separately from an implementation standpoint, they are a single software product. [ * ]

The product can be run in a three tier configuration with the server tier being split between the application and the database. This is transparent to the [ * ] application making use of facilities within the supported databases to enable the database server to run on a separate tier.

The application is database intensive and is designed to work with very large customer or prospect data bases (100+ million customers and hence rows). [ * ]

[ * ]

Finally [ * ] is a reporting tool currently. It is based on the [ * ] product set.

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 2.4-A

Development LoB Statement of Work

Attachment to Exhibit 2.4 Development Line of Business Description

This Development Line of Business Statement of Work is incorporated into the Master Services Agreement dated December 15, 2003 by and between Supplier and Chordiant (for the purposes of this Statement of Work, the “Agreement”).  This Statement of Work describes Services and Deliverables to be performed and provided by Supplier under the Development Line of Business pursuant to the Agreement.  All capitalized terms used and not expressly defined in this Statement of Work will have the meanings given to them in the Agreement.

1.Scope of Project.  [ * ]

2.Estimated EDC Resources Required.

3.Project Schedule/Milestones.

4.Business, Technical and Other Specifications.

5.Deliverables.  [ * ]

6.Acceptance Criteria and Testing.

7.Estimated Expenses.

8.Project Management and Reporting Responsibilities.

9.Key Personnel Required.

10.Assumptions, Dependencies and Exclusions.

Chordiant Signed:                                                                      Name:                                                                      Title:                                                                      Dated:                                                                    Supplier Signed:                                                                      Name:                                                                      Title:                                                                      Dated:                                                                   

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 2.5-A

Onsite professional services LoB Statement of Work

Attachment to Exhibit 2.5 onsite professional services of Business Description

This Onsite Professional Services Line of Business Statement of Work(“SOW”) is incorporated into the Master Services Agreement dated December 15, 2003 by and between Supplier and Chordiant (for the purposes of this Statement of Work, the “Agreement”) with the exception of certain Clauses that do not pertain to the Professional Services Line of Business (“Exclusions”).  Such Exclusions have been identified in Section 12 (Assumptions, Dependencies, and Exclusions) in this document.

This Statement of Work describes Services and Deliverables to be performed and provided by Supplier under the Onsite Professional Services Line of Business pursuant to the Agreement.  Chordiant desires to use the technical and consulting services of Ness Consultants (also referred to as ‘Ness Associates’ elsewhere in this document), and NESS agrees to provide such services under the terms and conditions detailed in this document.  The Ness consultants would be deployed at onsite projects to implement Chordiant products and technology under the guidance of the Chordiant Engagement Management and Project Management.

11.Scope of Project / Location / Duration

Chordiant Software, Inc. (CHRD) Professional Services has engaged Ness Global Services, Inc. (Ness) to provide Supplemental Staff under a Sub-Contracted, Time and Materials Basis (T&M) for specific Chordiant Professional Services Projects.  This Statement of Work is intended for the [ * ] Engagement but the Services may be deployed at other locations and/or Chordiant Customers in the United States.

Training Location:  Chordiant, Cupertino, CA for an initial period of [ * ]

Assignment/Deployment Location:  [ * ] or other locations within Continental United States for an initial, minimum period of [ * ] (extended at the end of this period as agreed to in writing by the parties under the terms and conditions herein, unless informed otherwise) post initial [ * ] training period.

12.Resources Required.

Ness to Provide a Team of [ * ] Ness Associates.  The Team will include [ * ] Ness designated Leader/Manager as a working member of the Team [ * ].

13.Project Schedule/Milestones/Acceptance.

As defined and communicated by Chordiant Project Manager responsible for the Ness Team.  No Acceptance or Acceptance Criteria are applicable under this SOW.

14.Estimated Expenses (Service Fees during Training, Deferred Service Fees, Regular Service Fees, Travel & Expenses)

SERVICE FEES DURING TRAINING

Ness will defer the Service Fees spent by Ness Associates during the initial Training Period (4 weeks or less, as applicable) and the cost incurred in relocating any of the Ness Team members to Cupertino for training purposes.  The ‘Deferred Service Fees’ and its invoicing-schedule are defined below.

DEFERRED SERVICE FEES

Ness estimates that it will incur [ * ] (hereafter referred to as “Deferred fees”) in Salaries, Relocation, and lost opportunity for [ * ] people over the initial [ * ] Training Period.  This amount translates to [ * ] per month.  Hence, Ness will charge Chordiant, Service Fees equivalent to “Standard Service Fees” + “Deferred Fees” on a Per Person Day Basis as defined below.

Ness and Chordiant will reconcile the “Deferred Fees” payable to Ness at the end of [ * ], and any remaining “Deferred Fees” at the time will be payable to Ness by Chordiant, if any remaining, or if applicable, Ness will credit Chordiant if the Deferred Fees were exceeded.

REGULAR SERVICE FEES POST TRAINING

Ness will charge Chordiant @ [ * ] per person day (which includes Deferred Service Fees of [ * ] per person day) until the Deferred Fees have been paid by Chordiant, for all Ness Associates, except for Ness Leader/Manager – [ * ], whose services would be billed @ [ * ] per person day.  Except as described above, and during the effective ness of this SOW, the regular billable Service Fee is [ * ] per day per Ness Associate.

TRAVEL & EXPENSES (T&E)

For those Ness Associates deployed on a customer site, the reimbursement of all travel and expenses (T&E) will be governed by the reimbursement policy Chordiant negotiates with the customer. This will apply to all Ness associates except [ * ] will commute every week-end between the assignment/deployment location and Cupertino, CA and the same will be billed to Chordiant at actual in accordance with Chordiant travel policy.

For those Ness Associates deployed in the Chordiant Engineering labs, Travel and Expenses will be reimbursed in accordance with the Chordiant T&E policy which is in line with industry standard Professional Services practices.  Chordiant will share such concurred policy (concurred between Chordiant and its Client) with Ness.

Ness will offer an option to the Ness Associates (except [ * ]) of relocating to the Assignment/Deployment location for the duration of the assignment/deployment. In such a case, Ness will charge Chordiant a one-time Relocation Cost as per Ness Policy. This option shall only be executed if it is more advantageous for Chordiant’s customer or Chordiant than above-mentioned options.

15.Billing Frequency

Daily Service Fees will be billed to Chordiant on a monthly basis to be paid within Net 30 days of date of receipt of Invoice.

Travel & Expenses (T&E) will be billed to Chordiant on a fortnightly basis to be paid within NET 15 days of Date of Invoice. Ness will comply with Chordiant’s online Time Tracking and T & E entry system/policy that will help timely billing by Chordiant to its client(s).

16.Utilization Commitment

Chordiant agrees to provide guarantee of utilization of all [ * ] Ness Associates for a period of [ * ] months post the initial training period (“Utilization Guarantee Period”).

In the event Chordiant decides to release a part of the [ * ] member team, or the entire [ * ] member team, then Chordiant will provide Ness with a minimum of 2-weeks notice or pay Ness the Service Fees equivalent to 2-weeks billing per person released, in lieu of the Utilization Guarantee Period.

In addition, should Chordiant decide to terminate the assignment with Ness and release any or all of the Ness Associates before the completion of the [ * ]-month Utilization Guarantee Period, then Chordiant will also pay Ness the pro-rated “Deferred Service Fees”. Pro-ration will be based on remaining months and the released headcount.

17.Travel Order & Time Accounting

All Travel will be pre-approved by the Chordiant Professional Services Manager. This will be used as the basis for billing T&E to Chordiant.

Time Sheets will be approved by Chordiant Professional Services Manager. This will be used as the basis for billing Service Fees to Chordiant.

18.Project Management and Reporting Responsibilities.

Chordiant Project Management

19.Key Personnel Required.

Refer to Annexure‘A’ – Chordiant provided Technical Specification for Ness Team

20.Selection of Key Personnel.

All Ness Associates to be deployed on this engagement will be selected by Ness with initial resume screening and approval by Chordiant Professional Services Manager.

During the training or during a project assignment, Chordiant or a Chordiant customer may request the termination of a Ness Associate for performance reasons. Such requests will be evaluated between Chordiant Professional Services Manager and [ * ]. If Chordiant or a Chordiant customer should still request the removal of a Ness Associate, the Ness Associate will be released from the engagement with no penalties to Chordiant. However Chordiant will pay for the pro-rated remaining Deferred Fees for the said Ness Associate.

11.           Personnel Equipment

In case the Ness Associates should be deployed in one of the Chordiant Engineering labs, Chordiant will provide the appropriate infrastructure (computer, software) required in the execution of the project.. Ness will not provide any infrastructure (computer, software) required in the execution of the project.

Ness will provide each Ness Associate with a Cellular / Mobile Phone. Ness will Bill actual Usage / Charges to Chordiant limited to business calls.

12.           Assumptions, Dependencies and Exclusions.

The parties agree that the services to be provided under this Statement of Work are substantially different than those contemplated at the time the parties executed the Agreement. Accordingly, several provisions of the Agreement are not applicable to this Statement of Work and it is hereby agreed that such clauses shall not be applicable with respect to this Statement of Work. Specifically, the following provisions of the Agreement shall not be applicable to this Statement of Work:

Section 3.1(e) ,3.1(f);                                                                          Section 16.1;

Section 3.2 (a)-(g), 3.3, 3.4;                                                                          Section 17.1, 17.2, 17.3;

Section 3.6, 3.7, 3.8, 3.9, 3.10;                                                                          Section 17.5;

Section 4.1,4.2,4.3,4.4,4.5;                                                                          Section 17.8, 17.9, 17.10;

Section 5.2;                                                                          Section 24;

Section 8;                                                                          Section 25;

Section 9;                                                                          Section 26;

Section 10;                                                                          Section 27.3;

Section 11.2,4, 6, and 9;                                                                          Section 28.3(a)(ii);

Section 12;                                                                          Section 30; and

Section 13.2;                                                                          Section 31.1.

Section 13.9, 13.10;

Section 14.2;

The remaining provisions of the Agreement shall remain in full force and effect and shall continue to govern this Statement of Work. Notwithstanding the foregoing, in the event any provision of this Statement of Work conflicts with a provision of the Agreement, the provision in this Statement of Work shall control.

Chordiant Software, Inc. Signed: /s/ Cary G. Morgan                                                                      Name: Cary G. Morgan                                                                      Title: V. P. Finance                                                                      Dated: June 16, 2004                                                                    Ness Global Services, Inc. Signed: /s/ Shashank Samant                                                                      Name: Shashank Samant                                                                      Title: Executive Vice President, Managed Labs   Dated: June 16, 2004                                                                   

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Annexure- A

Skills Set ofthe Ness-CHRD Professional Services Team

General

• 4+ years of software industry experience

• Communication skills

• Multi-year [ * ] experience in large application

• development projects

• Insight and understanding of [ * ] projects

• Insight and understanding of customer requirements

• Project background contains 2 or more of the following technical specialties

• Large Business application experience for commercial applications (e.g. Banking, Travel, Finance, Telecommunications or large defense communications systems).

• Computer - Telephony Integration in call centers 100+ users or greater, networked hardware systems such as ACDs (telephone switches), VRUs (voice response unit--voice mail)

• Distributed computing applications; worked on software projects where the PC application was connected to a UNIX/ WIN NT server across building, state or country lines. Highly networked environments including integration with Internet apps (e.g. calling web sites to retrieve data such as time-of-day, weather, maps, etc.).

• Development and/or customization of a [ * ] solution

• Heterogeneous or multiple interface experience e.g. [ * ]

• Relational DBMS (one of:  [ * ]

• Ability to completely install sophisticated UNIX or Win NT software applications onto large multi-CPU servers.

Technical

• Proficient with [ * ] design and development [ * ]  as well as some [ * ] Analysis (UML); supported by concrete tool knowledge for code generation as [ * ]

• Experience with [ * ] or equivalent as well as configuration management and versioning tools

• Excellent technical knowledge of one or the following domains, solid exposure to the other domain:

• Design and development of [ * ] based enterprise back end components based on [ * ]

• Design and development of Java-based enterprise front end components based on [ * ]

Experience installing and administrating a J2EE application server and deploying an enterprise application under [ * ]  Good config. and versioning management experience would be required.

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 2.5-B

Offshore Professional Services LoB Statement of Work

Attachment to Exhibit 2.5 Professional Services of Business Description

This Offshore Professional Services Line of Business Statement of Work (“SOW”) is incorporated into the Master Services Agreement dated December 15, 2003 by and between Ness Global Services, Inc. (“Ness” or “Supplier”) and Chordiant Software, Inc. (“Chordiant”) (for the purposes of this Statement of Work, the “Agreement”) with the exception of certain Clauses that do not pertain to the Professional Services Line of Business (“Exclusions”). Such Exclusions have been identified in Section 16 (Assumptions, Dependencies, and Exclusions) in this document. 

This SOW describes Services and Deliverables to be performed and provided by Ness under the Offshore Professional Services Line of Business pursuant to the Agreement.  Chordiant desires to use the technical and consulting services of Ness Associates, and Ness agrees to provide such services under the terms and conditions detailed in this document. The Ness Associates would be deployed at onsite projects in the United States to implement Chordiant products and technology under the guidance of the Chordiant Consulting Services Manager and/or the Project Manager.  Chordiant will also designate a “PSO Program Manager” herein referred to as the Chordiant PSO Program Manager. 

1.Scope of Project / Duration

Chordiant has engaged Ness to provide Supplemental Staff under a Sub-Contracted, Time and Materials Basis (T&M) for specific Chordiant Professional Services Projects.

This Statement of Work (SOW) shall be effective from the date of start of training of the first batch i.e. target of April 25th, 2005 (“Effective Date”), and shall remain in effect for one (1) year and can be renewed thereafter on mutual agreement.

2.Location:

The work done by the Ness Associates can be divided into the following two categories.  (a) All productive work will be performed onsite in the US by Ness Associates; (b) Chordiant will maintain the “Bench” of this team at the Ness Mumbai-India offshore center.  “Bench” is defined as Supplier personnel located in Ness Mumbai-India center that are readily available, and have the skills and qualifications, to provide the Services listed in this SOW.

For Providing Onsite Services: The services as per this SOW shall be provided by the Ness Associates deployed to Chordiant US locations and/or Chordiant Customer locations in the United States.

For Offshore Services (Bench): The Ness Associates will be located in the Ness Mumbai-India center while they are on Bench. Chordiant has the option of keeping the Ness Associates at Chordiant US locations and/or Chordiant Customer locations in the United States; however the Onsite Billing Rates (as defined in section 6) would be applicable in such situations. In case any Ness Associate is expected to be on bench for an extended period of time, Ness and Chordiant will jointly check the feasibility of deploying this Ness Associate to the Chordiant EPC in Bangalore-India.

3.Number of Ness Associates Required.

Ness will provide a team of [ * ] Ness Associates in two batches of [ * ] each (the “Ness Team”). The team will include [ * ] Ness designated Leader/Manager as a working member of the Team.

Ness may utilize up to [ * ] contractors on this engagement on a case-by case basis, and will inform Chordiant about the same.

4.Project Schedule/Milestones/Acceptance.

The Ness Team will be responsible for work as defined and communicated by the Chordiant Project Manager.  No Acceptance or Acceptance Criteria are applicable under this SOW.

5.Training:

Training Location:                                           Training will be conducted by the Chordiant trainers, or trainers designated by Chordiant at Ness Mumbai – India for a period of [ * ]. The start dates of the training are provided below. The faculty for training would be provided by Chordiant at no cost to Ness. In case some resources from the existing US-based Ness PSO team are required as trainers for training, boot-camps etc., their usual services billing rate and T&E reimbursements  will be applicable.

Training Start Date:

Batch 1: [ * ] Ness Associates to start training by                                                                                                           target of April 25^th, 2005

Batch 2: [ * ] Ness Associates to start training by                                                                                                           target of June 27^th, 2005

Ness will train [ * ] additional Ness Associates at its own cost to mitigate any performance issues. Ness will automatically bill for the services provided by the Ness Associate(s) to Chordiant as per the rates specified in the following section if they replace any billable Ness Associate who has been terminated for quality/performance reasons specified in Section 11 of this document, or if any of these Ness Associate(s) are deployed either Onsite or Offshore by Chordiant.  Ness will begin billing for services of the replacement Ness Associate(s) from the first day they begin performing services.

Associate Start Date: is defined as the date from which an Associate undergoes training, or starts performing services for Chordiant as per this SOW.

6.Fees, Rates and Payments:

The Onsite Billing Rates and Offshore Billing Rates are collectively referred to as Services Fees in this document.

Onsite Billing Rates: Ness will charge Chordiant a flat rate of [ * ] per person hour during the Onsite deployment of any Ness Associate in the US, calculated based on a minimum of [ * ] per working week.

Airfare and Visa Costs: The Onsite Billing Rates mentioned above include all expenses except Airfare and Visa costs, which would be reimbursed by Chordiant on actual for all Ness Associates.

Offshore Billing Rates:  Ness will charge Chordiant a flat Services Fee of [ * ] per person hour, during the Offshore deployment of any Ness Associate in India, or while they are on Bench in India, calculated based on a minimum of [ * ] per working week.

Billing Rates during training:  Ness will not charge for the initial [ * ] of time spent by the Ness Team while undergoing training imparted by the Chordiant trainers.  Additionally, Ness will not charge for training an additional [ * ] Ness Associates.

Billing Rates during resource vacations:  Ness will not charge Chordiant for vacation time incurred by the associates assigned to the program.

Payment of Overtime or Weekend work:  Payment of overtime and/or weekend work will be handled on a case-by-case basis and is to be governed by Chordiant’s terms and conditions with its Customer, as well as applicable federal, state and local laws.  All overtime and/or weekend work must be approved by the Chordiant Project Manager or the Chordiant PSO Program Manager.

Travel & Expenses (T&E):  Each Ness Associate will be deployed to a single designated Chordiant US location or Chordiant Customer location in the US. The cost associated with redeployment of any Ness Associate within the US from these designated locations would be reimbursed by Chordiant at actual costs. Any short-term travel within the US will be paid by Chordiant on actual as per the T&E policy in place between Ness and Chordiant for the current US-based Ness PSO team.

In the case that Chordiant’s Customer has a standard Travel & Expense Policy, the Customer’s Policy will take precedence over the agreed upon T&E Policy, as long as the Customer Policy is consistent with the agreed upon intentions of Ness and Chordiant, and is compliant to generally acceptable industry practices.

The average onsite trip is assumed to be [ * ] months in duration.  Every offshore Ness Associate is assumed to travel back and forth from India to US once every [ * ] months. The relocation costs incurred by Ness during 2 trips to the US per Ness Associate per year have been considered in the Onsite Billing Rates indicated in this section. The relocation costs for any further trips to the US would be reimbursed by Chordiant on actual costs.

7.Billing Frequency

Ness will bill Chordiant for services on a monthly basis, to be paid within NET 30 days of date of receipt of Invoice.

Travel & Expenses (T&E) will be billed to Chordiant on a fortnightly basis to be paid within NET 15 days of Date of Invoice.  The Ness Associates will be required to enter all time and expense information into Chordiant’s T&E system, [ * ], within 1 business day following month-end.  Chordiant will issue an electronic mail reminder to all Ness Associates that have not submitted their time and expense information within 3 business days from the end of the billing cycle.  The Ness Associates will be required to input all of their time and expense by close of business the fifth business day after the month close. Failure to enter time or expense in a timely manner could result in the forfeiture of fees or out-of-pocket expenses. If an expense report is submitted after the fifth business day after the month close, due to a Chordiant internal issue or an operational failure of the time entry system, or a delay in receiving invoices or bills from third party vendors, such amounts will not result in forfeiture.

8.Utilization Commitment

Chordiant agrees to provide guarantee of utilization of all [ * ] Ness Associates for a period of [ * ] from the Effective Date (“Utilization Guarantee Period”), as per section 2 and section 6. The Ness Associates will be continuously billable to Chordiant after the initial [ * ] training time and except for training the additional [ * ] Ness Associates. However, vacation time of any Ness Associate will not be billed to Chordiant.

9.Termination

a.  Chordiant shall not terminate this Agreement prior to the completion of six (6) months from the Effective Date.  Chordiant shall have the option of terminating this Agreement upon completion of six (6) months from the Effective Date.  In such case, Chordiant shall provide Ness with at least four (4) weeks prior written notice of termination, and there shall be no penalty or other termination fee associated with such termination.

b.   Chordiant shall not terminate an assignment with Ness or release any or all of the Ness Associates prior to the completion of six (6) months from their respective Associate Start Date. Chordiant shall have the option of terminating an assignment with Ness or release any or all of the Ness Associates upon completion of six (6) months from their respective Associate Start Date.  In such case, Chordiant shall provide Ness with at least four (4) weeks prior written notice of such termination or release, and there shall be no penalty or other termination fee associated with any such termination or release.

c.  Notwithstanding the provisions of this Section 9, Chordiant may terminate any Ness Associate for performance related issues at any time after the Effective Date in accordance with the provisions of Section 10.

10.           Quality and Remedy:

From and after the Effective Date, in case of a performance issue with any Ness Associate(s) identified in writing by Chordiant to Ness, Chordiant may place such Ness Associate(s) in a “Remedy Period” of [ * ].  Chordiant and Ness shall mutually agree on what remedial action should be taken with respect to such Ness Associate(s) during the Remedy Period.  Upon completion of the Remedy Period, the Ness Associate will be either reassigned to an assignment or terminated by Chordiant. All the above actions (identification of performance issue, completion of the Remedy Period, the action taken after the Remedy Period) will be taken upon mutual concurrence between Chordiant and Ness Program Managers, and will be accompanied by all the required supporting documentation.

During the Remedy Period the Associate can either be onsite or be sent back to Ness Mumbai –India. Upon completion of the Remedy Period, in case the Program Managers agree to terminate the Ness Associate, [ * ]. Additionally, within the first six (6) months from the Effective Date, the following will apply:

 (a)  If more than [ * ] the Ness Team or [ * ] Ness Associates (whichever is greater) are terminated by Chordiant, then Ness will provide [ * ] person month of free offshore services period to Chordiant for every additional Ness Associate terminated. (i.e. [ * ] person month of free offshore services period would be applicable for the [ * ] and [ * ] Ness Associate terminated.)

 (b) If more than [ * ] the team or [ * ] Ness Associates (whichever is greater) are terminated by Chordiant, then Ness will provide [ * ]person months of free offshore services period to Chordiant for every additional Ness Associate terminated. (i.e. [ * ] person months of free offshore services period would be applicable for the [ * ] and [ * ] Ness Associate terminated.)

 (c)  If more than [ * ] the team or [ * ] Ness Associates (whichever is greater) are terminated by Chordiant, then Ness will provide 2 person months of free offshore services period to Chordiant for every additional Ness Associate terminated. (i.e. [ * ] person months of free offshore services period would be applicable for any Ness Associate terminated beyond the [ * ] resource). Alternatively, Chordiant would have the option to terminate this SOW without payment of any additional early termination fees.

11.           Travel Order & Time Accounting

All Travel and Expenses will be pre-approved by the Chordiant Project Manager or the Chordiant PSO Program Manager, and these will be used as the basis for billing T&E to Chordiant. All other T&E (Visa, flybacks to India, or other non-billable (to Chordiant customer) travel) must be pre-approved by theChordiant PSO Program Manager or the VP of North America Consulting.

Time Sheets will be approved by Chordiant Professional Services Manager, and these will be used as the basis for billing Service Fees to Chordiant.

12.           Project Management and Reporting Responsibilities.

The parties acknowledge and agree that the Chordiant PSO Program Manager or the Chordiant Account Project Manager/Consulting Services Manager, who shall be a Chordiant employee, shall be completely responsible for the management and direction of the Ness Associates and the Services provided by Ness under this SOW.

13.           Selection of Ness Associates.

All Ness Associates to be deployed on this engagement will be selected by Ness. On request by Chordiant, the resume of these candidates will be provided by Ness to the Chordiant PSO Program Manager.

14.           Personnel Equipment

Chordiant will provide the appropriate infrastructure (laptop computer, software) required in the execution of the project. Ness will not provide any infrastructure required in the execution of the project while the Ness Associates are working in the USA.

Ness will provide the desktops to the Ness Associates while working at Ness-Mumbai. Ness will also provide network connectivity between the Chordiant-EPC in Bangalore-India and Ness-Mumbai.

15.           Short-Term Travel

If an offshore based Ness Associate is required to travel to the US for a predetermined time of less than 3 months (or as legally permissible by INS guidelines), these Associates may be able to travel on a short-term business visa. In this case, the Offshore Billing Rates as mentioned in section 6 would be applicable while the Ness Associate is in the US.

Travel and Expenses (T&E), Airfare and Visa costs would be charged additionally at actual, as per details provided in Section 6 of this document.

16.           Assumptions, Dependencies and Exclusions.

The parties agree that the services to be provided under this Statement of Work are substantially different than those contemplated at the time the parties executed the Agreement.  Accordingly, several provisions of the Agreement are not applicable to this Statement of Work and it is hereby agreed that such clauses shall not be applicable with respect to this Statement of Work.  Specifically, the following provisions of the Agreement shall not be applicable to this Statement of Work:

Section 3.1(e), 3.1(f); Section 3.2 (a)-(g), (h) 3.3, 3.4 Section 3.6, 3.7, 3.8, 3.9, 3.10; Section 4.1, 4.2, 4.3, 4.4, 4.5; Section 5.2; Section 8; Section 9; Section 10; Section 11.2, 11.4, 11.6, 11.7(a), (c) and 11.9; Section 12; Section 13.2; Section 13.9, 13.10; Section 14.2;   Section 16.1; Section 17.1, 17.2, 17.3; Section 17.5; Section 17.8, 17.9, 17.10; Section 24 ; Section 25; Section 26; Section 27.3; Section 28.3(a)(ii); Section 30; and Section 31.1.  

The remaining provisions of the Agreement shall remain in full force and effect and shall continue to govern this Statement of Work.  Notwithstanding the foregoing, in the event any provision of this Statement of Work conflicts with a provision of the Agreement, the provision in this Statement of Work shall control.

Chordiant Software, Inc. Signed: /s/ Robert J. Cummings                                                                      Name: Robert J. Cummings                                                                      Title: V. P. North America Consulting   Dated: March 15, 2005                                                                    Ness Global Services, Inc. Signed: /s/ Rocco Cazza                                                                      Name: Rocco Cazza                                                                      Title: Corporate Counsel                                                                      Dated: March 15, 2005                                                                   

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 3

Service Levels

1.   GENERAL PROVISIONS

1.1General

This Exhibit sets forth the agreement between the Parties relating to Service Levels (as defined below) against which Supplier’s performance of the Base Services under the Lines of Business will be measured.  Supplier will perform each Base Service for which a Service Level has been established at no less than the applicable Service Level (as defined below).

1.2Attachments

The applicable Service Levels required for each Line of Business, together with measurement criteria and performance credit details, are set forth in the following attachments:

Attachment 3-A                                           Product Support Service Level Agreement

Attachment 3-B                                           Product/Technical Stack Sustaining Service Level Agreement

Attachment 3-C                                           Product Test Service Level Agreement

Attachment 3-D                                           Product Development Service Level Agreement

Attachment 3-E                                           Measuring Tools and Methodologies

1.3Reporting

[ * ]

1.4Definitions

Capitalized terms used in this Exhibit and not defined in this Section 1.4 will have the meaning set forth in the Agreement.

“Performance Credit” shall mean a credit in an amount calculated in accordance with Section 1.5 (Overview of Performance Credit Process for Service Level Failures) payable to Chordiant by Supplier in connection with Service Level Failures.

“Performance Cure Period” means the period of time agreed upon the Program Managers during which a Service Level Failure will not give rise to a Performance Credit under the applicable Line of Business.

“Service Level” means the required level of performance specified in the Attachments to this Exhibit for Base Services under each Line of Business.

“Service Level Failure” means Supplier’s failure, subject to Section 6.4 of the Agreement, to perform a Base Service under a particular Line of Business at the applicable required Service Level.

1.5Overview of Performance Credit Process for Service Level Failures

If a Service Level Failure occurs in a particular Line of Business in any calendar month during the Term, subject to any Performance Cure Period in place for such Line of Business, Supplier shall provide a Performance Credit to Chordiant as specified in the applicable Attachment to this Exhibit for each Line of Business.

1.6Reporting and Invoicing Related to Service Level Failures

(a)   Reporting.  In each monthly report regarding Supplier’s performance of the Base Services, Supplier will, with respect to the immediately preceding month, (i) notify Chordiant of any Performance Credits to which Chordiant is entitled; and (ii) describe any Service Level Failure that occurred.  Pursuant to Exhibit 6 (Governance), the Parties may mutually agree in writing to modify the form or content of the standard reports, or to require Supplier to provide additional or custom reports.

(b)   Invoices For Performance Credits earned for Service Level Failures.  Supplier shall report and credit to Chordiant the total amount of all Performance Credits owed to Chordiant for Service Level Failures in the invoice for the month following the Service Level Failures (e.g., the amount of Performance Credits with respect to Service Level Failures occurring in June will be set forth in the invoice for July’s Base Charges).

1.7Problem Escalation

[ * 2 pages of text omitted]

1.8   Measuring Tools

[ * 1 page of text omitted]

2.   DETAILED METRICS

The detailed metrics relating to Service Levels are set forth in the Attachments to this Exhibit.

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 3-A

Product Support Line of Business Service Level Agreement

Attachment to Exhibit 3 (Service Levels)

1.   Definitions.  Capitalized terms used in this Attachment and not defined in this Section 1 will have the meaning set forth in the Agreement.

“EDC Product Support Center” means that portion of the EDC that is dedicated to providing Base Services under the Product Support Line of Business.

“Response Time” means the time from an Authorized User logging a Case (via telephone, email, fax or Web channels) to the EDC Product Support Center acknowledging receipt of such Case with the issuance of a Case Number.

“Restoration Time” means the time from an Authorized User logging a Case (via telephone, email, fax or Web channels) to the restoration of service of the Authorized User’s Chordiant system.

“Fix/WA/Close/Resolution Time” means the time from an Authorized User logging a Case (via telephone, email, fax or Web channels) to the Case being closed.  Closure may be as a result of:  (a) Development of a patch to fix a defect in the Chordiant Product and its installation on the Authorized User’s Chordiant system; (b) the Authorized User using the product in a different manner to avoid encountering the product issues (Workaround); or (c) the Authorized User agreeing that the reported Case is not a product defect.

“Critical Service Level” means those Service Levels identified in this Attachment for which no Performance Cure Period shall be applicable.  Critical Service Levels are identified in this Attachment by **.

“Performance Credit” is defined in Section 3.2.

“Performance Cure Period” is defined in Section 3.3.

“Priority 1” is defined in Section 2.2.

“Priority 2” is defined in Section 2.2.

“Priority 3” is defined in Section 2.2.

“Priority 4” is defined in Section 2.2.

“Backlog” means the number of active (non-closed) Cases.

“Product Support Engineer” or “PSE” means an EDC staff member performing Base Services in the Product Support Line of Business.

“PSE Tier 2 Response to Interaction” means the time from assigning a Case to a Product Support Engineer to the PSE’s first response to investigate the assigned Case.

“Management Escalation” means the Escalation Process defined in Exhibit 2.1 (Product Support Line of Business Description).

“Mean Workload” means the number of Cases that a Product Support Engineer is actively handling at the same time.  Measures with a three (3) month moving average.

[ * ]

[ * ]

“Line of Business Start” means the point in time when the first team or sub-team of EDC Personnel are in place for purposes of providing Base Services under the Product Support Line of Business.

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

2.   Product Support Service Levels

2.1   **Response, Restoration and Resolution Time Service Levels.  The following table sets forth the maximum Response, Restoration and Resolution Times permitted for managing cases logged by Authorized Users with the EDC Product Support Center.

[ * 2 pages of text omitted]

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

(a)Priority Levels.

Priority Level	Definition
Priority 1 “Production down” Problem	Business impact is immediate and major, i.e. no material benefit from the Supported software. The Supported software in a mission critical “live production” environment is inoperative, renders the system on which it is installed inoperable or suffers major performance degradation.  No workaround is available.
Priority 2 Mission Critical Problem	Business impact is immediate and significant. The Supported Software in a production or a mission critical development environment is inoperative or fails to satisfy critical functional, operational or performance specifications.
Priority 3 Serious Problem	Business impact is high but not widespread. An aspect of the software is inoperative, causes or results in substandard or erratic performance, but nonetheless the software operates substantially in accordance with specifications.
Priority 4 Problem	Business impact is moderate or small. No aspect of the software is inoperative. The software operates in accordance with specifications.

2.2Service Levels.

[ * ]

3.   Review and Performance Failure

3.1   Review.  For Base Services under the Product Support Line of Business, this Attachment will be in effect throughout the Term.  However, the Service Levels will not be used or applied to determine a Performance Credit during the first six (6) months following the Line of Business Start.  At the end of the fifth (5^th) month, the Steering Committee will review actual performance against the Service Levels set forth herein.  Response and Resolution Times set forth in Section 2.1 must remain fixed; however, the Steering Committee will determine if adjustments to resource levels, process changes, infrastructure/system requirements and/or the percentage variance in achievability of the Service Levels are required, subject to Section 8.6 of the Agreement.

[ * 1 page of text omitted]

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 3-B

Product/Technical Stack Sustaining Line of Business

Service Level Agreement

Attachment to Exhibit 3 (Service Levels)

1.           Definitions:

Capitalized terms used in this Attachment and not defined in this Section 1 will have the meaning set forth in the Agreement.

“Sustaining Engineer” means an EDC staff member assigned to the Product Sustaining team within the Product Sustaining and Tech Stack Line of Business.

“Escalated Case” means an Authorized User Case that the Product Support team has been unable to address and has passed it (escalated) to the Product Sustaining team for more in-depth technical analysis.

“Escalation Backlog” means the number of Escalated Cases that are in the Product Sustaining team’s work queue.

“Defect Density” means the number of defects per 1000 lines of code.

“Defect Removal Rate” means the number of defects found during the Product Test Phase of the release divided by the sum of (a) the number of defects found during the Product Test Phase of the release and (b) the number of defects found after GA (General Availability).

“Tech Stack Change Impact Analysis” means understanding the likely impact of a new Technical Stack component on the ability of the Chordiant product to operate according to specification.

“Tech Stack Certification” means the running of a defined series of Test Scripts to verify that the Chordiant product performs as per specification on the defined Technical Stack.

“Stability Test Run” means a long duration test (greater than 26 hours) that is used to verify that the product under the test’s performance does not degrade or fail over time.

“Line of Business Start” means the point in time when the first team or sub-team of EDC Personnel are in place for purposes of providing Base Services under the Product/Tech Stack Sustaining Line of Business.

“Critical Service Level” means those Service Levels identified in this Attachment for which no Performance Cure Period shall be applicable.  Critical Service Levels are identified in this Attachment by **.

“Performance Credit” is defined in Section 4.2.

“Performance Cure Period” is defined in Section 4.3.

2.   [ * ]

3.   [ * ]

4.   Review; Performance; and Guarantee of Quality

4.1   Review.  For Base Services under the Product and Technical Stack Sustaining Line of Business, the terms of this Attachment will be in effect throughout the Term.  However, the Service Levels stated herein will not be used or applied to determine a Performance Credit during the first six (6) months following the Line of Business Start.  At the end of the fifth (5^th) month, Supplier and Chordiant Program Managers will review actual performance against the Service Levels set forth herein and agree upon appropriate revisions to the Service Levels (or any changes) and/or determine if adjustments to resource levels, process changes, infrastructure/system requirements are required, subject to Section 8.6 of the Agreement.  The proposed revised Service Levels will be reviewed and agreed upon by the Steering Committee.  Changes to Performance Measurement criteria will require objective data to support case for change.  Chordiant and Supplier Program Managers will review Service Level performance on a monthly basis.

[ * 1 page of text omitted]

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 3-C

Product Test Line of Business Service Level Agreement

Attachment to Exhibit 3 (Service Levels)

1.   Definitions

Capitalized terms used in this Attachment and not defined in this Section 1 will have the meaning set forth in the Agreement.

“Test Engineer” means an EDC staff member performing Product Testing activities within the Product Test Line of Business.

“Test Script” means a document that describes the steps and actions (Test Cases) required to be undertaken by a Test Engineer to test a Module/Function Point.

“Module / Function Point” means a component of a Chordiant Product which may be a sub-system or functional unit.

“Stability Test Run” means a long duration test (greater than 26 hours) that is used to verify that the product under the test’s performance does not degrade or fail over time

“Performance Test Run” means a test that is designed to test that the product under test meets the performance requirements as defined in the product Marketing Requirements Document.

“Severity Level 1” is defined in Exhibit 2.2 (Product Sustaining Line of Business Description) Section 3.1.1.

“Severity Level 2” is defined in Exhibit 2.2 (Product Sustaining Line of Business Description) Section 3.1.1.

“Severity Level 3” is defined in Exhibit 2.2 (Product Sustaining Line of Business Description) Section 3.1.1.

“Severity Level 4” is defined in Exhibit 2.2 (Product Sustaining Line of Business Description) Section 3.1.1.

“Defect” means a product behavior that is not in conformance with its functional and design specification.

“Defect Removal Rate (Test)” means the number of defects found during the Product Test Phase of the release divided by the sum of (a) the number of defects found during the Product Test Phase of the release and (b) the number of defects found after GA.

“GA” means General Availability.  The product is released and generally available for purchase by customers with no restrictions on its usage.

“Test Cycle” means the execution of a defined series of Test Scripts.  The Product Test Phase of the release comprises a number of Test Cycles – the exact number of Test Cycles being defined during the project planning process.

“Line of Business Start” means the point in time when the first team or sub-team of EDC Personnel are in place for purposes of providing Base Services under the Product Test Line of Business.

“Performance Credit” is defined in Section 3.2.

“Performance Cure Period” is defined in Section 3.3.

2.   [ * ]

3.   Review, Performance; and Guarantee of Quality

3.1   Review.  For Base Services under the Product Test Line of Business, this Attachment will be in effect throughout the Term.  However, the Service Levels will not be used or applied to determine a Performance Credit during the first six (6) months the Line of Business Start.  At the end of the fifth (5^th) month, Supplier and Chordiant Program Managers will review performance against the Service Levels set forth herein and agree upon appropriate revisions to the Service Levels (or any changes) and/or determine if adjustments to resource levels, process changes, infrastructure/system requirements are required, subject to Section 8.6 of the Agreement.  The proposed revised Service Levels will be reviewed and agreed upon by the Steering Committee.  Changes to Performance Measurement criteria will require objective data to support case for change.  Chordiant and Supplier Program Managers will review Service Level performance on a monthly basis.

[ * ]

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 3-D

Development Line of Business Service Level Agreement

Attachment to Exhibit 3 (Service Levels)

1.   Definitions

Capitalized terms used in this Attachment and not defined in this Section 1 will have the meaning set forth in the Agreement.

“Modules / Function Points” means a component of a Chordiant Product which may be a sub-system or functional unit.

“Severity Level 1” is defined in Exhibit 2.2 (Product Sustaining Line of Business Description) Section 3.1.1.

“Severity Level 2” is defined in Exhibit 2.2 (Product Sustaining Line of Business Description) Section 3.1.1.

“Severity Level 3” is defined in Exhibit 2.2 (Product Sustaining Line of Business Description) Section 3.1.1.

“Severity Level 4” is defined in Exhibit 2.2 (Product Sustaining Line of Business Description) Section 3.1.1.

“Stability Test Run” means a long duration test (greater than 26 hours) that is used to verify that the product under the test’s performance does not degrade or fail over time

“Performance Test Run” means a test that is designed to test that the product under test meets the performance requirements as defined in the product Marketing Requirements Document.

“Defect Removal Rate” means the number of defects found by Product Test divided by the sum of (a) the number of defects found by Product Test and (b) the number of defects found by Development.

“Cyclomatic complexity” means is a measure of software module complexity (defined by McCabe) .

“Line of Business Start” means the point in time when the first team or sub-team of EDC Personnel are in place for purposes of providing Base Services under the Development Line of Business.

“Critical Service Level” means those Service Levels identified in this Attachment for which no Performance Cure Period shall be applicable.  Critical Service Levels are identified in this Attachment by **.

“Performance Credit” is defined in Section 3.2.

“Performance Cure Period” is defined in Section 3.3.

2.   [ * 1 page of text omitted ]

3.   Review; Performance Failure; Guarantee of Quality

3.1   Review.  For Base Services under the Development Line of Business, this Attachment will be in effect throughout the Term.  However, the Service Levels will not be used or applied to determine a Performance Credit during the first six (6) months following the Line of Business Start.  At the end of the fifth (5^th) month, Supplier and Chordiant Program Managers will review actual performance against the Service Levels set forth herein and agree upon appropriate revisions to the Service Levels (or any changes) and/or determine if adjustments to resource levels, process changes, infrastructure/system requirements are required, subject to Section 8.6 of the Agreement.  The proposed revised Service Levels will be reviewed and agreed upon by the Steering Committee.  Changes to Performance Measurement criteria will require objective data to support case for change.  Chordiant and Supplier Program Managers will review SLA performance on a monthly basis.

[ * ]

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 4

Pricing

1.Introduction.

This Exhibit sets forth the monthly rates for EDC Personnel, the lines of applicable expenses and the Travel & Expense Policies, and describes the methodology for calculating and invoicing the monthly Fees for the Services.

The Fees for EDC Personnel (“Service Fees”), as calculated in accordance with this Exhibit, compensates Supplier for providing the Services.

In addition, this Exhibit sets forth the calculation method for the Termination Fee.

2.Attachments.

Attachment 4-A                                           Service Fees and Expenses

Attachment 4-B                                           Travel & Expense Policies

Attachment 4-C                                           Termination Fee

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 4-A

Service Fees and Expenses

1.   EDC Personnel

1.1The Service Fees are set forth in Section 1.3 below.  The Service Fees may be modified solely by and in accordance with the Agreement and this Exhibit.  Each modification of the Service Fees will be reflected in an amendment to this Attachment 4-A.  Supplier shall invoice Chordiant for the monthly amount of the Service Fees, which is calculated as described in Section 1.2.  The Service Fees calculated in accordance with this Exhibit shall fully compensate Supplier for providing the Services during the appropriate billing period.

1.2For the avoidance of doubt, Chordiant shall not, unless expressly provided for in the Agreement, be charged for any time spent by EDC Personnel used by Supplier to cure any breach of warranty, fix Supplier errors or defects, or re-perform any Services that were improperly performed.

1.3“Billing Rate”

(a)   Flat rate of [ * ] per Compensable person/month.

(b)   “Compensable” shall require a minimum commitment of [ * ] dedicated toward the Services during the calendar month.

(c)   Pro-Ration – Determined on a [ * ] basis:

Supplier will not charge for a resource during any week in which the resource did not work a minimum of [ * ].

(d)   Overages – The maximum number of hours for each EDC Personnel shall be [ * ].  Supplier shall not bill for overtime, but if effort exceeds [ * ], the Parties will conduct staffing level discussions as outlined below, and the Parties will agree to either increase the staffing levels or adjust the work load.  Actual time booked to Chordiant (hours worked) will be made available to Chordiant and reviewed on a monthly basis to ensure pro-rating is working fairly for both Parties.

(e)   In each invoice, Supplier shall separate all Service Fees by Line of Business.

1.4   “T&E” – Travel & Expenses will be in accordance with whichever option under the Supplier and Chordiant T&E policies is least expensive, with the exception of per diem rates, which will be in accordance with Supplier’s T&E policy.

1.5Supplier Location (On-Site) – Billing Rate

1.6   Chordiant Location (Off-Site):

(a)   “Off-Site EDC Personnel” means those EDC Personnel who Chordiant requires to perform Service in a country other than that in which they regularly reside.

(b)   First [ * ]– Billing Rate + Travel & Expenses (“T&E”), subject to subsection (d) below.

(c)   Time Exceeding [ * ]– Billing Rate + T&E for Off-Site EDC Personnel.  In the event Chordiant requires that Off-Site EDC Personnel are Off-Site for more than [ * ], or Supplier is otherwise required to obtain work visas/permits for such Personnel, Chordiant shall reimburse Supplier the actual wages paid by Supplier, taking into account the published Department of Labor prevailing wages or other surveys acceptable to the applicable governmental authorities, as well as alternative visa arrangements, that may reduce the cost to Chordiant.

(d)   If it is known prior to their assignment that Off-Site EDC Personnel will be Off-Site for more than [ * ], the applicable rate shall be as set forth under subsection (c) from the day such Off-Site EDC Personnel commence performing Services on an Off-Site basis.

(e)   While Supplier will not charge Service Fees for the initial 4-week training period, as set forth in Section 11.4(d) of the Agreement, T&E will apply during that time.

2.   Pass Through Costs

2.1“Pass Through Costs” shall mean an actual expense incurred by Supplier on Chordiant’s behalf, for which Chordiant has agreed to reimburse Supplier on an actual out-of-pocket basis.

2.2Chordiant will reimburse Supplier for Pass Through Costs.  Supplier will proactively work with Chordiant during the Term to minimize the Pass Through Costs.

3.   Other Expenses

3.1Chordiant will reimburse Supplier for such other expenses as agreed upon between the Parties.

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 4-B

Travel & Expense Policies

Supplier T&E Policy

1.   Round-trip coach/economy airfare (India to designated site/work location);

2.   Hotel or other lodging accommodation (double occupancy permitted);

3.   Automobile rental [ * ];

4.   Fixed “per diem” amount of [ * ] per day (covering meals and incidentals); and

5.   Visa fees (at cost).

Supplier shall communicate any changes in this policy to Chordiant no less than thirty (30) days prior to any change.

Chordiant T&E Policy

[ * ]

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 4-C

Termination Fee

Termination Fee

If Chordiant terminates the Agreement in accordance with Section 24.1 of the Agreement, Chordiant shall pay a Termination Fee within thirty (30) days of the date of Termination to Supplier in accordance with the following formula:

[ * ]

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Schedule 4A

Pass Through Costs

I.           Equipment

A.           Hardware

B.           Software

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Schedule 4B

Other Expenses

Infrastructure Space

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 5

Human Resources

1.           General.  Supplier will be responsible for providing the EDC Personnel required to perform the Services.  Supplier personnel assigned to the EDC will be dedicated to Chordiant on a full-time basis, except as otherwise agreed by Chordiant.  Each of Supplier’s personnel performing Services will execute a Chordiant-approved Confidentiality and Proprietary Information and Inventions Agreement, in the form set forth on Attachment 5-D.

2.           Attachments.

Attachment 5-A                                EDC Personnel, Supplier Key Personnel

Attachment 5-B                                Resource Ramp-up Plan

Attachment 5-C                                Resource Skill Profile

Attachment 5-D                                Form of Proprietary Information Assignment Agreement

3.           Training.  Generally, staff training will occur in multiples of eight (8), but may include fewer or greater numbers of individuals as necessary when Lines of Business are brought online pursuant to the ramp up plan set forth in Attachment 5-B.  The four (4) week initial free period (as described in Exhibit 4 (Pricing)) does not start until the full training team is in place (for such team, the “Training Start Date”).  EDC Personnel will go through the following training period(s):

§   Initial Supplier induction and familiarization:  This will cover Supplier and Chordiant policies, the Chordiant EDC policies and procedures.  The induction training will take place prior to the Training Start Date.

§   On site at Chordiant:  a two (2) week seminar program covering Chordiant Product and product Internals.  This training is aimed at software engineers who will be developing Chordiant products, as opposed to using or developing with, Chordiant Products.

§   On Site at Chordiant:  a one (1) week seminar program covering Chordiant development, sustaining, test and support processes as appropriate. This will include training in Chordiant tools and systems.

§   On site at Chordiant:  a two (2) week “one-on-one” mentoring process, where EDC Personnel will be given real work tasks under close supervision.

§   At the EDC:  Four (4) week mentoring program.  Chordiant staff on site at the EDC Site will continue to mentor staff.

§   Ready for full time assignment to operational team.

All Supplier Key Personnel and at least half of the EDC Personnel will go through the training session detailed above.  The remaining EDC Personnel will be trained by the Chordiant-trained EDC Personnel themselves following the same program as above.

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 5-A

EDC Personnel, Key Supplier Personnel

1.           Key Supplier Personnel.  The following organizational roles within the EDC have been identified as of the Effective Date to be filled by Key Supplier Personnel.  Individuals to fill these positions will be identified by Chordiant in accordance with Section 11.3 of the Agreement during the Transition Period and thereafter as the ramp-up plan set forth in Attachment 5-B is implemented.  The Parties will complete this Attachment 5-A to reflect such assignments and will update the table below from time-to-time as necessary during the ramp-up period outlined in Attachment 5-B and thereafter during the Term.

Name	Role	Line of Business	Tier	Start Date
	EDC Team Program Manager
	Project Manager	Product Test
	Team Lead
	Team Lead
	Team Lead
	Project Manager	Product Development
	Senior Developer
	Project Manager	Sustaining
	Senior Developer
	Senior Developer
	Project Manager	Product Support
	Team Lead
	Team Lead
	Team Lead
	Team Lead
	Team Lead
	Team Lead
	Senior Support Engineer
	Senior Support Engineer
	Senior Support Engineer

1.           EDC Personnel.  In addition to the Supplier Key Personnel, during the Transition Period, the Parties will identify and assign additional individuals to serve as EDC Personnel in the organization roles identified below.  The Parties will complete this Attachment 5-A to reflect such assignments and will update from time-to-time as necessary during the ramp-up period outlined in Attachment 5-B and thereafter during the Term.

Name Role Tier Start Date

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 5-B

Resource Ramp-up Plan

Table 1 Resource Ramp-up Plan for Product Support, Product Sustaining, Product Test and Development Lines of Business

[ * 1 page of text omitted]

During the Transition Period, Chordiant may request a faster staffing ramp, upon which Supplier will work with Chordiant to determine an agreed revised ramp up plan.

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 5-C

Resource Skill Profile

The following table provides an indicative mix of skill levels for planning purposes.  Chordiant and Supplier may agree to change the balance of skills mix via the Steering Committee.  Chordiant will provide detailed job specifications for all positions during the transition planning to enable alignment of Chordiant titles/job levels with those of the Supplier.  It is expected that within the EDC, Chordiant job titles will be used.

[ * 3 pages of text omitted]

Supplier Resource Tier Definition (For use in Skill Level Definition only)
Category	Capability / Skill
[ * ]

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 5-D

Form of Proprietary Information and Inventions Agreement

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

The following confirms an agreement between me and Ness Global Services, Inc. and Ness India, Ltd., (the “Company”), which is a material part of the consideration for my employment as a consultant by the Company (all references to “employment” shall mean retention as an employee of the Company for services to be performed as part of establishing and operating an Extended Development Center for the Company’s client, Chordiant Software, Inc. (“Client”), in India):

1.           I recognize that the Company is engaged in a continuous program of research, development and production. I also recognize that the Company possesses or has rights and will possess and obtain rights to information which has commercial value in the Company’s and its Client’s business (”Proprietary Information”). Such Proprietary Information includes, but is not limited to, trade secrets, product ideas, processes, formulas, data, know-how, software and other computer programs and copyrightable materials, data about the Company consultants such as the performance levels and terms of employment, mask work rights, marketing plans and strategies, sales and financial reports and forecasts, and customer lists.

2.           I understand and agree that my employment as a consultant creates a relationship of confidence and trust between me and the Company with respect to (i) all Proprietary Information, and (ii) the confidential information of third parties, including Client, with which the Company has a business relationship. At all times, both during my employment as a consultant by the Company and after its termination, I will keep in confidence and trust all such information, and I will not use any such information for the benefit of, or disclose it to, any third party other than Client without the written consent of the Company or Client.

3.           In addition, I hereby agree as follows:

a)           All Proprietary Information shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owner of all trade secrets, patents, copyrights, mask work rights and any other rights in connection therewith. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information.

b)           All documents, records, apparatus, equipment and other physical property, whether or not pertaining to Proprietary Information, furnished to me by the Company or produced by me or others in connection with my employment as a consultant shall be and remain the sole property of the Company. I shall return to the Company all such materials and property as and when requested by the Company. Even if the Company does not so request, I shall return all such materials and property upon termination of my employment as a consultant by me or by the Company for any reason, and I will not take with me any such material or property or any reproduction thereof upon my termination without the Company’s or Client’s written consent.  I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information developed by me and all Inventions made by me during the term of this Agreement, which records shall be available to and remain the sole property of the Company at all times.

c)           I will promptly disclose to the Company, or any persons designated by it, all improvements, inventions, works of authorship, formulas, processes, and techniques, whether or not patentable (collectively, “Inventions”), made or conceived, reduced to practice or learned by me, either alone or jointly with others, during the term of my employment as a consultant.

d)           All Inventions which I conceive, develop or have developed (in whole or in part, either alone or jointly with others) through the (i) use of equipment, supplies, facilities or trade secret information of the Company, or (ii) during the hours for which I am to be or was compensated by the Company, or (iii) which relate at the time of conception or reduction to practice thereof to the business of the Company or to its actual or demonstrably anticipated research and development or (iv) which result from any work performed by me for the Company, shall be the sole property of the Company and its assigns (and to the fullest extent permitted by law shall be deemed works made for hire), and the Company and its assigns shall be the sole owner of all patents, copyrights, trademarks, trade secrets, and any other rights in connection therewith. I hereby assign to the Company any rights that I may have or will acquire in such Inventions.  I agree to assign in the future (when any such Inventions are first reduced to practice or first fixed in a tangible medium, as applicable) to the Company, or to Client as directed by the Company, any rights that I may have or will acquire in such Inventions.  The provisions in this Section shall not apply to any of the inventions, improvements, ideas, technologies, products, product categories, or processes listed in Exhibit A.

e)           With respect to Inventions described in Section 3.d) above, I will assist the Company in every proper way (but at the Company‘s expense) to obtain and from time to time enforce patents, copyrights, trademarks, trade secrets, or other rights in said Inventions in any and all countries, and will execute all documents reasonably necessary or appropriate for this purpose. This obligation shall survive the termination of my employment as a consultant.  In the event, after reasonable efforts to do so, the Company is unable for any reason whatsoever to secure my signature to any document reasonably necessary or appropriate to meet time-sensitive filing requirements for any of the foregoing purposes, (including renewals, extensions, continuations, divisions or continuations in part), I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents, as my agents and attorneys-in-fact to act for and in my behalf and instead of me, but only for the purpose of executing and filing any such document and doing all other lawfully permitted acts to accomplish the foregoing purposes with the same legal force and effect as if executed by me. The grant in the preceding sentence is made to assure timely compliance with applicable requirements and shall in no way be used or construed to prejudice me in the assertion of  my rights in the subject Inventions against the Company.

f)           So that the Company may be aware of the extent of any other demands upon my time and attention, I will disclose to the Company (such disclosure to be held in confidence by the Company) the nature and scope of any other business activity in which I am or become engaged during the term of my employment as a consultant. During the term of my employment as a consultant, I will not engage in any business activity which is related to the Company’s business or its actual or demonstrably anticipated research and development. A current list of my other activities that are approved by the Company is attached as Exhibit B.

g)           During my employment by the Company and for a period of one (1) year thereafter,  I agree not to solicit or induce any consultants of or other people hired by the Company to work for another employer. I also will not assist in the hiring or attempted hiring of any such person by another employer during this period nor will I encourage any such person to terminate his employment or other relationship with the Company.  The foregoing restrictions shall not apply in the event that I become an employee of Client and such activities are expressly permitted pursuant to the terms of the agreement between the Company and Client.

4.           As a matter of record I attach hereto a complete list of all inventions or improvements relevant to the subject matter of my employment as a consultant by the Company and which have been made or conceived or first reduced to practice by me, alone or jointly with others, prior to my employment as a consultant with the Company (“Prior Inventions”), and I covenant that such list is complete.  If I incorporate a Prior Invention into a Company product, process or machine, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, modify, use and sell such Prior Inventions.  I hereby agree, that, in the event that I incorporate a Prior Invention into a Company product, process or machine, that (a) such incorporation shall not result in a breach or violation of any confidentiality agreement by which I am bound, and (b) such incorporation shall not infringe the right(s) of any third party. Notwithstanding the foregoing, I agree that I will not incorporate, or permit to be incorporated, Prior Inventions in any Inventions without the Company’s prior written consent.

5.           I represent that my execution of this Agreement, my employment as a consultant with the Company and my performance of my proposed duties to the Company in the development of its business will not violate any obligations I may have to any former employer or third parties, including any obligations to keep confidential any proprietary or confidential information of any such employer. I have not entered into, and I will not enter into, any agreement which conflicts with or would, if performed by me, cause me to breach this Agreement.

6.           In the course of performing my duties to the Company, I will not utilize any proprietary or confidential information of any former employer or third parties.

7.           This Agreement does not affect the period that I will be retained as a consultant, which is governed by a consulting agreement between the Company and me.

8.           This Agreement shall be effective as of the first day of my employment as a consultant by the Company, shall be binding upon me, my heirs, executors, assigns and administrators and shall inure to the benefit of the Company, its successors and assigns.

9.           Unless otherwise agreed between the Company and Client in writing, in the event that ownership and control of Ness Global Services, Inc.’s India Extended Development Center (EDC), which is where I will perform services on behalf of Client, shall be transferred to Client, I hereby agree to remain with the EDC and become an employee of Client, at Client’s discretion, upon such transfer.

10.  I agree that for the term of my employment with the Company and for one (1) year after termination, or for a period of one (1) year after transfer of the EDC to Client, whichever is later, I will not directly or indirectly represent, be employed by, consult for or otherwise be associated with Client’s “Competition” (including, but not limited to Siebel and Epiphany) in the same capacity for which the Company is providing services to Client.   I will not perform any work for Client’s Competition in the same physical facilities as services are performed for Client. I shall notify Client if I provide any services to Competition or engage in any activities or business relations with Client’s Competition.

11.  Because my services are personal and unique and because I may have access to and become acquainted with  Proprietary Information, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement.

12.  This Agreement shall be governed by and construed in accordance with the laws of the India.  If any provision of this Agreement is found by a court of competent jurisdiction to be unenforceable for any reason, the remainder of this Agreement shall continue in full force and effect.  If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.  The prevailing party in any action to enforce this Agreement will be entitled to recover its reasonable attorney’s fees and costs in connection with such action.

Accepted and Agreed to by Consultant:

Signature

Print name

Address

City/State/Zip

Date

Accepted and Agreed by Company:

Signature

Print name

Title

Date

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

EXHIBIT A:  LIST OF INVENTIONS

1.The following is a complete list of all inventions or improvements relevant to the subject matter of my employment as a consultant by Company that have been made or conceived or first reduced to practice by me, alone or jointly with others, prior to my employment by Company that I desire to remove from the operation of the Company’s Proprietary Information and Inventions Agreement.

(Check One)

No inventions or improvements.

See below: Any and all inventions regarding

______________________________________

______________________________________

______________________________________

Additional sheets attached. (Exhibit A)

2.I propose to bring to my employment the following materials and documents of a former employer:

(Check if applicable)

______________________________________

______________________________________

______________________________________

______________________________________

No materials or documents.

Consultant signature

Date

EXHIBIT B:  CONSULTANT’S OTHER ACTIVITIES APPROVED BY COMPANY

Exhibit 6

Governance

1.   Introduction.

This Exhibit sets out the Governance structure for the Agreement; the roles and responsibilities of both Parties to maintain a working relationship; and the type, content and frequency of the review meetings that will be held.

2.Steering Committee.  Prior to the Effective Date, Chordiant and Supplier will establish a Steering Committee, consisting of both Chordiant and Supplier executives.  The names and/or titles of the representatives serving on the initial Steering Committee are listed in Attachment 6-A (Committee Membership) to this Exhibit.  The Steering Committee will have executive management responsibility for the Agreement and for the relationship between the Parties.

2.1Steering Committee Members.  The Steering Committee shall be co-chaired by the Chordiant SVP W/W Engineering and Supplier’s EVP Managed Labs and will be comprised as follows:

(a)Chordiant

(i)SVP W/W Engineering

(ii)Chordiant EDC Program Director

(iii)Head W/W Support

(b)Supplier

(i)Executive Vice President, Managed Labs

(ii)Vice President, Global Delivery

(iii)Chief Delivery Officer (CDO)

(iv)Chordiant-India-EDC Program Manager

2.2Key Responsibilities.  The responsibilities of the Steering Committee include, but are not limited to:

(a)Discuss staffing levels (quarterly);

(b)Approve special recognition awards, variable compensation or bonuses for EDC Personnel;

(c)Modify balance of resource skill level mix;

(d)Review actual performance against Service Levels; and

(e)Review and approve modifications to Service Levels.

2.3Meetings.  The frequency and manner of Steering Committee meetings shall be as follows:

(a)One (1) meeting per week during the first calendar quarter of the Term, with at least one (1) such meeting to be held in-person at a Chordiant Location.

(b)One (1) meeting per month after the first calendar quarter of the Term during the remainder of the first calendar year of the Term, with at least one (1) meeting per calendar quarter to be held in-person, at alternating sites.

(c)After the first calendar year of the Term, at least one (1) meeting per calendar quarter.

2.4Reports.  The Chordiant EDC Program Director and the Chordiant-India-EDC Program Manager will be responsible for preparing the minutes of each Steering Committee meeting for the review and approval of the full Steering Committee at its next meeting.

3.Program Managers.  Prior to the Effective Date, Chordiant and Supplier will appoint Program Managers.  The names and/or titles of the representatives serving as Program Managers are listed in Attachment 6-A (Committee Membership) to this Exhibit.  The Program Managers will be responsible for the day-to-day oversight of the EDC, with their specific roles and responsibilities to be further defined by the Parties during the transition planning conducted during the Transition Period.

3.1Key Responsibilities.  The responsibilities of the Program Managers include, but are not limited to:

(a)Recommend special recognition awards, variable compensation or bonuses for EDC Personnel;

(b)Determine operating procedures for daily data back-up;

(c)Agreement upon facility access control to the EDC;

(d)Review Service Level performance (monthly) and propose revisions to Steering Committee;

(e)Discuss Service Level failures by Supplier;

(f)Monitor and validate headcount assumptions;

(g)Preparing “Dashboard” reports for review by the Steering Committee; and

(h)Such other responsibilities as will be defined by the Parties during transition planning.

3.2Meetings. Program Managers shall hold at least one (1) meeting per week during the Term or with higher frequency as appropriate or requested by Chordiant.  Meetings of the Program Managers shall be held in such manner as the Program Managers determine.

3.3Reports.  The Program Managers shall be responsible for preparing “Dashboard” reports in the format set forth in Exhibit 9 (Reports, Section 2), which shall be submitted on a monthly basis to the Steering Committee.

4.Policies and Procedures Manual.  The Policies and Procedures Manual will provide comprehensive documentation of the procedures that will be followed by Supplier to implement and manage the EDC.  The responsibilities of Supplier and Chordiant will be clearly indicated within the document (including specific responsibilities by job title or function).  The manual will be used jointly by the Parties to assist with overall coordination and communication regarding the Agreement.  During the Transition Period, Supplier and Chordiant shall jointly develop and approve the Policies and Procedures Manual including, at a minimum, the content indicated in Attachment 6-B (Policies and Procedures Manual Content) to this Exhibit.

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

Attachment 6-A

Steering Committee Membership

1.   Steering Committee Members

1.1Chordiant:

Title	Name	Contact Information
[ * ]

1.2Supplier:

Title	Name	Contact Information
[ * ]

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

Attachment 6-B

Policies & Procedures Manual Content

1.   Introduction.  This document describes in summary the general content and organization of the Policies and Procedures Manual that will be developed by Supplier and Chordiant during the Transition Period to support Governance of the Agreement.

2.Topics.  The Policies and Procedure Manual will cover the topics identified below, as well as any additional content as may be agreed upon by the Parties during the Supplier/Chordiant planning sessions held during the Transition Period:

§   Procedures for setting priorities regarding scheduling the performance of Services;

§   Reporting frequency;

§   Meetings, frequency;

§   Change Control Procedures; and

§   the topics identified in the table below:

Content	Brief Description
ORGANIZATIONAL OVERVIEW
1.Chordiant Governance Organization.	Include organization charts, description of functions performed, contact information.
2.Supplier Management Organization	Include organization charts, description of functions performed, contact information.
3.Key Contacts – Chordiant	A list of contacts within Chordiant that perform a liaison function in regard to the Services (by business unit, by geography).
4.Key Contacts – Supplier	A list of the Supplier employee key contacts (name, contact number, e-mail address, etc.)
PERFORMANCE MANAGEMENT PROCEDURES	Ongoing, “steady state” procedures and policies; content below shall include information on coordination activities, responsibilities of each party (by title / function).
1.Performance Monitoring and Reporting Procedures (by Line of Business, as applicable)	Supplier and Chordiant to describe procedures it will use to verify proper Service delivery on a day-to-day basis, including internal reporting and reporting to Chordiant.
2.Problem Management and Escalation Procedures (by Line of Business, as applicable)	Supplier and Chordiant to describe procedures it will use to identify problems, report and resolve problems, and escalate as necessary within Supplier organization and/or Chordiant.
3.Root Cause Analysis Procedures (by Line of Business, as applicable)	Supplier and Chordiant to describe procedures it will use to determine root cause of problems, including involvement of (and/or support to) Chordiant.
4.Service Level Measurement and Reporting Procedures	Supplier and Chordiant to describe procedures it will use to measure and report Service Levels to Chordiant.
5.Project Management Procedures	Supplier and Chordiant to describe the methodology and procedures it will use to manage and report on Projects.
6.Change Management – Operational and Technical Procedures	Supplier and Chordiant to describe the procedures it will use (including the notification process, timing, planning, authorization, and implementation) regarding changes to the operational and technical environment. Supplier will include responsibilities and authority of Chordiant.
7.Asset Management	Supplier and Chordiant to describe procedures for installing, tracking, and removing Equipment and Software assets.
8.Physical Access & Security Procedures	Supplier to describe the physical access and security procedures it will use.
9.Network Access & Security Procedures	Supplier to describe the network access and security procedures it will use.
10.Disaster Recovery and Business Continuity Procedures	Supplier and Chordiant to describe the procedures it will use in regard to Disaster Recovery and business continuity (Supplier may reference other documents containing comprehensive procedures, but should provide general overview within the Policies and Procedures Manual).
FINANCIAL MANAGEMENT PROCEDURES	Ongoing, “steady state” procedures and policies; content below shall include information on coordination activities, responsibilities of each party (by title / function).
1.Invoicing	Supplier and Chordiant to describe procedures for invoicing (and verification of invoice by Chordiant).  Content to include procedures for calculating Base Charges (per Line of Business, as applicable), invoicing of projects, etc.  Content to include procedures regarding disputed invoice amounts.
2.Performance Credits	Supplier and Chordiant to describe procedures for calculating Performance Credits on invoices.
CONTRACT MANAGEMENT PROCEDURES	Ongoing, “steady state” procedures and policies; content below shall include information on coordination activities, responsibilities of each party (by title / function)
1.Change Control Procedures	Supplier and Chordiant to describe procedures regarding Changes under the Agreement.  Content to include notification period and process, authority levels, and escalation procedures for Changes.
1.Reporting	Supplier and Chordiant to describe procedures and activities regarding key standard reports and requests for ad-hoc reports from Chordiant.
2.Benchmarking	Supplier and Chordiant to describe procedures for Benchmarking exercises, including determination and agreement of benchmark firm, sample peer group and process used for benchmark, payment for benchmark, review of results, and potential outcome.  Content should include dispute resolution process.
3.Auditing	Supplier and Chordiant to describe procedures for operational and/or financial audits.  Supplier to describe notification process and procedures to resolve audit findings.
4.Supplier Key Personnel	Supplier and Chordiant to describe procedures for Chordiant approval regarding replacement or removal of Key Personnel.
5.Dispute Resolution	Supplier and Chordiant to describe procedures regarding formal dispute resolution process.
RELATIONSHIP MANAGEMENT PROCEDURES	Ongoing, “steady state” procedures and policies; content below shall include information on coordination activities, responsibilities of each party (by title / function).
1.Customer Satisfaction Surveys	Supplier and Chordiant to describe the process to be used for conduct of customer satisfaction surveys.  Content should include procedures regarding action items and attempts to resolve customer issues.
2.Business Units	Supplier and Chordiant to describe procedures and responsibilities regarding the relationship between the Lines of Business, the Chordiant Governance organization, and the Supplier.  Content to include procedures regarding communication and coordination regarding Statements of Work, Service delivery issues, budgeting and financial issues, etc.
SUPPLIER OPERATIONAL PROCEDURES	Ongoing, “steady state” procedures and policies; content below shall include information on coordination activities, responsibilities of each party (by title / function).
1.Operational Procedures (by Line of Business, as applicable)	The activities that the Supplier proposes to undertake in order to provide the Services, including those directions, supervision, monitoring, staffing, reporting, planning and oversight activities normally undertaken by the Supplier which shall be consistent with those Supplier activities used to provide services similar to the Services.

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

Exhibit 7

Facility Locations & Standards

1.   Introduction.

This Exhibit describes the sites at which the Services are performed.

2.   Attachments.

Attachment 7-A                                           Chordiant Sites

Attachment 7-B                                           Supplier Site

Attachment 7-C                                           Dedicated Lab Standards

Attachment 7-D                                           Chordiant Affiliates

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 7-A

Chordiant Sites

Supplier EDC Personnel may be required to provide Services onsite at the following Chordiant locations, or such other locations as may be specified in an applicable Statement of Work.

[ * ]

Supplier personnel will comply with all Chordiant safety and security procedures when on-site at Chordiant facilities.  While at Chordiant facilities, Supplier will not perform any activities other than the Services for Chordiant.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 7-B

Supplier EDC Site

Supplier will provide a dedicated “Chordiant” facility in Bangalore India, which will be contained in a dedicated, secured area (card access capable of restricting access to individual employees) in Supplier’s building.  The EDC Site will be contained on a single floor (for initial resource level) and is to be furnished to Supplier’s standard.  Supplier’s standard should be in line with other comparable companies in Bangalore.

Supplier’s facility must have a permanently sustainable, autonomous power supply using diesel generators or alternative power generation with a minimum ten (10) day fuel supply on hand at all times.  In addition, all critical systems, including without limitation, computers, servers and the telephone system must be protected by minimum two (2) hour full UPS to prevent power loss during switch over to generators.

Supplier will implement industry standard access controls to EDC Site.  At a minimum, Supplier will control access using security-cards, exclusively limited to EDC Personnel and mutually agreed IT and services staff, and Supplier will implement second level of access to server rooms and other labs.

Without limiting the foregoing, Supplier will maintain and enforce at the EDC Site safety and security procedures that are at least equal to (a) industry standards for similar facilities, or (b) Chordiant’s procedures for similar facilities, or (c) the procedures agreed upon by the parties, whichever is most protective.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 7-C

Dedicated Lab Standards

1.   EDC Dedicated Laboratory

[ * 1 page of text omitted ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 7-D

Chordiant Affiliates

{To be updated by the Parties as applicable per Section 4.4(a) of the Agreement}

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 8

Infrastructure

1.   Introduction.

The following attachments list the minimum standard hardware, software and communications configurations to be provided by Supplier for the EDC.

2.   Attachments.

Attachment 8-A                                           Hardware Requirements

Attachment 8-B                                           Software Requirements

Attachment 8-C                                           Communications Requirements

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately w           ith the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 8-A

Hardware Requirements

Minimum Standard Hardware Configuration Provided by Supplier and Included in Standard Charge Rate

1.   Standard Desktops for all EDC Personnel.  Desktops should have a minimum of 1 GB of RAM memory, 50 GB of hard disc capacity and a Pentium IV CPU processor running at 1.2 GHz or faster.

2.   Supplier will provide an appropriate number of shared/networked printers, faxes, copiers and other business-essential peripherals for EDC Personnel.

3.   Per headcount of 25 EDC Personnel, the following servers will be provided by Supplier:

A.   1 X Sun E 250/280 server ( or IBM AIX equivalent) with Base+1 configuration, or 2 X Windows or equivalent.

B.   Incremental servers will be added as and when the headcount numbers increase in multiples of 25.

C.   During the resource ramp-up period (as defined in Exhibit 5) the supplier will provide servers at the following staff numbers:

i.   A server at the start of ramping the first 25 staff.

ii.   A server at the start of ramping the second 25 staff.

iii.   A server at the start of ramping the remaining staff.

4.   The E-mail (MS-Exchange) Local Server will be provided by Supplier for Chordiant-Supplier-EDC purposes at no additional cost to Chordiant.  Chordiant will assess the system configuration to ensure adequate performance footprint.

5.   All EDC hardware will be on a dedicated subnet(s).

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately w           ith the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 8-B

Software Requirements

A. Minimum Standard Software Configuration Provided by Vendor

1.   Standard Desktops for all EDC Personnel will include Windows XP, MS Office applications (Word, Excel, PowerPoint), Microsoft Project Office, and virus scan software.

2.   EDC Servers provided by Supplier will include default Operating System, default networking and systems management software, and virus scan software.

3.   Supplier will ensure appropriate software versions and patch levels are maintained as per Chordiant corporate standard

4.   Supplier will ensure license compliance for all workstations and servers provided under the Attachment 8-A.

5.   Supplier will provide EDC Intranet site providing online access to EDC Handbook, Policies and Procedures Manual, Plans, reports, product documentation including dashboards. EDC intranet site will be available to Chordiant employees as required.

6.   The E-mail (MS-Exchange) Local Server will be provided by Supplier for Chordiant-Supplier-EDC purposes.  Supplier will ensure sufficient licenses for the mail accounts.  Supplier will provide anti virus and anti-Spam software on the Exchange server as per Chordiant corporate standard.

B. Software Provided by Chordiant for use on Supplier-provided hardware defined in Exhibit 8, Attachment 8-A (Hardware Requirements)

1.   Chordiant-provided software will be installed and managed by EDC Personnel.

2.   Chordiant will supply Chordiant Development Environments comprising Database, Application Servers, Databases, development tools, access to Clearcase and Clearquest production systems for use on Supplier-provided desktops and servers.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately w           ith the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 8-C

Communications Requirements

[ * 2 pages of text omitted ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately w           ith the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 9

Reports

1.   General.  Supplier shall provide reports requested by Chordiant, including those reports listed in Section 3 below.  Supplier shall deliver all reports according to the format, content, and frequency specifications below (as may be amended by Chordiant from time to time).  It is expected that the reporting process will reflect the “best practice” used by the Supplier with other its other customers.

2.EDC Dashboard Report.  The key report will be the EDC Dashboard that reports on a broad range of areas including, but not limited too(all reports weekly unless stated otherwise):

[ * ]

3.Project Status Reports. Supplier will report the status of all projects assigned to the EDC under the applicable Lines of Business in a weekly Project Status Report (due each Friday by close of business Pacific time) substantially in the form attached to this Exhibit as Attachment 9-A (Project Status Report).

4.   Other Report Descriptions.

4.1Product Support Line of Business Reports.  As described in Exhibit 2.1 (Product Support Line of Business Description).

[ * 1 page of text omitted]

4.2Product Sustaining Line of Business Reports.  As described in Exhibit 2.2 (Product Sustaining Line of Business Description, Section 6).

[ * 2 pages of text omitted]

4.3Technical Stack Sustaining Line of Business Reports.

Report Name	Description	Frequency	Recipient(s)	Media
Project Status Report	See Attachment 9-A	Weekly	Chordiant Product Sustaining Manager	Softcopy

4.4Product Test Line of Business Reports.  As described in Exhibit 2.3 (Product Test Line of Business Description, Section 6).

[ * 1 page of text omitted]

4.5Development Line of Business Reports.  As described in Exhibit 2.4 (Development Line of Business Description, Section 6).

[ * ]

4.6Additional Supplier Reports.  During the Transition Period, the Parties will determine the nature of any additional regular reporting required from Supplier to Chordiant regarding the Services and update this Exhibit to indicate such reports in the following table.

Report Name Description Frequency Recipient(s) Media

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 9-A

Form of Project Status Report

Attachment to Exhibit 9 (Reports)

Chordiant                                                                                     

Project XXX Status Report

Current Project Phase:                                                                Execution

Current Report Date:                                                                14 November 2003

1. Milestones

1.1 Chordiant Life Cycle Milestones

	Original	Last Week	Current	Notes
Design Complete
Code Complete
Integration Complete
GA Release Candidate
Product Test Complete
Verification Complete
Platform Certification Complete
Master GA CD(s) Ready

1.2 Dependencies (Need Dates)

Dependencies should include items required from other teams in order to meet scheduled deliverables.

Dependency For Team From Team Need Date Dependency Description

1.3 Internal Project Milestones

In addition to the milestones listed below, Internal Project Milestones should include a listing of all key milestones noted in development, test and documentation project schedules (i.e. review docs, test builds, etc).  The time for all dates is assumed to be Close of Business (COB) unless stated otherwise.

[ * 2 pages of text omitted]

1.4 Milestones Delayed (new estimate + impact assessment)

[ * ]

1.5  Milestones Completed this week

[ * ]

1.6  Milestones Planned next week

[ * ]

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

2 Tasks

[ * 2 pages of text omitted]

2.2 Tasks Completed this week

[ * ]

2.3 Tasks Planned next week

[ * ]

3 Unplanned Activities

[ * ]

4 Issues

[ * 1 page of text omitted]

5 Other

6 Release Criteria (not enhancement based)

·   0 Severity 1’s

·   0 Priority 1’s assigned for Release 5.6

 (includes Assigned, Need_Info, Opened, Submitted and Under_Review state defects)

Criteria	03 Oct 2003	10 Oct 2003	17 Oct 2003	24 Oct 2003	31Oct 2003	7 Nov 2003	14 Nov 2003
P 1/Sev x: Assigned/with Postponed
Sev 1/not P1: Assigned/with Postponed
Sev 2/not P1: Assigned/with Postponed
Sev 3/not P1: Assigned/with Postponed
Sev 4/not P1: Assigned/with Postponed
5.5 Backlog Bugs Fixed
Overall
Defect  Data (cc: EngDocs\Product_Releases\ FSCTP_5.6_Defect Reporting
Overall with enhancements

7 Staffing And Project Statistics

	Last Week (reporting week)		Current Week	Next Week	Week +1	Notes
Staff	Planned	Actual	Plan	Plan	Plan
Design
Development
Product Test
Platform certification
Tech Comm

If time planned is different than actual, the difference should be recorded in the table below:

Staff  Support Notes (Customer or Issue)

For execute phase prior to code complete, include the project tracking graph here.

[ * ]

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 10

Customer Satisfaction Surveys

1.   Introduction.

This Exhibit describes the Supplier’s obligations related to Customer Satisfaction Surveys.

2.General Requirements.  During the Transition Period, Supplier and Chordiant will mutually agree upon the nature of the Customer Satisfaction Surveys to be conducted.  Supplier in all its reasonable capacity will cooperate with Chordiant or its affiliates in the Customer Satisfaction Survey process.  Any time spent by EDC Personnel in connection with the Customer Satisfaction Survey process, as approved by Chordiant, will be included within the Base Charges for the applicable Line of Business.

3.   Sample Survey.

Attachment 10-A:  Sample Customer Survey.  The sample survey contained in the Attachment will serve as the basis for the typical point of service satisfaction measurements required by Chordiant from the Customer Satisfaction Surveys conducted by Supplier during the Term.

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

ATTACHMENT 10-A

SAMPLE CUSTOMER SURVEY

PLEASE COMPLETE AND RETURN BY 29 APRIL 2002

CUSTOMER INFORMATION

Your Organisation:

Your Name:

Your Primary Role                                           c           Overall responsibility for Chordiant

c                 Functional owner

c                 IT/System owner

c                 Project manager for implementation

c                 Other – please specify……………………………………………

Introduction

Thank you for agreeing to complete this questionnaire. Completion should take no more than 15 minutes. We believe passionately in placing the customer first and serving the customer agenda. This questionnaire has the objective of supporting these beliefs and helping us deliver a service that reflects our own internal value of Customer Obsession.

Your views are important to us and will be used as input to our Customer First Programme.  This is the second survey and we really appreciate the contribution that many of you made to the last survey.  We implemented many changes based on the suggestions you made. The Executive Team will similarly review the results from this survey.  Be assured that specific actions will be taken based on your feedback and Chordiant Software commits to communicating back to you progress made against these actions.

Questionnaire

Each area contains a number of multiple-choice questions; please mark your selected answer with a tick in the relevant box.  If you have any queries about the form or its completion please contact Colin Stares our [ * ].  They will be pleased to assist you.  Please post or fax the completed questionnaire to Colin Stares.

Information provided will only be used to help us improve our service to our customers.  No sales or marketing activity will be initiated based on your responses unless you give us your permission to do so. Your participation will not be publicised to anyone outside of Chordiant Software.

Thank you for your participation in this pilot survey.  As a token of our appreciation we will draw one name from the UK respondents and one from the US respondents to receive a bottle of quality champagne.  We will send all participants a summary of the key findings of the full survey, together with a list of the prize-winners.  Further details of the prize draw have been enclosed with the pack issued to you.

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

OVERALL SATISFACTION

1.   How satisfied are you overall with Chordiant as a company?

Very satisfied                                           c

Satisfied                                c

Neutral                                           c

Slightly Dissatisfied                                           c

Very Dissatisfied                                c

2.   How satisfied are you with the Chordiant products you use?

Very satisfied                                           c

Satisfied                                c

Neutral                                           c

Slightly Dissatisfied                                           c

Very Dissatisfied                                c

3.   Why?

………………………………………………………………………………………………………………………………

………………………………………………………………………………………………………………………………

………………………………………………………………………………………………………………………………

……………………………………………………………………………………………………………………………..

Business Features & Usability of Chordiant Software Products

[ * 1 page of text omitted]

Implementation

[ * 1 page of text omitted]

Post Implementation Support

[ * 2 pages of text omitted]

Training

[ * 1 page of text omitted]

Our Relationship with You

[ * 5 pages of text omitted]

LIVING WITH THE CHORDIANT PRODUCT

[ * 2 pages of text omitted ]

FINAL QUESTIONS

[ * 2 pages of text omitted]

Thank you for your help in completing this questionnaire.  Your views are invaluable to us.  Please post or fax the completed questionnaire to:

[ * ]

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 11

Disaster Recovery Plan

As soon as possible, but no later than within the first ninety (90) days of the Term, the Parties shall create and agree to the Disaster Recovery Plan, which shall be set forth in this Exhibit 11.

1.Topics.  The Disaster Recovery Plan will include the following topics, as applicable.

2.Backup-Recovery Implementation Approach.  The Supplier’s approach to backup-recovery to be implemented for the EDC will include the following:

JOINT PLANNING

§   Identification of scope of backup (Work items, data etc.), Frequency

§   Identify Backup infrastructure (Servers, Software required)

§   Documentation of Backup/Restoration procedures, including testing

SETUP

§   Procurement of necessary Hardware, Software

§   Backup infrastructure setup

§   Testing as per the documentation

OPERATIONAL PROCEDURE

As a standard operating procedure, Ness Project-Admin and IT staff conduct a daily/weekly backup schedule both on media and on network (often times clients also conduct a similar schedule on their side – specially easy with distributed ClearCase). Such backup media are kept in fireproof, secured cabinets on both on-site and off-site facilities. Ness runs a surprise drill (to restore the data) once a month, just to check the sanity and workability of such backups/process.

In summary:

§   Daily Tape backup in India (EDC)

§   Incremental weekly Tape backup (kept offsite and in fireproof location)

§   Ship the backups to alternate site, NESS Mumbai (2-4 weeks backups available at anytime)

§   Backup Data to be sent/synced up with Chordiant (Program Managers to decide operating procedure)

§   Restoration drill on a monthly/quarterly basis as per the documented procedure

§   Conduct root-cause analysis and make the necessary amendments to the preventive procedures.

§   Active relationship is maintained with local hardware vendors – SUN, Dell, IBM to help in recovery procedures on a need basis. Chordiant would need to facilitate the same.

Practices

RESPONSIBILITY MATRIX

S.No	Event	Responsibility	Dependencies
1	Backup Infrastructure Planning	IT Coordinator – Chordiant-EDC, IT Coordinator – Chordiant, EDC Program Manager, Chordiant Program Manager
2	Documentation of Restoration procedures	IT Coordinator – Chordiant-EDC
3	Backup Infrastructure Setup	IT Coordinator – Chordiant-EDC, IT Coordinator – Chordiant
4	Backup of Data	IT Coordinator – Chordiant-EDC
5	Restoration of data from Back Up	IT Coordinator – Chordiant-EDC
6	Loss of Data event escalation	Program Manager – Chordiant EDC

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 12

Security

4.   Introduction.

This Exhibit sets forth the requirements that must be met by Supplier with regard to physical and data security procedures.

5.   Attachments.

Attachment 12-A                                           Data Security

Attachment 12-B                                           Physical Security

Attachment 12-C                                           Terms for EU Directive on Data Protection

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and           filed           separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 12-A

Data Security

1.   Secure Procedures for Handling Confidential Information.

1.1Designated Facility.  Supplier shall access Chordiant’s software only on a Secure Computer System (as defined below) at Supplier’s dedicated physical facility for the Chordiant EDC (the “EDC Site”).

1.2Authorized Employees.  Supplier will ensure that all EDC Personnel receive the following notice of confidentiality before they receive access to Confidential Information:

“Employee has previously signed an agreement with {name of Supplier} pursuant to which Employee has agreed to maintain the confidentiality of confidential information of {name of Supplier} and other parties and to use the confidential information solely for the benefit of {name of Supplier}.  The purpose of this notice is to apprise Employee that {name of Supplier} will be receiving certain proprietary information of Chordiant, all of which is of a confidential nature and which contains information that Chordiant considers valuable trade secrets and proprietary know-how of Chordiant (the “Confidential Information”) and which constitutes Confidential Information under Employee’s agreement with {name of Supplier}.

This is to inform Employee that the Confidential Information cannot be used for any purpose except for performing services for Chordiant, and that Employee is not authorized to disclose the Confidential Information to any person at any time except to employees of Chordiant and to those authorized employees which {name of Supplier} informs Employee are authorized to receive such Confidential Information.

All documents and materials furnished to Employee by {name of Supplier} or Chordiant or created by Employee in connection with Employee’s use or evaluation of the Confidential Information remain the property of Chordiant and must be returned to Chordiant promptly at its request.”

Supplier agrees that any breach by any EDC Personnel of his or her obligations under such confidentiality agreements with respect to any Confidential Information protected by this Agreement will also constitute a breach by Supplier of this Agreement.

1.3No Commingling Of Technology.  Supplier shall ensure that there is no use of the Confidential Information in the development of any products or software by Supplier except in connection with the Services.  In furtherance of this requirement, Supplier shall ensure that there is no (a) disclosure of any Confidential Information or other information based upon or derived from the Confidential Information to any participant in any development project outside the Services; or (b) participation in development of any product or software similar in features or functions to Chordiant’s software (“Similar Products”) by any person with access to such Confidential Information.  Supplier shall ensure that all EDC Personnel who have had previous access to Confidential Information will be precluded for a period of twelve (12) months after their latest access to such Confidential Information from being employed in any development of Similar Products (either internally or externally) by or for Supplier.  “Employment in the development of Similar Products” means having direct access to, or producing any specifications, documentation, or source code for, components of a Similar Product.  Supplier shall further ensure that each such employee signs, before beginning work on any Similar Product within Supplier, a written affirmation to Supplier on a form provided by Supplier which states that the employee (i) has neither retained nor had access for a minimum period of twelve (12) months to any Confidential Information, and (ii) will not utilize, or facilitate use of, any Confidential Information in such development.

1.4Certification.  At Chordiant’s request Supplier will provide Chordiant with written certification by an officer of Supplier of Supplier’s compliance with its obligations under this Section 1.

1.5Inspections.  Upon reasonable advance written notice from Chordiant to Supplier, an independent auditor selected by Chordiant may inspect Supplier’s records and premises to allow Chordiant to determine whether Supplier has complied with this Section.  Such inspections will be conducted (a) during Supplier’s regular business hours, (b) in a manner such that, to the extent possible, Supplier’s regular business activities are minimally disrupted, and (c) under the terms of an appropriate confidentiality agreement executed by firm conducting the inspection.  If Chordiant determines, after receiving the inspector’s report at the conclusion of the inspection, that Supplier has not complied with its obligations with respect to handling Confidential Information as set forth under this Section 1, Supplier shall pay the costs of the inspection (including the fees and expenses of the firm that conducted the inspection).  Otherwise, Chordiant will pay the costs of the inspection.  Supplier shall immediately correct any breaches or non-compliance discovered in the course of the inspection (in addition to all other rights and remedies of Chordiant arising from or relating to such breaches or non-compliances).

2.   Secure EDC Computer Environment

2.1Definition.  All computer systems within the EDC, including Supplier-provided personal workstations and servers defined in Attachment 8-A and all computer systems provided by Chordiant, will be used to hold and access Chordiant Source Code and design documentation.  Therefore the entire EDC computer infrastructure is must be maintained by Supplier as a “Secure EDC Computer Environment.”  Such Secure EDC Computer Environment must consist of an isolated network (subnet or subnets) containing all EDC computer systems.  The Secure EDC Computer Environment will be housed in a secure portion of the EDC Site according to the provisions set forth below.

2.2Site Security Provisions.

(a)The entire EDC Secure Computer Environment must be located in a confined area at the EDC Site that is accessible only to persons authorized under Section 2.3 below.

(b)Regular access to the secured area must be limited to EDC Personnel and the designated Supplier Systems and Security Administrator (“SSA”) for the EDC.

(c)Restricted access to the secured area by other individuals will be allowed but such individuals must be approved by the SSA and must be limited to maintenance, housekeeping, management, and similar activities.

(d)The EDC Secure Computer Environment must be governed by a security policy established by the SSA as submitted to, and approved in writing by, Chordiant’s Program Manager (the “Security Policy for Handling Source Code”).  The Security Policy for Handling Source Code must govern the ingress and egress of all materials and equipment including computer hardware and software, documents, notebooks, manuals, listings, furniture, supplies, media (including magnetic and optical diskettes, cartridges and tapes).  Removal of any materials from this secured area will be absolutely controlled by the SSA so as to prevent removal of the Confidential Information, or any partial or modified portion thereof, from the secured area except as specified herein or in the Security Policy for Handling Source Code.  Supplier will not change the approved Security Policy for Handling Source Code without the express prior written consent of Chordiant.

(e)The EDC Secure Computer Environment must not be remotely accessible (e.g., by telecommunications) except through the secure communications link established between the EDC and Chordiant or as otherwise expressly provided in the Security Policy for Handling Source Code.

(f)All copies and partial copies in any form including all hard copy printouts of Confidential Information supplied to Supplier by Chordiant or created by Supplier must be retained exclusively within the EDC Site.

2.3EDC Secure Computer Environment Security Provisions.

(a)Access to Chordiant software within the EDC Secure Computer Environment must be limited to (a) EDC Personnel and (b) the SSA for the purpose of system maintenance and backups.

(b)All such individuals must have signed a confidentiality agreement.

(c)Access to the EDC Secure Computer Environment must be controlled by password identification and will be permission and policy based.  Passwords must be issued and controlled by the SSA.

(d)Backups of Chordiant software must be administered by the SSA and must be securely archived within the controlled access site containing the EDC Secure Computer Environment or at a site approved in writing by Chordiant.  All backup tapes containing Confidential Information must be labeled “{Supplier} Confidential” and must be subject to Supplier’s maximum security measures.  Network system maintenance must be conducted under the supervision of the SSA by EDC Personnel.

(e)Confidential Information delivered to Supplier must be transported to the Supplier SSA by one of the following methods:  (i) on magnetic media by a mutually agreed upon carrier, or (ii) transmitted by the approved secure communications link established between the EDC and Chordiant.

(f)Any hardware used in the EDC Secure Computer Environment may be removed from the EDC Site only if any persistent storage capacity has been erased or reformatted with the effect of erasing any data contained therein.

2.4Backup of Supplier-Provided Systems.  Supplier will provide backups of Supplier-supplied systems at no additional cost to Chordiant and as follows:

(a)Daily incremental back-up of all systems.

(b)Weekly back-up (kept off-site and in fireproof location).

(c)Back-up Data to be sent/synced up with Chordiant on daily basis.  (Program Managers to decide upon operating procedure)

2.5Backup of Chordiant-Supplied Systems.

(a)The NAS system installed in the dedicated EDC Lab will provide high availability and fault tolerant storage and will provide first level of data security.

(b)Production Systems for Clearcase, Clearquest and Case tracking are all multi-site implementations and will be synchronized with Chordiant -based systems at least once per hour providing continuous backup of Source Code and key operational data.

(c)Local tape backup will also be carried out as defined by Chordiant and Supplier Program Managers.  The backup process will be carried out by the Supplier as part of the Shared Common Services it provides as set forth on Exhibit 13.

2.6Responsibility.  The EDC Manager will be responsible for ensuring the EDC backup processes defined in Sections 2.4 and 2.5 above are implemented.

2.7Audits.  Chordiant IT will have the right to perform periodic audits to verify that the data security processes set forth in this Section 2 are being implemented.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and           filed           separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 12-B

Physical Security

o   Facilities/Physical Controls

ü   Security Force manually guards the premises at all times.

ü   All perimeter doors are equipped with strong and effective locks.

ü   Fire escape entrances are properly secured.

o   Fire/Safety

ü   The building has round-the-clock security.

ü   Access to Alarm system is restricted to a minimum of key personnel.

ü   Heat sensitive sprinklers are located in all areas of the building.

ü   Fire extinguishers are located throughout the building with proper signage for identification.

ü   The extinguishers are inspected on a periodic basis.

ü   Heat/Smoke detection system is in place.

ü   Fire exits are clearly identified by signage.

ü   Fire drills are conducted on a periodic basis.

ü   Security guard force is in place with documented processes and procedures.

o   Employees/Visitors Access

ü   Employees are required to show proper company identification (badge with ID) to gain entrance to the building.  Employee identification must be visible at all times.

ü   All employees enter/exit the facility via the secured access.

ü   All visitors on a daily basis are required to be identified in a log that documents name, person visited, time in and time out.

ü   Visitors are required to wear badges and badge process is in place to ensure that badges cannot be retained in an unauthorized manner.

ü   The Card Access system records individual personnel entrance and exit times in an audit trail that is retained and reviewed regularly.

ü   Inspection of incoming and outgoing packages (e.g., bags, briefcases, boxes, etc.) is conducted on a random basis.

o   General Procedures

ü   Documented procedures and tracking are in place for approving access requests to secured/restricted areas of the building.

ü   Security and Emergency procedures are defined, documented, and distributed to all employees.

ü   A disposition strategy is in place and documented which includes: sensitive trash, electronic media, and volatile or hazardous materials.

ü   Client information is protected from unauthorized disclosure and not divulged without expressed approval.

ü   All personnel are required to attend an annual security awareness briefing.

ü   All personnel are required to sign a statement acknowledging their awareness and acceptance of responsibility for the security and integrity of Client information assets.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and           filed           separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 12-C

Terms for EU Directive on Data Protection

1.   Definition and Interpretation

1.1   Throughout this Attachment 12-C to Exhibit 12 of the Master Services Agreement (the “Agreement”) between the Parties, the following words and phrases shall bear the following meanings:

“Confidential Information” means all:

(a)   Chordiant’s Personal Data; and

(b)   any other information, data, drawings, graphics, experience, trade secrets, know-how, samples, devices or demonstrations relating to the business of Chordiant

which is directly or indirectly disclosed to Supplier by Chordiant or any person authorised by Chordiant for this purpose whether orally or in writing and whether before, on or after the date of the Agreement or which is otherwise directly or indirectly acquired by Supplier from Chordiant or any person authorised by Chordiant for this purpose, and shall include, without limitation, information, data or research relating to Chordiant’s services, products, suppliers, customers, business plans and financial situation and any notes, memoranda, summaries, analyses, data, compilations or any other writings relating thereto prepared by Supplier or on its behalf;

“Chordiant’s Personal Data” means Personal Data in relation to which Chordiant is the Data Controller of;

“DPA” means the Data Protection Act 1998 and all regulations and orders made pursuant thereto as the same may from time to time be modified, replaced, re-enacted or consolidated in so far as such modification, replacement, re-enactment or consolidation applies or is capable of applying to any action and/or transaction entered into pursuant to the Agreement;

“Data” shall have the meaning set out in the DPA;

“Data Controller” shall have the meaning set out in the DPA;

“Effective Date” means the date Supplier first Processed any Chordiant’s Personal Data;

“Personal Data” shall have the meaning set out in the DPA; and

“Processing” shall have the respective meaning set out in the DPA and the term “Processed” shall be construed accordingly.

1.2   The Annex to this Exhibit shall be considered part of this Exhibit and any reference to this Exhibit shall include the Annex.

2.   Contracts for Processing

2.1   Supplier agrees to undertake processing of Chordiant’s Personal Data for Chordiant from time to time upon the terms of this Exhibit.

2.2   Supplier will process Chordiant’s Personal Data only on, and in accordance with, the instructions of Chordiant.

2.3   Supplier agrees that it will co-operate with Chordiant to enable Chordiant to monitor compliance by Supplier with its obligations under this Exhibit and in particular that Chordiant shall on giving reasonable prior notice to Supplier have access to any premises of Supplier where Processing of Chordiant’s Personal Data is being carried out for the purposes of the Agreement and this Exhibit.

2.4   Supplier will implement any change to its Processing operations that is identified by Chordiant as being necessary for Supplier to comply with its obligations in this Exhibit.

4.           DPA

4.1   Supplier shall, and shall procure that sub-contractors that it uses to Process Chordiant’s Personal Data shall, comply with the DPA, and in particular Supplier shall comply with obligations equivalent to those imposed on Chordiant by the Seventh Data Protection Principle set out in the DPA, in connection with the subject matter of this Exhibit.

4.2   Without prejudice to the generality of Clause 4.1, Supplier will:

4.2.1   take all reasonable steps (including the development of password and other security systems) with a view to ensuring that only directors and employees of Supplier who are engaged in the Processing of Chordiant’s Personal Data will have access to Chordiant’s Personal Data;

4.2.2   keep in safe custody all documentation, tapes, discs and other media used to record or store Chordiant’s Personal Data and other Confidential Information;

4.2.3   issue to all directors and employees who have access to Chordiant’s Personal Data or other Confidential Information a regulation in the form included in the Annex to this Exhibit or in such other form as the parties may from time to time agree.  In the event of any director or employee breaching the terms of the regulation Supplier will invoke its internal disciplinary procedures and will advise Chordiant of the action taken;

4.2.3   not, without the prior written consent of Chordiant, divulge Chordiant’s Personal Data or other Confidential Information to any person, firm or company other than its directors and employees who have been issued with the regulation included in the Annex to this Exhibit and who have agreed to comply with such regulation and the obligations of confidentiality imposed on Supplier hereunder or make any use of it except only as has been agreed in writing between the Parties.

4.3   Supplier warrants to Chordiant that it will not do or omit to do anything which would cause Chordiant to be in breach of the DPA.

4.4   All Chordiant’s Personal Data Processed by Supplier on behalf of Chordiant shall belong to Chordiant and shall form part of Chordiant’s Personal Data.

5.   Return of Confidential Information

Upon Chordiant’s request at any time and/or on termination of the Agreement for any reason Supplier shall transfer to Chordiant or a third party nominated by Chordiant without charge or delay:

5.1           any and all property belonging to Chordiant; and

5.2 any and all Chordiant’s Personal Data and any other Confidential Information, customer or other records, documents, stationery, computer discs, marketing and sales literature, and statistics which have been supplied to Supplier by Chordiant or generated or processed by Supplier pursuant to the Agreement (and all copies and reproductions thereof);

and will not retain any copies, extracts and analysis and reproductions in whole or in part of such material except where and for so long as such Confidential Information, records or documentation are required to be kept by Supplier for statutory or regulatory requirements.

6.           Confidentiality

6.1 Supplier undertakes subject to Clause 6.2 below, that it will not without Chordiant’s express prior written consent:

6.1.1 disclose any Confidential Information to any other third party including for the purpose of communication (by whatever means) any advertising or marketing material which is directed to particular individuals, or otherwise for the promotion of any trade or business of any party; or

6.1.2 use any Confidential Information for any purpose other than the purpose of carrying out its obligations under the Agreement; or

6.1.3 copy, reproduce, divulge, publish or circulate (or authorize or permit anyone else to copy, reproduce, divulge, publish or circulate) any of the Confidential Information.

6.2 The restrictions on use and disclosure set out in this Exhibit shall not apply to any Confidential Information which:

6.2.1 at the date of its disclosure by Chordiant is in the public domain or which subsequently enters the public domain other than through unauthorized disclosure by Supplier;

6.2.2 was in Supplier’s possession prior to the time of its disclosure by Chordiant to Supplier;

6.2.3 was received by Supplier from a third party which is lawfully in possession of such Confidential Information and is not in breach of any obligation to Chordiant; or

6.2.4           is required to be disclosed by Supplier by applicable law, regulation or court order in which event Supplier shall promptly notify Chordiant of the requirement for such disclosure and co-operate through all reasonable and legal means in any attempts by Chordiant to prevent or otherwise restrict disclosure of such Confidential Information.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and           filed           separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

ANNEX

Confidentiality Regulation

Data Protection Act 1998

You are reminded that information held by this company about individuals (for example, customers contacts, suppliers and fellow employees) is confidential to this company and is likely to be regulated by the Data Protection Act (DPA).  This means that it should only be used for the legitimate purposes of this company’s business.  Such information must not be used for any other purpose or disclosed to anyone not authorised to receive it.

In addition staff may from time to time in the course of their duties have access to similar information held by other companies (for example because this company is processing information on behalf of such other companies) or other confidential information relating to such other companies and their products and processes.  Staff must not access, use, process or disclose any such information except for the legitimate purposes of the other company’s business and in accordance with this company’s specific instructions.

Failure to comply with the DPA may result in criminal offences being committed by this company and/or the employee responsible.  Breach of the DPA will also constitute a disciplinary offence which may result in suspension or dismissal.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and           filed           separately           with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 13

Shared Common Services

Supplier will provide shared common services for EDC purposes, including, for example:

§   Quality Assurance and Project Office Functions.

§   HR Services, including recruitment (dedicated HR for over 50 EDC Staff)

§   Finance and Facilities support

§   UNIX and NT Admin (excluding dedicated Chordiant Lab)

§   Database and Network Admin (excluding dedicated Chordiant Lab)

§   Systems administration services will include backup of EDC Personnel workstations, email servers and supplier supplied servers

§   Execution of defined backup process for production servers at no charge to Chordiant, but for which Chordiant will provide backup Equipment and Software

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 14

Technology Refresh Standards

1.   Introduction.

This Exhibit sets forth the technology refresh standards to be used by Supplier in connection with the maintenance of the hardware and software it employs in its performance of the Services.

2.   Supplier Obligations.

2.1Supplier is responsible for refresh of Equipment and Software identified in Exhibit 8. The Supplier and Chordiant IT teams will jointly decide on the Technology-Refresh (new releases) schedule of such Equipment and Software.  If the agreed upon schedule is in line with Supplier-IT corporate schedule, the resource effort for technology refresh will be not be charged to Chordiant.

2.2Supplier will actively seek new technologies and service-delivery methods to reduce the cost to Chordiant of receiving and using the Services, and Supplier will identify such technologies and methods to Chordiant.

2.3Throughout the Term, Supplier will maintain technology and service-delivery methods at a level of currency equal to Chordiant’s own systems and methods for similar tasks and functions, and in any event at a level sufficient to meet Chordiant’s business needs and for Chordiant to take advantage of technological advances in order to remain competitive.

2.4Supplier will update anti-virus software virus definitions on Supplier supplied Equipment (desktops and servers) as per Ness IT guidelines.

2.5Supplier will implement security patch updates as per Ness IT guidelines.

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 15

LEFT BLANK

      

        [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.      

    

Exhibit 16

Transition Plan

1.       Introduction

This document outlines the transition plan for the establishment of the EDC.  It highlights the key phases and milestones that are to be achieved and identifies key activities during the transition.  During the Transition Period, the Parties will work together to accomplish the transition in accordance with the milestones set forth herein. During that time, the plan will be reviewed jointly between the Supplier-EDC team and the Chordiant Team and may need changes/tuning in light of the key activities and milestones to be accomplished.

2.       Transition Overview

Four Lines of Business are being established under this Agreement:

§   Product Support

§   Product Test

§   Product Sustaining and Technical Stack Sustaining

§   Product Development (Marketing Director product)

In addition to the individual lines of business, transition plans are required for Hardware, EDC Personnel recruitment and staff management, establishment of EDC Handbook covering working methodologies and reporting, and shared services.

The EDC Project Manager is expected to be in place by January 5^th 2004. All dates in this document are 2004 unless otherwise specified.

All start dates for EDC Personnel are the Start Date that the full team is available – not the hire or assignment dates for individuals.

3.   Product Support Transition

[ * ]

3.1           Staff Ramp and Training

[ * ]

3.2           Infrastructure

All hardware and software required by the EDC Product Support Team will be in place and fully tested by February 13^th, 2004. This includes the availability of the Dedicated EDC Lab and a fully functional network link back to Chordiant.

This includes the set up of the integrated Case tracking and Defect tracking systems, enabling full access to all systems from all Chordiant and EDC locations.

3.3           Processes

The Chordiant Product Support process, including the operation of the EDC Product Support Team will be defined (based on the process defined in Exhibit 2.1), agreed and documented by January 23^rd, 2004. This will include training materials for use in the EDC Personnel training sessions.

4.       Product Test Transition

[ * ]

4.1           Staff Ramp and Training

The training program is outlined in Exhibit 5 (Human Resources). It comprises a 6 week program at a Chordiant Location (including travel) and a 4 week mentoring period.

[ * ]

4.2           Infrastructure

All hardware and software required by the EDC Product Test Team will be in place and fully tested by May 19th. This includes the set up of Rational Test Tools, access to W/W Test Script repository in line with Chordiant Testing Standards.

4.3           Processes

The Chordiant Product Test process, including the operation of the EDC Product Test Team will be defined (based on the process defined in Exhibit 2.3), agreed and documented by April 14th. This will include training materials for use in the staff training sessions.

4.4           Test Designs and Test Scripts

All Chordiant’s existing Test Scripts, Test documentation, Test data, Test System configuration set up will be transitioned to the EDC Test Leadership team during the 1:1 Mentoring Sessions that take place during the training process.

5.       Product Sustaining and Technical Stack Transition

[ * ]

5.1           Staff Ramp and Training

The training program is outlined in Exhibit 5 (Human Resources).  It comprises a 6 week program at a Chordiant Location (including travel) and a 4 week mentoring period.

The team of 7 staff will go through the training program starting June 25^th, 2004.

5.2           Infrastructure

All hardware and software required by the EDC Product Sustaining and Tech Stack Team will be in place and fully tested by June 25th. This includes the set up of all required Operating systems, Application Servers and Databases along with installation of Chordiant product versions.

Also included is the set-up of the clearcase source code control system, including all source code (except MD) and build processes for all products.

5.3           Processes

The Chordiant Product Sustaining process, including the operation of the EDC Product Sustaining Team will be defined (based on the process defined in Exhibit 2.2), agreed and documented by June 14^th, 2004.  This will include training materials for use in the staff training sessions.

For the Technical Stack team the initial roadmap of investigations and certifications including definitions of configurations will be defined by April 15^th to enable set-up of appropriate configurations. In addition, the ongoing process for the operation of this team will be defined.

5.4           Sustaining and Technical Stack Knowledge and Materials Transfer

All Chordiant’s existing Sustaining and Tech Stack test Scripts, test documentation, test data, test System configuration set up will be transitioned to the EDC Sustaining Leadership team during the 1:1 Mentoring Sessions that take place during the training process.

6. Product Development [ * ]

6.1           Staff Ramp and Training

The training program is outlined in Exhibit 5 (Human Resources).  It comprises a 6 week program at a Chordiant Location (including travel) and a 4 week mentoring period.

[ * ]

The second group of staff will be trained internally at the EDC by EDC staff.

6.2           Infrastructure

All hardware and software required by the EDC Product Development Team will be in place and fully tested by August 25^th, 2004. This includes the set up of all required Operating systems, Application Servers and Databases along with installation of Development environments Chordiant product versions.

6.3           Processes

The Chordiant Product Development process, including the operation of the EDC Product Development Team will be defined (based on the process defined in Exhibit 2.4), agreed and documented by June 30th. This will include training materials for use in the staff training sessions.

6.4           Product Source, Test materials transfer

All Chordiant’s existing Source Code, build processes, build validation processes, design documentation, functional specifications, test Scripts, test documentation, test data, test System configuration set up will be transitioned to the EDC Development Leadership team during the 1:1 Mentoring Sessions that take place during the training process.

Also included is the transfer and set up of source trees for the [ * ] product line, build processes on the production systems

7.       Other Transfer Considerations

Governance and reporting processes will be defined prior to January 5^th, 2004.

The EDC Intranet will be established within 60 days of the Effective Date.  As the transition continues the intranet site will be updated with all relevant information such that the Intranet becomes the repository and access point for all EDC information.

The Hardware and Software environment, including the Dedicated laboratory will be defined by January 5^th, 2004.  An infrastructure detailed plan that delivers on the go-live dates outline above will be delivered by January 15^th, 2004.

      

        [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.      

    

Exhibit 17

Benchmarkers

1.   Introduction.

This Exhibit sets forth the third party service providers that have been pre-approved by the Parties to conduct the Benchmark Process identified in Article 9 (Customer Satisfaction and Benchmarking) of the Agreement.

2.   Benchmarkers.

[ * ]

      

        [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.      

      

         Page       

    

Exhibit 18

Competitors

1.   Introduction.

This Exhibit, as updated by Chordiant from time to time as provided below, documents the recognized Chordiant Competitors for purposes of the restrictions set forth in Section 11.9 (Assignment to Competitors) and Section 31.1 (Non-compete) of the Agreement.

2.   Competitors.

§   Siebel

§   Epiphany

3.   Additions.

Chordiant reserves the right to name additional third parties as Competitors upon written notice to Supplier; provided, however, that if Supplier has a pre-existing relationship with such third party prior to Chordiant’s naming them as a competitor, such relationship will be excluded for purposes of the limitation set forth in the first sentence of Section 31.1).

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 19

Deliverables

1.           Introduction.

This Exhibit sets forth any Supplier Background Technology, third party materials and open source code included in the Deliverables.  Supplier shall update such information in a timely manner by amendment to the appropriate attachment, listed below

2.           Attachments.

Attachment 19-A                                           Supplier Background Technology

Attachment 19-B                                           Third Party Materials

Attachment 19-C                                           Open Source Code

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 19-A

Supplier Background Technology

This Attachment lists the Supplier Background Technology included within any Deliverable provided to Chordiant by Supplier in the performance of the Services.

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 19-B

Third Party Materials

This Attachment lists the third party materials included within any Deliverable provided to Chordiant by Supplier in the performance of the Services.

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Attachment 19-C

Open Source Code

This Attachment lists the open source code incorporated into any Deliverable provided to Chordiant by Supplier in the performance of the Services.

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 20-21

LEFT BLANK

      

                  [           *           ] = Certain confidential information contained in this document, marked by brackets,            has been omitted and filed separately            with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

Exhibit 22

Transfer Option

The Parties agree that the following terms shall govern the “Transfer” of the EDC to Chordiant (“Transfer Co.”) should Chordiant elect to exercise such option under Section 30 of the Agreement.

	HEADING	Terms of the Agreement
I.	BOT Transfer Model	The EDC will be established on a Build-Operate-Transfer (BOT) model of operation.
A.	Minimum Build-Operate Phase	Chordiant may exercise the Transfer Option any time twenty four (24) months after [ * ].
B.	Minimum Personnel Transfer	[ * ] of EDC Personnel at time of transfer or [ * ] EDC Personnel, whichever is greater (“Minimum Personnel Transfer”).
C.	Transfer transition timing	Supplier will use all efforts to complete the transfer within [ * ] from Chordiant’s election to exercise the Transfer Option, with the recognition that government approvals will be required.
D.	Transfer of EDC Personnel	i.At least [ * ] of EDC Personnel at time of exercise must stay with Transfer Co. for the Transfer Option to be completed.  Buffer Resources that stay with Transfer Co. shall be included in this calculation per iv below. ii.For each EDC Personnel not remaining, Supplier shall replace such employee [ * ]. iii.Chordiant has the right in its sole discretion to select how many and which EDC Personnel and Buffer Resources stay with Transfer Co. iv.If Buffer Resources are used to meet the Minimum Personnel Transfer requirement, Chordiant and Supplier shall agree, in good faith, upon the number of “effective Buffer Resources” necessary to meet that requirement.
E.	Benefits to Chordiant	The Parties will structure the transfer to maximize benefits to Chordiant and minimize taxes paid or payable, fees, tariffs or penalties of any kind levied by any governmental or administrative body paid by Chordiant.
II.	TRANSFER PRICING OPTIONS
	Option Selection	Chordiant, in its sole discretion, may select the pricing option at the time of exercise of the Transfer Option.
A.	Option A:  Physical Transfer (Buy Out)	Physical Transfer (Buy Out) Option Transfer pricing structure will have four elements: 1.Live business transfer price 2.Transfer management fee 3.Infrastructure Transfer Price 4.Facilities Price (at Chordiant’s option)
1.	Live Business Transfer Price	Chordiant will pay [ * ] of annualized billing rate.  (Annualized billing = 2 x preceding 6 months actual billings.)
2.	Transfer Management Fees	[ * ] per Transferred Employee to manage successful transfer, including, but not limited to, obtaining government and legal approvals, payable upon certification of sufficient Transferred Employees.  For a period of one (1) year following transfer, Supplier will not solicit, hire or influence directly or indirectly any Transferred Employees.
3.	Infrastructure Transfer Price	Chordiant shall purchase any hardware and software infrastructure at the amount remaining to be depreciated.
4.	Facilities Price	i.Chordiant has the option to remain in Supplier facility or relocate to its own facility following Transfer. ii.Should Chordiant relocate to its owns facility, it will not be charged for Supplier’s freed up office space. iii.Supplier will assist Chordiant in searching for alternative office space free of charge. iv.Should Chordiant desire to remain in Supplier facilities, Supplier will charge lease/rent for occupied space at cost [ * ]. v.Should Chordiant continue to use shared services (security, HR, Admin etc) Supplier will charge for portion of services at cost [ * ].
B.	Option B: Management Transfer	Management Transfer Option
1.	Transfer price/fee	None
2.	Monthly Operational Fee	Chordiant to pay Supplier portion of direct costs for running the EDC. (EDC utilities, infrastructure and shared services.)
3.	Management Fee	$X per month per employee for managing and running EDC, per the following sliding scale where X is: Þ[ * ] employees Þ[ * ] employees (e.g., for [ * ]) Management fees cover shared services such as HR, Finance, Management, Quality and IT (TBD – Chordiant).

      

                  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

    

EX-10.43

Exhibit 10.43

SOFTWARE LICENSE AND SERVICES AGREEMENT

ThisSoftware License And Services Agreement (this “Agreement”) is made as of September 28, 2006 (the “Effective Date”) by and between Connecticut General Life Insurance Company, a Connecticut corporation having a place of business at 900 Cottage Grove Road, Bloomfield, Connecticut 06152 (“Customer”), and Chordiant Software, Inc., a Delaware corporation having its principal place of business at 20400 Stevens Creek Blvd., Suite 400, Cupertino, CA 95014 (“Chordiant”).  The terms of this Agreement shall apply to each Software license granted by Chordiant under this Agreement, which shall be identified on the Order Form.

1.      Definitions.

(a)“CIGNA Entities” means (i) Customer and Customer subsidiaries, divisions and affiliates, as well as any divested or spun off Customer entities or divisions, (ii) business partners, members, suppliers or customers of the entities set forth in (i) and (iii) healthcare providers; provided that all individual users of such partners, members, suppliers, customers and healthcare providers shall be considered users for purposes of counting the Number of Concurrent Users.

(b)“CIGNA Agent” means International Business Machines Corporation or such other third party service provider or providers designated by Customer.

(c)“Number of Concurrent Users” means the peak sum of simultaneous users at any given time within a twelve (12) month period.

(d)“Delivery Date” means the date on which Chordiant delivers the Software to Customer or its designee, or if no delivery is necessary, the Effective Date set forth above or on the relevant Order Form.

(e)“Designated Contact” means the contact person or group designated by Customer who shall coordinate all Support requests to Chordiant.

(f)“Documentation” means all documentation, technical manuals, operator and user guides and manuals, flow diagrams, file descriptions and other written information describing the functions, operational characteristics and specifications of the Software or other technology, or explaining how to install, use, maintain or support the Software or other technology.  Documentation is provided in CD-ROM or bound form, whichever is generally available.

(g)“Error” means a reproducible error, defect or problem in the Supported Program or Documentation which causes the Supported Program not to operate substantially in accordance with the Documentation

(h)“License Fee” means the license fee(s) payable by Customer or CIGNA Agent pursuant to Section 8 and as set forth in any particular Order Form.

(i)“Order Form” means the document in hard copy form by which Customer orders Software licenses, and which is agreed to by the parties, or which is agreed to between Chordiant and a CIGNA Agent (and where the licensed Software is listed on Schedule A hereto).  The Order Form shall reference the Effective Date and be governed by the terms of this Agreement.

(j)“Resolution” means a modification or workaround to the Supported Program and/or Documentation provided by Chordiant to Customer that resolves an Error without additional cost to Customer or adverse impact to the CIGNA Entities.

(k)“Services” means work performed by Chordiant for Customer pursuant to a Statement of Work agreed to by the parties under this Agreement.

(l) “Software” means the software referenced in a particular Order Form in object code form, which consists of proprietary Chordiant software, and Third Party Software and Open Source Code Software embedded therein, and the media, Documentation and any Updates thereto.  Additionally, the Customer shall be provided with certain source code elements of the proprietary Chordiant software pursuant to Section 2.6 and may be provided with the entire source code of the proprietary Chordiant software from the Source Code escrow pursuant to Section 2.7, if appropriate.

(m)“Support” means ongoing maintenance and support services provided by Chordiant and/or CIGNA pursuant to the terms of this Agreement as set forth on Exhibit A hereto, and, if more favorable to Customer, Chordiant’s current support policies.  In any event, Chordiant shall be responsible for providing Minor Release Updates, Major Release Updates and Patch Updates as part of Support (and at no additional charge) under its contract with IBM and/or this Agreement.

(n)“Supported Program” or “Supported Software” shall mean, at any given time, the then-current release and the two immediately preceding point releases from the current release  of the Software in use by any of the CIGNA Entities.  For example, if the most current release is 5.5, Chordiant must support 5.3, 5.4 and 5.5 or if the most current release is 6.1, then Chordiant must support 5.9, 6.0 and 6.1 (and once the current release is 6.2, then support 6.0, 6.1 and 6.2).

(o)“Support Fee” means the support fee(s) payable by Customer or a CIGNA Agent pursuant to Section 3, if any, and as set forth in any particular Order Form.  During the term of Chordiant’s services contract with IBM, IBM will pay Chordiant the Support Fee directly and Chordiant shall provide Support through IBM.  In the event that the contract between IBM and Customer or the services agreement between IBM and Chordiant terminates, then Chordiant shall provide Support at fees consistent with the fees charged to IBM by Chordiant during the term of the CIGNA and IBM services agreement.  Upon Customer’s request (subject to Customer having obtained IBM’s consent), Chordiant shall make such pricing information available to Customer; provided that such Support Fee may be increased from the previous year’s Support Fee by the lesser of 5% or the actual increase in the Consumer Price Index (CPI) for the previous twelve (12) month period as published by the Wall Street Journal.

(p)“Support Hours” means the support hours specified on Schedule A for either the Standard Support period or the Premier Support period, as specified on the particular Order Form.

(q)“Support Period” means the period during which Customer is entitled to receive Support on a Supported Program, which shall be a period of twelve (12) months beginning from the Delivery Date or, if applicable, twelve (12) months from the expiration of the preceding Support Period unless otherwise agreed in writing by the parties.

(r)“Supported Environment” means the application server or servers on which the Documentation states the Software can operate.

(s)“Third Party Software” means the software of Sun Microsystems, Corticon Technologies, Inc., Desiderata Software and Flux Corporation which is embedded in the Software and any other third party software embedded in the Software.

(t)“Update” means any new release, version, enhancement, update, correction, patch, bug-fix or other modifications (regardless of how characterized) to the Software that are distributed, designed, developed or created by or for Chordiant, but excluding any Customizations or Additions.  Chordiant shall provide such Major Release Updates, Minor Release Updates and Patch Updates to Customer and/or a CIGNA Agent at no additional fee at the same time as Chordiant provides them to other users or licensees of the Software as and when developed for general release.  Additional Documentation is provided for Major Release Updates and Minor Release Updates.  Such additional Documentation shall contain a description of any Open Source Code Software contained in the Update.

(i)   “Major Release Update” shall mean any subsequent release of the Software that is a numbered release (ie, Chordiant 5 Foundation, or Chordiant 6 Foundation).

(ii)   “Minor Release Update” shall mean any subsequent release of the Software that is a dot-, numbered release (ie, Chordiant 5.1 Foundation).  All Minor Release Updates shall be included in the next Major Release Update.

(iii)   “Patch Update” shall mean any subsequent release of the Software that is a dot-, dot- numbered release (ie, Chordiant 5.1.1 Foundation) and is typically a patch.  All Patch Updates shall be included in the next Minor Release Update.

2.      Software License.

2.1                                                Rights Granted.

(a)  Chordiant hereby grants to the CIGNA Entities a worldwide, irrevocable, perpetual, non-exclusive, fully-paid, royalty-free, license to reproduce, use, modify, enhance, perform, display, distribute and sublicense to CIGNA Entities and/or CIGNA Agents, directly and indirectly, through one or more tiers of sublicensees, and make derivative works of the Software listed on Schedule A hereto (and any amendments to Schedule A and any Order Forms subsequently entered into between Customer and Chordiant) for use in connection with the business operations of the CIGNA Entities.

(b)  The license granted in this Section 2.1 includes the object code version of the licensed Software (including all Third Party Software) and includes all Updates of the Software to be provided to Customer promptly upon release. Additionally, the license includes certain source code elements of the proprietary Chordiant software pursuant to Section 2.6 and may include the entire source code of the proprietary Chordiant software from the Source Code escrow pursuant to Section 2.7, if appropriate.

(c)  Customer shall have the right to make such copies of the Software as Customer deems reasonably necessary, including for back-up, testing, disaster recovery, development or archival purposes.  All titles, trademarks and copyright or other restricted rights notices shall be reproduced in any such copies.

(d)  Customer shall have the right to allow third parties to use the Software for the operations of the CIGNA Entities (for example, third parties involved with disaster recovery, the integration of the Software with the systems of CIGNA Entities, development and production), so long as Customer is responsible for use of the Software is in accordance with the terms of this Agreement (unless the third party has a direct agreement with Chordiant in which case CIGNA shall not be responsible and Chordiant shall look to its agreement with such third party).

(e) Notwithstanding anything contrary in this Agreement, the CIGNA Entities and their agents, contractors and third party service providers (and their affiliates and subcontractors), wherever located, may access, use, modify, enhance, create derivatives works of and install the Software solely for the benefit of the business operations of the CIGNA Entities.  The Software may be installed at the locations, facilities and systems owned or leased by the CIGNA Entities and their agents, contractors and third party service providers (and their affiliates and subcontractors) solely for the benefit of the business operations of the CIGNA Entities.

2.2             Restrictions

(a)  Chordiant has obtained the right for the CIGNA Entities to use any Sun Microsystems, Inc. software or any other third party software that is embedded in the Software in connection with any use of the Software as contemplated by Section 2.1.

(b)  Customer agrees not to  engineer, disassemble, de-compile, or any other attempt to derive source code from the Software for which source code was not provided pursuant to Section 2.6 or from the Third Party Software, except to the extent required to obtain interoperability with either independently created software or as specified by law.

(c)  Chordiant and its suppliers shall retain all title, copyright and other proprietary rights in the Software. Customer does not acquire any rights, express or implied, in the Software, other than those specified in this Agreement. Customer agrees that it shall not publish any results of benchmark tests run on the Software, other than for the internal use of the CIGNA Entities.

2.3  Transfer.

(a)   Customer may use the Software on any Supported Environment available as of the Effective Date or thereafter without the payment of an additional license fee so long as Customer’s usage of the Software does not exceed the scope of the license it acquired for use.

      (b)    If Customer divests part of its business or an Affiliate ceases to be an Affiliate (in each instance the “Former Business”), Customer may sublicense use of the Software, assign a designated number of licenses to that Former Business or provide services to such Former Business with respect to the use of the Software to the Former Business; provided that the continued use of the Software by or for the Former Business shall be considered a part of the underlying license for the purpose of counting the Number of Concurrent Users and the number of CPUs in use.

2.4                                                Verification.  At Chordiant’s written request, not more frequently than annually, Customer shall furnish Chordiant with a signed certification verifying that the Software is being used pursuant to the provisions of this Agreement and applicable Order Form.  Chordiant (or Chordiant’s designee) may audit Customer's use of the Software.  Any such audit shall be conducted at Chordiant’s cost and expense during regular business hours at Customer's facilities and shall not unreasonably interfere with Customer's business activities.  Chordiant agrees that its employees shall comply with Customer’s reasonable security and confidentiality requirements during the audit.  If an audit reveals that Customer has underpaid fees to Chordiant, Customer shall be invoiced directly for such underpaid fees based on the rates set forth in the applicable Order Form.  Payment of such underpaid fees shall be Chordiant’s sole and exclusive remedy in the event of an underpayment by Customer.

2.5                                                Customizations and Additions.  Modifications, enhancements and derivatives works of the Software, including certain software objects applicable to the business of the CIGNA Entities, are referred to herein as “Customizations”.  Additions, bolt-ons or other software that interacts or interfaces with the Software are referred to herein as “Additions”.  Any Customizations made by Customer either directly or through their third parties other than Chordiant shall be owned by Customer (“Customer Customizations”).  All right, title and interest to any Customizations made by Chordiant on behalf of Customer or CIGNA Agents, either directly or indirectly (“Chordiant Customizations”), shall be owned by Chordiant.  Chordiant hereby grants Customer a license to such Chordiant Customizations on the same terms and conditions as those set forth in Section 2 pertaining to the originally licensed Software, and such Chordiant Customizations shall be considered licensed Software under this Agreement.  Any Additions shall be owned by Customer, and Chordiant hereby assigns all rights, title and interests to such Additions to Customer.  To the extent that Customer desires to have Chordiant incorporate such Customer Customizations or Additions (collectively, “Customer Specific Objects”) into Chordiant’s Software (and Chordiant agrees, in its sole discretion, to incorporate such Customer Specific Objects), Customer shall promptly deliver to Chordiant the source and object code versions (including documentation) of such Customer Specific Objects, and any updates or modifications thereto, and hereby grants Chordiant a perpetual, irrevocable, worldwide, fully-paid, royalty-free, non-exclusive, license to reproduce, modify, use, perform, display, distribute and sublicense, directly and indirectly, through one or more tiers of sublicensees, such Customer Specific Objects (provided that any use by Chordiant shall be on an “as-is” basis” at Chordiant’s sole risk, with no obligation on the part of Customer to maintain or support).

2.6Additional Software Restrictions.

(a)      Customer acknowledges that any Software licensed under this Agreement shall primarily be in object code format.  However, Customer acknowledges that certain licensed Software may include source code based files.  Customer acknowledges that the Software, its structure, organization and any human-readable versions of a software program (“Source Code”) constitute valuable trade secrets that belong to Chordiant and/or its suppliers.

(b)    To the extent that Chordiant includes such Source Code within its Software, such Source Code shall be deemed licensed Software under the terms of this Agreement and the Order Form.  Customer may modify the Source Code in accordance with Section 2.5 and as Customer otherwise deems necessary or useful in support of Customer’s authorized use of the Software.

(c)    Customer agrees that it shall only disclose the Source Code to authorized employees of CIGNA Entities and authorized third parties and contractors of CIGNA Entities who (i) require access thereto for a purpose authorized by this Agreement, and (ii) are subject to confidentiality obligations to protect third party confidential information.

(d)     Customer shall use the same degree of care is to prevent the unauthorized use, dissemination, or publication of the source code (i.e., human readable) of the Software (the “Source Code”) and the Software as Customer uses to protect its own confidential information of a like nature, but in no event shall the safeguards for protecting such Source Code, and the Software be less than a reasonably prudent business would exercise under similar circumstances.  Customer shall take prompt and appropriate action in an effort to prevent unauthorized use or disclosure of such Source Code and the Software, including, without limitation, storing such Source Code only on secure central processing units or networks and requiring passwords and other reasonable physical controls on access to such Source Code.

2.7                                                Source Code Escrow.  Within 30 days of the Effective Date Chordiant shall take such steps as are necessary to enable Customer to obtain the Source Code that it not been provided under the terms of the Escrow Agreement between Chordiant and Iron Mountain Intellectual Property Management, Inc., as successor-in-interest to Source File LLC, as Escrow Agent, a copy of which has been provided to Customer, in the event that Chordiant undergoes a change of control, assigns all or part of this Agreement, enters into a voluntary or involuntary receivership arrangement, bankruptcy or other insolvency proceedings, or otherwise ceases to be in business or ceases to maintain or otherwise support the Software for Customer. Chordiant shall not cancel said agreement during the term of this Agreement without the prior written consent of Customer.  In the event that during the term of this Agreement the Source Code is changed, Chordiant shall provide updated Source Code and any supporting documentation to the Escrow Agent.  Customer's use of the Source Code is limited to support and maintenance of the Software and is otherwise subject to the terms of this Agreement.  Customer acknowledges that the Software Source Code does not include the source code for the Third Party Software.

3.      Maintenance and Support Services.

3.1                                                Maintenance and Support Services.  If annual Support services are purchased by IBM on behalf of Customer, then such Support services shall be provided by Chordiant (through IBM) to Customer pursuant to the terms of Chordiant’s services agreement with IBM (which shall at a minimum include the services and obligations set forth in this Agreement).  If annual Support services are purchased directly by Customer, then such Support services shall be provided by Chordiant to Customer under the terms of this Agreement or, if more favorable to Customer, Chordiant’s support policies in effect on the date Support is ordered by Customer. For as long as Customer or a CIGNA Agent notifies Chordiant that it wishes to purchase Support, Chordiant shall offer to provide such Support.  Notwithstanding the foregoing, Chordiant shall provide Support under its agreement with IBM for Customer for as long as the services agreement between Chordiant and IBM is in place (or such longer period as support has been paid for by IBM), and IBM has paid the then current Support Fee.  If, during the term of Customer’s services agreement with IBM, IBM has not paid any undisputed Support Fees within 60 days after the commencement of the then current renewal Support Period, then Chordiant shall notify Customer in writing of such failure.  If Chordiant does not receive payment of the then current undisputed Support Fee within 30 days following receipt of notice to Customer, from either Customer or IBM, then Chordiant, in its sole discretion, may either terminate the provision of Support hereunder or agree with Customer to continue to provide Support.  Support is intended to ensure that the Software operates in accordance with its Documentation on an ongoing basis.

3.2  Update Policy.  Additionally, as part of Support, Chordiant shall provide Customer with Updates, if and when such Updates made available by Chordiant.

3.3                                                Reinstatement.  Once Support has been terminated in writing by Customer for a particular Supported Program, it can be reinstated only if Customer pays a fee equal to the Support Fees that would have been payable for the period of time during which Support was terminated for such Supported Program.  All Support provided to IBM under the services agreement shall count as if Customer had obtained the Support itself (and no break in support shall have occurred).

4.      Consulting Services.

4.1                                                Consulting Services.  In the event that Chordiant provides Services directly for Customer, Chordiant shall provide Services in accordance with a Statement of Work to be mutually agreed to by Chordiant and Customer.  Chordiant shall charge Customer for Services performed pursuant to this Agreement on a time and materials basis at the rates set forth in the applicable Statement of Work.  If a dollar limit is stated in the applicable Statement of Work for time and materials Services, the limit shall be deemed an estimate for Customer’s budgeting and Chordiant’s resource scheduling purposes; after the limit is expended, Chordiant shall continue to provide the Services on a time and materials basis, if requested by the Customer or as otherwise agreed to by the parties. Customer shall reimburse Chordiant for pre-approved actual, reasonable travel and lodging expenses incurred in conjunction with the provision of Services in accordance with Chordiant’s or Customer’s internal travel policy, as agreed upon by the parties.

4.2 Representative.  Chordiant shall designate a Chordiant employee to oversee and direct Chordiant’s Services (the “Chordiant Project Manager”).  Chordiant’s Project Manager shall work at the direction of the Customer project manager.  Customer’s project manager shall be completely responsible for the management and direction of the Customer project.  Chordiant may subcontract any portion of the work to be performed under the Agreement.

4.3                                                Customer’s Duties.

At no cost, Customer shall provide Chordiant with (a) adequate access to Customer’s facility to perform all work required under this Agreement; (b) all necessary safety training regarding Customer’s facility, and (c) reasonable onsite facilities, including secure storage space, a designated work area with adequate heat and lighting, and access to any needed telephone lines, communication facilities or other equipment.

4B.  Intellectual Property Rights.

4B.1   Rights to Developments.

a.      With regard to any Customizations or Additions developed by Chordiant for Customer or CIGNA Agents, either directly or indirectly, the provisions of Section 2.5 shall apply.

b.  With regard to other deliverables or work product developed or provided by Chordiant for Customer or CIGNA Agents, either directly or indirectly, subject to paragraph a above,

i.  to the extent that any of Chordiant’s pre-existing intellectual property rights (“Chordiant IP”) are embedded in any deliverable developed or provided by Chordiant to Customer or CIGNA Agents or in any CIGNA owned or licensed intellectual property (other than the Software), Chordiant hereby grants to Customer an unlimited, worldwide, perpetual, irrevocable, fully paid-up, nonexclusive, unlimited license to use and sublicense, and to permit third parties to use, the Chordiant Intellectual Property that is incorporated or embedded in any such deliverable or intellectual property for so long as such Chordiant IP remains embedded or incorporated in such deliverable or intellectual property and is not separately commercially exploited by Customer.

ii.  Chordiant shall own all modifications and enhancements to, and derivatives of, Chordiant IP that are developed by Chordiant during the provision of any Services (collectively, “Chordiant New Intellectual Property”).  Chordiant hereby grants to Customer an unlimited, worldwide, perpetual, irrevocable, fully paid-up license to use (and allow Customer’s agents and third parties to use) any Chordiant New Intellectual Property.  

iii.  Subject to the foregoing ownership and assignment rights set forth in this Section 4B.1, which take precedent over this subparagraph iii, Customer shall own, and Chordiant hereby perpetually assigns to Customer, all rights, title and interests in work product that are developed or provided by Supplier in connection with the provision of any Supplier Services.

c. Notwithstanding the foregoing, nothing in this Section 4B.1 shall expand the original scope of license of the Software set forth in Section 2 above.

d.  Chordiant shall enter into an agreement with IBM that is consistent with and effectuate the terms of this Section 4B.1 and that shall not create any broader rights; provided that Chordiant may agree to assign all right, title and interest in work product or deliverables which are modifications and enhancements to, or derivative works of, IBM’s pre-existing intellectual property.

4B.2   Chordiant’s Duties.

All current and future employees and agents of and consultants to Chordiant with access to or involved in the performance of Services have executed and delivered or shall execute and deliver to Chordiant a proprietary rights agreement with Chordiant substantially consistent with the form attached as Exhibit C hereto pursuant to which such employee or consultant agrees to confidentiality and intellectual property assignment terms sufficient to enable Chordiant to meet its obligations to Customer under this Agreement.

5.      Term and Termination.

5.1                                                Term.  This Agreement shall be terminated under this Section 5 (“Term and Termination”) or as otherwise specified in the applicable Order Form.  Notwithstanding any termination of this Agreement, all software licenses are irrevocable and perpetual.

5.2                                                Termination by Customer.  Customer may terminate any Software license at any time; however, termination shall not relieve Customer’s obligations specified in Section 5.4 (“Effect of Termination”).

5.3                                                Termination by Chordiant.  Chordiant may terminate this Agreement upon written notice if Customer materially breaches this Agreement and fails to correct the breach within 30 days following written notice specifying the breach; provided that any license previously licensed hereunder shall remain in effect during the term provided for in the license grant, and Section 2 shall survive termination of the Agreement in addition to the provisions of Section 5.4 for the duration of such term.

5.4                                                Effect of Termination.  Termination of this Agreement or any license shall not limit either party from pursuing other remedies available to it, including injunctive relief, nor shall such termination relieve Customer’s obligation to pay all fees that have accrued under any Order Form or Statement of Work.  The parties’ rights and obligations under Sections 2.2 and 2.6 (“Restrictions”), 5 (“Term and Termination”), 6 (“Indemnity, Warranties, Remedies”), 7 (“Limitation of Liability”), 8 (“Payment Provisions”), 9 (“Confidentiality”) and 10 (“Miscellaneous”) shall survive termination.  Except for termination pursuant to Section 5.3, upon termination, Customer shall cease using, and shall return or destroy as directed by Chordiant, all copies of the Software and Documentation.

6.      Indemnity, Warranties, Remedies

6.1                                                Infringement Indemnity.  Chordiant shall defend and indemnify the CIGNA Entities against a third party claim arising from (a) the Software (including Updates and any Contract Property) the Documentation or the Services infringing any third party’s intellectual property rights provided that: (i) Customer promptly notifies Chordiant in writing of the claim; (ii) Chordiant has sole control of the defense and all related settlement negotiations (provided that Customer may participate in the defense at its own cost); and (iii) Customer provides Chordiant with the assistance, information and authority necessary to perform Chordiant’s obligations under this Section 6, (b) any third party software embedded in the Software and (c) and any use by Chordiant or third parties under the license granted to Chordiant under Section 2.5 Chordiant shall have no liability for any claim of infringement based on use of a superseded or altered release of Software if Chordiant notified Customer that the infringement would have been avoided by the use of a current unaltered release of the Software which Chordiant makes available to Customer and Chordiant pays the cost of implementing the new release.

If a third party claim results in preventing Customer from using the Software or if Chordiant, in its reasonable opinion, believes that the Software is likely to be held as infringing, Chordiant shall have the option, at its expense, to (i) modify the Software to be non-infringing, or (ii) obtain for Customer a license to continue using the Software.  If it is not commercially reasonable to perform either of the above options, then Chordiant may terminate the license for infringing Software and refund the License Fees paid for the applicable Software license.

6.2                                                Warranties and Disclaimers.

(a)                                                Software Warranty.  For each Supported Software license that Customer acquires, Chordiant warrants for a period of 180 days from the Delivery Date that the Software, as delivered by Chordiant to Customer, or CIGNA’s Agent, shall substantially perform the functions described in the associated Documentation in all material respects when operated in the Supported Environment.  Provided that Customer gives Chordiant written notice of a breach of the foregoing warranty during the warranty period, Chordiant shall correct any reproducible Errors that cause the breach of the warranty in accordance with its technical support policies, or if Chordiant is unable to make the Software operate as warranted, Customer shall be entitled to terminate the Software license and recover the fees paid to Chordiant for the Software license.

(b)                                                Media Warranty.  Chordiant warrants the diskettes/CD disks media to be free of defects in materials and workmanship for thirty (30) days from the Delivery Date. Chordiant shall replace defective media.

(c)                                                Services Warranty.  Chordiant warrants that any Support or consulting services provided hereunder shall be performed in a professional and workmanlike manner in accordance with generally accepted industry practices.  This warranty is valid for a period of 30 days from performance.

(d)                                                Additional Warranties.

(i)    Each party hereby represents and warrants to the other that (i) it has all requisite corporate power and authority (or if a party is not a corporation, such party represents and warrants that it has sufficient power and authority under its organizational documents or agreements) to enter into this Agreement and to carry out the transactions contemplated hereby, (ii) the execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate (or, as applicable, other entity) action on the part of such party, (iii) this Agreement has been duly executed and delivered by such party and (assuming the due authorization, execution, and delivery hereof by the other party) is a valid and binding obligation of such party and enforceable against it in accordance with its provisions, and (iv) its entry into this Agreement does not violate or constitute a breach of any agreement to which it is a party or otherwise bound.

(ii)  Chordiant represents and warrants to Customer that (i) Chordiant has all necessary rights, title, licenses, permissions, and approvals required to grant the rights and licenses to the Software (including Third Party Software embedded therein) as set forth in this Agreement and  (ii) Chordiant has not received any written notice or claim, and is not otherwise aware, that the Software (including any third party software embedded therein), or the use thereof as contemplated by this Agreement, infringes on or misappropriates, or would infringe on or misappropriate, the copyright, patent, trademark, trade secret, or other intellectual property or other proprietary rights of any third party.

(iii) Chordiant represents and warrants to Customer that in performing its obligations and exercising its rights under this Agreement, Chordiant shall comply (and shall require all of its personnel and agents involved in Chordiant’s performance under this Agreement to comply) with all applicable laws, rules, regulations, and other governmental requirements relating to or affecting this Agreement or the work to be performed by Chordiant hereunder, and that Chordiant shall obtain and maintain all permits, licenses, and consents required in connection therewith.

(iv)  Except for the functions and features expressly disclosed in the Documentation, Chordiant represents and warrants to Customer that the Software (including Third Party Software embedded therein do not contain, and Chordiant shall not insert into the Software (including Third Party Software embedded therein) any lock, dongle, clock, timer, counter, hardware key, copy protection feature, replication device, “virus” or “worm,” as those terms are commonly used in the computer industry, or other software code that may (a) lock, disable, or erase the Software (including Third Party Software embedded therein), or any other software, programs, or data of Customer or its respective customers or suppliers, (b) limit or prevent full use of or copying of the Software (including Third Party Software embedded therein) as permitted under this Agreement, (c) harm or otherwise interfere with Customer’ servers or data processing hardware (including terminals, auxiliary storage, and communication and peripheral devices), or (d) require action or intervention by Chordiant or any other person to allow use of the Software (including Third Party Software embedded therein) as permitted under this Agreement.

(v)                 Except as set forth on Exhibit B hereto, Chordiant represents and warrants to Customer that neither the Software (including Third Party Software embedded therein) provided by Chordiant to Customer under this Agreement contain any freeware, computer code, or other items or materials that are subject to the GNU General Public License or any other open source license agreement (collectively, “Open Source Code Software”).

(vi)                 Chordiant represents and warrants that the Updates will be consistent with the Documentation provided and shall not reduce the functionality existing within the licensed Software.  Chordiant will not seek to remove or materially reduce functionality from an Update by repacking such Updates as ‘new products’ such as to require Customer to acquire such Updates for additional license fees or cost beyond payment of the Support Fees in accordance with the terms of this Agreement and the applicable Order Form.

(e)                                                DISCLAIMER OF WARRANTIES.Except as specifically provided herein, each party disclaims all warranties, whether express, implied or statutory, including all implied warranties of merchantability and fitness for a particular purpose.In addition, Chordiant does not warrant that the software shall operate in combinations other than as specified in the Documentation or that the operation of the Software shall be uninterrupted or error-free.

7.      Limitation of Liability.

In no event shall either party or its suppliers be liable for any special, indirect or consequential loss or damage arising out of or in any way relating to this Agreement, including, but not limited to, economic loss, loss of profits, loss of opportunity, even if such party has been advised of the possibility of such damages.  The limitation of liability provided in this section shall apply even if the warranties provided in Section 6 fail of their essential purpose.  Except for any breach of Section 2 or Section 9, each party’s liability for damages hereunder shall in no event exceed the sum of the greater of $20,000,000 and the amount of fees paid and payable under this Agreement.

Notwithstanding the foregoing, nothing in this Agreement shall operate to exclude or restrict either party’s liability for: (i) death or personal injury resulting solely from the negligence of the defaulting party; (ii) breach of any applicable legislation; (iii) the fraud or willful default of the defaulting party; and (iv) the indemnification and third party consent obligations.

The provisions of this Agreement allocate the risks between Chordiant and Customer.  Chordiant’s pricing reflects this allocation of risk and the limitation of liability specified herein.

8.      Payment Provisions.

8.1           Invoicing.  All license fees shall be due upon the date of the applicable Order Form or Statement of Work and payable 30 days from receipt of an invoice and paid without deductions based on any Taxes and, except as set forth in this Agreement, shall be non-refundable and non-cancelable (without limitation on CIGNA’s right to bring a damages claim against Chordiant).  Payments for the renewal of annual Support shall be due and payable within 30 days of the date of support renewal.  All fees shall be paid by IBM for the license and support during the term of the services agreement between CIGNA and IBM and all claims by Chordiant for fees arising during such period shall be between Chordiant and IBM.

8.2                                                Payments.  The parties hereby acknowledge and agree that all payments to be made by Customer hereunder shall be made by Customer and/or CIGNA Agent on behalf of Customer, as further stated an the applicable Order Form or Statement of Work.  Chordiant shall bill all amounts due and payable by Customer hereunder to Customer or through CIGNA Agent, as the case may be.  All payments made by Customer and/or by CIGNA Agent on behalf of Customer shall be in U.S. Dollars and directed to:

Chordiant Software Inc.

P.O. Box [ * ]

San Jose, CA [ * ]

Or wire to:

Comerica Bank

Chordiant Software, Inc.

Account#: [ * ]

Routing #: [ * ]

Notwithstanding the foregoing, if Customer or CIGNA Agent and Chordiant agree or have agreed upon a different method for making payment, they may utilize such method when making payment to Chordiant.  Customer may, at any time upon prior written notice to Chordiant, make payment of any and all amounts due and payable hereunder directly to Chordiant.

8.3                                                Taxes.  The fees in this Agreement or the applicable Order Form or Statement of Work do not include services or sales taxes on the fees charges to Customer hereunder.  Chordiant is required to pay all other taxes, including property, excise, import or export, import, government fees or other taxes based on the licenses granted or services provided under this Agreement.  This Section does not apply to taxes based on Chordiant revenue or income.

8.4                                                Disputes Invoices.  Customer may withhold payments for any item(s) on Customer's invoice that Customer reasonably disputes in good faith.  Customer shall provide to Chordiant written notice of its intention to withhold payment, including the reason(s) for Customer's reasonable dispute of the invoice (the “Dispute Notice”).  Following receipt of the Dispute Notice, Chordiant shall review the invoice in question and, if appropriate, send Customer a corrected invoice.  If Chordiant does not agree with Customer's reasons for withholding payment or, if sent, the corrected invoice does not resolve the dispute to Customer's satisfaction, then either party shall notify in writing the other party of the fact that the dispute continues (the “Response Notice”).

The parties shall use commercially reasonably efforts to resolve or settle the dispute within thirty days from the date of the Response Notice.  During such thirty day period, executives of both companies shall first meet in person to negotiate in good faith a resolution or settlement of the dispute.  Pending settlement or resolution of the issue(s), Customer's non-payment of these items shall not constitute default by Customer, and shall not entitle Chordiant to suspend or delay its furnishing of the Support or performance of services for a period of six (6) months from the date of the Response Notice; provided that Customer pays all undisputed invoices in accordance with the provisions of Section 8.1.   After expiration of such six month period, Customer shall pay Chordiant 50% of the amount of the disputed invoice.  If not, Chordiant may suspend its furnishing of Support or performance of services covered by the disputed item(s).  If so, Chordiant will not suspend its furnishing of Support or the performance of services covered by the disputed item(s) for another six month period.  After the expiration of the second six month period, Customer shall pay Chordiant the remaining 50% of the amount of the disputed invoice.  If not, Chordiant may suspend its furnishing of Support or performance of services covered by the disputed item(s).  If, once the dispute is resolved, it is determined that Customer did not owe Chordiant all or any portion of the amounts it paid under this paragraph, Chordiant shall reimburse Customer for such payments.

9.      Confidentiality.

By virtue of this Agreement, the parties may have access to information that is confidential to one another (“Confidential Information”).  Confidential Information shall include but not be limited to the Software (including Source Code), Chordiant services, the terms and pricing under this Agreement, and all information clearly identified as confidential or which is self-evidently of a confidential nature.

A party’s Confidential Information shall not include information that: (a) is or becomes a part of the public domain through no act or omission of the other party; (b) was in the other party’s lawful possession prior to the disclosure and had not been obtained by the other party either directly or indirectly from the disclosing party; (c) is lawfully disclosed to the other party by a third party without restriction on disclosure; or (d) is independently developed by the other party.

The parties agree to hold each other’s Confidential Information in confidence during the term of this Agreement and for a period of five years after termination of this Agreement (except for Chordiant’s Software which shall remain confidential in perpetuity).  The parties agree, unless required by law, not to make each other’s Confidential Information available in any form to any third party for any purpose other than the implementation of this Agreement.  Each party agrees to take all reasonable steps to ensure that Confidential Information is not disclosed or distributed by its employees or agents in violation of the terms of this Agreement.

Each party agrees that its obligations and covenants are necessary and reasonable in order to protect the party disclosing Confidential Information.  Each party acknowledges that its breach of its obligations would cause irreparable harm to the other party for which monetary damages would be inadequate and hereby agrees that the other party shall be entitled to seek injunctive relief under this Agreement in addition to any other remedies that may be available at law, in equity or otherwise.

Immediately upon termination of this Agreement, Chordiant shall return all of Customer’s Confidential Information.

10.                                                Miscellaneous.

10.1           Export Administration.  Each party agrees to comply with all relevant export laws and regulations of the United States, the United Kingdom and any other applicable country (“Export Laws”) to assure that neither the Software nor any direct product thereof are (i) exported, directly or indirectly, in violation of Export Laws; or (ii) are used for any purposes prohibited by the Export Laws, including, without limitation, nuclear, chemical, or biological weapons proliferation.

10.2           Conflict of Interest.  Chordiant agrees that during the term of this Agreement, it shall not provide services or contract to provide services to any third party that would prevent it from providing Software or performing Services under this Agreement for Customer, except with the prior written consent of Customer.

10.3   Insurance.  Chordiant shall carry and maintain at its own cost, with companies that are rated a minimum of “A-“ in Best’s Insurance Guide or are otherwise reasonably acceptable to Customer, all necessary insurance (which shall include as a minimum the requirements set forth below) during the term of this Agreement, for damages caused or contributed to by Chordiant, and insuring Customer against claims which may arise out of or result from Chordiant’s performance or failure to perform hereunder, including: (i) statutory worker’s compensation in accordance with applicable laws, (ii) employer’s liability insurance in an amount of not less than $500,000 per occurrence, (iii) commercial general liability, including bodily injury, property damage, owners and contractors protective liability, products and completed operations liability and contractual liability, with a combined single limit of not less than $1,000,000, (iv) automotive liability covering all vehicles owned, non-owned, hired and leased with a combined single limit for bodily injury and property damage of not less than $1,000,000, (v) professional liability and errors and omissions insurance in an amount of not less than $5,000,000 per claim.  Chordiant, if requested by Customer, shall provide Customer with certificates of insurance and copies of the policies of insurance reflecting the coverage and amounts set forth in this Section.  Chordiant’s certificates of insurance shall contain a provision that the coverage afforded under the policy(s) shall not be cancelled without thirty (30) days prior written notice to Customer.

10.4   Notices.  All notices under this Agreement shall be in writing and deemed to have been given when mailed by first class.  Notices shall be sent to the addresses set forth at the beginning of this Agreement or such other address as either party may specify in writing.  If notice is sent to Chordiant, it shall be sent to the attention of Chordiant’s Chief Financial Officer and Chordiant’s General Counsel.

10.5           Force Majeure.  Neither party shall be liable hereunder by reason of any failure or delay in the performance of its obligations hereunder (except for the payment of money) on account of acts of God, war, unforeseeable governmental action, earthquakes, or other similar cause which is beyond the reasonable control of such party.

10.6           Assignment.  This Agreement is binding upon all successors and assigns of the parties.  Chordiant shall not assign or subcontract all or any part of its rights or obligations hereunder except in the case of operation of law, merger, consolidate or sale of all or substantially all of its assets, without the written consent of Customer.  Customer may assign or delegate its rights under this Agreement.

10.7           Waiver and Severability.  The failure of a party to require performance by the other party of any provision hereof shall not affect the right to require performance at any time thereafter; nor shall the waiver by either party of a breach of any provision hereof be taken or held to be a waiver of the provision itself.  If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions of this Agreement shall remain in full force and the invalid or unenforceable provision shall be changed and interpreted to best accomplish the provision within the limits of the law.

10.8           Governing Law and Jurisdiction.  This Agreement shall be governed in accordance with the laws of the State of New York, without regard to any conflicts of law principles, as if this Agreement were executed in and fully performed within the State of New York.  The parties agree that the United Nations Convention on Contracts for the International Sale of Goods is specifically excluded from application to this Agreement.

10.9           No Agency.  Nothing contained herein shall be construed as creating any agency, partnership or other form of joint enterprise between the parties.

10.10                      Counterparts.  This Agreement may be executed simultaneously in two or more counterparts, each of which shall be considered an original, but all of which together shall constitute one and the same instrument.

10.11                      Customer Reference.  Chordiant may not refer to Customer as a customer in sales presentations, marketing vehicles and activities, without Customer’s prior written consent.

10.12 Entire Agreement.This Agreement, the Order Form(s), together with any exhibits, completely and exclusively state the agreement of the parties.  In the event of any conflict between the terms of this Agreement and any exhibit hereto, the terms of this Agreement shall control.  In the event of any conflict between the terms of this Agreement and any purchase order or Order Form, the individualized terms of such purchase order or Order Form shall control, but any pre-printed terms on Customer’s purchase order shall be of no effect.  This Agreement supersedes, and its terms govern, all prior proposals, agreements or other communications between the parties, oral or written, regarding the subject matter of this Agreement.  This Agreement shall not be modified except by a subsequently dated written amendment signed by the parties, and any “pre-printed” terms on a Customer purchase order or other document purporting to supplement the provisions hereof shall be void.

             

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

In Witness Whereof, the parties hereto have caused this Agreement to be executed by their duly authorized representatives.

Chordiant Software, Inc.                                                                                                Connecticut General

                                                   Life Insurance Company:

/s/ Steven R. Springsteel                                                                                        /s/ Debra A. Christie

Signature                                                                                                                         Signature

Steven R. Springsteel                                                                               Debra A. Christie

Print Name                                                                                                                     Print Name

President and CEO                                                                                 AVP

Print Title                                                                                                                       Print Title

September 28, 2006                                                                                             September 28, 2006

Date                                                                                                                               Date

             

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

                                       

Schedule A

By the terms of this Schedule A, Chordiant Software, Inc. (“Chordiant”) agrees to license its software to Connecticut General Life Insurance Company (“CIGNA”) in accordance with the terms of the Software License and Services Agreement (the “License Agreement”) dated September 28, 2006 between Chordiant and CIGNA.

SOFTWARE LICENSE

Customer Application: Contact Center Architecture

Software Product(s)	Quantity	License Type (i.e. Named User/Client, Server, Developer) URN’s (no. of)
Chordiant Call Center Browser Edition	4,000*	Concurrent Users
Chordiant Foundation Server	86*	CPU
- Application Components
- Business Process Server
- Security Server
- CTI Server
-  Persistence Server
- Request Server
- JDBC Connector
- Chordiant Connector for WebSphere MQ
- Chordiant Interaction Controller
Chordiant Tools Bundle	30	Developers
- Chordiant Business Process Designer
- Chordiant Café Developer Environment
Chordiant Rules Designer	10	Designers

Chordiant Rules Server                                                                86*                      CPU

*This Schedule A shall be amended to reflect increases to the licenses for the Number of Concurrent Users ordered by Customer or CIGNA Agents.  Each time the Number of Concurrent Users increases by 500, the number of CPUs increases by 8.

*In the event that the contract between IBM and Customer terminates, then Chordiant shall increase the Number of Users and number of CPUs as requested by Customer at fees consistent with the fees charged to IBM by Chordiant during the term of the CIGNA and IBM services agreement.  Upon Customer’s request (subject to Customer having obtained IBM’s consent),Chordiant shall make such pricing information available to Customer.

             

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

                                       

Exhibit A - General Support Terms

1. Technical Support

Annual Support services ordered by Customer shall be provided under Chordiant’s Support policies and pricing in effect on the date Support is ordered and shall be effective upon shipment (or upon Order Form Effective Date for products not requiring shipment).

Chordiant shall make available to Customer Support in the form of access via e-mail, web and telephone (telephone access during the Support Hours only) in English to the Designated Contacts and/or via the support website for technical information, technical advice and technical consultation regarding Customer’s use of the Supported Software.

Scope of Support.  The primary objective of Chordiant Product Support is to assist Customer in maintaining and/or regaining an operational state.  The secondary objective of Product Support is to provide in due course the correction of any underlying Errors.

 Product Support shall include the following:

(a) Problem Prevention

1.   Notification of availability of patches and releases.

(b) Problem Identification

1.   Clarification of Chordiant error messages,

2.   Assistance in identifying and verifying the causes of suspected Errors, and;

3.   Advice on bypassing identified Errors (providing workarounds) in the Supported Software.

(c) Problem Resolution

1.   Reporting and tracking product defects and enhancement requests,

2.   Resolution of defects via workaround, maintenance release or in exceptional circumstances emergency patches, and

3.   Notification of status on issues, including escalation when required.

Resolution of Errors.  Chordiant shall provide an initial response acknowledging Errors reported by Customer in accordance with the priority levels and response times set out in Schedule A.  Chordiant shall acknowledge each Customer report of a case by written acknowledgment setting forth a Case Problem Number for use by Customer and Chordiant in all correspondence relating to such case.  Thereafter, Chordiant shall use commercially reasonable efforts to provide a Resolution.

Exceptions. Chordiant shall have no responsibility to fix any Errors arising out of or related to the following causes:

a.   any modifications or enhancements made by the Customer to the Software or the application specific environment, unless such modifications or enhancements are specifically approved in writing by Chordiant Product Support; this includes but is not limited to;

- location of binaries

- scripts provided by Chordiant

- any application specific object (e.g., table, view, index, trigger)

- any application specific operating system permissions or role privileges

b.   Any modification or combination of the Software (in whole or in part), including without limitation any portions of the Software code or Source Code customized by the customer that is not part of the unmodified Software delivered by Chordiant or for which Chordiant has not received and acknowledged receipt of the source code and agreed to Support.

c.   Use of the Software in an environment other than a Supported Environment.

d.   Accident; electrical or electromagnetic stress; neglect; misuse; failure or fluctuation of electric power, failure of media not furnished by Chordiant; operation of the Software with other media and hardware, software or telecommunication equipment or software; or causes other than ordinary use.

2. Customer Responsibilities

Customer agrees to:

(i) Provide Chordiant with remote access to Customer’s Supported Software during the term of this Agreement via an electronic link; and

(ii) Provide any reasonable assistance that Chordiant may require from the Designated Contacts and other appropriate Customer representatives (e.g. network administrator, as the case may be) to enable Chordiant to provide Customer with Support; and

(iii) Establish and maintain the conditions of the Supported Environment in compliance with Chordiant Certified Matrix and Technical Stack developed for the installed release or any environmental operating ranges specified by the manufacturers of the components of the Designated Center. Any deviation from this Support Environment voids all Resolutions within the timeframe set forth in Exhibit A.

The Customer agrees to designate appropriately qualified and trained personnel to be the Designated Contacts, and only those individuals shall request Support services.  The Customer agrees endeavor to adequately train and obtain “Chordiant certification” for, and forward to Chordiant the names and contact details of the Designated Support Contacts.

The Customer agrees to notify Chordiant Product Support promptly of any malfunction of the Supported Software.

The Customer agrees to provide Chordiant with access to and use of such of the Customer’s information and facilities reasonably necessary to service the Supported Software including, but not limited to, an accurate description of the Designated Center and the current Supported Environment, the problem being reported, the transactions and any error messages, along with screenshots and log files.

The Customer agrees to install the Current Release as soon as reasonably practicable, and in any event within the timeframe set out in Chordiant’s release policy in effect on the date Support is ordered.

             

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

                                       

SCHEDULE A

PRIORITY LEVELS AND RESPONSE TIMES:

Priority Level	Definition	Response Time to Designated Support Contact
PRIO-1 “Production down” Problem	Business impact is immediate and major, i.e. no material benefit from the Supported Software. The Supported Software in a mission critical “live production” environment is inoperative, renders the system on which it is installed inoperable or suffers a major performance degradation.  No workaround is available.	1 business hour
PRIO-2 Mission critical Problem	Business impact is immediate and significant. The Supported Software in a production or a mission critical development environment is inoperative or fails to satisfy critical functional, operational or performance specifications.	4 business hours
PRIO-3 Serious Problem	Business impact is high but not widespread. An aspect of the software is inoperative, causes or results in substandard or erratic performance, but nonetheless the software operates substantially in accordance with specifications.	1 business day
PRIO-4 Problem	Business impact is moderate or small. No aspect of the software is inoperative.  The software operates in accordance with specifications.	5 business days

NORMAL SUPPORT HOURS

Customer shall report all problems to the closest support center.  Chordiant reserves the right to alter the location(s) of its support centers, and shall inform the Customer in writing should this occur.  Chordiant provides Product Support from the following support centers during their respective normal business hours as set out below:

EMEA 08:30 – 17:30 UK Time {Greenwich Mean Time (GMT) or British Summer Time (BST), as applicable}

Americas 08:30 – 17:30 Pacific Std Time (i.e. 16:30 – 01:30 UK Time, subject to time changes)

Asia/Pacific 08:30 – 17:30 Melbourne, Australia (i.e.23:30 – 08:30 UK Time, subject to time changes)

“Standard Support” means calls from any priority level which are supported from Monday to Friday during the normal business hours for Customer’s closest support center as set out above.

“Premier Support” means, in addition to Standard Support, Customer shall receive extended 24 Hour support in respect of PRIO-1 CALLS FOR CHORDIANT’S PLATFORM AND FOUNDATION SOFTWARE ONLY from Monday to Sunday inclusive as noted below (not available for Application Products).

Notes:

(a)   PRIO-1 calls are to be placed by phone andfollowed up with a detailed explanation of the problem via e-mail to the respective regional support center.

(b)   The Customer may categorize the priority level in accordance with the above definitions when reporting the problem.

             

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

                                       

EXTENDED 24-HOUR SUPPORT

(Applicable to ‘PRIO-1’ Calls on Chordiant’s Platform and Foundation software only)

In respect of “Standard Support” and “Premier Support” for Platform and Foundation software products only, Chordiant extends support hours for the applicable days to 24 hours per applicable day for PRIO-1 calls only.  Outside the normal regional support hours, Chordiant shall decide if the Prio-1 Case continues to be handled by the EMEA support center, or if the PRIO -1 call shall “follow the sun” to another support center and shall, if required, initiate a page to 24-hour on-call Product Support engineers.

Please note that the extended 24 hour support in respect of ‘PRIO-1’ calls set forth above is only available and applicable to customers licensing Chordiant’s platform or foundation software, and does not apply to any other Chordiant application software, including but not limited to Chordiant’s Marketing Director or Selling Director product suites.

             

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

                                       

Exhibit B – Open Source Software

[ * 3 pages of tabular text omitted]

             

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

                                       

EXHIBIT C

Form Non-Disclosure and Assignment Agreement

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

EXHIBIT C

Form Non-Disclosure and Assignment Agreement

THIS NON-DISCLOSURE AND ASSIGNMENT AGREEMENT (this “Agreement”), dated as of this ____ day of ____________, 200__, is entered into by and between Chordiant Software, Inc. (“Chordiant”) and [insert Chordiant employee or contractor full name]

W I T N E S S E T H:

WHEREAS, my full name is [insert Chordiant employee or contractor full name] and I am employed by or acting as a consultant to Chordiant;

WHEREAS, IBM provides certain services (the “Services”) to Connecticut General Life Insurance Company, its affiliates and certain other entities designated by Connecticut General Life Insurance Company (collectively, “CIGNA”) under that certain Master Services Agreement by and between CIGNA and IBM, dated as of September 28, 2006 (the “MSA”);

WHEREAS, Chordiant provides certain services to IBM under that certain Statement of Work by and between Chordiant and IBM dated as of September 28, 2006 (the “SOW”) on behalf of CIGNA;

WHEREAS, Chordiant provides licenses and rights to CIGNA pursuant to a certain agreement between Chordiant and CIGNA dated as of September 28, 2006 (the “CIGNA Agreement”);

WHEREAS, CIGNA possesses certain Confidential Information (as defined below) relating to its business processes, products and technology;

WHEREAS, I understand and agree that I will have access to such Confidential Information during my [employment] [consultancy] with Chordiant; and

NOW THEREFORE, in consideration for and as a condition to my assignment to the CIGNA account, I agree to be bound by the terms set forth herein.

1.   Definition of Confidential Information.  As used herein, “Confidential Information” shall mean any and all materials, information, processes, methodologies, tools, software programs, code, intellectual property and other data, technical or non-technical, whether written, electronic, graphic or oral, furnished or disclosed by CIGNA or on CIGNA’s behalf to you (by IBM or otherwise), either directly or indirectly, with the exception only of the following: (a) information that is now in the public domain or subsequently enters the public domain through no fault or act of the receiving party; (b) information that is presently known or becomes known to the receiving party from its own independent source as evidenced by the receiving party; (c) information that the receiving party receives from any third party not under any obligation to CIGNA to keep such information confidential; (d) information that is independently developed by the receiving party as proven by the receiving party’s written records; and (e) as otherwise allowed in the SOW and the MSA.

2.   Non-Disclosure Obligations.  I hereby understand and agree:

(a)   To use the same care and discretion to avoid disclosure, publication or dissemination of Confidential Information as I use with respect to Chordiant’s own similar information that it does not wish to disclose, publish or disseminate and use Confidential Information solely to the extent required to fulfill Chordiant’s obligations under the SOW and IBM’s obligations or exercise IBM’s rights under the MSA.

(b)   Not to deliver to or disclose or otherwise make available to anyone any Confidential Information except as authorized in the SOW and the MSA.

(c)   Except as otherwise expressly stated in this Agreement, not to disclose the existence of this Agreement, any of the activities which may take place pursuant to this Agreement, the relationship formed, if any, under this Agreement or the other party’s interest in the subject matter to which this Agreement relates, to anyone except those employees of Chordiant, CIGNA and IBM with a need to know unless authorized in the SOW and the MSA.

(d)   That Confidential Information delivered by CIGNA (or by IBM, on CIGNA’s behalf), and all copyright, patent, and other proprietary rights therein, shall remain property of CIGNA or its direct and indirect subsidiaries and affiliates, as the case may be, at all times.

(e)   Nothing contained herein shall be construed as:  (i) granting to me any right, title or interest in or to, or any license under, any patent or patent application, now or subsequently owned by CIGNA or IBM or their respective designees; and (ii) granting to me any right, title or interest in or to, or any license under Confidential Information provided by CIGNA (or by IBM, on CIGNA’s behalf).

(f)   Upon Chordiant’s completion of Services to IBM and CIGNA, or IBM’s completion of Services to CIGNA, or upon CIGNA or IBM’s earlier request:  (i) I shall immediately cease using the Confidential Information; and (ii) return Confidential Information (including all copies and summaries thereof) to CIGNA (or IBM, on CIGNA’s behalf), or, at the CIGNA’s option, destroy the same promptly after a written or oral demand.  Upon CIGNA or IBM’s request, I shall certify to the requesting party in writing that I have complied with my obligations under this paragraph.

3.   Assignment Obligations.  I hereby understand and agree:

(a)   That during the course of my employment, I may work on and be a part of the development of technology, processes, methodologies, and other work product for CIGNA (or IBM, on CIGNA’s behalf).  In accordance with the provisions of the SOW and the CIGNA Agreement, I hereby assign to Chordiant any technology, processes, methodologies, and other work product developed by me and such technology, processes, methodologies, and other work product which shall become the sole and absolute property of Chordiant to enable Chordiant to meet its obligations under the SOW and the CIGNA Agreement and for IBM to meet its obligations to CIGNA under the MSA.

(b)   That any and all inventions, improvements, discoveries, technologies, processes, methodologies, and other work product developed or discovered by me as a result [of my employment at] [or consultancy with] Chordiant shall be fully disclosed to Chordiant (or IBM, on CIGNA’s behalf, as required by the MSA), and in accordance with the provisions of the SOW I hereby assign the same to Chordiant, and the same shall become the sole and absolute property of Chordiant to enable Chordiant to meet its obligations under the SOW and the CIGNA Agreement and for IBM to meet its obligations to CIGNA under the MSA.  Upon the request of IBM or CIGNA, I shall execute, acknowledge, and deliver such assignments and other documents as Chordiant, IBM or CIGNA may consider necessary or appropriate to vest all rights, titles, and interests in Chordiant to enable Chordiant to meet its obligations under the SOW and the CIGNA Agreement and to enable IBM to meet its obligations to CIGNA under the MSA.

4.   Remedies.  I hereby understand and agree:

(a)   That unauthorized use or disclosure of Confidential Information may likely result in substantial monetary and other damages to CIGNA (or IBM, on CIGNA’s behalf) and their respective direct and indirect subsidiaries and affiliates and will subject me to disciplinary action, including termination of employment, and civil and criminal legal proceedings.

(b)   That the unauthorized use or disclosure of Confidential Information may give rise to irreparable injury to CIGNA (or IBM, on CIGNA’s behalf) and acknowledge that remedies other than injunctive relief may not be adequate.  Accordingly, IBM and CIGNA and their respective direct and indirect subsidiaries and affiliates have the right to seek equitable and injunctive relief to prevent the unauthorized disclosure of Confidential Information.

5.   Miscellaneous.  I hereby understand and agree:

(a)   This Agreement embodies the entire understanding between the parties as to the subject matter of this Agreement and supersedes and replaces any and all prior understandings, arrangements and agreements whether oral or written relating to the Confidential Information.  The terms of this Agreement shall not be amended or modified except in writing signed by each of Chordiant and me.

(b)   The provisions of this Agreement shall survive the expiration or termination of the MSA and the SOW for a period of seven (7) years.

(c)   This Agreement is a personal, indivisible, nontransferable agreement and may not be assigned or transferred, in whole or in part, by either party.

(d)   CIGNA shall be an intended third party beneficiary of this Agreement but only as to individuals who are no longer employed by Chordiant or retained as a consultant by Chordiant.

(e)   This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York, without respect to its rules on the conflict of laws.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as set forth below.

CHORDIANT SOFTWARE, INC.	[insert Chordiant employee or contractor full name]
By:	By:
Name:	Name:
Title:	Title:
Date:	Date:

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

EX-10.51

        Confidential Treatment Requested       

Exhibit 10.51

LICENSE SCHEDULE

License Schedule #:	5
Effective Date:	Oct. 23, 2006

THIS LICENSE SCHEDULE is entered as of the Effective Date designated above, by and between Licensor and the Licensee designated below.  The Parties hereto acknowledge that they are entering into this License Schedule pursuant to the provisions of the Master Software License and Support Agreement dated as of February 1, 2006, between Licensor and Citicorp Credit Services, Inc. (USA).  The Parties further acknowledge and agree that the provisions of the Master Software License and Support Agreement (“Agreement”) shall apply to this License Schedule as though such provisions were set forth herein in their entirety.

	LICENSOR	LICENSEE
Name:	Chordiant Software, Inc.	Citicorp Credit Services, Inc. (USA)
Address:	20400 Stevens Creek Blvd.   Suite 400   Cupertino, CA 95014	14000 Citi Cards Way Jacksonville, FL 32258
State of Incorporation:	Delaware	Delaware

Software (Itemize)	List Price	Discount %	License Fee
Perpetual License			$20,000,000
Chordiant Order Form #5 attached hereto and       incorporated herein by reference
Source Code delivered pursuant to Order Form #5 does not include the third party source code listed on Appendix A hereto.

Third-Party Software  (Itemize)	Owner
IBM Websphere	CCSI (USA)
Oracle	CCSI (USA)

Delivery Site:		Citicorp Credit Services, Inc. (USA)					Delivery Date:	NA
	14000 Citi Cards Way                          Jacksonville, FL 32258
Billing Address		Citicorp Credit Services, Inc. (USA)
		14000 Citi Cards Way Jacksonville, FL 32258
Installation Fees:			$		NA
Training Fees:			$		NA
Development Fees:			$		NA
Implementation Fees:			$		NA
Maintenance Fees:			$		See Order Schedule #5	Payment Cycle:		Annually
Maintenance Term:				See Order Schedule #5
CPU and/or number of MIPS and MIPS environment:							Sun Solaris
Acceptance Test Period:					NA
Warranty Period:					90 days from the date of delivery of the Software

Source Code Provided Directly to Licensee:	Yes       X	No
Deposited with Escrow Agent:	Yes       X	No
Name of Escrow Agent:  Iron Mountain Intellectual Property            Management, Inc.
Address of Escrow Agent:

Additional Terms and Conditions:

1.In the case of any conflict between this License Schedule and Chordiant Order Form #5, the terms of Chordiant Order Form #5 shall prevail.  (See additional terms and conditions in Chordiant Order Form #5.)

2.Notwithstanding Section 7.1 of the Agreement, in addition to Delivering Licensee the Source Code of the Software, Licensor also shall escrow the Software as indicated above in accordance with Section 7.1 of the Agreement.

Term:  Perpetual

Specifications: No Additional Specifications

Allowed Combinations: Not required

Acceptance Criteria: NA

Configuration: NA

Disaster Recovery Plan: NA

Escrow Agreement:

IN WITNESS WHEREOF, the Parties hereto, through their duly authorized officers, have executed this License Schedule to the Master Software License and Support Agreement as of the Effective Date designated above.

Chordiant Software, Inc.:		Citicorp Credit Services, Inc. (USA):
By:	/s/ Steven Springsteel	By:	/s/ Mark D. Torkos
Name:	Steven Springsteel	Name:	Mark Torkos
Title:	President & CEO	Title:	CIO
	(type or print)

Date:      __12/7/06____________________         Date:      _____________12/8/06_______

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

      

        Confidential Treatment Requested      

    

Chordiant Software, Inc.:
By:	/s/ Peter Norman
Name:	Peter Norman
Title:	CFO
	(type or print)

Date:      _________12/7/06_________________

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

      

        Confidential Treatment Requested      

    

Appendix A – Undelivered Third Party Source Code

[* 7 pages of tabular text omitted]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

      

        Confidential Treatment Requested      

    

Order Form No. 5

Contract Information

Customer Name:                                           Citicorp Credit Services, Inc. (USA) (“CCSI (USA)”)

Purchase Order Number:

Customer Location:                                                      [ * ]

Customer Telephone Number:                                                                [ * ]

Designated Support Contact:                                                      [ * ]

Contact’s E-Mail Address:                                                      [ * ]

Agreement Name and Date:Master Software License and Support Agreement dated February 1, 2006 by and between Citicorp Credit Services, Inc. (USA) and Chordiant Software, Inc. (“Agreement”)

This Order Form (“Order Form”) is placed in accordance with and shall be governed by the terms of the Agreement specified above.  Customer hereby orders the Software licenses for use as follows:

A:  SOFTWARE LICENSE

Designated Center:

Hardware:                                           Sun Microsystems

Operating System:                                                      Sun Solaris

Relationship Database:                                                                Oracle

Customer Application:                                                      Citicorp Credit Services, Inc. (USA) (“CCSI (USA)”)

Application Server:                                                      IBM Websphere

Channel Usage:                                                      North American Contact-Center, Internet, Portal, ATM, IVR

Branch.

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

      

        Confidential Treatment Requested      

    

1. Server Environment

Software Product(s)	Qty	License Type (i.e. Named User/Client, Server, Developer) URN’s (no. of)
·Chordiant 5 Foundation Server: Application Components Business Process Server Security Server Persistence Server Foundation Server JDBC Connector for Oracle CTI Server CAFÉ Server Connector to MQ	CCSI (USA) Enterprise Source Code*	CPU
·Chordiant 5 Development Tools: Tools Platform Process Developer CAFÉ Development Environment	CCSI (USA) Enterprise	Developers
Recommendation Advisor	CCSI(USA) Enterprise Source Code*	A.Concurrent Users
Chordiant 5 Lead Management module	CCSI(USA) Enterprise Source Code*	Module
Chordiant 5 Basel II	CCSI(USA) Enterprise Source Code*	Module
Fraud Recoveries	CCSI (USA) Enterprise Source Code*	Module
Chargeback & Disputes	CCSI (USA) Enterprise Source Code*	Module
License Fee		[ * ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

      

        Confidential Treatment Requested      

    

2. Decision/Marketing Environment

Software Product(s)	Quantity	License Type (i.e. User/Client, Server, Developer), URN’s (no. of)
Chordiant Marketing Director	CCSI (USA)  Enterprise Source Code*	URN
On-line Marketing Director	CCSI (USA)  Enterprise Source Code*	URN
Predictive Analytics Director	CCSI (USA)  Enterprise Source Code*	Developers
Strategy Director	CCSI (USA)  Enterprise Source Code*	Developers
Real-Time Decision Server	CCSI (USA) Enterprise Source Code*	URN
Database Decision Server	CCSI (USA) Enterprise Source Code*	URN
Decision Monitor	CCSI (USA)  Enterprise Source Code*	Developers
Decision Monitor Universe	CCSI (USA) Enterprise Source Code*	URN
Data Preparation Director	CCSI (USA) Enterprise Source Code*	Developers
Interaction Services	CCSI (USA) Enterprise Source Code*	URN
Adaptive Decisioning Services	CCSI (USA) Enterprise Source Code*	URN
License Fee		[ * ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

      

        Confidential Treatment Requested      

    

3. Reporting Environment

Software Product(s)	Quantity	License Type  URN’s (no. of)	License Fee
Chordiant OneReporting Report Library (assets only) ***	CCSI (USA) Enterprise	CPU	[ * ]
License Fee			[ * ]

4. Rules Environment

Software Product(s)	Quantity	License Type (i.e. User/Client, Server, Developer), URN’s (no. of)	License Fee
Rules Server	CCSI (USA) Enterprise	CPU	[ * ]
Rules Designer	[ * ]	Developers	[ * ]
License Fee			[ * ]

5. Desktop Environment

Software Product(s)	Quantity	License Type (i.e. User/Client, Server, Developer), URN’s (no. of)	License Fee
Chordiant 5 Call Center Advisor Browser Edition	1000 Source Code*	Concurrent Users	[ * ]
Chordiant 5 Teller	100 Source Code*	Concurrent Users	[ * ]
License Fee			[ * ]

6. Collections

Software Product(s)	Quantity	License Type (i.e. User/Client, Server, Developer), URN’s (no. of)	License Fee
Chordiant Collections v1.0**	CCSI (USA) Enterprise Source Code*	CPU	$1,200,000
License Fee			$1,200,000

7. Financial Environment (Retail Banking)

Software Product(s)	Quantity	License Type (i.e. User/Client, Server, Developer), URN’s (no. of)	License Fee
Chordiant 5 Lending (to include lending and mortgage assets/templates)***	CCSI(USA) Enterprise Source Code*	Module	[ * ]
Chordiant 5 Financial Services	CCSI(USA) Enterprise Source Code*	4 CPU	[ * ]
License Fee			[ * ]

* Excludes source code of Third Party Software itemized on the License Schedule No.5.

** Generally available (GA) delivery of the Chordiant Collections 1.0 software product with the product specifications described on Exhibit A hereto is anticipated to occur in the second calendar quarter of 2007.

*** This license is limited to the software product initially delivered and is not supported.

7.  Total License Fees (subject to Section 9.5 of the Agreement, due and payable upon execution of the Order Form):$20,000,000

8.  Additional Licenses. CCSI (USA) may purchase additional licenses for the Software Products listed below at the respective quantities and license fee indicated.

CCSI (USA)’s Purchase table valid until September 2012

Software Product(s)	Quantity	License Type (i.e. User/Client, Server, Developer), URN’s (no. of)	License Fee
Chordiant 5 Call Center Advisor Browser Edition	500	Concurrent Users	$325,000
Chordiant 5 Teller	100	Concurrent User	$30,000

Subject to the note below, CCSI (USA) agrees that if it deploys any software which is a functional substitute for Chordiant 5 Call Center Advisor Browser Edition or Chordiant 5 Teller then CCSI (USA) will pay Chordiant the same license fees for such functional substitute as would have been applicable to a corresponding deployment of Chordiant 5 Call Center Advisor Browser Edition or Chordiant 5 Teller and the users of such functional substitute shall be considered Concurrent Users (as such term is defined below).

For purposes of this Order Form, the term “functional substitute” shall be defined as being an equivalent product with like functionality and technical maturity or, in the case of the Chordiant Call Center Advisor Browser Edition, a product which otherwise allows CCSI (USA)’s employees and contractors the ability to access the functionality of the Software Products licensed hereunder on an Enterprise basis.  In the event that Chordiant 5 Call Center Advisor Browser Edition or Chordiant 5 Teller becomes functionally or technically obsolete, Chordiant will have 90 days to resolve the deficiency.  If Chordiant is unable to do so, CCSI (USA) shall have the option of deploying a substitute without penalty, without payment to Chordiant and the users of such functional substitute shall not be considered concurrent users.

Note: If the total license fees paid by CCSI (USA) or its affiliates (under this Order Form #5 and any subsequent Order Form under the Agreement entered into after the date of execution of this Order Form #5) equal or exceed $50,000,000 at any time before the end of the year 2012, then the Chordiant 5 Call Center Advisor Browser Edition and Chordiant 5 Teller will be considered enterprise (unlimited Concurrent Users) for CCSI (USA). CCSI(USA)’s obligation set forth in the two paragraphs immediately above this Note to pay Chordiant license fees for CCSI(USA)’s deployment of functional substitutes shall cease to apply when the total license fees paid to Chordiant by CCSI(USA) reach $50,000,000.

B:  ANNUAL SUPPORT FEE(S) ON SOFTWARE LICENSE

1.  Annual Support Fees for the software license identified in Section A above are:

Premium Support

a.  First 12 months of Premium Support services shall be provided at no cost.

b.  During the second 12 month period, the Premium Support services shall be calculated at an annual rate equal to $ 240 x Number of Concurrent Users on the Counting Date (as defined below). Notwithstanding the foregoing, the fee for Premium Support services shall not exceed $20,000,000 per annum.

2.  Definitions

The Number of Concurrent Users is defined as the maximum number of individuals using Chordiant 5 Call Center Advisor Browser Edition or Chordiant 5 Teller to access a Chordiant 5 server product at any one time.

3.  Reporting

CCSI (USA) will inform Chordiant Software Inc. of the peak Number of the Concurrent Users on the second Monday in September of each year (the “Counting Date”) not more than thirty (30) days after the Counting Date.  For each support period, Chordiant will invoice CCSI (USA) following receipt from CCSI (USA) of the report stating the Number of Concurrent Users on the Counting Date.

Not more frequently than annually, Chordiant may audit CCSI (USA)’s use of the Software.  If an audit reveals, or CCSI (USA) reports to Chordiant, that the Number of Concurrent Users in production by CCSI (USA) on the Counting Date exceeds the Number of Concurrent Users licensed by CCSI (USA) on the Counting Date, then CCSI (USA) shall be invoiced directly for such unpaid licenses based on CCSI (USA)’s Purchase table listed above.

4.  Renewal of Support: At CCSI (USA)’s option, on the second anniversary of the execution of this License Schedule, and on each subsequent anniversary date, CCSI (USA) may acquire an additional one year of Premium Support services for the Software licensed under this Order Form, for an annual support fee calculated as the higher of 4% of the License fees paid or $240 x Number of Concurrent Users on the Counting Date.  The Concurrent User support fee (initially $240 per user) shall not increase from the previous year’s per user Support Fee by more than the lesser of 5% or the actual increase in the Consumer Price Index (CPI) for the previous twelve (12) month period as published by the Wall Street Journal. Notwithstanding the foregoing, the fee for Premium Support services shall not exceed $20,000,000 per annum.

C:  MISCELLANEOUS

1.   As specified on this Order Form, Chordiant shall deliver to the CCSI (USA) Location, one copy of the Software media and Documentation (electronically, or CD-ROM or bound, whichever is generally available and at CCSI (USA) discretion) (“Master Copy”) for each Software license specified above for use at the Designated Center.  CCSI (USA) shall have the right to make up to a reasonable number of copies of the Software, including Documentation, for each License Type of the Software, and CCSI (USA) shall be responsible for installation of the Software.  All fees due under this Order Form shall be due and payable upon the dates set forth in this Order Form, and shall be non-cancelable and the sum paid non-refundable.

2.   No acceptance period shall apply to the Software.  The Software is deemed accepted upon delivery.

Chordiant Software Inc.                                                                                                Citicorp Credit Services, Inc. (USA)

Signature                                                                                                                        Signature

Steven Springsteel                                                                                      

Print Name                                                                                                                    Print Name

President & CEO                                                                                                ________________________________________

Print Title                                                                                                                       Print Title

Date                                                                                                                             Date           

Chordiant Software Inc.                                                                                                

Signature

Peter Norman                                                                           

Print Name

CFO                                                                

Print Title

Date                                                                      

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

      

        Confidential Treatment Requested      

    

Exhibit A

Chordiant Collections 1.0

Product Specifications

[ * 3 pages of text omitted ]

      

                  [ * ]            = Certain confidential information contained in this document, marked by brackets,           has been omitted and filed separately with            the Securities and Exchange Commission pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended.               

           

EX-10.60

 [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.      

Exhibit 10.60

Chordiant Fiscal Year 2008 Executive Incentive Bonus Plan

Executive Bonus Plan

The Executive Bonus Plan will cover all Executive Officers and Vice Presidents of the Company (excepting those paid on sales commission plans).  Bonuses under this plan will be calculated and paid (if applicable) quarterly based on corporate results filed on Forms 10-Q and 10-K versus Chordiant’s established FY2008 Financial Plan as compared against four quantitative measures: contract value (Bookings), GAAP Revenue, Non-GAAP Operating Profit, Cash Flow (as defined below) and one discretionary component managed by the Chief Executive Officer. Total bonuses paid for the fiscal year under the plan shall not exceed 300% of the bonus opportunity for any one individual.  Payment and earnings in any one quarter will be limited to a maximum of 100% of the participant’s targeted bonus for that quarter.  At the end of the fiscal year, the Company will calculate performance in total for the plan year and evaluate attainment against full plan year goals. Performance in excess of 100% of the total plan year goal, but no greater than 300% of the total plan year goal for each element or in aggregate,  will be paid not later than 60 days after fiscal year end (or later if audited results are not completed) according to the acceleration schedule for each measure.

Plan Summary

Quantitative Components:

·   Contract Value (Bookings) in $US

·   GAAP Revenue in $US

·   Non GAAP Operating Profit in $US

·   Cash flow Generation in $US

Discretionary Component:

·   CEO Discretionary

Plan annual maximum payout to individuals – 300%

Payments

·   Quarterly

·   Limited to 100% maximum payment each quarter

·   Overachievement paid at end of fiscal year

Component – Contract Value (Bookings)

Weighting – 25%

Total Bookings Goal (in $US)

Q1                                  $[ * ]

Q2                                  $[ * ]

Q3                                  $[ * ]

Q4                                  $[ * ]

FY2008                                $[ * ]

    Performance*                                                      Payout*

Thresholds                                            80%                                            50%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Revenue

Weighting – 25%

Revenue Goal (Reported GAAP Revenue in $US)

Q1                                  $[ * ]

Q2                                  $[ * ]

Q3                                  $[ * ]

Q4                                  $[ * ]

FY2008                                $[ * ]

    Performance*                                        Payout*

Thresholds                     80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Non GAAP Operating Profit

Weighting – 25% for executives other than the CEO and 35% for the CEO

(Reported Non-GAAP Operating Profit in $US)

Q1                                    $[ * ]

Q2                                    $[ * ]

Q3                                    $[ * ]

Q4                                    $[ * ]

FY2008                                  $[ * ]

                                     Performance*                          Payout*

Thresholds                     80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Cash Flow

Weighting – 15%

(Periodic Change in Reported Cash, Cash Equivalents, Marketable Securities and Restricted Cash in $US)

Q1                                    $[ * ]

Q2                                    $[ * ]

Q3                                    $[ * ]

Q4                                    $[ * ]

FY2008                                  $[ * ]

                                     Performance*                            Payout*

Threshold                       80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

*Performance and payout interpolate between levels

Component – CEO Discretionary

Weighting – 10% for executives other than the CEO

This component is paid at the sole discretion of the CEO.  Should the quantitative metrics specified above justify a bonus payment above 100% for the quantitative portion of this bonus plan, then the payment under this opportunity increases proportionately.

Bookings

Contract value (“Bookings”) is a basis for measurement under the Executive Bonus Plan.  Bookings under this plan will be defined as the booking amount measured and represented by the non-cancelable portion of revenue under a contract or contracts plus executed statements of work.  The cancelable portion of a contract will receive booking credit when the customer and/or Chordiant performs tasks specified in the contract or a time limitation contained in the contract expires such that the contract relating to that portion of Bookings is no longer cancelable by the customer.  For each fiscal quarter, total Bookings will be determined utilizing the Company’s internal financial statements measured against the Company’s 2008 Annual Financial Plan.

The portion of an executive’s bonus opportunity related to Bookings (a “Bookings Portion”) is determined and (if applicable) distributed equally across the fiscal year, with 25% of the Bookings Portion eligible for payment each quarter.  Whether the Bookings Portion qualifies for payment, however, is determined entirely by actual Company performance against the Company’s Bookings goals according to the following schedule:

·If the Company does not achieve at least 80% of its Bookings goal for the quarter, then none of the Bookings Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Bookings goal for the quarter, but less than 100% of its Bookings goal for the quarter, then 50% of an executive’s target for the Bookings Portion will qualify for payment, with an additional 2.5% of an executive’s target for the Bookings Portion qualifying for payment for each 1% above 80% to 100% of the Bookings goal that was achieved for the quarter.

·If the Company achieves greater than 100% of its Bookings goal but less than 120% of its Bookings goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Bookings goal to 120% of Bookings goal. From 120% of Bookings goal to 130% of Bookings goal,  an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Bookings goal to 130% of Bookings goal until the maximum payout of 300% is reached.

Revenue

Revenue is the second measure for the Executive Bonus Plan and is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

·If the Company does not achieve at least 80% of its revenue goal for the quarter, then none of the Revenue Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its revenue goal for the quarter then 25% of an executive’s target for the revenue portion will qualify for payment, with an additional 3.75% of an executive’s target for the revenue portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the revenue goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its revenue goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of revenue goal until the payment of 200% at 120% of goal is reached. From 120% of revenue goal to 130% of revenue goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Revenue goal to 130% of revenue goal until the maximum payout of 300% is reached.

Non GAAP Operating Profit

Non-GAAP Operating Profit is the third measure for the Executive Bonus Plan and is defined as Non-GAAP Operating Profit reported on  the Company’s quarterly Non-GAAP consolidated statement of operations in $US.  Historically, these Non-GAAP results exclude amortization of intangible assets and capitalized software development, stock-based compensation and other non-recurring charges.

·If the Company does not achieve at least 80% of its Non-GAAP Operating Profit goal for the quarter, then none of the Non-GAAP Operating Profit portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Non-GAAP Operating Profit  goal for the quarter then 25% of an executive’s target for the Non-GAAP Operating profit portion will qualify for payment, with an additional 3.75% of an executive’s target for the Non-GAAP operating profit portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the Non-GAAP Operating Profit goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its Non-GAAP Operating Profit goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Non-GAAP Operating Profit goal until the payment of 200% at 120% of goal is reached. From 120% of Non-GAAP Operating Profit goal to 130% of Non-GAAP Operating Profit goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Non-GAAP Operating profit goal to 130% of Non-GAAP Operating Profit goal until the maximum payout of 300% is reached.

Cash Flow

Cash Flow is the fourth  measure for the Executive Bonus Plan and is defined as the periodic Change in Reported Cash, Cash Equivalents, Marketable Securities and Restricted Cash)  reported on  the Company’s quarterly consolidated statement of balance sheets in $US.

·If the Company does not achieve at least 80% of its revenue goal for the quarter, then none of the Revenue Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Non-GAAP Operating Profit goal for the quarter then 25% of an executive’s target for the Non-GAAP Operating profit portion will qualify for payment, with an additional 3.75% of an executive’s target for the Non-GAAP operating profit portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the Non-GAAP Operating Profit goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its Cash Flow goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Cash Flow goal until the payment of 200% at 120% of goal is reached. From 120% of Cash Flow goal to 130% of  Cash Flow goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Cash Flow goal to 130% of Cash Flow goal until the maximum payout of 300% is reached.

Calculations

Calculations of quarterly payouts will be done on a quarterly stand-alone basis. At the end of the fiscal year the calculation of any payment in excess of 100% will be based on the results for the full year.  Executives joining the Company mid-year will only be entitled to a pro-rata portion of the bonus amount that exceeds 100%.

Payment

The final decision to pay a bonus will remain the decision of the Board of Directors or the Compensation Committee if so delegated by the Board.  The Board may in its own discretion, determine to pay or not pay a bonus based upon the factors listed above or other Company performance criteria it deems appropriate.  The factors listed above are guidelines to assist the Board, or the Committee, as the case may be, in its judgment but the final decision to pay or not pay is in the discretion the Board.  In its discretion, the Committee may recommend, and the Board has the authority to approve, a payment of up to 50% of an executive’s bonus opportunity to an individual(s) without regard to the performance criteria set forth in this plan.

Bonuses are generally calculated within thirty (30) days after the end of any given quarter and are generally paid within forty-five (45) days after the end of a given quarter, and generally not later than 60 days following the end of such quarter.  Bonuses are then paid in the next regularly-scheduled paycheck.  Payment for achievement of greater than 100% of plan goal generally will be made not later than 60 days following the close of the Company’s fiscal year.  These payment dates are contingent upon the Company filing its periodic forms 10-Q and 10-K.

No bonus is earned until it is paid under this plan.  Therefore, in the event the employment of an executive eligible under this plan  is terminated (either by the Company or by the eligible executive, whether voluntarily or involuntarily) before a bonus is paid, then the executive will not be deemed to have earned that bonus, and will not be entitled to any portion of that bonus.

Questions regarding the Plan should be directed to the Chief Executive Officer or the Vice President of Human Resources.  Acceptance of payment(s) under the Plan constitutes full and complete acceptance of its terms and conditions.  Any eligible employee wishing to not participate in the Plan must notify the Vice President, Human Resources in writing of their desire and intent.

Nothing in this Plan is intended to alter the at-will nature of employment with the Company, that is, the executive’s right or the Company’s right to terminate the executive’s employment at will, at any time with or without cause or advance notice.  In addition, acceptance of this Plan shall not be construed to imply a guarantee of employment for any specified period of time.

This Plan contains the entire agreement between the Company and its executives on this subject, and supersedes all prior bonus compensation plans or programs of the Company and all other previous oral or written statements regarding any such bonus compensation programs or plans.

The contents of this Plan are Company confidential.  This Plan shall be governed by and construed under the laws of the State of California.

*   *   *

I have read and understand the provisions of this 2008 Executive Bonus Plan and hereby accept its terms.

Employee Name (Printed)                                                      Employee Signature                                                      Date

EX-10.61

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.      

Exhibit 10.61

Chordiant Fiscal Year 2008 General Counsel Incentive Bonus Plan

General Counsel Bonus Plan

The General Counsel Bonus Plan applies to the Vice President and General Counsel and is comprised of 2 components—the quantitative portion and the qualitative portion.  The quantitative portion under this plan will be calculated and paid (if applicable) quarterly based on corporate results measured against four quantitative measures: Contract Value (Bookings), GAAP Revenue, Non Gaap Operating Profit and Cash Flow. Additionally there will be a CEO discretionary measure which may be either quantitative or qualitative. The qualitative portion of the bonus will be calculated and paid on an annual basis.  Total bonuses paid in the fiscal year under the plan shall not exceed 300% of the bonus opportunity    Payment in any one quarter will be limited to a maximum of 100% of the participant’s targeted quantitative bonus for that quarter .  At the end of the fiscal year, the Company will calculate performance in total for the plan year and evaluate attainment against full plan year goals.

The qualitative portion of the bonus may be paid regardless of the performance of the Company against the quantitative measures.  Evaluation of and payment for performance under the qualitative portion of the bonus shall be the exclusive decision of the Board of Directors. Payment  of the qualitative portion of the bonus is limited to no greater than 100% when overall performance under the quantitative measures is less than 100% on a combined measure basis.  When the quantitative measure is greater than 100% for the year, the qualitative portion of the bonus may also exceed 100% proportionately.

Plan Summary

Quantitative Components:

·   Contract Value (Bookings) in $US

·   GAAP Revenue in $US

·   Non GAAP Operating Profit in $US

·   Cash flow Generation in $US

Discretionary Component:

·   CEO Discretionary

Plan annual maximum payout to individuals – 300%

Payments

·   Quarterly

·   Limited to 100% maximum payment each quarter

·   Overachievement paid at end of fiscal year

Component – Contract Value (Bookings)

Weighting – 25%

Total Bookings Goal (in $US)

Q1                                  $[ * ]

Q2                                  $[ * ]

Q3                                  $[ * ]

Q4                                  $[ * ]

FY2008                                $[ * ]

    Performance*                                       Payout*

Thresholds                     80%                                            50%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Revenue

Weighting – 25%

Revenue Goal (Reported GAAP Revenue in $US)

Q1                                  $[ * ]

Q2                                  $[ * ]

Q3                                  $[ * ]

Q4                                  $[ * ]

FY2008                                $[ * ]

    Performance*                                      Payout*

Thresholds                     80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Non GAAP Operating Profit

Weighting – 25%

(Reported Non-GAAP Operating Profit in $US)

Q1                                    $[ * ]

Q2                                    $[ * ]

Q3                                    $[ * ]

Q4                                    $[ * ]

FY2008                                  $[ * ]

                                     Performance*                           Payout*

Thresholds                       80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Cash Flow

Weighting – 15%

(Periodic Change in Reported Cash, Cash Equivalents, Marketable Securities and Restricted Cash in $US)

Q1                                    $[ * ]

Q2                                    $[ * ]

Q3                                    $[ * ]

Q4                                    $[ * ]

FY2008                                  $[ * ]

                                     Performance*                             Payout*

Threshold                        80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

*Performance and payout interpolate between levels

Component – CEO Discretionary

Weighting – 10%

This component is paid at the sole discretion of the CEO.  Should the quantitative metrics specified above justify a bonus payment above 100% for the quantitative portion of this bonus plan, then the payment under this opportunity increases proportionately.

Quantitative Measures – 75% of total bonus opportunity

Bookings

Contract value (“Bookings”) is a basis for measurement under the Executive Bonus Plan.  Bookings under this plan will be defined as the booking amount measured and represented by the non-cancelable portion of revenue under a contract or contracts plus executed statements of work.  The cancelable portion of a contract will receive booking credit when the customer and/or Chordiant performs tasks specified in the contract or a time limitation contained in the contract expires such that the contract relating to that portion of Bookings is no longer cancelable by the customer.  For each fiscal quarter, total Bookings will be determined utilizing the Company’s internal financial statements measured against the Company’s 2008 Annual Financial Plan.

The portion of an executive’s bonus opportunity related to Bookings (a “Bookings Portion”) is determined and (if applicable) distributed equally across the fiscal year, with 25% of the Bookings Portion eligible for payment each quarter.  Whether the Bookings Portion qualifies for payment, however, is determined entirely by actual Company performance against the Company’s Bookings goals according to the following schedule:

·If the Company does not achieve at least 80% of its Bookings goal for the quarter, then none of the Bookings Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Bookings goal for the quarter, but less than 100% of its Bookings goal for the quarter, then 50% of an executive’s target for the Bookings Portion will qualify for payment, with an additional 2.5% of an executive’s target for the Bookings Portion qualifying for payment for each 1% above 80% to 100% of the Bookings goal that was achieved for the quarter.

·If the Company achieves greater than 100% of its Bookings goal but less than 120% of its Bookings goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Bookings goal to 120% of Bookings goal. From 120% of Bookings goal to 130% of Bookings goal,  an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Bookings goal to 130% of Bookings goal until the maximum payout of 300% is reached.

Revenue

Revenue is the second measure for the Executive Bonus Plan and is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

·If the Company does not achieve at least 80% of its revenue goal for the quarter, then none of the Revenue Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its revenue goal for the quarter then 25% of an executive’s target for the revenue portion will qualify for payment, with an additional 3.75% of an executive’s target for the revenue portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the revenue goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its revenue goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of revenue goal until the payment of 200% at 120% of goal is reached. From 120% of revenue goal to 130% of revenue goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Revenue goal to 130% of revenue goal until the maximum payout of 300% is reached.

Non GAAP Operating Profit

Non-GAAP Operating Profit is the third measure for the Executive Bonus Plan and is defined as Non-GAAP Operating Profit reported on  the Company’s quarterly Non-GAAP consolidated statement of operations in $US.  Historically, these Non-GAAP results exclude amortization of intangible assets and capitalized software development, stock-based compensation and other non-recurring charges.

·If the Company does not achieve at least 80% of its Non-GAAP Operating Profit goal for the quarter, then none of the Non-GAAP Operating Profit portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Non-GAAP Operating Profit  goal for the quarter then 25% of an executive’s target for the Non-GAAP Operating profit portion will qualify for payment, with an additional 3.75% of an executive’s target for the Non-GAAP operating profit portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the Non-GAAP Operating Profit goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its Non-GAAP Operating Profit goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Non-GAAP Operating Profit goal until the payment of 200% at 120% of goal is reached. From 120% of Non-GAAP Operating Profit goal to 130% of Non-GAAP Operating Profit goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Non-GAAP Operating profit goal to 130% of Non-GAAP Operating Profit goal until the maximum payout of 300% is reached.

Cash Flow

Cash Flow is the fourth  measure for the Executive Bonus Plan and is defined as the periodic Change in Reported Cash, Cash Equivalents, Marketable Securities and Restricted Cash)  reported on  the Company’s quarterly consolidated statement of balance sheets in $US.

·If the Company does not achieve at least 80% of its revenue goal for the quarter, then none of the Revenue Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Non-GAAP Operating Profit goal for the quarter then 25% of an executive’s target for the Non-GAAP Operating profit portion will qualify for payment, with an additional 3.75% of an executive’s target for the Non-GAAP operating profit portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the Non-GAAP Operating Profit goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its Cash Flow goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Cash Flow goal until the payment of 200% at 120% of goal is reached. From 120% of Cash Flow goal to 130% of  Cash Flow goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Cash Flow goal to 130% of Cash Flow goal until the maximum payout of 300% is reached.

Calculations

Calculations of quarterly payouts will be done on a quarterly stand-alone basis. At the end of the fiscal year the calculation of any payment in excess of 100% will be based on the results for the full year.  Executives joining the Company mid-year will only be entitled to a pro-rata portion of the bonus amount that exceeds 100%.

Qualitative Measures – 25% of Bonus Opportunity

Corporate Governance

By Board direction the General Counsel reports to the Board in his role as chief compliance officer.  Each quarter he shall submit a report to the compensation committee on his activities in this role for evaluation by the committee.  At year end, based on such performance evaluation, the compensation committee shall recommend a scoring of full, partial or no payout to the Board for its determination.  Should the quantitative  metrics justify a bonus payment above 100%, the payment under this opportunity shall be increased proportionately.

Payment

The final decision to pay a bonus will remain the decision of the Board of Directors or the Compensation Committee if so delegated by the Board.  The Board may in its own discretion, determine to pay or not pay a bonus based upon the factors listed above or other Company performance criteria it deems appropriate.  The factors listed above are guidelines to assist the Board, or the Committee, as the case may be, in its judgment but the final decision to pay or not pay is in the discretion the Board.  In its discretion, the Committee may recommend, and the Board has the authority to approve, a payment of up to 50% of an executive’s bonus opportunity to an individual(s) without regard to the performance criteria set forth in this plan.

Bonuses are generally calculated within thirty (30) days after the end of any given quarter and are generally paid within forty-five (45) days after the end of a given quarter, and generally not later than 60 days following the end of such quarter.

Bonuses are then paid in the next regularly-scheduled paycheck.  Payment for achievement of greater than 100% of plan goal generally will be made not later than 60 days following the close of the Company’s fiscal year.  These payment dates are contingent upon the Company filing its periodic forms 10-Q and 10-K.

No bonus is earned until it is paid under this plan.  Therefore, in the event the employment of an executive eligible under this plan  is terminated (either by the Company or by the eligible executive, whether voluntarily or involuntarily) before a bonus is paid, then the executive will not be deemed to have earned that bonus, and will not be entitled to any portion of that bonus.

Questions regarding the Plan should be directed to the Chief Executive Officer or the Vice President of Human Resources.  Acceptance of payment(s) under the Plan constitutes full and complete acceptance of its terms and conditions.  Any eligible employee wishing to not participate in the Plan must notify the Vice President, Human Resources in writing of their desire and intent.

Nothing in this Plan is intended to alter the at-will nature of employment with the Company, that is, the executive’s right or the Company’s right to terminate the executive’s employment at will, at any time with or without cause or advance notice.  In addition, acceptance of this Plan shall not be construed to imply a guarantee of employment for any specified period of time.

This Plan contains the entire agreement between the Company and its executives on this subject, and supersedes all prior bonus compensation plans or programs of the Company and all other previous oral or written statements regarding any such bonus compensation programs or plans.

The contents of this Plan are Company confidential.  This Plan shall be governed by and construed under the laws of the State of California.

*   *   *

I have read and understand the provisions of this 2008 Executive Bonus Plan and hereby accept its terms.

Employee Name (Printed)                                                      Employee Signature                                                      Date

EX-10.62

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.    

Exhibit 10.62

FY2008 Compensation Plan

October 1, 2007

PK,

The letter is to clarify your variable compensation plan for Chordiant’s 2008 fiscal year which begins October 1^st, 2007 and ends September 30^th, 2008.  Your variable compensation element, which has a target equal to 60% of your annual base salary of $275,000, will be calculated and paid (if applicable) quarterly based on the following criteria:

·   50% based on the criteria and payment calculation formulas established in the Chordiant Fiscal Year 2008 Executive Incentive Bonus Plan (attachment A)

·   50% based on the actual worldwide cumulative Professional Services Direct Controllable Contribution Margin % (“PS DCCM %”) versus plan numbers (attachment B).  For FY 2008, PS DCCM% will include results for both Consulting Service and Training.

·   If the Company achieves greater than 100% of its PS DCCM% goal but less than 120% of its PS DCCM% goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of PS Margin goal to 120% of PS Margin goal until the maximum payout of 200% is reached.

·   From 120% of DCCM% goal to 130% of DCCM% goal, then an additional 10%  will qualify for payment after year end for each 1% above 120% of DCCM% goal to 130% of DCCM% goal until the maximum payout of 300% is reached.

For purposes of calculating worldwide professional services DCCM %, Chordiant will use the financial results in the Worldwide Professional Services full-stream (combining both consulting service and training) income statement published in the Great Plains financial system for the applicable period.  This full-stream income statement will then be adjusted by:

·   reversing all travel and expense reimbursement and related travel and expense reimbursement costs

·   Reversing all corporate allocation for centralized service charges.

Additional adjustments to revenue for timing differences for Open Air billings versus recognized revenue may also be included in the calculation at the discretion of Chordiant’s Vice President of Worldwide Field Operations.  Such adjustments must be agreed to in writing by both Chordiant’s Vice President of Worldwide Field Operations and Chief Executive Officer before payment is processed.

Total bonuses paid to you in the fiscal year under the plan shall not exceed 300% of your annual bonus opportunity of $165,000.  Payment and earnings in any one of the first three fiscal quarters will be limited to a maximum of 100% of your targeted bonus for that quarter which equates to $41,250.

Payment

The final decision to pay a bonus will remain the decision of the Board of Directors or the Compensation Committee if so delegated by the Board.  The Board may in its own discretion, determine to pay or not pay a bonus based upon the factors listed above or other Company performance criteria it deems appropriate.  The factors listed above are guidelines to assist the Board, or the Committee, as the case may be, in its judgment but the final decision to pay or not pay is in the discretion the Board.  In its discretion, the Committee may recommend, and the Board has the authority to approve, a payment of up to 50% of the bonus opportunity without regard to the performance criteria set forth in this plan.

Bonuses are generally calculated within thirty (30) days after the end of any given quarter and are generally paid within forty-five (45) days after the end of a given quarter, but not later than 60 days following the end of such quarter.  Notwithstanding the foregoing, bonuses will not be calculated or paid for a fiscal quarter until the public disclosure of final financial information for the applicable period.  Bonuses are then paid in the next regularly-scheduled paycheck.  Contingent upon the Company filing it’s Form 10K, payment for achievement of greater than 100% of plan goal and for the qualitative measure of the plan will be made not later than 60 days following the close of the Company’s fiscal year.

No bonus is earned until it is paid under this plan.  Therefore, in the event your employment is terminated (either by the Company or by you, whether voluntarily or involuntarily) before a bonus is paid, then you will not be deemed to have earned that bonus, and will not be entitled to any portion of that bonus.

Questions regarding the Plan should be directed to the Chief Executive Officer or the Vice President of Human Resources.  Acceptance of payment(s) under the Plan constitutes full and complete acceptance of its terms and conditions.  If you do not wish to participate in the Plan, you must notify the Vice President, Human Resources in writing of his desire and intent.

Nothing in this Plan is intended to alter the at-will nature of employment with the Company, that is, your right or the Company’s right to terminate the your employment at will, at any time with or without cause or advance notice.  In addition, acceptance of this Plan shall not be construed to imply a guarantee of employment for any specified period of time.

This Plan contains the entire agreement between the Company and you on this subject, and supersedes all prior bonus compensation plans or programs of the Company and all other previous oral or written statements regarding any such bonus compensation programs or plans.

The contents of this Plan are Company confidential.  This Plan shall be governed by and construed under the laws of the State of California.

Please acknowledge that you have read and understood the terms of this agreement by signing and dating below.

Signed                                                                                                Date

      

        [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.      

    

Attachment A

Plan Summary

Quantitative Components:

·   Contract Value (Bookings) in $US

·   GAAP Revenue in $US

·   Non GAAP Operating Profit in $US

·   Cash flow Generation in $US

Discretionary Component:

·   CEO Discretionary

Plan annual maximum payout to individuals – 300%

Payments

·   Quarterly

·   Limited to 100% maximum payment each quarter

·   Overachievement paid at end of fiscal year

Component – Contract Value (Bookings)

Weighting – 25%

Total Bookings Goal (in $US)

Q1                                  $[ * ]

Q2                                  $[ * ]

Q3                                  $[ * ]

Q4                                  $[ * ]

FY2008                                $[ * ]

    Performance*                                         Payout*

Thresholds                       80%                                            50%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Revenue

Weighting – 25%

Revenue Goal (Reported GAAP Revenue in $US)

Q1                                  $[ * ]

Q2                                  $[ * ]

Q3                                  $[ * ]

Q4                                  $[ * ]

FY2008                                $[ * ]

    Performance*                                      Payout*

Thresholds                     80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Non GAAP Operating Profit

Weighting – 25%

(Reported Non-GAAP Operating Profit in $US)

Q1                                    $[ * ]

Q2                                    $[ * ]

Q3                                    $[ * ]

Q4                                    $[ * ]

FY2008                                  $[ * ]

                                     Performance*                              Payout*

Thresholds                       80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Cash Flow

Weighting – 15%

(Periodic Change in Reported Cash, Cash Equivalents, Marketable Securities and Restricted Cash in $US)

Q1                                    $[ * ]

Q2                                    $[ * ]

Q3                                    $[ * ]

Q4                                    $[ * ]

FY2008                                  $[ * ]

                                     Performance*                          Payout*

Threshold                      80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

*Performance and payout interpolate between levels

Component – CEO Discretionary

Weighting – 10%

This component is paid at the sole discretion of the CEO.  Should the quantitative metrics specified above justify a bonus payment above 100% for the quantitative portion of this bonus plan, then the payment under this opportunity increases proportionately.

Bookings

Contract value (“Bookings”) is a basis for measurement under the Executive Bonus Plan.  Bookings under this plan will be defined as the booking amount measured and represented by the non-cancelable portion of revenue under a contract or contracts plus executed statements of work.  The cancelable portion of a contract will receive booking credit when the customer and/or Chordiant performs tasks specified in the contract or a time limitation contained in the contract expires such that the contract relating to that portion of Bookings is no longer cancelable by the customer.  For each fiscal quarter, total Bookings will be determined utilizing the Company’s internal financial statements measured against the Company’s 2008 Annual Financial Plan.

The portion of an executive’s bonus opportunity related to Bookings (a “Bookings Portion”) is determined and (if applicable) distributed equally across the fiscal year, with 25% of the Bookings Portion eligible for payment each quarter.  Whether the Bookings Portion qualifies for payment, however, is determined entirely by actual Company performance against the Company’s Bookings goals according to the following schedule:

·If the Company does not achieve at least 80% of its Bookings goal for the quarter, then none of the Bookings Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Bookings goal for the quarter, but less than 100% of its Bookings goal for the quarter, then 50% of an executive’s target for the Bookings Portion will qualify for payment, with an additional 2.5% of an executive’s target for the Bookings Portion qualifying for payment for each 1% above 80% to 100% of the Bookings goal that was achieved for the quarter.

·If the Company achieves greater than 100% of its Bookings goal but less than 120% of its Bookings goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Bookings goal to 120% of Bookings goal. From 120% of Bookings goal to 130% of Bookings goal,  an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Bookings goal to 130% of Bookings goal until the maximum payout of 300% is reached.

Revenue

Revenue is the second measure for the Executive Bonus Plan and is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

·If the Company does not achieve at least 80% of its revenue goal for the quarter, then none of the Revenue Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its revenue goal for the quarter then 25% of an executive’s target for the revenue portion will qualify for payment, with an additional 3.75% of an executive’s target for the revenue portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the revenue goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its revenue goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of revenue goal until the payment of 200% at 120% of goal is reached. From 120% of revenue goal to 130% of revenue goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Revenue goal to 130% of revenue goal until the maximum payout of 300% is reached.

Non GAAP Operating Profit

Non-GAAP Operating Profit is the third measure for the Executive Bonus Plan and is defined as Non-GAAP Operating Profit reported on  the Company’s quarterly Non-GAAP consolidated statement of operations in $US.  Historically, these Non-GAAP results exclude amortization of intangible assets and capitalized software development, stock-based compensation and other non-recurring charges.

·If the Company does not achieve at least 80% of its Non-GAAP Operating Profit goal for the quarter, then none of the Non-GAAP Operating Profit portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Non-GAAP Operating Profit  goal for the quarter then 25% of an executive’s target for the Non-GAAP Operating profit portion will qualify for payment, with an additional 3.75% of an executive’s target for the Non-GAAP operating profit portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the Non-GAAP Operating Profit goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its Non-GAAP Operating Profit goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Non-GAAP Operating Profit goal until the payment of 200% at 120% of goal is reached. From 120% of Non-GAAP Operating Profit goal to 130% of Non-GAAP Operating Profit goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Non-GAAP Operating profit goal to 130% of Non-GAAP Operating Profit goal until the maximum payout of 300% is reached.

Cash Flow

Cash Flow is the fourth  measure for the Executive Bonus Plan and is defined as the periodic Change in Reported Cash, Cash Equivalents, Marketable Securities and Restricted Cash)  reported on  the Company’s quarterly consolidated statement of balance sheets in $US.

·If the Company does not achieve at least 80% of its revenue goal for the quarter, then none of the Revenue Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Non-GAAP Operating Profit goal for the quarter then 25% of an executive’s target for the Non-GAAP Operating profit portion will qualify for payment, with an additional 3.75% of an executive’s target for the Non-GAAP operating profit portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the Non-GAAP Operating Profit goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its Cash Flow goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Cash Flow goal until the payment of 200% at 120% of goal is reached. From 120% of Cash Flow goal to 130% of  Cash Flow goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Cash Flow goal to 130% of Cash Flow goal until the maximum payout of 300% is reached.

Calculations

Calculations of quarterly payouts will be done on a quarterly stand-alone basis. At the end of the fiscal year the calculation of any payment in excess of 100% will be based on the results for the full year.  Executives joining the Company mid-year will only be entitled to a pro-rata portion of the bonus amount that exceeds 100%.

EX-10.63

 [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.      

Exhibit 10.63

FY2008 Vice President Worldwide Sales Bonus Plan

November 5, 2007

David Cunningham,

The letter is to clarify your variable compensation plan for Chordiant’s 2008 fiscal year which begins on November 1^st, 2007 and ends September 30^th, 2008.  Your variable compensation element, which has a target equal to 83.33% of your annual base salary of $300,000 (subject to pro ration for the portion of the fiscal year in during which you are an employee of Chordiant), will be calculated and paid (if applicable) quarterly based on the following criteria:

·   25% based on the criteria and payment calculation formulas established in the Chordiant Fiscal Year 2008 Executive Incentive Bonus Plan (attachment A)

·   75% based on based on the criteria and payment calculation formulas established in the 2008 Vice President, Worldwide Sales Compensation Plan General Terms and Conditions and the Quota Assignment and Commission Factors for Sales Personnel (attachment B)

Payment

The final decision to pay a bonus will remain the decision of the Board of Directors or the Compensation Committee if so delegated by the Board.  The Board may in its own discretion, determine to pay or not pay a bonus based upon the factors listed above or other Company performance criteria it deems appropriate.  The factors listed above are guidelines to assist the Board, or the Committee, as the case may be, in its judgment but the final decision to pay or not pay is in the discretion the Board.  In its discretion, the Committee may recommend, and the Board has the authority to approve, a payment of up to 50% of the bonus opportunity without regard to the performance criteria set forth in this plan.

Bonuses are generally calculated within thirty (30) days after the end of any given quarter and are generally paid within forty-five (45) days after the end of a given quarter, but not later than 60 days following the end of such quarter.  Notwithstanding the foregoing, bonuses will not be calculated or paid for a fiscal quarter until the public disclosure of final financial information for the applicable period.  Bonuses are then paid in the next regularly-scheduled paycheck.  Contingent upon the Company filing it’s Form 10K, payment for the plan will be made not later than 60 days following the close of the Company’s fiscal year.

No bonus is earned until it is paid under this plan.  Therefore, in the event your employment is terminated (either by the Company or by you, whether voluntarily or involuntarily) before a bonus is paid, then you will not be deemed to have earned that bonus, and will not be entitled to any portion of that bonus.

Questions regarding the Plan should be directed to the Chief Executive Officer or the Vice President of Human Resources.  Acceptance of payment(s) under the Plan constitutes full and complete acceptance of its terms and conditions.  If you do not wish to participate in the Plan, you must notify the Vice President, Human Resources in writing of his desire and intent.

Nothing in this Plan is intended to alter the at-will nature of employment with the Company, that is, your right or the Company’s right to terminate the your employment at will, at any time with or without cause or advance notice.  In addition, acceptance of this Plan shall not be construed to imply a guarantee of employment for any specified period of time.

This Plan contains the entire agreement between the Company and you on this subject, and supersedes all prior bonus compensation plans or programs of the Company and all other previous oral or written statements regarding any such bonus compensation programs or plans.

The contents of this Plan are Company confidential.  This Plan shall be governed by and construed under the laws of the State of California.

Please acknowledge that you have read and understood the terms of this agreement by signing and dating below.

Signed                      /s/ David Cunningham                                                                                     Date                      October 23, 2007

      

        [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.      

    

Attachment A

Chordiant Fiscal Year 2008 Executive Incentive Bonus Plan Summary

Quantitative Components:

·   Contract Value (Bookings) in $US

·   GAAP Revenue in $US

·   Non GAAP Operating Profit in $US

·   Cash flow Generation in $US

Discretionary Component:

·   CEO Discretionary

Plan annual maximum payout to individuals – 300%

Payments

·   Quarterly

·   Limited to 100% maximum payment each quarter

·   Overachievement paid at end of fiscal year

Component – Contract Value (Bookings)

Weighting – 25%

Total Bookings Goal (in $US)

Q1                                  $[ * ]

Q2                                  $[ * ]

Q3                                  $[ * ]

Q4                                  $[ * ]

FY2008                                $[ * ]

    Performance*                                                      Payout*

Thresholds                                            80%                                            50%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Revenue

Weighting – 25%

Revenue Goal (Reported GAAP Revenue in $US)

Q1                                  $[ * ]

Q2                                  $[ * ]

Q3                                  $[ * ]

Q4                                  $[ * ]

FY2008                                $[ * ]

    Performance*                                        Payout*

Thresholds                       80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Non GAAP Operating Profit

Weighting – 25%

(Reported Non-GAAP Operating Profit in $US)

Q1                                    $[ * ]

Q2                                    $[ * ]

Q3                                    $[ * ]

Q4                                    $[ * ]

FY2008                                  $[ * ]

                                     Performance*                            Payout*

Thresholds                      80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

Component – Cash Flow

Weighting – 15%

(Periodic Change in Reported Cash, Cash Equivalents, Marketable Securities and Restricted Cash in $US)

Q1                                    $[ * ]

Q2                                    $[ * ]

Q3                                    $[ * ]

Q4                                    $[ * ]

FY2008                                  $[ * ]

                                     Performance*                             Payout*

Threshold                       80%                                            25%

100%                                           100%

120%                                           200%

130%                                           300%

*Performance and payout interpolate between levels

Component – CEO Discretionary

Weighting – 10%

This component is paid at the sole discretion of the CEO.  Should the quantitative metrics specified above justify a bonus payment above 100% for the quantitative portion of this bonus plan, then the payment under this opportunity increases proportionately.

Bookings

Contract value (“Bookings”) is a basis for measurement under the Executive Bonus Plan.  Bookings under this plan will be defined as the booking amount measured and represented by the non-cancelable portion of revenue under a contract or contracts plus executed statements of work.  The cancelable portion of a contract will receive booking credit when the customer and/or Chordiant performs tasks specified in the contract or a time limitation contained in the contract expires such that the contract relating to that portion of Bookings is no longer cancelable by the customer.  For each fiscal quarter, total Bookings will be determined utilizing the Company’s internal financial statements measured against the Company’s 2008 Annual Financial Plan.

The portion of an executive’s bonus opportunity related to Bookings (a “Bookings Portion”) is determined and (if applicable) distributed equally across the fiscal year, with 25% of the Bookings Portion eligible for payment each quarter.  Whether the Bookings Portion qualifies for payment, however, is determined entirely by actual Company performance against the Company’s Bookings goals according to the following schedule:

·If the Company does not achieve at least 80% of its Bookings goal for the quarter, then none of the Bookings Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Bookings goal for the quarter, but less than 100% of its Bookings goal for the quarter, then 50% of an executive’s target for the Bookings Portion will qualify for payment, with an additional 2.5% of an executive’s target for the Bookings Portion qualifying for payment for each 1% above 80% to 100% of the Bookings goal that was achieved for the quarter.

·If the Company achieves greater than 100% of its Bookings goal but less than 120% of its Bookings goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Bookings goal to 120% of Bookings goal. From 120% of Bookings goal to 130% of Bookings goal,  an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Bookings goal to 130% of Bookings goal until the maximum payout of 300% is reached.

Revenue

Revenue is the second measure for the Executive Bonus Plan and is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

·If the Company does not achieve at least 80% of its revenue goal for the quarter, then none of the Revenue Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its revenue goal for the quarter then 25% of an executive’s target for the revenue portion will qualify for payment, with an additional 3.75% of an executive’s target for the revenue portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the revenue goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its revenue goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of revenue goal until the payment of 200% at 120% of goal is reached. From 120% of revenue goal to 130% of revenue goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Revenue goal to 130% of revenue goal until the maximum payout of 300% is reached.

Non GAAP Operating Profit

Non-GAAP Operating Profit is the third measure for the Executive Bonus Plan and is defined as Non-GAAP Operating Profit reported on  the Company’s quarterly Non-GAAP consolidated statement of operations in $US.  Historically, these Non-GAAP results exclude amortization of intangible assets and capitalized software development, stock-based compensation and other non-recurring charges.

·If the Company does not achieve at least 80% of its Non-GAAP Operating Profit goal for the quarter, then none of the Non-GAAP Operating Profit portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Non-GAAP Operating Profit  goal for the quarter then 25% of an executive’s target for the Non-GAAP Operating profit portion will qualify for payment, with an additional 3.75% of an executive’s target for the Non-GAAP operating profit portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the Non-GAAP Operating Profit goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its Non-GAAP Operating Profit goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Non-GAAP Operating Profit goal until the payment of 200% at 120% of goal is reached. From 120% of Non-GAAP Operating Profit goal to 130% of Non-GAAP Operating Profit goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Non-GAAP Operating profit goal to 130% of Non-GAAP Operating Profit goal until the maximum payout of 300% is reached.

Cash Flow

Cash Flow is the fourth  measure for the Executive Bonus Plan and is defined as the periodic Change in Reported Cash, Cash Equivalents, Marketable Securities and Restricted Cash)  reported on  the Company’s quarterly consolidated statement of balance sheets in $US.

·If the Company does not achieve at least 80% of its revenue goal for the quarter, then none of the Revenue Portion will qualify for payment that quarter.

·If the Company achieves at least 80% of its Non-GAAP Operating Profit goal for the quarter then 25% of an executive’s target for the Non-GAAP Operating profit portion will qualify for payment, with an additional 3.75% of an executive’s target for the Non-GAAP operating profit portion qualifying for payment for each 1% above 80% of revenue goal to 100% of the Non-GAAP Operating Profit goal that was achieved for the quarter.

· If the Company achieves greater than 100% of its Cash Flow goal, then an additional 5% of an executive’s target will qualify for payment after year end for each 1% above 100% of Cash Flow goal until the payment of 200% at 120% of goal is reached. From 120% of Cash Flow goal to 130% of  Cash Flow goal, then an additional 10% of an executive’s target will qualify for payment after year end for each 1% above 120% of Cash Flow goal to 130% of Cash Flow goal until the maximum payout of 300% is reached.

Calculations

Calculations of quarterly payouts will be done on a quarterly stand-alone basis. At the end of the fiscal year the calculation of any payment in excess of 100% will be based on the results for the full year.  Executives joining the Company mid-year will only be entitled to a pro-rata portion of the bonus amount that exceeds 100%.

EX-10.64

Exhibit 10.64

CHORDIANT SOFTWARE, INC.

2008 Vice President of ,Worldwide Sales Compensation Plan General Terms and Conditions

1.   Objectives of Plan.

A.   To provide compensation to the Vice President, Worldwide Salesfor efforts which benefit and support the objectives of Chordiant Software, Inc. ("the Company" or "Chordiant").

B.   To encourage sales, to capitalize on sales opportunities, increase sales volume and improve our position in the market.

C.   To emphasize marketing strategies which conform to stated Company goals.

D.   To ensure the completion of required administrative responsibilities of sales personnel.

Objective of Individual:  Support the goals of Chordiant Software Inc. through selling efforts that meet or exceed individual Quota assignments.

2.   Effective Date/Amendment/Termination of Plan.

The effective date of this Plan is November 1, 2007 and it shall continue through September 30, 2008.  The 2008 Vice President, Worldwide Sales Compensation Plan General Terms and Conditions and the Quota Assignment and Commission Factors for Sales Personnel terms attached hereto together form the 2008 Vice President ,Worldwide Sales Compensation Plan (the “Plan”) and the Plan supersedes all prior sales compensation plans of the Company.  Commissions will be paid on license and first year maintenance on bookings accepted by the Company after November 1, 2007 in accordance with this Plan provided all other conditions of the Plan are met.  For the purposes of this Plan, a “booking” is a non-cancelable, non-refundable contractual payment commitment whereby the payment amount is fixed and determinable and not predicated on a subsequent event.  Any exceptions to this Plan require the written approval of the Board of Directors.  The Plan will remain in effect until superseded, changed, or terminated by the Company.  The Plan only may be superseded, changed, or terminated by written approval of the Board of Directors.

3.   Qualification of Participation.  In order to be eligible to participate in the Plan:

A.   The individual must be a regular full-time employee of the Company.

B.   The employee must be the Vice President, Worldwide Sales.

C.   The participating employee (“Sales Personnel”) must acknowledge that he or she has received a copy of this Plan; has read, understands and accepts its terms; understands his or her Assignment; and understands that his or her quota, bonus, and commissions are subject to the terms of this Plan.

4.   Assignments and Quotas.

An Assignment and Quota will involve a combination of revenue/bookings quota, and commission schedule as outlined in the Quota Assignment and Commission Factor term sheet for Sales Personnel attached hereto (hereinafter, "Assignment" or “Quota” as applicable) and will be effective on November 1, 2007.  All Assignments will be in writing only and Quota performance will be calculated on a fiscal year to date (“YTD”) basis.

The Board of Directors reserves the right in its sole discretion to review and revise any of the terms of the Quota (i.e., geographic territory, quota and commission schedule) in any manner at any time.

5.   Qualifying Orders/Earning of Commissions.

Any complete order accepted by the Company for licenses, first year maintenance and support will qualify for commissions or quota achievement, according to this Plan, provided all other conditions of this Plan are met, including Sections 5(B) through 5(E) below.  Nothing in this Plan will be construed to oblige the Company to accept any particular order it chooses not to accept. Commissions are considered earned (in accordance with the terms of this Plan) upon achievement of all of the following conditions:

A.   Licenses for Available Products

For licenses of products and first year maintenance and support that are available at the time the license agreement is signed, the following must be provided to Chordiant Contracts Administration to qualify for Quota credit and commissions:

(1)           a validly signed and approved software license with associated order forms and support and maintenance terms;

(2)           delivery of the licensed software to the customer and a written acknowledgement of receipt of such software from the customer;

(3)           a customer purchase order for the amount of the order if required by the Customer.

For orders that qualify as provided above, fifty percent (50%) of the Quota credit and commission shall be deemed earned at the time of booking of the order.

The other fifty percent (50%) of such Quota credit and commission of orders under this Section 6(A) shall be deemed earned upon actual payment by the customer.

B.   Compliance with all Company guidelines.

Any contract signed or order taken in violation of Company guidelines, including the Revenue Recognition Policy will not qualify for Quota credit or commission payment.

C.   Services

For any order(s) which include a Services component (support, maintenance and/or consulting), containing any significant discount, credits or financial concessions, such orders Quota credit and resulting commission will be subject to reduction by the amount of “carve-out” from license fees under GAAP and Chordiant accounting policies.  Any quota or commission credit will be reduced relative to the carve-out.  Notwithstanding any other provision of this plan, if any order contains a component of consulting services where a specific result or deliverable as a result of such services is promised for a fixed price, then (i) no quota credit will be given or commission paid until such result or deliverable is completed and delivered to the Customers and the customer has paid for the related services and (ii) to the extent that the cost to Chordiant of providing such deliverable or result is greater than the amount paid by the customer for the related services, then the Quota credit and booking on which commission is payable for such order will be reduced by the difference between such cost and the amount paid by the customer for the services.

D.   Third-Party Fees

Any order(s) which includes a third-party referral fee payment or charge are also subject to “carve-out” from gross license fee of the order conforming with GAAP and Chordiant accounting policies.  Any Quota credit and commission will be reduced relative to the carve-out amount.

E Verification/Certification.

Sales Personnel agree that they will sign each quarter and additionally upon the request of the Company, a Company form certification statement representing and attesting to, at a minimum the following statements: (a) the fact that there are no “side letters,” or other written or oral agreement(s) or understanding(s), express or implied, that a customer or partner is entitled to or may receive any credits, rights or return of product, free services; and/or (b) any other concessions and conditions or terms outside the express written terms of the license/support agreement.

F. Salesforce.com

Sales Personnel further agree that they will use Salesforce.com to track all opportunities.  Orders will not be considered qualified for quota or commission purposes if they are not input into Salesforce.com in advance of Chordiant receiving the order or contract from the customer.

G. Revenue Confirmation Letters

Sales Personnel agree to assist in the quarterly process of obtaining the necessary Revenue Confirmation Letter responses from their customers.  Commissions will be deemed earned based on the previous sections, however commission payments may be withheld if the Sales Personnel is found to be non-responsive in assisting with obtaining the aforementioned letters.

*           *           *

Any exception to conditions 5(A) through 6(G) must be submitted in writing and must receive approval by the Board of Directors prior to Chordiant accepting an order or other customer contract.

“Enterprise License” or non-standard License Transaction – The Company recognizes that certain customer orders may not meet all conditions per the definition of a qualifying order in Sections 5(A) – (F) above; however, it may otherwise still be beneficial to accept such orders.  For such orders to be accepted and qualify for commissions and/or quota credit according to this Plan at a minimum the following conditions must be met:

1.  All conditions of Section 5 (A) and 5 (F) of this Plan,

2.  Approval of the License Transaction by the Compensation Committee.

6.   Non-Qualifying Orders.

Although Sales Personnel may be assigned responsibilities involving sales of the nature described in subparagraphs A through E below, these sales will not qualify for commissions or Quota under this Plan:

A.   Orders canceled within the “acceptance period” or subject to a cancellation clause.

B.   Customer credits, repair charges and charges under warranty programs.

C.   Installation/De-installation charges that are not part of a service contract.

D.   Upgrades, Updates or reconfigurations initiated by the Company.

E.   Orders / Sales not accepted by the Company.

F.   Any license agreement where there exists return rights or the provision for forfeiture of monies paid under the contract.

G.  License or Maintenance Agreements or Order forms containing a non-standard term that prevents revenue from being recognized in accordance with Generally Accepted Accounting Principles (GAAP) and Chordiant Revenue Recognition policy.

7.   Orders.

Orders will be documented by a written contract and written acceptance of the order by the Company.  The Company reserves the right to refuse any order or contract that does not comply with local, state or federal laws, does not meet credit standards or for other reasons deemed unauthorized by the CEO or Chief Financial Officer.

8. Commission disputes will be decided by the Compensation Committee.

Quota credit and commission issues will be brought to the Compensation Committee of the Board of Directors, in writing for resolution.  The Compensation Committee decision will be final and binding.  All other oral or written statements regarding quota credit and commission issues which have not been pre-approved by the Compensation Committee are invalid and without effect.

9. Commission Payment, Credit and Payment of Commission.

All earned commissions are paid on a monthly basis on the second regular payroll distribution in the first month following the applicable month.  All orders will be credited toward the retirement of Assignment/Quota in the month in which the order is accepted by the Company.  The timing of commission payment is subject to change.

The commissionable amount for each order is the “net” amount due from the customer for the applicable license and/or service order.  The net amount due is the amount after application of any sales discounts granted to customer and other reductions to revenue and does not include any taxes, returns and allowances (including any credit for prior or terminated license sales), freight or shipping, or any other similar items (i.e., travel and entertainment expenses for service orders). In those circumstances where a referral, third party product resell/pass through royalty, or similar fees are paid to a partner, the “net” amount is considered to be amount due from the customer less the amount due for the referral, third party product/resell/pass through royalty, or similar fees after application of any sales discounts granted to customer.

Each Sales Personnel’s Quota is divided into Quota performance tiers with each tier containing an associated commission rate.  Commissions are calculated starting with the lowest tier first. Sales Personnel must attain 100% of their performance in the tier before moving to the next accelerated commission rate in the next tier.  Each tier must be completed before progressing on to the next tier.

10. Adjustments to Commissions and Commission Recovery.

Commissions will be reduced to reflect any customer cancellation, credits, returned products, non-payment of invoices or carve outs.  Cancellations will be charged against commissions and Quota for the month in which the order was originally invoiced.  For accounts receivable with open invoices exceeding the terms of the contract, the commissions and Quota associated with such invoices are recoverable by the Company (at the sole discretion of the Company) from current and subsequent commission payments.  Any commission recovery that causes a negative compensation balance is considered a recoverable advance against compensation.  No other commissions will be paid to Sales Personnel until the negative balance has been offset in full with earned commissions.

11.           Ethical and Legal Standards.

It is the policy of the Company to act in accordance with the Company’s Code of Ethics, which complies with the anti-trust and trade regulation laws (including the Foreign Corrupt Practices Act) applicable to its operations.  There are no exceptions to this policy, and it will not be qualified or compromised by anyone acting for, or on behalf of, the Company.

Sales Personnel will not enter into any agreement, plan, or understanding, expressed or implied, formal or informal, with any competitor with regard to prices, terms or conditions of sales, distribution, territories or customers, nor exchange or discuss in any manner with a competitor, prices, terms or conditions of sale, nor engage in any other conduct which violates any anti-trust laws or ethical and legal business standards.

Sales Personnel will not engage in any conduct, activity, or relationship which would conflict with their duties and obligations to the Company.  Sales Personnel will not work for any other employer while employed by the Company, with the exception of military reserve or jury service obligations.

Sales Personnel will not pay, offer to pay, assign or give any part of his or her commissions, compensation or any other money to any agent, customer, supplier or representative of any customer or supplier, or to any other person as an inducement or reward for assistance in making a sale.

Gifts or entertainment above a nominal value will not be given to customers, agents or representatives; or accepted from customers, vendors, or agents.

Any infraction of this policy, or of recognized ethical business standards, will subject Sales Personnel to termination of employment and revocation of any commissions under this Plan to which the Sales Personnel would otherwise be entitled.

12.           Plan Interpretation.

Interpretation and administration of the Plan will be decided by the Compensation Committee of the Board of Directors.

13.           Agreement with Program.

By signing below, Sales Personnel acknowledges that he/she has read and understood this Sales Compensation Plan; agrees to its terms and conditions (including the sales Quota); and understands and agrees that nothing in this Plan otherwise alters the at-will nature of his/her employment relationship with the Company, which can be terminated by Sales Personnel or the Company at any time, with or without cause, and with or without advance notice.

This agreement is effective as of November 1, 2007.

/s/ David Cunningham
Sales Personnel
/s/ Steven R. Springsteel
Chief Executive Officer
/s/ Kelly Hicks    October 30, 2007	/s/ Peter S. Norman    October 30, 2007
Director of World Wide Field Operations	Chief Financial Officer

EX-10.65

Exhibit 10.65

October 19, 2007

David Cunningham

51 Summit Road

Riverside, CT  06878

Dear David,

It gives me great pleasure to offer you employment with Chordiant Software, Inc as Vice President Worldwide Sales, reporting directly to Steven R. Springsteel, Chairman, President and CEO. The terms of your employment are detailed as follows:

Your annual base salary will be $300,000.00 less payroll deductions and all required withholdings and will be payable bi-monthly in increments of $12,500.00 on the fifteenth and last day of each month. You will have a total bonus target equal to 83.33% of your base salary at 100% attainment of all objectives under Chordiant’s 2008 Vice President Worldwide Sales Incentive Bonus Program.    Under Chordiant’s 2008 Vice President Global Sales Incentive Bonus Program 75% of your target bonus would be earned at 100% achievement of Sales Plan objectives, and 25% of your target bonus would be earned at 100% achievement of the objectives of the 2008 Executive Incentive Plan. Chordiant will have the sole discretion to determine if you have earned this bonus and, the amount of the bonus. You must be employed by Chordiant on the date such bonuses are paid in order to earn any bonus.

Subject to Board approval, you will be granted an option to purchase 75,000 shares of the Company’s common stock.  The option shall have an exercise price equal to the fair market value on the date of grant, and shall be governed in all respects by the terms of the plan documents and the option agreement between you and the company.

In addition, The Company will recommend to the Compensation Committee of the Board of Directors that the Board grant you an award under our 2008-2009 Performance Share Unit Program (the "PSUP") covering 10,000 shares at target performance levels and 15,000 shares at maximum performance levels. This award is a performance-based restricted stock unit award and is granted subject to the terms of the PSUP and the Company's 2005 Equity Incentive Plan.   The number of shares under the award that you actually earn and become vested in will be determined shortly after the close of the Company's 2009 fiscal year, based on the Company's achievement of the performance metrics determined under the PSUP and subject to your continued service to the Company through the date on which the Compensation Committee certifies whether the performance metrics have been met. 

As an executive of the Company, you will participate in the Change in Control program as approved by Chordiant's Board of Directors.

You will be eligible for Chordiant Software’s Employee Benefits program, which includes among others, participation in our 401(k) Plan, and the company Group Medical, Dental, and Disability Insurance Programs.  Chordiant may change compensation and benefits from time to time in its discretion.

You will be expected to sign and comply with a proprietary information and non-disclosure agreement which requires among other provisions, the assignment of patent rights to any invention made during your employment at Chordiant Software and nondisclosure of proprietary information.  You also will be expected to abide by the Company’s standard policies and procedures, and acknowledge in writing that you have read and will comply with the Company’s Employee Handbook.

This offer is contingent upon a successful background check, successful reference checks, and your submission of an I-9 form and satisfactory documentation and identification supporting your right to work in the United States.  These must be provided on your first day of employment.  Please bring these with you on your first day.

Employment with Chordiant Software is considered employment “at will” and may be terminated by you or Chordiant Software at any time with or without cause, and with or without advance notice.  Your employment at-will status can only be modified in a written agreement signed by you and by a duly authorized officer of the Company. The Company may change your position, duties, and work location from time to time in its discretion.

As part of your duties for Chordiant, you may be assigned to work onsite with a Chordiant customer.  Some of these customers have additional requirements that they impose upon individuals who work onsite at their business.  If you are assigned to work with such a customer, you will be given notice of the customer’s additional requirements and will be asked to consent to these requirements.

This letter, together with your proprietary information and non-disclosure agreement, forms the complete and exclusive statement of your employment agreement with the Company.  The terms in this letter supersede any other agreements or promises made to you by anyone, whether oral or written.  This letter agreement cannot be changed except in a written agreement signed by you and a duly authorized officer of the Company.

This offer is valid through October 25^th, 2007. Please sign below to indicate your acceptance of this offer and return by fax to Human Resources at 408 517-5035 (fax).  Please send an original signed copy in the pre-addressed enclosed envelope. Details regarding orientation will be mailed to you prior to your start date. Orientation is held at 10:00 PST on your start date or you can arrange with your manager to attend orientation in one of Chordiant’s remote offices.

Sincerely,

/s/ Jack Landers

Jack Landers

Vice President, Human Resource

Accepted: /s/ David Cunningham Date Signed: October 22, 2007  Monday Start Date:  November 5, 2007

EX-10.66

  [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.       

Exhibit 10.66

Chordiant Software, Inc.

2005 Equity Incentive Plan

2008-2009 Performance Share Unit Program

Adopted:  October 11, 2007

1.Purpose.  The Chordiant Software, Inc. 2008-2009 Performance Share Unit Program (the “Program”), established under the Chordiant Software, Inc. 2005 Equity Incentive Plan (the “Plan”), is intended to provide equity incentive compensation to individuals who make a significant contribution to the performance of Chordiant Software, Inc. (the “Company”).  Program objectives are to:  (i) focus key Employees on achieving specific performance targets, (ii) reinforce a team orientation, (iii) provide significant award potential for achieving outstanding performance, and (iv) enhance the ability of the Company to attract and retain highly talented and competent individuals.

2.Definitions.

Defined terms not explicitly defined in this Program but defined in the Plan shall have the same definitions as in the Plan.

(a)“Actual Award” means the number of shares of Common Stock earned by a Designated Participant under the Program during a Performance Period based on achievement of applicable Performance Goals and Other Performance Goals, as determined on the Certification Date.

(b)“Certification Date” means the date on which the Committee certifies the extent to which the Performance Goals have been met under the Performance Award Formula and whether any reductions in the Maximum Awards should be made on account of the degree of achievement of the Other Performance Goals or other factors (to the extent permitted under Section 162(m) of the Code).

(c)“Designated Participant” means a key Employee of the Company who is designated by the Committee in writing to participate in the Program.

(d)“Maximum Award” means the maximum number of shares of Common Stock that may be credited to a Designated Participant under the Program in respect of a specified Performance Period and issued if the applicable Performance Goals and Other Performance Goals are achieved at the levels set by the Committee during the applicable Performance Period and if the Designated Participant remains in Continuous Service during the entire Performance Period.

(e)“Other Performance Goal” means a performance goal established by the Committee that is not a Performance Goal established pursuant to Section 2(kk) of the Plan.

(f)“Performance Period” means the period of time selected by the Committee over which the attainment of one or more Performance Goals and Other Performance Goals will be measured for the purpose of determining a Designated Participant’s right to an Actual Award.  At the discretion of the Committee, a Performance Period may be divided into shorter periods (for example, fiscal quarters of the Company) over which the attainment of one or more Performance Goals and Other Performance Goals will be measured.

3.How Awards Are Earned Under the Program.

(a)General Program Description.  The Program provides the opportunity for certain key Employees to earn shares of Common Stock based on the performance of the Company.  In general, the Committee will select certain key Employees to participate in the Program at the beginning of a Performance Period.  Upon selection to participate in the Program, each such Designated Participant will be granted a Maximum Award equal to the number of shares of Common Stock that can be issued under an Actual Award to such Designated Participant  if (i) specified levels of applicable Performance Goals are achieved during the Performance Period, (ii) the Committee does not reduce the Maximum Award on account of the degree of achievement of applicable Performance Goals and/or Other Performance Goals, and (iii) the Designated Participant remains in Continuous Service during the entire Performance Period and any subsequent additional vesting period.  If the Committee does reduce the Maximum Award on account of the degree of achievement of applicable Performance Goals and/or Other Performance Goals, the Designated Participant will be awarded a portion (or none) of the shares of Common Stock subject to the Maximum Award; provided, however, that (i) if the specified level of Performance Goals is not achieved during the Performance Period, the Designated Participant will not receive any shares of Common Stock, and (ii) the maximum number of shares of Common Stock that a Designated Participant may receive as an Actual Award will in no event exceed the Maximum Award.  The methodology for the operation of the Program in terms of establishing the Maximum Award based on the levels of achievement of the Performance Goals and the determination of whether the Maximum Award, or some portion of it, will become payable to a Designated Participant as an Actual Award in respect of a Performance Period is set forth in the attached Exhibit A, as amended from time to time.  As required by Section 7(e) of the Plan and in accordance with Section 162(m) of the Code, in no event may a Maximum Award be granted to a Designated Participant such that the number of shares of Common Stock that could be earned by such Designated Participant in any calendar year under all Performance Stock Awards, including the Maximum Award, would exceed 3,000,000 shares of Common Stock.

(b)Designated Participants.Each key Employee of the Company who is designated by the Committee in writing for participation in the Program for a particular Performance Period shall be eligible for a Maximum Award with respect to such Performance Period.  The Committee may designate a key Employee who commences Continuous Service after the beginning of a particular Performance Period as eligible to receive a prorated Maximum Award for such Performance Period.  The determination as to whether an individual is a Designated Participant shall be made by the Committee, in its sole discretion, and such determination shall be binding and conclusive on all persons.

No Employee shall have any right to be a Designated Participant in the Program, to continue as a Designated Participant, or to be granted a Maximum Award or Actual Award under the Program.  The Company is not obligated to give uniform treatment (e.g., number of shares subject to Maximum Awards) to Employees or Designated Participants under the Program.  Participation in the Program as to a particular Performance Period does not convey any right to participate in the Program as to any other Performance Period.

(c)Performance Goals and Other Performance Goals.  The Performance Goals  and Other Performance Goals, if applicable, for a particular Performance Period and their relative weights, will be determined by the Committee, in its sole discretion. The Committee also may establish, in its sole discretion, Performance Goals and Other Performance Goals for annual, quarterly or other periods within the applicable Performance Period.  The Performance Goals and Other Performance Goals for a Performance Period or for shorter periods within a Performance Period are not required to be identical to the Performance Goals and Other Performance Goals for any other Performance Period or shorter period within a Performance Period.  The Committee may establish Performance Goals and Other Performance Goals for each Designated Participant or for groups of Designated Participants.

4.Other Program Provisions.

(a)Distribution of Actual Awards.  Assessment of actual performance, determination of Actual Awards and the distribution of shares of Common Stock in respect of Actual Awards will be subject to (i) certification by the Committee that the applicable Performance Goals and other terms of the Program have been met, (ii) the Committee’s determination as to the appropriate reductions, if any, in the amounts of the Maximum Awards in arriving at the amounts of the Actual Awards, based on the levels of achievement of applicable Performance Goals, Other Performance Goals and/or other factors, and (iii) the completion of any subsequent additional vesting period.  Unless an Actual Award is subject to additional vesting conditions following the Certification Date (as provided in Exhibit A), shares of Common Stock that are credited to a Designated Participant as an Actual Award on the Certification Date will be fully vested as of the Certification Date.  In all cases, vested shares will be distributed to the Designated Participant (or the Designated Participant’s heirs in the case of death) within thirty (30) days following the vesting date.  Notwithstanding the foregoing, if the Company has provided a Designated Participant with a plan or program by which to defer distribution of such shares of Common Stock and the Designated Participant has made an effective election to defer such distribution under such plan or program, such shares will be distributed to the Designated Participant (or the Designated Participant’s heirs in the case of death) in accordance with such election.  Notwithstanding the distribution of the shares, the Committee may determine that any shares issued under an Actual Award may not be immediately sold or transferred by the Designated Participant and must instead be held for a pre-determined period of time.  The Company shall have the right to withhold shares of Common Stock otherwise deliverable to the Designated Participant in satisfaction of any federal, state or local tax withholding obligation relating to the delivery of Common Stock under the Actual Award, but the Company shall not withhold a number of shares with a fair market value in excess of the applicable tax withholdings determined by application of the minimum required statutory rates.

(b)Employment and Termination.  In order to receive shares of Common Stock in respect of an Actual Award under the Program, a Designated Participant must remain in Continuous Service during the entire Performance Period, and for any subsequent additional vesting period, except as otherwise provided under the terms of the applicable Award Agreement.

(c)No Employment or Service Rights.  Nothing in the Program or any instrument executed or Award granted pursuant to the Program shall (i) confer upon any Employee or Designated Participant any right to continue to be retained in the employ or service of the Company, (ii) change the at-will employment relationship between the Company and an Employee or Designated Participant, or (iii) interfere with the right of the Company to discharge any Employee, Designated Participant or other person at any time, with or without cause, and with or without advance notice.

(d)Program Administration.  The Committee shall be responsible for all decisions and recommendations regarding Program administration and retains final authority regarding all aspects of Program administration, the resolution of any disputes, and the application of the Program in any respect to a Designated Participant.  All determinations and interpretations made by the Committee in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.  The Committee may, without notice, amend, suspend or terminate the Program; provided, however, that no such action may adversely affect any then outstanding Award unless (i) expressly provided by the Committee and (ii) with the consent of the Designated Participant, unless such action is necessary to comply with any applicable law, regulation or rule.

(e)Stockholder Rights. No Designated Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to a Maximum Award (including, without limitation, the right to receive dividends) unless and until such Designated Participant has received an Actual Award under the Program, has vested in the shares subject to the Actual Award and has received delivery of such shares; provided, however, that a plan or program by which receipt of shares of Common Stock in respect of an Actual Award may be deferred may provide for the crediting of dividend equivalent rights.

(f)Validity.  If any provision of the Program is held invalid, void, or unenforceable, the same will not affect, in any respect whatsoever, the validity of any other provision of the Program.

(g)Governing Plan Document.  The Program is subject to all the provisions of the Plan and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted by the Committee, the Board or the Company pursuant to the Plan.  In the event of any conflict between the provisions of this Program and those of the Plan, the provisions of the Plan shall control.

      

        [ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.      

    

Exhibit A

2008-2009 Performance Share Unit Program

Award Calculation Methodology

Capitalized terms not explicitly defined in this Exhibit A but defined in the Program or the Plan shall have the same definitions as in the Program or the Plan.

Award Type & Size

·   Designated Participants will be granted performance-based Restricted Stock Units (RSUs) under Chordiant’s 2005 Equity Incentive Plan. RSUs are bookkeeping entries, not representing any actual ownership of shares of Common Stock until the Award has vested and shares of Common Stock have been delivered.  The number of RSUs granted corresponds on a 1:1 basis to shares of Common Stock that may be delivered in the future based on the provisions of the Plan, the Program and the applicable Award Agreement.

·   The Award Agreement issued to the Designated Participant will set forth the number of shares subject to the total Target Award and the total Maximum Award that such  Designated Participant can earn.

Date of Grant

·   Awards subject to this Exhibit A will be granted on October 11, 2007.

Performance Period & Vesting

·   Performance will be measured over the two year period constituting the Company’s fiscal years 2008 and 2009 (the “Performance Period”)

·   Subject to the Designated Participant’s Continuous Service through the Certification Date, the shares of Common Stock subject to the Actual Award will vest in full on the Certification Date.

·   Except in the case of a Change in Control, the Certification Date shall occur within the ten (10) day period after the date on which the Company files its annual report on Form 10-K for fiscal year 2009.  If a Change in Control occurs prior to the Committee’s determination in such ten (10) day period, the effective date of the Change in Control shall be the Certification Date (as further described below).

Award Metrics

·   Up to 50% of the Maximum Award will be earned based on achievement of Cumulative Revenue (such 50% , the “Maximum Revenue Award”), as follows:

Performance Level	Cumulative Revenue	% of Maximum Revenue Award Earned	With Respect to this 50% of the Award:
Threshold	$[ * ]	0%
Target	$[ * ]	66.67%	“Target Award”
Maximum	$[ * ]	100%	“Maximum Award”

For example, assume a Designated Participant has been granted a Maximum Award covering 36 shares.  If the Company achieved Cumulative Revenue of $[ * ], the Designated Participant will earn 66.67% of the 18 shares that constitute his Maximum Revenue Award – i.e., 12 shares.

·   Up to 50% of the Maximum Award will be earned based on achievement of Cumulative Operating Income (such 50%, the “Maximum OI Award”), subject to reductions for the Other Performance Goal.  In order to earn any part of the Maximum OI Award, the Company must achieve Cumulative Operating Income of at least $[ * ] (the “Funding Gate”).  If the Funding Gate is not met, no part of the Maximum OI Award will be earned.  If the Funding Gate is met, the Maximum OI Award will be earned, subject to reduction based on the achievement of the Other Performance Goal, as follows:

Performance Level	Cumulative Non-GAAP Operating Profit	% of Maximum OI Award Earned	With Respect to this 50% of the Award:
Threshold	$[ * ]	0%
Target	$[ * ]	66.67%	“Target Award”
Maximum	$[ * ]	100%	“Maximum Award”

For example, for the Designated Participant described in the example above, if the Company achieved the full Funding Gate, and also achieved Cumulative Non-GAAP Operating Profit of $[ * ], the Designated Participant will earn 100% of the 18 shares that constitute his Maximum OI Award – i.e., 18 shares.

In total, this Designated Participant earned an Actual Award equal to 30 shares (out of his total 36 share Maximum Award.

·   In applying the foregoing tables,  linear interpolation shall be used for Performance Levels that are other than the Threshold, Target and Maximum levels.  Moreover, in applying the percentage of a Maximum Award earned,  partial shares of Common Stock shall be rounded up to the nearest whole share.

Holding Period

·   Each Designated Participant must not sell or otherwise transfer (excluding transfers to family trusts for tax planning purposes for which the Designated Participant is deemed to be the “beneficial owner” of the shares for purposes of the Exchange Act) any of the shares of Common Stock issued under the Actual Award until the earliest of (1) the fourth anniversary of the Date of Grant, (2) a Change in Control of the Company, (3) the certification by the Board that the Designated Participant is suffering an Unforeseeable Emergency, or (4) the termination of the Designated Participant’s Continuous Service with the Company as a result of an Involuntary Termination or as a result of the Designated Participant’s death or Disability (such period, the “Holding Period”).

·   Shares withheld by the Company to cover applicable tax withholdings will not be deemed a violation of the Holding Period.

·   The Company will place appropriate legends on the certificates representing the shares of Common Stock issued under the Actual Award regarding the Holding Period, and will take such steps as otherwise reasonably necessary to enforce the Holding Period (including but not limited to placing the shares into an escrow account and issuance of a stop transfer order).

Effects of a Change In Control

·   If the effective date of the Change in Control occurs prior to the Certification Date, Designated Participant will earn, as of immediately prior to the Change in Control, an Actual Award equal to the lesser of (1) 1.0 of the Target Award (i.e., the number of shares determined under the tables above as if the Funding Gate was met and all applicable Performance Goals and the Other Performance Goal had been achieved at the Target level of performance) and (ii) the product of (a) 1.0 of the Target Award and (b) a fraction, the numerator of which is the number of months since the start of the Performance Period (rounded up for any partial months of service) plus 12 months, and the denominator of which is 24.  The effective date of the Change in Control will be the Certification Date for purposes of the Program.  The Actual Award will be fully vested as of Certification Date.

For example, assume a Designated Participant has been granted a Maximum Award covering 36 shares, so that his Target Award is for 24 shares.  If the Change in Control occurs on the 15^th day of the sixth month of fiscal year 2008, and the Designated Participant remains in Continuous Service through such date, the Designated Participant will earn an Actual Award equal to [(6 + 12)/24] x 24 shares = 18 shares.  This Actual Award will be fully vested as of the effective date of the Change in Control.

Compliance with Section 409A of the Code

·   It is intended that the Awards granted under the Program satisfy, to the greatest extent possible, the exception from the application of Section 409A provided under Treasury Regulations Section 1.409A-1(b)(4) (i.e., the “short term deferral exception”).

·   Notwithstanding the foregoing, if the Company (or, if applicable, the successor entity thereto) determines that any Award under the Program constitutes a “deferral of compensation” under Section 409A of the Code (together, with any state law of similar effect, “Section 409A”) and if a Designated Employee is a “specified employee” of the Company or any successor entity thereto as such term is defined in Section 409A(a)(2)(B)(i) (a “Specified Employee”) as of the date of the Designated Participant’s “separation from service” (within the meaning of Treasury Regulations Section 1.409A-1(h)) (such date, the “Separation Date”), then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A resulting from the delivery of shares of Common Stock as a result of his or her separation from service (as defined above), the delivery of the shares of Common Stock (or any portion thereof) shall be delayed as follows:  on the earlier to occur of (i) the date that is six months and one day after the Separation Date or (ii) the date of the Designated Employee’s death (such earlier date, the “Delayed Initial Payment Date”), the Company (or the successor entity thereto, as applicable) shall (A) issue to the Designated Employee those shares subject to the Actual Award that the Designated Employee would otherwise have been issued through the Delayed Initial Payment Date if the issuance of the shares had not been delayed pursuant to this paragraph and (B) commence issuing the balance of the shares in accordance with the original issuance schedule described above. 

·   It is intended that each installment of the issuance of the shares provided for in the Program is a separate “payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2).

Other Terms & Conditions

·   No rights to dividends or dividend equivalents under the RSUs, except as provided under Section 11(a) of the Plan.

Definitions

·   “Change in Control” will have the meaning set forth in the Plan; provided, however, that Section 2(f)(v) will, for purposes of this Program, be revised to read as follows: “individuals who, on the date this Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board during any 12-month period; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of the Plan, be considered a member of the Incumbent Board.”

·   “Cumulative Non-GAAP Operating Profit” means Cumulative Operating Income, excluding the following:

1.      restructuring and other nonrecurring charges;

2.   the effects of any “extraordinary items” as determined under GAAP;

3.   charges for stock based compensation; and

4.   amortization of intangible assets or purchased software

·   “Cumulative Operating Income” means total GAAP operating income as would be reported in the Company’s filings under Form 10-K, but excluding restructuring and other nonrecurring charges and the effects of any “extraordinary items” as determined under GAAP

·   “Cumulative Revenue” means total GAAP revenue as would be reported in the Company’s filings under Form 10-K, but excluding restructuring and other nonrecurring charges and the effects of any “extraordinary items” as determined under GAAP

·   “Good Reason” means the Designated Participant has resigned from all positions he or she then holds with the Company (or any successor thereto) if (1) one of the following actions has been taken:  (a) there is a material diminution of Designated Participant’s authority, duties, or responsibilities; provided, however, that Good Reason shall not be satisfied solely by reason of such Designated Participant’s retaining substantially the same position held prior to a Change in Control, but in a distinct legal entity or business unit of a larger entity following such Change in Control, (b) there is a material reduction in the Designated Participant’s annual base salary or target bonus opportunity, except to the extent the base salaries or target bonus opportunities (as applicable) of other similarly situated officers of the Company are accordingly reduced, (c) the Designated Participant is required to relocate his or her primary work location to a facility or location that would increase the Designated Participant’s one way commute distance by more than twenty (20) miles from the Designated Participant’s primary work location as of immediately prior to such change, or (d) the Company (or any successor thereto) materially breaches its obligations under this Program or any effective written employment agreement with the Designated Participant, and (2) the Designated Participant provides written notice to the Company’s General Counsel within thirty (30) days after such material change or reduction, (3) such material change or reduction is not remedied by the Company within thirty (30) days following the Company’s receipt of such written notice, and (4) the Designated Participant’s resignation is effective not later than sixty (60) days after the expiration of such thirty (30) day cure period.

·   “Involuntary Termination” means a termination without Cause or a resignation for Good Reason.  A termination by reason of death or Disability shall not be considered an Involuntary Termination.

·   “Other Performance Goal” means Cumulative Non-GAAP Operating Profit.

·   “Unforeseeable Emergency” means a severe financial hardship to the Designated Participant after the issuance of the shares under the Actual Award, which hardship results from (1) an illness or accident of the Designated Participant or his or her  spouse, registered domestic partner, parent or child; (2) loss of the Designated Participant’s property due to casualty (including the need to rebuild the Designated Participant’s primary residence following damage to the home not otherwise covered by insurance); or (3) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Designated Participant.

EX-10.67

Exhibit 10.67

Chordiant Software, Inc.

2005 Equity Incentive Plan

2008-2009 Performance Share Unit Program

Award Grant Notice

Chordiant Software, Inc. (the “Company”), pursuant to its 2008-2009 Performance Share Unit Program (the “Program”) under its 2005 Equity Incentive Plan (the “Plan”), hereby awards to Participant the award (the “Award”) set forth below.  This Award is subject to all of the terms and conditions as set forth herein and in the Performance Share Unit Award Agreement (the “Award Agreement”), the Program and the Plan, all of which are attached hereto and incorporated herein in their entirety.  Unless otherwise defined herein, capitalized terms shall have the meanings set forth in the Plan or the Program, as applicable.

Participant:	[            ]
Date of Grant:	[            ]
Vesting Commencement Date:	Date of Grant
Number of Shares Subject to Target Award:	[            ] shares of Common Stock
Number of Shares Subject to Maximum Award:	[            ] shares of Common Stock
Performance Period:	[            ]

Determination of Actual Award:  On the Certification Date, the Participant will earn an Actual Award representing the number of shares of Common Stock (which may be equal to all or a portion, including none, of the Maximum Award) determined by the Committee in accordance with Exhibit A of the Program.

Vesting Schedule:   Subject to the Participant’s Continuous Service through the Certification Date (as defined in the Program), the Actual Award will vest in full on the Certification Date.

Delivery of Shares:   Subject to the limitations contained herein and the provisions of the Plan and the Program, the Company shall deliver to Participant the shares of Common Stock subject to the Actual Award within thirty (30) days following the date on which such shares vest.

Additional Terms/Acknowledgements:  The undersigned Participant acknowledges receipt of, and understands and agrees to, this Award Grant Notice, the Award Agreement, the Program (including the exhibits thereto) and the Plan (collectively, the “Award Documents”).  Participant further acknowledges that as of the Date of Grant, the Award Documents set forth the entire understanding between Participant and the Company regarding the Award and supersede all prior oral and written agreements on that subject.

Chordiant Software, Inc.:		Participant:
By
	Signature	Signature
Title:		Date:
Date:

Attachments: Performance Share Unit Award Agreement, 2008-2009 Performance Share Unit Program and 2005 Equity Incentive Plan

Attachment I

Performance Share Unit Award Agreement

Attachment II

2008-2009 Performance Share Unit Program

Attachment III

2005 Equity Incentive Plan

Chordiant Software, Inc.

2005 Equity Incentive Plan

2008-2009 Performance Share Unit Program

Performance Share Unit Award Agreement

Pursuant to the Award Grant Notice (“Grant Notice”) and this Performance Share Unit Award Agreement (“Award Agreement”), Chordiant Software, Inc. (the “Company”) has awarded you, pursuant to its 2008-2009 Performance Share Unit Program (the “Program”) under its 2005 Equity Incentive Plan (the “Plan”), the Award as indicated in the Grant Notice.  Unless otherwise defined herein or in the Grant Notice, capitalized terms shall have the meanings set forth in the Plan or the Program, as applicable.

The details of your Award are as follows.

1.Entitlement to Shares.

(a)Actual Award.  The Actual Award shall be determined in the manner described in the Grant Notice.  If the Committee reduces the Maximum Award, including on account of the degree of achievement of the Funding Gate, the Performance Goals or the Other Performance Goal (as each such term is defined in the Program), you will be deemed to have earned a portion (or none) of the shares of Common Stock subject to the Maximum Award.  In no event will you earn an Actual Award covering a number of shares in excess of the Maximum Award.

(b)Vesting.  The Actual Award shall be subject to vesting in accordance with the Vesting Schedule set forth in the Grant Notice.

(c)Termination of Continuous Service. Upon the termination of your Continuous Service, the shares credited to you under the Maximum Award that were not vested on the date of such termination of Continuous Service will be forfeited and you will have no further right, title or interest in or to the unvested shares subject to the Maximum Award.

2.Effect of Change in Control. In the event of a Change in Control prior to the Certification Date, you will earn, as of immediately prior to the Change in Control (and subject to your Continuous Service through such time), an Actual Award equal to the lesser of (a) the Target Award and (b) the product of (i) the Target Award and (ii) a fraction, the numerator of which is the number of months since the start of the Performance Period (rounded up for any partial months of service) plus 12 months, and the denominator of which is 24.   The Actual Award will be fully vested as of the effective date of the Change in Control, and such date will be the Certification Date.

3.Delivery of Shares.  Not later than thirty (30) days after the applicable vesting date of any portion of the Actual Award, the Company will issue to or on behalf of you a certificate (which may be in electronic form) for the applicable number of shares of Common Stock under the Actual Award that so vested, subject, however, to the satisfaction of any applicable withholding taxes (as provided in Section 5 below).   Notwithstanding the foregoing, if the Company determines that any shares that are scheduled to be issued on a day (the “Original Issuance Date”) on which the issuance of the shares would be a violation of applicable law, as determined by the Company, then such shares will not be issued on such Original Issuance Date and will instead be issued on the first date thereafter on which the issuance of the shares would not be a violation of applicable law; provided, however, that, except as otherwise permitted in compliance with Section 409A of the Code, in no event will the date of issuance be later than the later of (a) the 15^th day of the third month following the end of the Company’s first taxable year in which the applicable vesting date occurs or (b) the 15^th day of the third month following the end of your first taxable year in which the applicable vesting date occurs.  In no event will fractional shares of Common Stock be issued; any fraction of a share will be paid in cash.

4.Holding Period.  You agree that, notwithstanding the delivery of the shares subject to the Actual Award as provided in Section 3 above, you will not sell or otherwise transfer (excluding transfers to family trusts for tax planning purposes for which you are deemed to be the “beneficial owner” of the shares for purposes of the Exchange Act) any of the shares of Common Stock issued under the Actual Award until the earliest of (1) the fourth anniversary of the Date of Grant, (2) a Change in Control of the Company, (3) the certification by the Board that you have suffered an Unforeseeable Emergency (as defined in the Program), or (4) the termination of your Continuous Service with the Company as a result of an Involuntary Termination (as defined in the Program) or as a result of your death or Disability (as defined in the Program) (such period, the “Holding Period”).  Shares sold or withheld by the Company to cover applicable tax withholdings as provided in Section 5 below will not be deemed a violation of the Holding Period.  The shares of Common Stock issued pursuant to the Actual Award shall be endorsed with appropriate legends, if any, determined by the Company, and you agree to enter into such other arrangements as determined reasonably necessary by the Company (including an escrow arrangement) in order to enforce the provisions of this Section 4.

5.Withholding Obligations. You hereby agree to make adequate provision for any sums required to satisfy the applicable federal, state, local and foreign employment, social insurance, payroll, income and other tax withholding obligations of the Company or any Affiliate (the “Tax Obligations”) that arise in connection with this Award.  The satisfaction of the Tax Obligations will occur at the time you receive a distribution of Common Stock or other property pursuant to this Award, or at any time prior to such time or thereafter as reasonably requested by the Company and/or any Affiliate in accordance with applicable law.  You hereby authorize the Company, at its sole discretion and subject to any limitations under applicable law, to satisfy any such Tax Obligations by (a) withholding from wages and other cash compensation payable to you, (b) causing you to tender a cash payment to the Company, (c) permitting you to enter into a “same day sale” commitment with a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby you irrevocably elect to sell a portion of the shares to be delivered under the Award to satisfy the applicable Tax Obligations and whereby the NASD Dealer irrevocably commits to forward the proceeds necessary to satisfy the Tax Obligations directly to the Company and/or its Affiliates, and (d) withholding shares that are otherwise to be issued and delivered to you under this Award in satisfaction of the Tax Obligations (provided, however, that the amount of the shares so withheld will not exceed the amount necessary to satisfy the required Tax Obligations using the minimum statutory withholding rates that are applicable to this kind of income).   In the event the Tax Obligations arise prior to the delivery to you of the shares or it is determined after the delivery of shares or other property that the amount of the Tax Obligations was greater than the amount withheld by the Company and/or any Affiliate, you will indemnify and hold the Company and its Affiliates harmless from any failure by the Company and/or any Affiliate to withhold the proper amount.  The Company may refuse to deliver the shares if you fail to comply with your obligations in connection with the Tax Obligations.

6.Capitalization Adjustments; Dividends.  The number of shares of Common Stock subject to your Award will be adjusted from time to time for capitalization adjustments, as provided in Section 11(a) of the Plan.  Except as provided in Section 11(a) of the Plan, you shall not receive or be credited with any payment or other adjustment in the number of shares subject to the Award for dividends that may be made in respect of the shares of Common Stock to which your Award relates until you become the holder of record of such shares.

7.Securities Law Compliance.  The grant of your Award and the issuance of any shares of Common Stock pursuant to an Actual Award shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities.  You may not be issued any shares of Common Stock pursuant to an Actual Award if the issuance of shares of Common Stock would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Common Stock may then be listed.  In addition, you may not be issued any shares of Common Stock pursuant to an Actual Award unless (i) a registration statement under the Securities Act shall at the time of issuance be in effect with respect to the shares of Common Stock or (ii) in the opinion of legal counsel to the Company, the shares of Common Stock may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act.  YOU ARE CAUTIONED THAT THE SHARES OF COMMON STOCK MAY  NOT BE ISSUED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares of Common Stock pursuant to an Actual Award shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained.  As a condition to the issuance of any shares of Common Stock pursuant to an Actual Award, the Company may require you to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

8.Compliance with Section 409A.  It is intended that this Award satisfies, to the greatest extent possible, the exception from the application of Section 409A provided under Treasury Regulations Section 1.409A-1(b)(4).  Notwithstanding the foregoing, if the Company (or, if applicable, the successor entity thereto) determines that the Award constitutes a “deferral of compensation” under Section 409A of the Code (together, with any state law of similar effect, “Section 409A”) and if you are a “specified employee” of the Company or any successor entity thereto as such term is defined in Section 409A(a)(2)(B)(i) (a “Specified Employee”) as of the date of your “separation from service” (within the meaning of Treasury Regulations Section 1.409A-1(h)) (such date, the “Separation Date”), then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A resulting from the delivery of shares of Common Stock as a result of your separation from service (as defined above), the delivery of the shares of Common Stock (or any portion thereof) under the Actual Award shall be delayed following your separation from service as follows:  on the earlier to occur of (i) the date that is six months and one day after the Separation Date or (ii) the date of your death (such earlier date, the “Delayed Initial Payment Date”), the Company (or the successor entity thereto, as applicable) shall (A) issue to you those shares subject to the Actual Award that you would otherwise have been issued through the Delayed Initial Payment Date if the issuance of the shares had not been delayed pursuant to this paragraph and (B) commence issuing the balance of the shares in accordance with the original delivery schedule set forth in Section 3 above.  It is intended that each installment of the issuance of the shares provided for in the Award is a separate “payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2).

9.Transferability.  Your Award and any unvested shares of Common Stock subject to the Actual Award are not transferable, except by will or by the laws of descent and distribution.  Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to receive any distribution of shares of Common Stock under the Actual Award pursuant to this Award Agreement.

10.Unsecured Obligation; Stockholder Rights.  Your Award is unfunded, and you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares of Common Stock pursuant to an Actual Award under this Award Agreement.  You shall not have voting or any other rights as a stockholder of the Company with respect to the Common Stock acquired pursuant to this Award Agreement until such Common Stock is issued to you pursuant to this Award Agreement.  Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company with respect to the Common Stock so issued.  Nothing contained in this Award Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.

11.Successors and Assigns.  Except to the extent otherwise provided in this Agreement, the provisions of this Agreement will inure to the benefit of, and be binding upon, the Company and its successors and assigns and you, your assigns, the legal representatives, heirs and legatees of your estate and any beneficiaries designated by you.

12.No Employment or other Service Rights. Nothing in this Agreement will confer upon you any right to continue to serve the Company or an Affiliate in the capacity in effect at the time this Award was granted or will affect the right of the Company or an Affiliate to terminate (i) your employment with or without notice and with or without cause, (ii) your service pursuant to the terms of any consulting  agreement with the Company or an Affiliate or (iii) your service as a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

13.Electronic Delivery.  The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan or the Program and this Award by electronic means or to request your consent to participate in the Plan and/or the Program by electronic means.  You hereby consent to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

14.Severability. If any provision of this Agreement will be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision will (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited will remain in full force and effect, and (b) not affect any other provision of this Award Agreement or part thereof, each of which will remain in full force and effect.

15.Governing Plan Document.  Your Award is subject to all the provisions of the Award Documents, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan or Program.  In the event of any conflict between the provisions of this Award Agreement and those of the Plan or Program, the provisions of the Plan or Program shall control.  In the event of any conflict between the provisions of the Plan or Program, the provisions of the Plan shall control.

16.Applicable Law.  This Award Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.

EX-10.68

Exhibit 10.68

ADDENDUM “A”

TO MASTER SERVICES AGREEMENT

This agreement between Ness USA, Inc. (“NESS”) (formerly Ness Global Services, Inc. or “NGS”), located at 160 Technology Drive, Canonsburg, PA 15317 (“NESS”) and Chordiant Software, Inc., located at 20400 Stevens Creek Blvd. Cupertino, CA  95014 (“COMPANY”) is an Addendum (the “Addendum”) to the Master Services Agreement executed on December 15, 2003 (the “Agreement”) between NGS and COMPANY.

WHEREAS, subsequent to the execution of the Agreement, NGS changed it corporate name to Ness USA, Inc.; and

WHEREAS the parties hereto wish to extend the term of the Agreement, which otherwise would expire by its own terms on December 14, 2007.

Accordingly, in consideration of the promises and covenants set forth below, the parties agree as follows, intending to be legally bound:

1.   The term of the Agreement shall be extended through and including December 14, 2008.

2.   “Ness USA, Inc.” shall take the place of “Ness Global Services, Inc.” throughout the Agreement in all respects.

3.   With the exception of the foregoing changes, the terms and conditions of the Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Addendum, intending to be legally bound, as of the day and year written above.

Accepted by		Accepted by:
/s/ Rocco Cozza		/s/ James F. Walsh
Name: Rocco Cozza		Name: James F. Walsh
Title:   Corporate Counsel		Title:    VP, Offshore Operations
Date:	October 18, 2007	Date	October 15, 2007
For:	Ness USA, Inc.	For:	Chordiant Software, Inc.
	(f/k/a Ness Global Services, Inc.)
		/s/ Peter S. Norman
		Title: Chief Financial Officer
		Date: October 25, 2007
		Chordiant Software, Inc.

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Chordiant Software, Inc.

Cupertino, California

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-100843, No. 333-83506; No. 333-60156; 333-49032; No. 333-42844; No. 333-34502; No. 333-110743, No. 333-131057, and 333-145080) of Chordiant Software, Inc. of our reports dated November 15, 2007, relating to the consolidated financial statements and financial statement schedule, and to Chordiant Software, Inc’s internal control over financial reporting, appearing in this Annual Report on Form 10-K.

/s/ BDO Seidman, LLP

San Jose, California

November 15, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Steven R. Springsteel, certify that:

1. I have reviewed this Annual Report on Form 10-K of Chordiant Software, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

CHORDIANT SOFTWARE, INC.
By:	/s/  STEVEN R. SPRINGSTEEL
	Steven R. Springsteel Chairman, President, and Chief Executive Officer

Date: November 15, 2007

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Peter S. Norman, certify that:

1. I have reviewed this Annual Report on Form 10-K of Chordiant Software, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

CHORDIANT SOFTWARE, INC.
By:	/s/  PETER S. NORMAN
	Peter S. Norman Chief Financial Officer and Principal Accounting Officer

Date: November 15, 2007

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350), Steven R. Springsteel, Chief Executive Officer of Chordiant Software, Inc. (the “Company”) and Peter S. Norman, Chief Financial Officer and Principal Accounting Officer of the Company, each hereby certifies that, to the best of his knowledge:

1. The Company’s Annual Report on Form 10-K for the period ended September 30, 2007, and to which this Certification is attached as Exhibit 32.1 (the “Annual Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and the results of operations of the Company.

IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 15th day of November, 2007.

/s/  STEVEN R. SPRINGSTEEL

Steven R. Springsteel, Chairman, President, and

Chief Executive Officer

/s/  PETER S. NORMAN

Peter S. Norman, Chief Financial Officer and

Principal Accounting Officer

This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Chordiant Software, Inc. under the Securities Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.