ex1062.htm

[ * ] = 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.

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:

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.

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.

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.

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 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 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 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 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 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%.