-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q0wkHt0/yjtch073tPoFD9Cn15eUAWbHZAGhypj4L/bY7yipTG+Zs0SkyP+/MQHK 57dnb3nbGZOZI0TjG67iLg== 0001042134-09-000008.txt : 20090129 0001042134-09-000008.hdr.sgml : 20090129 20090129161758 ACCESSION NUMBER: 0001042134-09-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 20081231 FILED AS OF DATE: 20090129 DATE AS OF CHANGE: 20090129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHORDIANT SOFTWARE INC CENTRAL INDEX KEY: 0001042134 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 931051328 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-34179 FILM NUMBER: 09554717 BUSINESS ADDRESS: STREET 1: 20400 STEVENS CREEK BLVD STREET 2: SUITE 400 CITY: CUPERTINO STATE: CA ZIP: 95014 BUSINESS PHONE: 408-517-6100 MAIL ADDRESS: STREET 1: 20400 STEVENS CREEK BLVD STREET 2: SUITE 400 CITY: CUPERTINO STATE: CA ZIP: 95014 10-Q 1 d10q.htm d10q.htm




 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
 
 
FORM 10-Q

 
 
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2008
 
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)
(I.R.S. Employer
Identification Number)
 
20400 Stevens Creek Boulevard, Suite 400
Cupertino, CA 95014
(Address of Principal Executive Offices including Zip Code)
 
(408) 517-6100
(Registrant’s Telephone Number, Including Area Code)
 
 
(Former name, former address and former fiscal year if changed since last report)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  
Accelerated filer  x
 
Non-accelerated filer   (Do not check if a smaller reporting company)
Smaller reporting company  
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
 
As of January 16, 2009, there were 30,083,770 shares of the registrant’s common stock outstanding.


CHORDIANT SOFTWARE, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 2008
 
PART I. FINANCIAL INFORMATION
Page No.
     
Item 1.
3
     
 
3
     
 
4
     
 
5
     
 
6
     
Item 2.
28
     
Item 3.
44
     
Item 4.
44
     
PART II. OTHER INFORMATION
 
     
Item 1.
45
     
Item 1A.
45
     
Item 5
56
     
Item 6.
57
     
 
57
     


PART I - FINANCIAL INFORMATION
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
 
     
December 31,
2008
     
September 30,
2008
 
                 
ASSETS
               
Current assets:
               
Cash and cash equivalents
 
$
53,775
   
$
55,516
 
Accounts receivable, net
   
20,258
     
24,873
 
Prepaid expenses and other current assets
   
5,888
     
8,168
 
Total current assets
   
79,921
     
88,557
 
Property and equipment, net
   
2,760
     
3,165
 
Goodwill
   
22,608
     
22,608
 
Intangible assets, net
   
1,211
     
1,514
 
Deferred tax assets—non-current
   
4,389
     
6,849
 
Other assets
   
1,926
     
2,007
 
Total assets
 
$
112,815
   
$
124,700
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
 
$
4,971
   
$
7,711
 
Accrued expenses
   
8,608
     
9,456
 
Deferred revenue
   
32,952
     
33,503
 
Total current liabilities
   
46,531
     
50,670
 
Deferred revenue—long-term
   
10,184
     
12,831
 
Other liabilities—non-current
   
1,007
     
818
 
Restructuring costs, net of current portion
   
427
     
529
 
Total liabilities
   
58,149
     
64,848
 
                 
Commitments and contingencies (Notes 8, 9 and 10)
               
                 
Stockholders’ equity:
               
Preferred stock, $0.001 par value; 51,000 shares authorized (500 shares designated as Series A Junior Participating Preferred Stock); none issued and outstanding at December 31, 2008 and September 30, 2008
   
     
 
Common stock, $0.001 par value; 300,000 shares authorized; 30,081 and 30,076 shares issued and outstanding at December 31, 2008 and September 30, 2008, respectively
   
30
     
30
 
Additional paid-in capital
   
282,887
     
281,910
 
Accumulated deficit
   
(228,519
)
   
(225,850
)
Accumulated other comprehensive income
   
268
     
3,762
 
Total stockholders’ equity
   
54,666
     
59,852
 
Total liabilities and stockholders’ equity
 
$
112,815
   
$
124,700
 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


CHORDIANT SOFTWARE, INC.
(In thousands, except per share data)
(Unaudited)
 
   
Three Months Ended December 31,
     
2008
     
2007
 
                 
Revenues:
               
License
 
$
7,941
   
$
8,807
 
Service, including related party items aggregating nil and $64 for the three months ended December 31, 2008 and 2007, respectively.
   
15,436
     
20,327
 
Total revenues
   
23,377
     
29,134
 
Cost of revenues:
               
License
   
98
     
334
 
Service
   
6,686
     
8,478
 
Amortization of intangible assets
   
303
     
303
 
Total cost of revenues
   
7,087
     
9,115
 
Gross profit
   
16,290
     
20,019
 
Operating expenses:
               
Sales and marketing
   
7,780
     
8,903
 
Research and development
   
5,259
     
6,725
 
General and administrative
   
4,402
     
5,003
 
Restructuring expense
   
784
     
 
Total operating expenses
   
18,225
     
20,631
 
Loss from operations
   
(1,935
)
   
(612
)
Interest income, net
   
292
     
835
 
Other income, net
   
685
     
134
 
Income (loss) before income taxes
   
(958
)
   
357
 
Provision for income taxes
   
1,711
     
152
 
Net income (loss)
 
$
(2,669
)
 
$
205
 
                 
Net income (loss) per share:
               
Basic
 
$
(0.09
)
 
$
0.01
 
Diluted
 
$
(0.09
)
 
$
0.01
 
                 
Weighted average shares used in computing net income (loss) per share:
               
Basic
   
30,008
     
33,292
 
Diluted
   
30,008
     
33,864
 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


CHORDIANT SOFTWARE, INC.
(In thousands)
(Unaudited)
 
   
Three Months Ended December 31,
     
2008
     
2007
 
                 
Cash flows from operating activities:
               
Net income (loss)
 
$
(2,669
)
 
$
205
 
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
               
Depreciation and amortization
   
456
     
397
 
Amortization of intangibles and capitalized software
   
363
     
570
 
Non-cash stock-based compensation expense
   
965
     
1,175
 
Provision for doubtful accounts and sales returns
   
202
     
38
 
Accretion of discounts on marketable securities
   
     
(32
)
Non-cash provision for income taxes
   
1,263
     
 
Changes in assets and liabilities:
               
Accounts receivable
   
2,736
     
6,255
 
Prepaid expenses and other current assets
   
1,203
     
(2,013
)
Other assets
   
(44
)
   
999
 
Accounts payable
   
(2,443
)
   
396
 
Accrued expenses, other liabilities—non-current, and restructuring
   
(256
)
   
23
 
Deferred revenue
   
864
     
(10,664
)
Net cash provided by (used for) operating activities
   
2,640
     
(2,651
)
Cash flows from investing activities:
               
Property and equipment purchases
   
(180
)
   
(723
)
Capitalized product development costs
   
(13
)
   
(66
)
Increase in restricted cash
   
(1
)
   
(2
)
Purchases of marketable securities and short-term investments
   
     
(4,340
)
Proceeds from maturities of marketable securities and short-term investments
   
     
5,647
 
Net cash provided by (used for) investing activities
   
(194
)
   
516
 
Cash flows from financing activities:
               
Proceeds from exercise of stock options
   
11
     
569
 
Excess tax benefits from stock-based compensation
   
     
17
 
Net cash provided by financing activities
   
11
     
586
 
Effect of exchange rate changes
   
(4,198
)
   
(226
)
Net decrease in cash and cash equivalents
   
(1,741
)
   
(1,775
)
Cash and cash equivalents at beginning of period
   
55,516
     
77,987
 
Cash and cash equivalents at end of period
 
$
53,775
   
$
76,212
 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.


CHORDIANT SOFTWARE, INC.
(UNAUDITED)
 
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 insurance, healthcare, telecommunications, financial services, retail and other consumer direct industries.
 
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of presentation

The accompanying Condensed Consolidated Financial Statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles, or GAAP, in the United States have been condensed or omitted pursuant to such rules and regulations. The September 30, 2008 Condensed Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by GAAP in the United States. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related Notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2008, or 2008 Form 10-K, filed with the SEC.

All adjustments, consisting of only normal recurring adjustments, which in the opinion of management, are necessary to state fairly the financial position, results of operations and cash flows for the interim periods presented have been made. The results of operations for interim periods are not necessarily indicative of the results expected for the full fiscal year or for any future period.

Reclassifications
 
Certain reclassifications have been made to prior period balances to conform to the current period’s presentation.
 
Principles of consolidation
 
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
 
Use of estimates

The preparation of Condensed Consolidated Financial Statements in conformity with GAAP in the United States 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 the 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. The Company bases these estimates on historical experience and on various other assumptions that are believed to be reasonable. Actual results may differ from these estimates under different assumptions or conditions.

Revenue recognition
 
The Company derives revenue from licensing software and related services, which include assistance in implementation, customization and integration, post-contract customer support, or PCS, training and consulting. All revenue amounts are presented net of sales taxes in the Company’s Condensed 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.


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Software license revenue is recognized in accordance with AICPA’s 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, the Company recognizes revenue for services and PCS 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 charged for the services when such services are sold separately. The fair value VSOE for annual PCS 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.

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”, or SOP 81-1.

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.

For transactions involving extended payment terms, the Company deems these fees not to be fixed or determinable for revenue recognition purposes and revenue is deferred until the fees become due and payable.


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

For arrangements with multiple elements accounted for under SOP 97-2 where the Company determines it can account for the elements separately and the fees are not fixed or determinable due to extended payment terms, revenue is recognized in the following manner. If the undelivered element is PCS, or other services, an amount equal to the estimated value of the services to be rendered prior to the next payment becoming due is allocated to the undelivered services. The residual of the payment is allocated to the delivered elements of the arrangement.

For arrangements with multiple elements accounted for under SOP 81-1 where the Company determines it can account for the elements separately and the fees are not fixed or determinable due to extended payment terms, revenue is recognized in the following manner. Amounts are first allocated to the undelivered elements included in the arrangement, as payments become due or are received, the residual is allocated to the delivered elements.

Revenue for PCS 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.

Restricted cash

At December 31, 2008 and September 30, 2008, interest bearing certificates of deposit were classified as restricted cash. These restricted cash balances serve as collateral for letters of credit securing certain lease obligations. These restricted cash balances are classified in Other Assets in the Condensed Consolidated Balance Sheets. See Note 3 for restricted cash balances at each balance sheet date.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, restricted cash, and accounts receivable. To date, the Company has invested excess funds in money market accounts, commercial paper, corporate bonds, and certificates-of-deposit. The Company has cash and cash equivalents with various large banks and institutions domestically and internationally. As of December 31, 2008, the Company held no marketable securities.

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. Based upon current economic conditions, the Company reviewed accounts receivable and has recorded allowances as deemed necessary.

Some of our current or prospective customers have recently been facing financial difficulties. Customers that have accounted for significant revenues in the past may not generate revenues in any future period, causing any failure to obtain new significant customers or additional orders from existing customers to materially affect our operating results. The following table summarizes the revenues from customers that accounted for 10% or more of total revenues:


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

     
Three Months Ended December 31,
 
     
2008
 
2007
 
 
Citicorp Credit Services, Inc.
   
13
%
   
22
%
 
 
Vodafone Group Services Limited and affiliated companies 
 
25
%
   
*
   
 
International Business Machines (“IBM”)
   
*
     
11
%
 
 
Wellpoint, Inc.
   
*
     
11
%
 
                     
*       Represents less than 10% of total revenues.

As previously announced, the Company has agreed to license certain of its software to IBM’s customers.

At December 31, 2008, CitiCorp Credit Services, Inc., Vodaphone Group Services Limited, and Orange Personal Communications accounted for 19%, 18%, and 10%, of our accounts receivable, respectively. At September 30, 2008, Citicorp Credit Services, Inc., Vodafone Group Services Limited, and IBM accounted for approximately 19%, 18%, and 13% of our accounts receivable, respectively.

Research and Development

Software development costs are expensed as incurred until technological feasibility of the underlying software product is achieved. After technological feasibility is established, software development costs are capitalized until general availability of the product. Capitalized costs are then amortized at the greater of a straight line basis over the estimated product life, or the ratio of current revenue to total projected product revenue.

During fiscal year 2008 and the three months ended December 31, 2008, technological feasibility to port existing products to new platforms was established through the completion of detailed program designs. Costs aggregating $0.4 million associated with these products have been capitalized and included in Other Assets as of December 31, 2008. As the porting of these products are completed, the capitalized costs are being amortized using the straight-line method over the estimated economic life of the product which is 36 months. For the three months ended December 31, 2008, amortization expense, included in cost of revenue for licenses related to these products was less than $0.1 million. As of December 31, 2008, the unamortized expense was approximately $0.4 million.

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 were capitalized and included in Other Assets as of September 30, 2007. This product was completed and became available for general release 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 three months ended December 31, 2008 and 2007, amortization expense, included in cost of revenue for license related to this product was less than $0.1 million for both periods. As of December 31, 2008, the unamortized expense was $0.3 million.

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.

Effective October 1, 2007, the Company adopted Financial Accounting Standards Interpretation, No. 48 “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” or FIN 48. FIN 48 prescribes a recognition threshold and measurement guidance for the financial statement reporting of uncertain tax positions taken or expected to be taken in a company’s income tax return. The application of FIN 48 is explained in Note 11 to the Condensed Consolidated Financial Statements.


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Net income (loss) per share

The Company computes net income (loss) per share in accordance with Statement of Financial Accounting Standard, No. 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. In accordance with SFAS 123(R), unvested performance based restricted stock units or RSUs are not included in the computation of earnings per share as they are considered contingently issuable shares. The calculation of diluted net loss per share excludes potential common shares as their effect is anti-dilutive for the three months ended December 31, 2008.

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):

   
Three Months Ended December 31,
 
     
2008
     
2007
   
                   
 
Net income (loss) available to common stockholders
$
(2,669
)
 
$
205
   
 
Denominator:
               
 
Weighted average common stock outstanding
 
30,008
     
33,292
   
 
Denominator for basic calculations
 
30,008
     
33,292
   
                   
 
Effect of dilutive potential common shares
 
(*)
   
572
   
 
Denominator for diluted calculations
 
30,008
     
33,864
   
                   
 
Net income (loss) per share—basic
$
(0.09
)
 
$
0.01
   
 
Net income (loss) per share—diluted
$
(0.09
)
 
$
0.01
   
(*) – 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):

     
December 31,
2008
           
                   
 
Employee stock options
 
4,212
           
 
Restricted stock awards (RSAs)
 
71
           
 
Restricted stock units
 
520
           
     
4,803
           



CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Recent Accounting Pronouncements

In November 2008, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 08-6, “Equity Method Investment Accounting Considerations” or EITF 08-6. EITF 08-6 clarifies the accounting for certain transactions and impairment considerations involving equity method investments. EITF 08-6 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company does not currently have any investments that are accounted for under the equity method and therefore EITF 08-6 will not have a significant impact on the determination of our financial results.

In November 2008, the FASB ratified EITF Issue No. 08-7, “Accounting for Defensive Intangible Assets” or EITF 08-7. EITF 08-7 clarifies the accounting for certain separately identifiable intangible assets which an acquirer does not intend to actively use but intends to hold to prevent its competitors from obtaining access to them. EITF 08-7 requires an acquirer in a business combination to account for a defensive intangible asset as a separate unit of accounting which should be amortized to expense over the period the asset diminishes in value. EITF 08-7 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited.  The Company has evaluated the new EITF and has determined that it will not have a significant impact on the determination or reporting of our financial results.

In October, 2008, the FASB issued FASB Staff Position (FSP) FAS 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” or FSP 157-3. FSP 157-3 clarifies the application of FAS 157 and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 is effective upon issuance, including prior periods for which financial statements have not been issued. Revisions resulting from a change in the valuation technique or its application should be accounted for as a change in accounting estimate following the guidance in FAS Statement No. 154, “Accounting Changes and Error Corrections” or FAS 154. However, the disclosure provisions in FAS 154 for a change in accounting estimate are not required for revisions resulting from a change in valuation technique or its application. The Company has evaluated the new FSP and has determined that it will not have a significant impact on the determination or reporting of our financial results

NOTE 3—FINANCIAL INSTRUMENTS AND FAIR VALUE

The Company adopted the provisions of SFAS 157 effective October 1, 2008. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company has investments that are valued in accordance with the provisions of SFAS 157. SFAS 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

 
Level 1 – Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access.
 
Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
 
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The following table represents information about the Company’s investments measured at fair value on a recurring basis (in thousands).

   
Fair value of investments as of December 31, 2008
 
   
Total
     
Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1)
     
Significant
Other
Observable
Inputs
(Level 2)
     
Significant
Unobservable
Inputs
(Level 3)
 
 
Money Market Funds
$
25,149
   
$
25,149
   
$
   
$
 
                                 


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 4—BALANCE SHEET COMPONENTS

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

     
December 31,
2008
     
September 30,
2008
   
 
Accounts receivable, net:
               
 
Accounts receivable
$
21,077
   
$
25,502
   
 
Less: allowance for doubtful accounts
 
(819
)
   
(629
)
 
   
$
20,258
   
$
24,873
   

Prepaid expenses and other current assets

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

     
December 31,
2008
     
September 30,
2008
   
 
Prepaid expenses and other current assets:
               
 
Prepaid commissions and royalties
$
1,296
   
$
2,171
   
 
Deferred tax assets
 
2,308
     
3,102
   
 
Other prepaid expenses and current assets
 
2,284
     
2,895
   
   
$
5,888
   
$
8,168
   

Property and equipment, net

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

     
December 31,
2008
     
September 30,
2008
   
 
Property and equipment, net:
               
 
Computer hardware (useful lives of 3 years)
$
4,786
   
$
4,744
   
 
Purchased internal-use software (useful lives of 3 years)
 
3,325
     
3,323
   
 
Furniture and equipment (useful lives of 3 to 7 years)
 
718
     
749
   
 
Leasehold improvements (shorter of 7 years or the term of the lease)
 
2,688
     
2,811
   
     
11,517
     
11,627
   
 
Accumulated depreciation and amortization
 
(8,757
)
   
(8,462
)
 
   
$
2,760
   
$
3,165
   

Intangible assets, net

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

   
December 31, 2008
 
September 30, 2008
     
Gross
Carrying
Amount
     
Accumulated
Amortization
     
Net
Carrying
Amount
     
Gross
Carrying
Amount
     
Accumulated
Amortization
     
Net
Carrying
Amount
 
Intangible assets:
                                               
Developed technologies
 
$
6,904
   
$
(5,989
)
 
$
915
   
$
6,904
   
$
(5,765
)
 
$
1,139
 
Customer list and trade-names
   
2,731
     
(2,435
)
   
296
     
2,731
     
(2,356
)
   
375
 
   
$
9,635
   
$
(8,424
)
 
$
1,211
   
$
9,635
   
$
(8,121
)
 
$
1,514
 


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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 the 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 $0.3 million for each of the three month periods ended December 31, 2008 and 2007, respectively. The Company expects amortization expense on acquired intangible assets to be $0.9 million for the remainder of fiscal year 2009 and $0.3 million in fiscal year 2010.

Other assets

Other assets consist of the following (in thousands):

     
December 31,
2008
     
September 30,
2008
   
 
Other assets:
               
 
Long-term restricted cash
$
88
   
$
89
   
 
Other assets
 
1,838
     
1,918
   
   
$
1,926
   
$
2,007
   

Accrued expenses

Accrued expenses consist of the following (in thousands):  

     
December 31,
2008
     
September 30,
2008
   
 
Accrued expenses:
               
 
Accrued payroll, payroll taxes and related expenses
$
4,373
   
$
5,088
   
 
Accrued restructuring expenses, current portion (Note 5)
 
435
     
538
   
 
Accrued third party consulting fees
 
939
     
1,264
   
 
Accrued income, sales and other taxes
 
1,524
     
1,678
   
 
Other accrued liabilities
 
1,337
     
888
   
   
$
8,608
   
$
9,456
   

Deferred Revenue

Deferred revenue consists of the following (in thousands):

     
December 31,
2008
     
September 30,
2008
   
 
Deferred revenue:
               
 
License
$
9,679
   
$
12,465
   
 
Support and maintenance
 
32,622
     
32,908
   
 
Other
 
835
     
961
   
     
43,136
     
46,334
   
 
Less: current portion
 
(32,952
)
   
(33,503
)
 
 
Long-term deferred revenue
$
10,184
   
$
12,831
   


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 5—RESTRUCTURING

Restructuring Costs
 
Through December 31, 2008, the Company approved certain restructuring plans to, among other things, reduce its workforce, terminate contracts 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; (ii) lease termination costs and costs associated with permanently vacating certain facilities, and (iii) contract termination costs. The Company accounted for each of these costs in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” or SFAS 146 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 Costs—These costs represent future minimum lease payments related to excess and abandoned office space under leases, and the disposal of property and equipment including facility leasehold improvements, net of estimated sublease income.

 
Termination Costs—These costs represent contract termination costs related to the restructuring plan.

As of December 31, 2008, the total restructuring accrual consisted of the following (in thousands):

     
Current
     
Non-Current
     
Total
   
                           
 
Excess facilities
$
435
   
$
427
   
$
862
   
 
Total
$
435
   
$
427
   
$
862
   

As of December 31, 2008 and September 30, 2008, $0.4 million and $0.5 million, respectively, of the restructuring reserve are included in the Accrued Expenses line item on the Condensed Consolidated Balance Sheets. The allocation between current portion and long term portion is based on the current lease agreements or the anticipated settlement dates.

As of December 31, 2008, all severance and termination benefits and contract termination costs have been paid.

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 Net Future
Minimum Lease
Payments
           
 
2009 (nine months remaining)
       
334
           
 
2010
         
409
           
 
2011
         
119
           
 
Total
       
$
862
           

Included in the future minimum lease payments schedule above is an offset of $0.6 million of contractually committed sublease rental income. In the event that the sub-lessee was to default on their lease commitment to the Company, an adjustment to expense would be required if we were unable to find a replacement tenant on a timely basis.


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Fiscal Year 2009 Restructuring

In October 2008, the Company initiated a restructuring plan, the 2009 Restructuring, intended to align its resources and cost structure with expected future revenues. The 2009 Restructuring plan includes reductions in headcount and third party consultants across all functional areas in both North America and Europe. The 2009 Restructuring plan includes a reduction of approximately 13% of the Company’s permanent workforce. A significant portion of the positions eliminated were in North America.

As a result of the cost-cutting measures, the Company recorded a pre-tax cash restructuring charge in the first quarter of fiscal year 2009, of approximately $0.9 million, including $ 0.8 million for severance costs and $0.1 million for other contract termination costs. As of December 31, 2008, all payments have been made.

     
Severance
and Benefits
     
Contract
Termination
Costs
     
Total
   
                           
 
Provision
$
758
   
$
130
   
$
888
   
 
Cash paid
 
(758
)
   
(130
)
   
(888
)
 
 
Reserve balance as of December 31, 2008
$
   
$
   
$
   

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, or 2005 Restructuring, and in July 2005 affected employees were notified. As part of the 2005 Restructuring, the Company incurred a one-time restructuring charge of $1.1 million in the fourth quarter ended September 30, 2005 for severance and termination benefits.

During the quarter ended March 31, 2007, the Company incurred an additional charge of less than $0.1 million for additional severance expense for an employee located in France. During the quarter ended December 31, 2008, the Company reversed the charge as the Company was not required to pay the severance expense to the employee.

The following table summarizes the activity related to the 2005 Restructuring (in thousands):

     
Severance
and Termination
Benefits
   
 
Reserve balance as of September 30, 2008
$
123
   
 
Provision adjustment
 
(104
)
 
 
Non-cash
 
(19
)
 
 
Cash paid
 
   
 
Reserve balance as of December 31, 2008
$
   



CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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 was lower than previously estimated as part of the restructure facility reserve, and 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 as of September 30, 2008
$
943
   
 
Non-cash
 
   
 
Cash paid
 
(81
)
 
 
Reserve balance as of December 31, 2008
$
862
   

NOTE 6—COMPREHENSIVE INCOME (LOSS)

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

   
Three Months Ended December 31,
 
     
2008
     
2007
   
                   
 
Net income (loss)
$
(2,669
)
 
$
205
   
                   
 
Other comprehensive income (loss):
               
 
Change in foreign currency translation
 
(3,494
)
   
29
   
 
Net change in unrealized gain from investments
 
     
5
   
 
Comprehensive income (loss)
$
(6,163
)
 
$
239
   

NOTE 7—RELATED PARTY TRANSACTIONS

Charles E. Hoffman, a director of the Company, is the former President and Chief Executive Officer of Covad Communications Group, Inc. (“Covad”), a customer of ours. Revenue from Covad was zero and less than $0.1 million for the three months ended December 31, 2008 and 2007, respectively.

David A. Weymouth is a former 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. Mr. Weymouth resigned as a member of the Board of Directors of the Company in February 2008.

In February 2008, Dan Gaudreau became a director of the Company. Mr. Gaudreau is the Chief Financial Officer of Actuate Corporation, a provider of licensed technology to the Company. The Company paid royalties to Actuate Corporation of less than $0.1 million and zero for the three months ended December 31, 2007 and 2008, respectively.


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 8—BORROWINGS

Revolving Line of Credit

 
The Company’s revolving line of credit with Comerica Bank expires on June 7, 2010. The terms of the agreement include a $5.0 million line of credit, available on a non-formula basis, and requires 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.

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 December 31, 2008, the Company had utilized $0.4 million of the standby commercial letters of credit limit which serves as collateral for computer equipment leases for Ness (see Note 9) of approximately $0.2 million and collateral for our Brighton facility of approximately $0.2 million. 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 December 31, 2008, the Company had not entered into any foreign exchange forward contracts. Pursuant to the March 2006 amended agreement, the Company is required to secure the standby commercial letters of credit and foreign exchange forward contracts through June 7, 2010. 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.

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 December 31, 2008, there were no outstanding balances on the revolving line of credit.

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 December 31, 2008 are as follows (in thousands):

     
Operating
Leases
     
Operating
Sublease
Income
     
Net
Operating
Leases
   
 
Fiscal year ended September 30:
                       
 
2009 (remaining nine months)
$
2,306
   
$
(190
 
$
2,116
   
 
2010
 
3,107
     
(293
)
   
2,814
   
 
2011
 
2,551
     
(86
)
   
2,465
   
 
2012
 
1,818
     
     
1,818
   
 
2013
 
1,660
     
     
1,660
   
 
Thereafter
 
261
     
     
261
   
 
Total minimum payments
$
11,703
   
$
(569
 
$
11,134
   

Operating lease payments in the table above include approximately $1.4 million for our Boston, Massachusetts facility operating lease commitment that is included in Restructuring Expense. As of December 31, 2008, the Company has $0.6 million in sublease income contractually committed for future periods relating to this facility. See Note 5 for further discussions.

The office lease for our Cupertino headquarters was scheduled to expire on December 31, 2008. In July 2008, the Company renewed the lease for a five year period with an option to renew for an additional five years. The table above includes our lease commitment for these facilities.


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Asset Retirement Obligations

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 recorded an Asset Retirement Obligation (ARO) of approximately $0.3 million and a corresponding increase in leasehold improvements in the fiscal year 2007. 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 asset retirement obligations are associated with commitments to return property subject to operating leases to original condition upon lease termination. As of December 31, 2008, the Company estimated that gross expected cash flows of approximately $0.3 million will be required to fulfill these obligations.

Asset retirement obligation payments as of December 31, 2008 are estimated as follows (in thousands):

             
Payments
           
 
Fiscal year ended September 30:
                       
 
2009 (remaining nine months)
       
$
           
 
2010
         
           
 
2011
         
142
           
 
2012
         
162
           
 
Total
       
$
304
           

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 one 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. From 2004 to 2008, the Company further expanded its agreement with Ness whereby Ness is providing certain additional technical and consulting services. In January 2009, the Company extended its agreement with Ness to provide technical and consulting services, however if the Company terminates the agreement prior to December 31, 2009, it may be required to pay a termination fee no greater than $0.5 million. 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 $0.2 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 enters into indemnification agreements pursuant to which the Company is obligated to indemnify certain of its officers, directors or employees for certain events or occurrences while the officer, director or employee is, or was, serving at the Company’s request in such capacity. The Company’s Bylaws similarly provide for indemnification of its officers, directors and employees under certain circumstances to the maximum extent permitted under Delaware law. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements and arrangements 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. As a result of insurance policy coverage, the Company


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

believes the estimated fair value of these indemnification agreements and arrangements is minimal. Accordingly, the Company has no liabilities recorded for these agreements or arrangements as of December 31, 2008.

The Company enters into standard agreements with indemnification provisions in its 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 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 agreements is unlimited. The Company has not incurred significant costs to defend lawsuits or settle claims related to these 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 December 31, 2008.

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 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 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 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 December 31, 2008.

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 December 31, 2008.

The Company warrants that its 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 December 31, 2008.

NOTE 10—LITIGATION

IPO Laddering

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 Securities 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”).



CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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 Cases pending the outcome of plaintiffs’ petition to the Second Circuit for rehearing en banc. On April 6, 2007, the Second Circuit denied plaintiffs’ rehearing petition, but clarified that the plaintiffs may seek to certify a more limited class in the district court. Accordingly, the settlement will not be finally approved. Plaintiffs filed amended complaints in six “focus cases” on or about August 14, 2007. The Company is not a focus case. 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. The focus case issuers filed motions to dismiss the claims against them on or about November 9, 2007 and an opposition to plaintiffs' motion for class certification on December 21, 2007. On March 16, 2008, the court denied the motions to dismiss in the focus cases. On October 2, 2008, the plaintiffs withdrew their class certification motion.  A deadline for the focus case defendants to answer the amended complaints has not been set. 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.

Derivative Class Action

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 alleged, 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 June 30, 2008, the parties signed a Stipulation of Compromise and Settlement ("the Settlement"), which was subject to court approval. The Settlement received final court approval on October 22, 2008. The Company's cash contribution toward the Settlement was not material to the financial statements.



CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Yue vs. Chordiant Software, Inc.

On January 2, 2008, the Company and certain of our officers and one other employee were named in a complaint filed in the United States District Court for the Northern District of California by Dongxiao Yue under the caption Dongxiao Yue v. Chordiant Software, Inc. et al. Case No. CV 08-0019 (N.D. Cal.). The complaint alleged that the Company’s Marketing Director software product infringed copyrights in certain software referred to as the “PowerRPC software,” copyrights that had been owned by Netbula LLC and assigned to Mr. Yue, the sole employee and owner of Netbula. The alleged infringement included (a) distributing more copies of the PowerRPC software than had originally been authorized in a run time license Netbula granted to Chordiant Software, Intl., (b) infringement of a software developer kit (“SDK”) by making copies of the SDK in excess of those that had been licensed by Netbula, (c) making unauthorized derivative works of the SDK, (d) unauthorized distribution of PowerRPC for products operating on the Windows Vista platform, and (e) unauthorized distribution of PowerRPC for server based products. The plaintiff sought monetary damages, disgorgement of profits, and injunctive relief according to proof. On February 5, 2008, the Company and its officers and employees filed a motion to dismiss the complaint for failure to state a claim upon which relief could be granted, and as to lack of personal jurisdiction as to one employee. On July 23, 2008, the Court issued an order that (1) denied Plaintiff's motion to disqualify counsel; (2) granted one employee’s motion to dismiss for lack of personal jurisdiction, with prejudice, and (3) granted the Company’s motion to dismiss, ruling that Plaintiff’s company, Netbula LLC, is the real party in interest and must appear through counsel. The Court ruled that Netbula LLC could file an amended complaint within 45 days and join Mr. Yue as an individual Plaintiff at that time.

On September 9, 2008, Plaintiffs Dongxiao Yue and Plaintiff Netbula LLC filed a First Amended Complaint asserting four causes of action relating to the Company’s alleged unauthorized use and distribution of Plaintiffs’ PowerRPC software: claims for copyright infringement, unfair competition, and “accession and confusion of property” against the Company, and a claim for vicarious copyright infringement against the Company’s Chief Executive Offer and its former Vice President, General Counsel and Secretary.

On September 20, 2008, the parties filed a stipulation allowing Plaintiffs to file a Second Amended Complaint asserting the two causes of action for copyright infringement and vicarious copyright infringement, but not including the unfair competition and accession and confusion claims.  The Second Amended Complaint seeks monetary damages, disgorgement of profits, and injunctive relief according to proof.  On November 10, 2008, the Company’s Chief Executive Offer and its former Vice President, General Counsel and Secretary filed a motion to dismiss on grounds that the Plaintiffs failed to state a claim as to them, and this motion is to be heard on February 23, 2009.  Also on November 10, 2008, the Company answered the complaint and asserted various affirmative defenses, including that the Plaintiffs’ claims are barred by the existence of an express or implied license from the Plaintiffs.  The Court has allowed discovery to proceed on this license-based defense and set April 9, 2009 for a hearing on the Company’s anticipated motion for summary judgment on this defense. 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.

The Company, from time to time, 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

Effective October 1, 2007, the Company adopted FIN No. 48 “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109”. FIN 48 prescribes a recognition threshold and measurement guidance for the financial statement reporting of uncertain tax positions taken or expected to be taken in a company’s income tax return. FIN 48 also provides guidance related to recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition matters related to uncertain tax positions. FIN 48 utilizes a two-step approach for evaluating uncertain tax positions accounted for in accordance with SFAS 109. Step one, recognition, requires a company to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including the resolution of related appeals or litigation processes, if any. Step two, measurement, is based on the largest amount of benefit which is more likely than not to be realized on ultimate settlement. The cumulative effect of adopting FIN 48, if any, is recorded as an adjustment to the opening balance of retained earnings as of the adoption date.

The net income tax assets recognized under FIN 48 did not materially differ from the net assets recognized before adoption, and, therefore, the Company did not record an adjustment to retained earnings related to the adoption of FIN 48. At the adoption date of October 1, 2007, the Company had $0.8 million of unrecognized tax benefits related to tax positions taken in prior periods, $0.2 million of which would affect the Company’s effective tax rate if recognized. From October 1, 2008 through December 31, 2008, unrecognized tax benefits increased by $0.2 million due to additional accrued interest and penalties and an uncertain tax return position filed during the period. As of December 31, 2008, we had gross unrecognized tax benefits of $1.2 million.


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the Provision for Income Taxes. The Company had less than $0.1 million accrued for interest and penalties as of December 31, 2008.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, all U.S. federal, state and United Kingdom tax years between 1995 and 2008 remain open to examination due to net operating loss carryforwards and credit carryforwards. Tax years 2003 and later remain open to examination in Canada and years 2004 and later remain open to examination in Germany.

Tax audits of the 2005 tax year are currently in process in the Netherlands. The Company does not expect resolution of these audits to have a material impact on our financial statements and the Company does not expect a significant increase or decrease in unrecognized tax benefits over the next 12 months.

At December 31, 2008, the Company has $72.5 million in gross deferred tax assets (DTAs) attributable principally to net operating losses (NOLs) and to a lesser extent temporary differences relating to deferred revenue. Historically, the Company maintained a 100% valuation allowance on DTAs because it previously was unable to conclude that it is more-likely-than-not that it will realize the tax benefits of these DTAs.  Based on recent operating results and the reorganization of the Company’s intellectual property into the U.S., current projections of disaggregated future taxable income has enabled the Company to conclude that it is more-likely-than-not that it will have future taxable income sufficient to realize $6.7 million of tax benefits from its deferred tax assets, which consist of that portion of net deferred tax assets attributable to net operating losses (NOLs) residing in the United Kingdom. Accordingly, the Company released (eliminated) the valuation allowance on its DTAs related to the United Kingdom, of which $9.5 million was recognized in the period ended September 30, 2008 as an offsetting reduction to goodwill (representing pre-acquisition NOLs). Beginning October 1, 2008 and through future periods, the Company expects to incur tax expense related to the United Kingdom which will result in an increase in overall expense; however, to the extent that such tax expense is offset by the utilization of NOLs, the recognition of this additional tax expense will be a non-cash item.

At December 31, 2008, the Company’s provision for income taxes was $1.7 million. Of this total, $1.3 million was related to a non-cash deferred tax expense for the recognition of taxable income in the United Kingdom. The Company also had unrecoverable withholding taxes related to sales transactions that occurred in Turkey, Poland and India. The remainder of the Company’s provision is attributable to taxes on earnings from the Company’s  foreign subsidiaries.

The remaining balance of gross deferred tax assets was generated in the U.S. With respect to U.S. generated deferred tax assets, the Company recorded a full valuation allowance as the future realization of the tax benefit is not considered by management to be more likely than not. The Company’s estimate of future taxable income considers available positive and negative evidence regarding current and future operations, including projections of income in various states and foreign jurisdictions.  The Company believes the estimate of future taxable income is reasonable; however, it is inherently uncertain, and if future operations generate taxable income greater than projected, further adjustments to reduce the valuation allowance are possible. Conversely, if the Company realizes unforeseen material losses in the future, or the ability to generate future taxable income necessary to realize a portion of the net deferred tax asset is materially reduced, additions to the valuation allowance could be recorded. At December 31 and September 30, 2008, the balance of deferred tax valuation allowance was approximately $65.9 million. 

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 as a result of an IRC 382 limitation. On September 30, 2008, the Company had federal research and development tax credit carryforwards of approximately $3.4 million. Due to Section 382 ownership changes under IRC Section 383, $2.1 million of the federal research tax credit carryforwards were subject to annual limitations and is expected to expire unutilized.

On September 30, 2008, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $139.1 million and $26.4 million, respectively. The Company generated pre-acquisition net operating losses related to Prime Response. Of the total $33.4 million of pre-acquisition net operating losses generated, approximately $19.6 million of pre-acquisition net operating losses expired unutilized as a result of an IRC Section 382 study. Upon being realized, the remaining $13.8 million of pre-acquisition net operating loss carryforwards will reduce goodwill and intangibles recorded at the date of acquisition before reducing the tax provision.. Approximately $35.5 million of additional net operating loss and capital allowance carryforwards were generated in the United Kingdom, none of which will expire. Approximately $4.1 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


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

reduction of the provision for income taxes. These carryforwards are available to offset future federal and state taxable income and expire in fiscal years 2011 through 2028 and 2009 through 2028, respectively. At September 30, 2008, there were approximately $1.4 million of federal research and development credits  that expire in 2025 through 2028. In addition, there are alternative minimum tax credits of approximately $0.1 million that do not expire. At September 30, 2008, there were also state credits of approximately $3.7 million of which $3.6 million do not expire.

On September 23, 2008, the state of California enacted tax legislation on the utilization of net operating losses and credit limitations.  Beginning in fiscal year 2009, any California net operating losses that the Company generates will have a 20 year carryforward period and effective for fiscal year 2012, will have a two year carryback period. In addition, for fiscal year 2009 through fiscal year 2010, the Company will be unable to utilize California net operating losses as they are being temporarily disallowed as a result of this legislation. This may give rise to tax expense for any such taxable income rising out of the disallowable 2 year period. Any disallowed California net operating losses that cannot be utilized during the disallowed period will be extended by two years. For fiscal year 2012, the carryback amount cannot exceed 50% of the net operating loss, for fiscal year 2013, the carryback cannot exceed 75% of the net operating loss, and for fiscal year 2014, the carryback cannot exceed 100% of the net operating loss.

Beginning in fiscal year 2009, California business tax credits will be limited to 50% of the Company’s tax liability. The carryover period for disallowed credit will be extended by the number of tax years that the credit was disallowed.

NOTE 12—EMPLOYEE BENEFIT PLANS

2005 Equity Incentive Plan

As of December 31, 2008, there were approximately 1.8 million shares available for future grant and approximately 4.2 million options that are outstanding under the 2005 Equity Incentive Plan or 2005 Plan. In the quarter ended December 31, 2008, the Board amended the 2005 Plan to incorporate the following changes:

1.  
amended the 2005 Plan to increase the number of shares reserved for future issuance by 0.7 million shares. This amendment was approved by the stockholders at the 2009 Annual Meeting of Stockholders’ held on January 28, 2009.
2.  
granted 520,000 RSUs, equal to an equivalent number of shares of Common Stock, to executive officers and management team members. Vesting of the shares are time based with one third of the RSU’s vesting each year after the date of grant for a period of three years. In the event of certain changes in control of the Company, any unvested shares would automatically vest.

In October 2007, the Company granted 0.2 million performance-based RSUs to selected executives of the Company pursuant to the 2005 Plan. The performance-based RSUs cliff vest at the end of a two year requisite service period, constituting the Company’s fiscal years 2008 and 2009, upon achievement of specified performance criteria established by the Compensation Committee of our Board of Directors. The award agreements for RSUs generally provide that vesting will be accelerated in certain events related to changes in control of the Company. Total compensation cost for these awards is based on the fair market value of the shares at the date of grant. The portion of the total compensation cost related to the performance-based awards is subject to adjustment each quarter based on management’s assessment of the likelihood of achieving the two year performance criteria. As of December 31, 2008, management believes achieving the two year performance criteria is unlikely.

2000 Nonstatutory Equity Incentive Plan

As of December 31, 2007, there were approximately 0.4 million options that are outstanding under the 2000 Nonstatutory Equity Incentive Plan.

1999 Non-Employee Directors’ Option Plan

As of December 31, 2008, there were approximately 0.2 million shares of common stock are available for future grant and 0.2 million options that are outstanding under the 1999 Non-Employee Directors’ Option Plan or Directors’ Plan. On November 19, 2008, the Board amended the Directors’ Plan such that the maximum number of shares of restricted stock that a Board member may receive in connection with the annual grant of restricted stock under the Directors’ Plan be limited to 15,000 shares. The Company expects to grant Board members restricted stock awards on January 28, 2009, at the 2009 Annual Meeting of Stockholders’. The amendment does not require stockholder approval.



CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Stock Option and RSA Activity
 
The following table summarizes stock option and RSA activity under our stock option plans (in thousands, except per share data):

           
Outstanding
 
   
Shares
Available
for Grant
     
Shares
     
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life (Years)
   
Aggregate
Intrinsic
Value
Closing
Price at
12/31/2008
of $2.66
 
Balance at September 30, 2008
 
3,056
     
3,662
   
$
8.19
           
Authorized
 
     
     
           
Granted
 
(1,404
)
   
884
     
2.85
           
Options exercised
 
     
(5
)
   
2.08
           
Options and awards cancelled/forfeited
 
329
     
(329
)
   
8.48
           
Authorized reduction in shares from existing plans
 
(10
)
   
     
           
Balance at December 31, 2008
 
1,971
     
4,212
   
$
7.06
 
6.58
 
$
279
 
Vested and expected to vest at December 31, 2008
         
3,644
   
$
7.02
 
6.37
 
$
245
 
Exercisable at December 31, 2008
         
2,143
   
$
7.70
 
5.76
 
$
64
 

The following table summarizes information about stock options outstanding and exercisable at December 31, 2008 (in thousands, except exercise prices and contractual life data):

   
Options Outstanding
 
Options Exercisable
 
Range of
Exercise Prices
 
Number
Outstanding
 
Weighted
Average
Remaining
Contractual
Life (Years)
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic
Value
Closing
Price at
12/31/2008
of $2.66
 
Number
Exercisable
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic
Value
Closing
Price at
12/31/2008
of $2.66
 
$0.35 – 2.32
   
719
   
4.67
 
$
2.29
 
$
269
   
91
 
$
2.06
 
$
54
 
2.50 – 4.75
   
500
   
6.72
   
4.04
   
10
   
313
   
3.75
   
10
 
4.90 – 7.50
   
575
   
5.68
   
6.37
   
   
392
   
6.59
   
 
7.53 – 8.15
   
527
   
6.81
   
7.89
   
   
380
   
7.89
   
 
8.25 – 8.28
   
653
   
7.31
   
8.25
   
   
361
   
8.25
   
 
8.35 – 9.25
   
784
   
8.21
   
9.12
   
   
291
   
9.03
   
 
9.26 – 45.00
   
454
   
6.42
   
12.56
   
   
315
   
12.54
   
 
$0.35 – 45.00
   
4,212
   
6.58
 
$
7.06
 
$
279
   
2,143
 
$
7.70
 
$
64
 

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of $2.66 as of December 31, 2008, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during the three months ended December 31, 2008 was less than $0.1 million and $0.7 million, respectively. As of December 31, 2008, total unrecognized compensation costs related to non-vested stock options was $5.9 million, which is expected to be recognized as expense over a weighted-average period of approximately 2.3 years. As of December 31, 2007, total unrecognized compensation costs related to non-vested stock options was $7.0 million, which was expected to be recognized as expense over a weighted-average period of approximately 2.9 years.


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

On February 1, 2008, the Company’s Board members were granted 71,088 RSAs for their annual service award under the Directors’ Plan. These RSAs were unvested as of December 31, 2008, and are excluded from the preceding table. The total fair value of the unvested RSAs at grant date was $0.6 million. The aggregate intrinsic value of the unvested RSAs at December 31, 2008 was $0.2 million. During the three months ended December 31, 2008, zero shares vested related to the RSAs. The weighted average fair value at grant date of the unvested RSAs was $8.44 per share as of December 31, 2008. As of December 31, 2008, total unrecognized compensation costs related to unvested RSAs was $0.1 million which is expected to be recognized as expense over a weighted average period of approximately 0.1 year. The Company had no unvested restricted stock as of December 31, 2007.

RSU Activity
 
The following table summarizes RSU activity (in thousands, except per share data):

           
Outstanding
 
           
Shares
     
Weighted
Average
Remaining
Contractual
Life (Years)
   
Aggregate
Intrinsic
Value
Closing
Price at
12/31/2008
of $2.66
 
Balance at September 30, 2008
         
0
               
Restricted stock units granted during the quarter ended December 31, 2008
         
520
               
Restricted stock units granted during prior periods *
         
               
Balance at December 31, 2008
         
520
     
1.90
 
$
1,383
 
Vested and expected to vest at December 31, 2008
         
520
     
1.90
 
$
1,383
 
*  The number of RSUs granted is an estimate based upon management’s assessment of the likelihood of achieving the two year performance criteria.

In the quarter ended December 31, 2008, the Company granted 0.5 million RSUs with an average fair value of $2.32 per unit, equal to an equivalent number of shares of Common Stock, to executive officers and management team members. Vesting of the shares are time based with one third of the RSU’s vesting each year after the date of grant for a period of three years. In the event of certain changes in control of the Company, any unvested shares would automatically vest. The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of $2.66 as of December 31, 2008. As of December 31, 2008, total unrecognized compensation costs related to unvested RSUs was $1.2 million which is expected to be recognized as expense over a weighted average period of approximately 2.9 years.

In October 2007, the Company granted 0.2 million performance-based RSUs to selected executives of the Company pursuant to the 2005 Plan. Based upon management’s assessment of the likelihood of achieving the two year performance criteria, the Company has estimated that zero out of a maximum of 0.2 million of unvested RSUs with an average fair value of $13.31 per unit will be awarded at the end of the measurement period. During the three months ended December 31, 2008, zero stock compensation expense related to the performance-based RSUs has been recognized. For the quarter ended December 31, 2007, the total unrecognized compensation costs related to unvested RSUs was $1.9 million which was expected to be recognized as expense over a weighted average period of approximately 21 months. If the maximum target of RSUs outstanding were assumed to be earned, total unrecognized compensation costs would be approximately $2.5 million which would be expected to be recognized as expense over a weighted average period of approximately 9 months.

The Company settles stock option exercises, RSAs and RSUs 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, RSAs, RSUs and employee stock purchases related to the Employee Stock Purchase Plan based on estimated fair values. The following table summarizes stock-based compensation expense related to employee stock options, RSAs  and RSUs for the three months ended December 31, 2008 and 2007, respectively, which was allocated as follows (in thousands):


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

   
Three Months Ended December 31,
 
     
2008
     
2007
   
                   
 
Stock-based compensation expense:
               
 
Cost of revenues
$
134
   
$
153
   
 
Sales and marketing
 
256
     
241
   
 
Research and development
 
109
     
199
   
 
General and administrative
 
466
     
582
   
 
Total stock-based compensation expense
$
965
   
$
1,175
   

The weighted-average estimated fair value of stock options granted during the three months ended December 31, 2008 and 2007 was $1.18 and $4.43 per share, respectively, using the Black-Scholes model with the following weighted-average assumptions:

   
Three Months Ended December 31,
 
     
2008
     
2007
   
 
Expected lives in years
 
2.8
     
3.5
   
 
Risk free interest rates
 
1.6
%
   
3.4
%
 
 
Volatility
 
62
%
   
59
%
 
 
Dividend yield
 
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 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 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 rate is based on the historical volatility of our stock price.
 
As stock-based compensation expense recognized in the Condensed Consolidated Statement of Operations for the three months ended December 31, 2008 and 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. Our estimated forfeiture rate for the three months ended December 31, 2008 and 2007 was based on our historical forfeiture experience.

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.


CHORDIANT SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 13—SEGMENT INFORMATION
 
Our chief operating decision maker reviews financial information presented on a consolidated basis, accompanied by desegregated information about revenues by geographic regions 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 revenue by product emphasis (in thousands):
 
   
Three Months Ended December 31,
 
     
2008
     
2007
   
 
License revenue:
               
 
Enterprise solutions
$
1,544
   
$
6,214
   
 
Marketing solutions
 
2,381
     
714
   
 
Decision management solutions
 
4,016
     
1,879
   
 
Total
$
7,941
   
$
8,807
   

The following table summarizes service revenue consisting of consulting implementation and integration, consulting customization, training, PCS, and certain reimbursable out-of-pocket expenses by product emphasis (in thousands):

   
Three Months Ended December 31,
 
     
2008
     
2007
   
 
Service revenue:
               
 
Enterprise solutions
$
9,662
   
$
15,209
   
 
Marketing solutions
 
2,951
     
3,118
   
 
Decision management solutions
 
2,823
     
2,000
   
 
Total
$
15,436
   
$
20,327
   

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):

   
Three Months Ended December 31,
 
     
2008
     
2007
   
                   
 
North America
$
8,083
   
$
15,591
   
 
Europe
 
15,294
     
13,543
   
 
Total
$
23,377
   
$
29,134
   

Included in foreign revenue results for Europe are revenue from the United Kingdom of $6.1 million for both the three months ended December 31, 2008 and 2007.

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

     
December 31
2008
     
September 30,
2008
   
                   
 
North America
$
2,060
   
$
2,250
   
 
Europe
 
700
     
915
   
 
Total
$
2,760
   
$
3,165
   


 
This discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying Notes included in this report and the 2008 Audited Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2008 filed with the SEC. Operating results are not necessarily indicative of results that may occur in future periods.
 
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 under the subheading “Risk Factors” and those discussed elsewhere in this report, in our other SEC filings and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2008 Form 10-K. Chordiant undertakes no obligation to update any forward-looking statement to reflect events after the date of this report.
 
Overview
 
As an enterprise software vendor, we generate substantially all of our revenues from insurance, healthcare, telecommunications, financial services and retail markets. 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.

Our business has been adversely impacted by the recent worldwide credit market turmoil, the result of which is that customers are hesitant to make large commitments and some customers are merging.

Our operations and performance depend on our customers having adequate resources to purchase our products and services. The unprecedented turmoil in the credit markets and the global economic downturn generally will adversely impact our customers and potential customers. These economic conditions have continued to deteriorate despite government intervention globally, and may remain volatile and uncertain for the foreseeable future. Customers may alter their purchasing activities in response to a lack of credit, economic uncertainty and concern about the stability of markets in general, and these customers may reduce, delay or terminate purchases of our products and services or other sales activities that affect purchases of our products and services. If we are unable to adequately respond to changes in demand resulting from deteriorating economic conditions, our financial condition and operating results may be materially and adversely affected.

Several of our current and prior customers have recently merged with others, been forced to raise significant levels of new capital, or received funds and/or equity infusions from regulators or governmental entities. This list of companies is extensive and includes Wachovia Corporation, AIG, Halifax Bank of Scotland, Royal Bank of Scotland, Barclays, and Lloyds. The impact of these mergers and changes in ownership on Chordiant’s near term business is uncertain. Customers who have recently reorganized, merged or face new regulations may delay or terminate their software purchasing decisions, and as an acquired or merged entity may lose the ability to make such purchasing decisions, resulting in declines in our bookings, revenues and cash flows.

For the quarter ended December 31, 2008, we recorded revenue of $23.4 million, a decrease of $5.0 million or 18% from previous quarter. We incurred a net loss of $2.7 million and ended the quarter with over $53.8 million in cash, cash equivalents, and marketable securities as compared to $87.1 million for quarter ended December 31, 2007. We generated cash from operating activities of $2.6 million.

Total revenue for the three months ended December 31, 2008 decreased $5.7 million or 20% from the three months ended December 31, 2007. The decrease in license revenue was $0.9 million as we had smaller dollar license transactions. Service revenue decreased $4.8 million from the three months ended December 31, 2007. The decrease in service revenue was primarily composed of decreases of $2.4 million in consulting revenue, $0.2 million in training revenue, $1.9 million in support and maintenance revenue and $0.3 million in expense reimbursement revenue.




Software Industry Consolidation and Possible Increased Competition

The enterprise software industry continues to undergo consolidation in sectors of the software industry in which we operate. In 2007 and 2008 IBM acquired ILOG, Cognos, DataMirror and Watchfire Corporation; Oracle completed its acquisitions of Hyperion, Moniforce and BEA Systems; Sun Microsystems acquired MySQL and SAP acquired BusinessObjects, YASU Technologies and Pilot Software. While we do not believe that ILOG, Cognos, DataMirror, Watchfire Corporation, Hyperion, Moniforce, BEA Systems, MySQL, BusinessObjects, YASU Technologies, or Pilot Software have been significant competitors of Chordiant in the past, the acquisition of these companies by IBM, Oracle, Sun Microsystems and SAP may indicate that we may face increased competition from larger and more established entities in the future.

Financial Trends
 
Backlog. 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 December 31, 2008 and 2007, we had approximately $55.6 million and $96.0 million in backlog, respectively, which we define as contractual commitments by our customers through purchase orders or contracts. Backlog at December 31, 2008 includes approximately $9.3 million relating to a large telecommunications customer commitment. The decrease in backlog is partially reflected in the decrease of deferred revenue recorded on our Condensed Consolidated Balance Sheets. For the period ended December 31, 2007 to December 31, 2008 aggregate deferred revenue balances decreased $14.0 million due to decreases of $5.1 million in short-term deferred revenue and $8.9 million in long-term deferred revenue. If the levels of backlog continue to decline, revenues in future periods may be adversely affected, and our ability to forecast future revenues would be diminished. 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;

 
contractual commitments received from customers through purchase orders or contracts that have yet to be delivered;

 
deferred revenue from customer support contracts; and
 
 
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. Consulting service orders that have expired are excluded from backlog.

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.

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 (SOP 97-2).

Service Revenues. Service revenues as a percentage of total revenues were 66% and 70% for the three months ended December 31, 2008 and 2007, respectively. While the composition of revenue will continue to fluctuate on a quarterly basis, we expect that service revenues will represent between 55% and 70% of our total annual 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 three months ended December 31, 2008 and 2007, international revenues were $15.3 million and $13.5 million, or approximately 65% and 46%, respectively, of our total revenues. We believe international revenues will continue to represent a significant portion of our total revenues in future periods.
 



For the three months ended December 31, 2008 and 2007, North America revenues were $8.1 million and $15.6 million, or approximately 35% and 54%, respectively of our total revenues. We believe North America revenues will continue to represent 40% 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 99% and 96% for the three months ended December 31, 2008 and 2007, respectively. 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% and 58% for the three months ended December 31, 2008 and 2007, respectively. We expect that gross margins on service revenues to range between 50% and 60% in the foreseeable future.

Reductions in Workforce. In October 2008, we initiated a restructuring plan, the 2009 Restructuring, intended to align its resources and cost structure with expected future revenues. The 2009 Restructuring plan includes reductions in headcount and third party consultants across all functional areas in both North America and Europe. The 2009 Restructuring plan includes a reduction of approximately 13% of our permanent workforce. A significant portion of the positions eliminated were in North America.

As a result of the cost-cutting measures, we recorded a pre-tax cash restructuring charge in the first quarter of fiscal year 2009, of approximately $0.9 million, including $ 0.8 million for severance costs and $0.1 million for other contract termination costs. As of December 31, 2008, all payments have been made.

On May 1, 2008, we implemented a reduction of approximately 10% of its workforce. We reduced our headcount across all functions of the organization. We reallocated resources in support of growth opportunities in emerging markets as well as adding headcount in revenue generating areas such as sales and alliances. We incurred approximately $0.5 million in expenses in the third quarter of fiscal year 2008 in connection with this reduction of force. As these costs did not meet the criteria of SFAS 146 to qualify as restructuring expenses, the expenses were charged as operating expenses to the respective functional areas.

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 $1.1 million in the fourth quarter ended September 30, 2005 for severance benefits. During the quarter ended March 31, 2007, we incurred an additional charge of less than $0.1 million for additional severance expense for an employee located in France. During the quarter ended December 31, 2008, we reversed the charge as we were not required to pay the severance expense to the employee.

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 fiscal year ended September 30, 2007. If the sub-lessee of the facility were to default on their payments to the Company, further adjustments to restructuring expense might be required.

Income Taxes. During the quarter ending December 31, 2008, we recognized $1.3 million of non-cash deferred tax expense related to taxable income in the United Kingdom. It is expected that we will recognize a total of approximately $3.0 million of non-cash deferred tax expense during fiscal year 2009. We expect the deferred tax expense to be reduced in future years.

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 early stages of development, particularly 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 Condensed Consolidated Financial Statements, which have been prepared in accordance with Generally Accepted Accounting Principles 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 and the recognition of revenue and expenses 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 Condensed 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;

 
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 AICPA’s 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.

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.

For transactions involving extended payment terms, we deem these fees not to be fixed or determinable for revenue recognition purposes and revenue is deferred until the fees become payable and due.

For arrangements with multiple elements accounted for under SOP 97-2 where we determine we can account for the elements separately and the fees are not fixed or determinable due to extended payment terms, revenue is recognized in the following manner. If the undelivered element is PCS, or other services, an amount equal to the estimated value of the services to be rendered prior to the next payment becoming due is allocated to the undelivered services. The residual of the payment is allocated to the delivered elements of the arrangement.

For arrangements with multiple elements accounted for under SOP 81-1 where we determine we can account for the elements separately and the fees are not fixed or determinable due to extended payment terms, revenue is recognized in the following manner. Amounts are first allocated to the undelivered elements included in the arrangement, as payments become due or are received, the residual is allocated to the delivered elements.

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.



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 $21.1 million with an allowance for doubtful accounts of $0.8 million as of December 31, 2008. Our gross accounts receivable balance was $25.5 million with an allowance for doubtful accounts of $0.6 million as of September 30, 2008. If the financial condition of our customers were to deteriorate further, resulting in an impairment of their ability to make payments, additional allowances may be required. Based upon current economic conditions, the Company has reviewed accounts receivable and has recorded allowances as deemed necessary.

Stock-based Compensation Expense. Upon adoption of SFAS 123(R) on October 1, 2005, we began estimating the value of employee stock awards on the date of grant using the Black-Scholes model. Prior to the adoption of SFAS 123(R), the value of each employee stock award 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 Condensed Consolidated Statement of Operations 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 December 31, 2008 variables, it is estimated that a change of 10% in either the volatility, expected life or interest rate assumption would result in a corresponding 9%, 5% or 1% change, respectively, 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 Condensed 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 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 Condensed Consolidated Balance Sheets. 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.

At December 31, 2008, we have $72.5 million in gross deferred tax assets (DTAs) attributable principally to our net operating losses (NOLs) and to a lesser extent temporary differences relating to deferred revenue. Historically, we maintained a 100% valuation allowance on our DTAs because we have previously been unable to conclude that it is more-likely-than-not that we will realize the tax benefits of these DTAs.  Based on recent operating results and the reorganization of our intellectual property into the U.S., our current projections of disaggregated future taxable income have enabled us to conclude that it is more-likely-than-not that we will have future taxable income sufficient to realize $6.7 million of tax benefits from our deferred tax assets, which consist of that portion of our net deferred tax assets attributable to our net operating losses (NOLs) residing in the United Kingdom. Accordingly, during our fiscal year ended September 30, 2008, we released (eliminated) the valuation allowance on our DTAs relating to the United Kingdom, of which $9.5 million was recognized as an offsetting reduction to goodwill (representing pre-acquisition NOLs). Beginning on October 1, 2008 through future periods, we expect to incur tax expense related to the United Kingdom which will result in an increase in overall expense; however, to the extent that such tax expense is offset by the utilization of NOLs, the recognition of this additional tax expense will be a non-cash item.

The remaining balance of gross deferred tax assets was generated in the U.S. With respect to our U.S. generated deferred tax assets, we have recorded a full valuation allowance as the future realization of the tax benefit is not considered by management to be more likely than not. Our estimate of future taxable income considers available positive and negative evidence regarding our current


and future operations, including projections of income in various states and foreign jurisdictions. We believe our estimate of future taxable income is reasonable; however, it is inherently uncertain, and if our future operations generate taxable income greater than projected, further adjustments to reduce the valuation allowance are possible. Conversely, if we realize unforeseen material losses in the future, or our ability to generate future taxable income necessary to realize a portion of the net deferred tax asset is materially reduced, additions to the valuation allowance could be recorded. At December 31 and September 30, 2008, the balance of the deferred tax valuation allowance was approximately $65.9 million. 
 
Effective October 1, 2007, the Company adopted Financial Accounting Standards Interpretation, No. 48 “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” or FIN 48. FIN 48 prescribes a recognition threshold and measurement guidance for the financial statement reporting of uncertain tax positions taken or expected to be taken in a company’s income tax return. The application of FIN 48 is explained in Note 11 to the Condensed Consolidated Financial Statements.

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 ended September 30, 2008 and performed Step 1 of the goodwill impairment analysis required by SFAS 142, “Goodwill and Other Intangible Assets,” and concluded that goodwill was not impaired as of September 30, 2008 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. At December 31, 2008, the market capitalization of the Company exceeded the book value of the Company. In the event that the market capitalization of the Company declines further, goodwill impairment charges might be necessary in future periods.



Restructuring Expenses. In the past several 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. Cost to terminate contracts represents contract termination costs related to the restructuring plan. 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, potential defaults on existing subleases, or changes in the market, the ultimate restructuring expenses for these abandoned facilities could vary by material amounts. See Note 5 to the Consolidated Financial Statement for detailed information regarding restructuring expense.

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 Condensed 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 Condensed Consolidated Statement of Operations or as a separate part of our net equity under the caption “Accumulated Other Comprehensive Income.” Under the relevant accounting guidance, the treatment of these translation gains or losses is dependent upon our 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 Condensed Consolidated Statement of Operations. If we dispose of any of our subsidiaries, any cumulative translation gains or losses would be recognized in our Condensed 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 Condensed 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 losses are included as part of Accumulated Other Comprehensive Income within our Condensed Consolidated Balance Sheets for all periods presented.

The magnitude of these gains or losses is 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 higher than those reported in previous periods. At December 31, 2008, approximately $36.6 million of our cash and cash equivalents were held by our subsidiaries outside of the United States.

Recent Accounting Pronouncements

See Note 2 to the Condensed Consolidated Financial Statements under section “Recent Accounting Pronouncements” for detailed information regarding status of new accounting standards that are not yet effective for us.



Results of Operations

The following table sets forth, in dollars (in thousands) and as a percentage of total revenues, unaudited Condensed Consolidated Statements of Operations data for the periods indicated. This information has been derived from the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
 
   
Three Months Ended December 31,
   
   
2008
   
2007
   
Statements of Operations Data:
                       
Revenues:
                                 
License
 
$
7,941
     
34
%
 
$
8,807
     
30
%
 
Service
   
15,436
     
66
     
20,327
     
70
   
Total revenue
   
23,377
     
100
     
29,134
     
100
   
Cost of revenue:
                                 
License
   
98
     
     
334
     
1
   
Service
   
6,686
     
29
     
8,478
     
29
   
Amortization of intangible assets
   
303
     
1
     
303
     
1
   
Total cost of revenue
   
7,087
     
30
     
9,115
     
31
   
Gross profit
   
16,290
     
70
     
20,019
     
69
   
Operating expenses:
                                 
Sales and marketing
   
7,780
     
33
     
8,903
     
31
   
Research and development
   
5,259
     
23
     
6,725
     
23
   
General and administrative
   
4,402
     
19
     
5,003
     
17
   
Restructuring expense
   
784
     
3
     
     
   
Total operating expense
   
18,225
     
78
     
20,631
     
71
   
Loss from operations
   
(1,935
)
   
(8
)
   
(612
)
   
(2
)
 
Interest income, net
   
292
     
1
     
835
     
3
   
Other income , net
   
685
     
3
     
134
     
   
Income (loss) before income taxes
   
(958
)
   
(4
)
   
357
     
1
   
Provision for income taxes
   
1,711
     
7
     
152
     
   
Net income (loss)
 
$
(2,669
)
   
(11
)%
 
$
205
     
1
%
 

Comparison of the Three Months Ended December 31, 2008 and 2007 (Unaudited)

Revenues

Total revenues decreased $5.7 million, or 20%, to $23.4 million for the three months ended December 31, 2008 as compared to the same period of the prior year. This decrease was primarily due to decreases of 10% in license revenue and 24% in service revenue.

The following summarizes the components of our total 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 method 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 three months ended December 31, 2008 and 2007 (in thousands, except percentages):



     
Three Months Ended December 31,
   
 
License Revenue:
 
2008
 
2007
 
Change
 
%
 
 
Enterprise solutions
 
$
1,544
 
$
6,214
 
$
(4,670
)
 
(75
)%
 
 
Marketing solutions
   
2,381
   
714
   
1,667
   
234
   
 
Decision management solutions
   
4,016
   
1,879
   
2,137
   
114
   
 
Total license revenue
 
$
7,941
 
$
8,807
 
$
(866
)
 
(10
)%
 

Total license revenue decreased by $0.9 million or 10% for the three months ended December 31, 2008 as compared to the same period of the prior year. The decrease is primarily due to less percentage-of-completion revenue and smaller average dollar license transactions.

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 three months ended December 31, 2008 and 2007 (in thousands, except percentages):

     
Three Months Ended December 31,
   
 
Service Revenue:
 
2008
 
2007
 
Change
 
%
 
 
Enterprise solutions
 
$
9,662
 
$
15,209
 
$
(5,547
)
 
37
%
 
 
Marketing solutions
   
2,951
   
3,118
   
(167
 
(5
 
 
Decision management solutions
   
2,823
   
2,000
   
823
   
41
   
 
Total service revenue
 
$
15,436
 
$
20,327
 
$
(4,891
 
(24
)%
 

Total service revenue decreased $4.8 million or 24% for the three months ended December 31, 2008, as compared to the same period of the prior year. The decrease in service revenue was primarily composed of decreases of $2.4 million in consulting revenue, $0.2 million in training revenue, $1.9 million in support and maintenance revenue and $0.3 million in expense reimbursement revenue. In addition, the decrease was affected by the changes in foreign exchange rates.
 
Cost of Revenue
 
License
 
Cost of license revenue 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. In addition, not all license products have associated royalty expense. Capitalized software development costs pertain to a banking product that was completed and available for general release in August 2005 and third party costs associated with the porting of existing products to new platforms. The following table sets forth our cost of license revenues for the three months ended December 31, 2008 and 2007 (in thousands, except percentages):

     
Three Months Ended December 31,
 
     
2008
 
2007
 
Change
 
%
 
 
Cost of license revenue
 
$
98
   
$
334
   
$
(236
)
(71
)%
 
 
Percentage of total revenue
   
%
   
2
%
             

Cost of license revenue decreased by $0.2 million or 71% for the three months ended December 31, 2008 as compared to the same period of the prior year. The decrease is primary from amortization of third party technology which became fully amortized in fiscal year 2008. In addition, we reduced our royalty expense associated with third party technology included in our products.



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, and PCS. The following table sets forth our cost of service revenues for the three months ended December 31, 2008 and 2007 (in thousands, except percentages):

     
Three Months Ended December 31,
 
     
2008
 
2007
 
Change
 
%
 
 
Cost of  service revenue
 
$
6,686
   
$
8,478
   
$
(1,792
(21
)%
 
 
Percentage of total revenue
   
29
%
   
29
%
             

Cost of service revenue decreased $1.8 million or 21% for the three months ended December 31, 2008, as compared to the same period of the prior year. The decrease is due to decreases of $0.5 million in employee costs, $0.7 million in consulting, $0.1 million in facility costs, and $0.5 million in travel expense. The decrease in service cost is consistent with the decrease in service revenue.
 
Amortization of Intangible Assets
 
Amortization of intangible assets cost consists 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 three months ended December 31, 2008 and 2007 (in thousands, except percentages):

     
Three Months Ended December 31,
 
     
2008
 
2007
 
Change
 
%
 
 
Amortization of intangible assets
 
$
303
   
$
303
   
$
 
%
 
 
Percentage of total revenues
   
1
%
   
1
%
             

We expect amortization expense for intangible assets to be $0.3 million for each of the three remaining quarters in fiscal year 2009 and $0.3 million in fiscal year 2010.

Operating Expenses

Sales and Marketing

Sales and marketing expense is attributed to activities associated with selling, promoting and advertising our products, product demonstrations and customer sales calls. These costs consist primarily of employee compensation and benefits, commissions and bonuses, facilities, travel expenses and promotional and advertising expenses. The following table sets forth our sales and marketing expenses for the three months ended December 31, 2008 and 2007 (in thousands, except percentages):

     
Three Months Ended December 31,
 
     
2008
 
2007
 
Change
 
%
 
 
Sales and marketing expense
 
$
7,780
   
$
8,903
   
$
(1,123
(13
)%
 
 
Percentage of total revenues
   
33
%
   
31
%
             

Sales and marketing expense decreased by $1.1 million or 13% for the three months ended December 31, 2008 as compared to the same period of the prior year. The decrease is primarily due to decreases of $0.6 million in employee costs, $0.2 million in recruiting costs, $0.6 million in sales and marketing program costs, and $0.1 million in facility costs offset by a $0.4 million increase in consulting costs. The decrease in employee costs is primarily from the reduction in headcount that occurred in the quarter.

Research and Development
 
Research and development expense results from the activities associated with the development of new products, enhancements of existing products and quality assurance activities. These costs consist primarily of employee compensation and benefits, facilities, the cost of software and development tools, equipment and consulting costs, including costs for offshore consultants. The following table sets forth our research and development expenses for the three months ended December 31, 2008 and 2007 (in thousands, except percentages):



     
Three Months Ended December 31,
 
     
2008
 
2007
 
Change
 
%
 
 
Research and development expense
 
$
5,259
   
$
6,725
   
$
(1,466
(22
)%
 
 
Percentage of total revenues
   
23
%
   
23
%
             

Research and development expense decreased by $1.4 million or 22% for the three months ended December 31, 2008 as compared to the same period of the prior year. The decrease is primarily related to decrease of $0.9 million in employee costs, $0.3 million in consulting, $0.1 million in facility costs, and $0.1 million in travel costs. The decrease in employee costs is primarily from the reduction in headcount that occurred in the quarter.

General and Administrative

General and administrative expense results from activities managed by our executive and administrative personnel (e.g. the office of the CEO, legal, human resources and finance personnel). These costs consist primarily of employee compensation and benefits, bonuses, stock-based compensation expense, facilities, consulting, legal and audit costs, including costs for Sarbanes-Oxley Act of 2002 (SOX) compliance. The following table sets forth our general and administrative expenses for the three months ended December 31, 2008 and 2007 (in thousands, except percentages):

     
Three Months Ended December 31,
 
     
2008
 
2007
 
Change
 
%
 
 
General and administrative expense
 
$
4,402
   
$
5,003
   
$
(601
(12
)%
 
 
Percentage of total revenues
   
19
%
   
17
%
             

General and administrative expense decreased by $0.6 million or 12% for the three months ended December 31, 2008, as compared to the same period of the prior year. The decrease is primarily due to decreases of $0.6 million in employee costs, $0.2 million in recruiting expenses, $0.1 million in consulting, and $0.1 million in travel expenses offset by increases of $0.2 million in facilities costs and $0.2 million in bad debt expense. The decrease in employee costs is primarily from the reduction in headcount that occurred in the quarter.

Restructuring Expense

In October 2008, the Company initiated a restructuring plan, the 2009 Restructuring, intended to align its resources and cost structure with expected future revenues. The 2009 Restructuring plan includes reductions in headcount and third party consultants across all functional areas in both North America and Europe. The 2009 Restructuring plan includes a reduction of approximately 13% of the Company’s permanent workforce. A significant portion of the positions eliminated were in North America.

As a result of the cost-cutting measures, the Company recorded a pre-tax cash restructuring charge in the first quarter of fiscal year 2009, of approximately $0.9 million, including $ 0.8 million for severance costs and $0.1 million for other contract termination costs. As of December 31, 2008, all payments have been made.

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, or 2005 Restructuring, and in July 2005 affected employees were notified. As part of the 2005 Restructuring, the Company incurred a one-time restructuring charge of $1.1 million in the fourth quarter ended September 30, 2005 for severance and termination benefits.

During the quarter ended March 31, 2007, the Company incurred an additional charge of less than $0.1 million for additional severance expense for an employee located in France. During the quarter ended December 31, 2008, the Company reversed the charge as the Company was not required to pay the severance expense to the employee.



Stock-based Compensation (included in Individual Operating Expense and Cost of Revenue categories)

The following table sets forth our stock-based compensation expense and functional breakdown for the three months ended December 31, 2008 and 2007 (in thousands):

   
Three Months Ended December 31,
 
     
2008
     
2007
   
 
Cost of revenues - service
$
134
   
$
153
   
 
Operating expenses:
               
 
Sales and marketing
 
256
     
241
   
 
Research and development
 
109
     
199
   
 
General and administrative
 
466
     
582
   
 
Total operating expenses
 
831
     
1,022
   
 
Total stock-based compensation expense
$
965
   
$
1,175
   

For the three months ended December 31, 2008, the aggregate stock-based compensation cost included in cost of revenues and in operating expenses was $1.0 million and primarily related to $0.8 million associated with employee stock options, $0.2 million associated with restricted stock awards, and less than $0.1 million associated with restricted stock units. For the three months ended December 31, 2007, the aggregate stock-based compensation cost included in cost of revenues and in operating expenses was $1.2 million and primarily related to $0.9 million associated with employee stock options and $0.3 million associated with restricted stock units.

Interest Income, Net
 
Interest income, net, consists primarily of interest income generated from our cash, cash equivalents, restricted cash and marketable securities, offset by interest expense incurred in connection letters of credit and imputed under SFAS 146 restructuring accruals. The following table sets forth our interest income, net for the three months ended December 31, 2008 and 2007 (in thousands, except percentages):

     
Three Months Ended December 31,
 
     
2008
 
2007
 
Change
 
%
 
 
Interest income, net
 
$
292
   
$
835
   
$
(543
(65
)%
 
 
Percentage of total revenues
   
1
%
   
3
%
             

Interest income, net decreased by $0.5 million or 65% for the three months ended December 31, 2008, as compared to the same period of the prior year. The decrease is primarily due to lower average cash and cash equivalents and lower interest rates compared to the same period of the prior year.

Other Income, Net

Other income, net is primarily attributed to foreign currency transaction gains or losses and 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, net for the three months ended December 31, 2008 and 2007 (in thousands, except percentages):

     
Three Months Ended December 31,
 
     
2008
 
2007
 
Change
 
%
 
 
Other income, net
 
$
685
   
$
134
   
$
551
 
411
%
 
 
Percentage of total revenues
   
3
%
   
%
             

Other income increased by $0.5 million or 441% for the three months ended December 31, 2008, as compared to the same period of the prior year. This increase was primarily related to exchange rate gains associated with the Pound Sterling and the Euro.



Provision for Income Taxes

Our provision for income taxes was $1.7 million and $0.2 million for the three months ended December 31, 2008 and 2007, respectively. The $1.5 million increase in income taxes is primarily due to an increase in taxable income of our UK entities which led to a non-cash tax expense of approximately $1.3 million and an increase of $0.2 million in unrecoverable withholding tax payments related to sales transactions that occurred in Turkey, Poland and India compared to three months ended December 31 2007. The remainder of our provision is primarily attributable to taxes on earnings from our foreign subsidiaries.

At December 31, 2008, we have $72.5 million in gross deferred tax assets (DTAs) attributable principally to our net operating losses (NOLs) and to a lesser extent temporary differences relating to deferred revenue. Historically, we maintained a 100% valuation allowance on our DTAs because we have previously been unable to conclude that it is more-likely-than-not that we will realize the tax benefits of these DTAs.  Based on recent operating results and the reorganization of our intellectual property into the U.S., our current projections of disaggregated future taxable income have enabled us to conclude that it is more-likely-than-not that we will have future taxable income sufficient to realize $6.7 million of tax benefits from our deferred tax assets, which consist of that portion of our net deferred tax assets attributable to our net operating losses (NOLs) residing in the United Kingdom. Accordingly, during the fiscal year ended September 31, 2008, we released (eliminated) the valuation allowance on our DTAs relating to the United Kingdom, of which $9.5 million was recognized as an offsetting reduction to goodwill (representing pre-acquisition NOLs). Beginning on October 1, 2008 through future periods, we expect to incur tax expense related to the United Kingdom which will result in an increase in overall expense; however, to the extent that such tax expense is offset by the utilization of NOLs, the recognition of this additional tax expense will be a non-cash item.

The remaining balance of gross deferred tax assets was generated in the U.S. With respect to our U.S. generated deferred tax assets, we have recorded a full valuation allowance as the future realization of the tax benefit is not considered by management to be more likely than not. Our estimate of future taxable income considers available positive and negative evidence regarding our current and future operations, including projections of income in various states and foreign jurisdictions. We believe our estimate of future taxable income is reasonable; however, it is inherently uncertain, and if our future operations generate taxable income greater than projected, further adjustments to reduce the valuation allowance are possible. Conversely, if we realize unforeseen material losses in the future, or our ability to generate future taxable income necessary to realize a portion of the net deferred tax asset is materially reduced, additions to the valuation allowance could be recorded. At December 31 and September 30, 2008, the balance of the deferred tax valuation allowance was approximately $65.9 million. 

Liquidity and Capital Resources

Prior to fiscal 2007, we had not been profitable and we financed any shortfall from our operating activities through the issuance of our common stock. For the three months ended December 31, 2008, we generated cash from operations and financing, but used cash for investing activities. It is anticipated that our current cash balances are adequate to fund operations for the next twelve months.

Operating Activities

Cash provided by operating activities was $2.6 million during the three months ended December 31, 2008, which consisted primarily of our net loss of $2.7 million adjusted for non-cash items (primarily depreciation and amortization, non-cash stock-based compensation expense, non-cash provision for income taxes , and the provision for doubtful accounts) aggregating approximately $3.2 million and the net cash inflow effect from changes in assets and liabilities of approximately $2.1 million. This net cash inflow was primarily due to the changes in account balances in deferred revenue of $0.9 million, accounts receivable of $2.7 million, and prepaid expenses and other current assets of $1.2 million, offset by cash outflows from the change in account balances in other assets of $0.1 million, accounts payable of $2.4 million, and $0.2 million in accrued expenses, other liabilities—non-current and restructuring.

Cash used by operating activities was $2.7 million during the three months ended December 31, 2007, which consisted primarily of our net income of $0.2 million adjusted for non-cash items (primarily depreciation and amortization, non-cash stock-based compensation expense, and the provision for doubtful accounts) aggregating approximately $2.1 million and the net cash outflow effect from changes in assets and liabilities of approximately $5.0 million. This net cash outflow was primarily due to the change in account balances in deferred revenue of $10.7 million, in prepaid expenses and other current assets of $2.0 million, offset by cash inflows from the change in account balances in accounts receivable of $6.3 million, in other assets of $1.0 million and in accrued expenses, other liabilities—non-current and restructuring and accounts payable of $0.4 million.

Investing Activities
 
    Cash used for investing activities was $0.2 million during the three months ended December 31, 2008. The cash used was primarily from the purchase of $0.2 million of property and equipment and the capitalization of less than $0.1 million of software


development costs associated with the porting of an existing product to a new platform. The property and equipment purchases were primarily computer equipment and software used in day-to-day operations.

Cash provided by investing activities was $0.5 million during the three months ended December 31, 2007. The cash provided was primarily from $1.3 million of net proceeds from marketable securities offset by the use of cash for the purchase of $0.7 million of property and equipment, and the capitalization of less than $0.1 million of software development costs associated with the porting of an existing product to a new platform. The property and equipment purchases were primarily computer equipment and software used in day-to-day operations.

Financing Activities

Cash provided by financing activities was less than $0.1 million during the three months ended December 31, 2008. The cash provided was primarily related to proceeds from stock option exercises. As long as the market value of the Company’s common stock remains below the exercise price for the majority of the outstanding exercise price for the majority of outstanding stock options, significant proceeds from stock option exercised are not expected.

Cash provided by financing activities was $0.6 million during the three months ended December 31, 2007. The cash provided was primarily related to proceeds from stock option exercises of $0.6 million and less than $0.1 million from excess tax benefits from stock-based compensation.

Revolving Line of Credit
 

 
See Note 8 to the Condensed Consolidated Financial Statements for detailed information regarding our revolving line of credit.

Contractual Obligations

Ness

We 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 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 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 one 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 us, subject to the payment of a termination fee. From 2004 to 2008, we further expanded the agreement with Ness whereby Ness is providing certain additional technical and consulting services. In January 2009, we extended our agreement with Ness to provide technical and consulting services, however if we terminate the agreement prior to December 31, 2009, we may be required to pay a termination fee no greater than $0.5 million. In addition to service agreements, we 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 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 $0.2 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.

Leases

Operating lease obligations in the table below include approximately $1.4 million for our Boston, Massachusetts facility operating lease commitment that is included in Restructuring Expense. As of September 30, 2008, the Company had $0.6 million in sublease income contractually committed for future periods relating to this facility. See Notes 5 and 9 to the Consolidated Financial Statements for further discussion.

The office lease for our Cupertino headquarters was scheduled to expire on December 31, 2008. In July 2008, the Company renewed the lease for a five year period with an option to renew for an additional five years. The table below includes this lease commitment.

We have asset retirement obligations, associated with commitments to return property subject to operating leases to original condition upon lease termination. As of December 31, 2008, we estimate that 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 December 31, 2008 based on fiscal years (in thousands):

     
Payments Due By Period
 
     
Total
     
Due in
2009
     
Due in
2010-2011
     
Due in
2012-2013
     
Thereafter
 
 
Operating lease obligations
$
11,703
   
$
2,306
   
$
5,658
   
$
3,478
   
$
261
 
 
Asset retirement obligations
 
304
     
     
142
     
162
     
 
 
Total
$
12,007
   
$
2,306
   
$
5,800
   
$
3,640
   
$
261
 

Effective October 1, 2007, the Company adopted FIN No. 48 and reclassified $0.2 million of gross unrecognized tax benefits to Other liabilities—non-current in our Consolidated Balance Sheets. As of December 31, 2008, the Company had $1.2 million of gross unrecognized tax benefits related to long term FIN 48 liabilities. As of December 31, 2008, the Company cannot make a reasonably reliable estimate of the period in which these liabilities may be settled with the respective tax authorities. See Note 11 to the Consolidated Financial Statements for additional information.

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 further, additional declines in cash balances 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.

Indemnification

See Note 9 to the Condensed Consolidated Financial Statements for detailed information regarding our indemnifications.

Off Balance Sheet Arrangements

None.


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

Interest Rate Risk. Our exposure to market rate risk for changes in interest rates relates primarily to money market accounts, and short-term certificates of deposit. We currently invest our excess cash in money market accounts and certificates-of-deposit with maturities of less than three months. 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. As of December 31, 2008, the Company held no fixed rate securities.

To provide a meaningful assessment of the interest rate risk associated with the Company’s total restricted cash of less than $0.1million as of September 30, 2008, we 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, 2008 and an average interest rate of 2%, a decrease in 100 basis points would decrease the fair value of restricted cash by less than $0.1 million. At December 31, 2008, the Company did not hold any investments that the Company deemed to have a material interest rate risk.

Foreign Currency Risk. International revenues accounted for approximately 65% of total revenues for three months ended December 31, 2008. International revenues accounted for approximately 48% of total revenues for the year ended September 30, 2008. The Company’s international operations 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 Condensed Consolidated 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. We do not hedge our exposure to foreign currency fluctuations. We performed a sensitivity analysis as of December 31, 2008 to determine the hypothetical impact of a decrease in average foreign exchange rates of 10% against the US dollar. A 10% decrease would decrease revenue by $1.0 million and increase loss from operations of $0.3 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 three months ended December 31, 2008 and for the fiscal year ended September 30, 2008, we recorded net foreign currency transaction gains (losses) of $0.7 million and ($0.3) million, respectively.

Item 4. Controls and Procedures.
 
Under the supervision and with the participation of our management, including the President and Chief Executive Officer and the Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act of 1934, as amended,  Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II - OTHER INFORMATION
 

See Note 10 to the Condensed Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for a description of our legal proceedings.

Item 1A.

The Company has marked with an asterisk  (*) those risk factors that reflect substantive changes from the risk factors included in the Company’s Form 10-K filed  with the Securities and Exchange Commission for the fiscal year ended September 30, 2008.

*Recent worldwide market turmoil may adversely affect our customers which directly impacts our business and results of operations.

The Company’s operations and performance depend on our customers having adequate resources to purchase our products and services. The unprecedented turmoil in the global markets and the global economic downturn generally continues to adversely impact our customers and potential customers. These market and economic conditions have continued to deteriorate despite government intervention globally, and may remain volatile and uncertain for the foreseeable future. Customers have altered and may continue to alter their purchasing and payment activities in response to deterioration in their businesses, lack of credit, economic uncertainty and concern about the stability of markets in general, and these customers may reduce, delay or terminate purchases of, and payment for, our products and services. Recently, a number of our current and prospective customers have merged with others, been forced to raise significant amounts of capital, or received loans or equity investments from the government, which actions may result in less demand for our products and services. If we are unable to adequately respond to changes in demand resulting from deteriorating market and economic conditions, our financial condition and operating results may be materially and adversely affected.

*In periods of worsening economic conditions, our exposure to credit risk and payment delinquencies on our accounts receivable significantly increases.

A substantial majority of our outstanding accounts receivables are not covered by collateral. In addition, our standard terms and conditions permit payment within a specified number of days following the receipt of our product. While we have procedures to monitor and limit exposure to credit risk on our receivables, there can be no assurance such procedures will effectively limit our credit risk and avoid losses. As economic conditions deteriorate, certain of our customers have faced and may face liquidity concerns and have delayed and may delay or may be unable to satisfy their payment obligations, which would have a material adverse effect on our financial condition and operating results.

Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.

Our cash and cash equivalents are highly liquid investments with original maturities of three months or less at the time of purchase. We maintain the cash and cash equivalents with reputable major financial institutions. Deposits with these banks exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits or similar limits in foreign jurisdictions. While we monitor daily the cash balances in the operating accounts and adjust the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit fails or is subject to other adverse conditions in the financial or credit markets. To date we have experienced no loss or lack of access to our invested cash or cash equivalents; however, we can provide no assurance that access to our invested cash and cash equivalents will not be impacted by adverse conditions in the financial and credit markets.

*To date, our sales have been concentrated in the insurance, healthcare, telecommunications and financial services markets, and if we are unable to continue sales in these markets or successfully penetrate new markets, our revenues may decline.

Sales of our products and services in several large markets—insurance, healthcare, telecommunications and financial services, accounted for approximately 82% and 93% of our total revenues for the quarters ended December 31, 2008 and 2007, respectively. We expect that revenues from these markets will continue to account for a substantial portion of our total revenues for the foreseeable future. However, we are seeking to expand in other markets. If we are unable to successfully increase penetration of our existing markets or achieve sales in additional markets, or if the overall economic conditions in our target markets further deteriorates, our revenues may decline. Some of our current and prospective customers, especially those in the financial services and insurance industries, have faced and may continue to face severe financial difficulties given their exposure to deteriorating financial and credit


markets, as well as the mortgage and homebuilder sectors of the economy. This may cause our current and prospective customers to reduce, delay or terminate their spending on technology, which in turn would have an adverse impact on our sales and revenues.

*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 revenue from a limited number of customers. The loss of a major customer could cause a decrease in revenues and net income. For the quarter ended December 31, 2008, Citicorp Credit Services, Inc. and Vodafone Group Services Limited accounted for 13% and 25% of our total revenue. For the quarter ended December 31, 2007, Citicorp Credit Services, Inc. IBM, and Wellpoint Inc. accounted for 22%, 11% and 11% of our total revenue.  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, which may materially affect our operating results. The deteriorating economic environment has resulted in failures of financial institutions and significant consolidation within the financial services industry from which we derive a significant portion of our customers and revenues. Accordingly, the risk that we could lose a significant customer is exacerbated in the current economic environment.

Historically, some of our products and services have assisted companies in attracting and retaining customers.  To the extent financial institutions and other large companies shrink the size of their customer base, the demand for these products may be reduced.

Some of our customers have used our products to aggressively expand the size of their customer base. Our marketing, decisioning and enterprise solutions have been used to varying degrees on projects intended to manage leads, personalize marketing campaigns and deliver highly effective sales messages. Due to the current economic climate, many large financial institutions have been forced to deleverage, sell parts of their businesses, or otherwise reduce the size of their organizations. In these situations it is possible that the demand for our products has been, and may continue to be, reduced, resulting in lower revenues in the future.

Over the near term we plan to increase the focus of our sales staff towards Decisioning Management products and reduce the focus on Enterprise Foundation products to reflect market conditions. There can be no assurance that this change in focus will be successful.

Sales of Enterprise Foundation solutions generally have a much higher cost to a customer than Decisioning Management solutions. The magnitude of the professional services required to implement Foundation projects is also much higher and often can take long periods of time to complete. Decisioning products are generally faster to implement and can produce a positive return on investment in a shorter period of time. Due to the current economic climate, our customers may focus on those projects that are smaller and faster to complete. Accordingly, our sales force plans to increase their focus on selling these types of solutions. This change in focus may not be successful and, as a result, revenues may not meet our expectations.

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

A significant portion of our sales and operating expenses result from transactions outside of the U.S., often denominated in foreign currencies. These currencies include the United Kingdom Pound Sterling, the Euro and the Canadian Dollar. Our international sales comprised 65% of our total sales for the quarter year ended December 31, 2008. Our international sales comprised 46% of our total sales for the quarter ended December 31, 2007. Our future operating results, as well as our cash and deferred revenue balances, will continue to be subject to fluctuations in foreign currency rates, especially if international sales increase as a percentage of our total sales, and we may be negatively impacted by fluctuations in foreign currency rates in the future. For the quarter ended December 31, 2008, we had a foreign currency transaction gain of $0.7 million. See Item 3, Quantitative and Qualitative Disclosures about Market Risk, for further discussions.

*Given that our stock price is near its historical low, we may be subject to takeover overtures that will divert the attention of our management and Board, and require us to incur expenses for outside advisors.

Given that our stock price is near its historical low, we may be subject to takeover overtures.  Evaluating and addressing these overtures would require the time and attention of our management and Board, divert them from their focus on our business, and require us to incur additional expenses on outside legal, financial and other advisors, all of which could materially and adversely affect our business, financial condition and results of operations.



*If current economic and market conditions worsen, we may be forced to make additional reductions to our workforce.

In July 2005, October 2006, May 2008 and October 2008, we reduced our workforce by approximately 10% - 15% in each instance.  If current economic and market conditions worsen, we may be forced to further reduce our workforce, which could materially and adversely affect our business, financial condition and results of operations.

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 may include:

 
Additional deterioration and changes in domestic and foreign markets and economies, including those impacted by the turmoil in the financial services, mortgage and credit markets;

 
Size and timing of individual license transactions;
 
 
Delay, deferral or termination of customer implementations of our products;
 
 
Lengthening of our sales cycle;
 
 
Efficiently utilizing 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;
 
 
Our ability to develop and market new products; and

 
Our ability to control our 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.

*Low gross margin in services revenues could adversely impact our overall gross margin and income.

Our services revenues have had lower gross margins than our license revenues. Service revenue comprised 66% and 70% of our total revenues for the quarters ended December 31, 2008 and 2007, respectively. Gross margin on service revenue was 57% and 58% for the three months ended December 31, 2008 and 2007, respectively. License revenues comprised 34% and 30% of our total revenues for the quarters ended December 31, 2008 and 2007, respectively. Gross margins on license revenues were 99% and 96% for the three months ended December 31, 2008 and 2007, 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. To increase services revenues, we may expand our services organization, requiring us to 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. This expansion could further reduce gross margins in our services revenues. In addition, given the current economic environment, customers and potential customers have sought and may seek discounts on our services, or services at no charge, which has and would further reduce our services gross margins and materially and adversely affect our business, financial condition and results of operations.


*Our revenues decreased in the quarter ended December 31, 2008 as compared to the quarter ended December 31, 2007. In addition, our revenues decreased in fiscal year 2008 as compared to fiscal year 2007, and until the fiscal year ended September 30, 2007, we were not profitable, which may raise vendor viability concerns about us and thereby make it more difficult to consummate license transactions with new and existing customers.
 
Our revenues decreased materially in the quarter ended December 31, 2008 as compared to the quarter ended December 31, 2007 and in fiscal year 2008 as compared to fiscal year 2007. In addition, while we were profitable for the years ended September 30, 2007 and September 30, 2008, we were not profitable for the years prior to September 30, 2007. As of December 31, 2008, we had an accumulated deficit of $228.5 million. We may incur losses in the future and cannot be certain that we can generate sufficient revenues to continue to achieve profitability. Continued losses or decreased revenues may make 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 vendor profitability and/or viability concerns, our revenues will decline, which could further adversely affect our operating results. This concern over vendor viability is exacerbated in the current economic environment.

*Anti-takeover provisions could make it more difficult for a third-party to acquire us.

We have adopted a stockholder rights plan and initially declared a dividend distribution of one right for each outstanding share of common stock to stockholders of record as of July 21, 2008. Each right entitles the holder to purchase one one-hundredth of a share of our Series A Junior Participating Preferred Stock for $20. Under certain circumstances, if a person or group acquires 20 percent or more of our outstanding common stock, holders of the rights (other than the person or group triggering their exercise) will be able to purchase, in exchange for the $20 exercise price, shares of our common stock or of any company into which we are merged, having a value of $40. The rights expire on July 21, 2011, unless extended by our Board of Directors. Because the rights may substantially dilute the stock ownership of a person or group attempting to acquire us without the approval of our Board of Directors, our rights plan could make it more difficult for a third-party to acquire us (or a significant percentage of our outstanding capital stock) without first negotiating with our Board of Directors regarding that acquisition.  Our Board has submitted to our stockholders for a vote at our 2009 annual meeting a non-binding resolution to approve the stockholder rights plan. Although the stockholder vote is not binding on our Board, the Board will nonetheless consider, but not necessarily implement, the stockholders wishes as expressed at the annual meeting.

In addition, our Board of Directors has the authority to issue up to 51 million shares of Preferred Stock (of which 500,000 shares have been designated as Series A Junior Participating Preferred Stock) and to fix the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions thereof. The rights of the holders of our common stock may be subject to, and may be adversely affected by, the rights of the holders of any Preferred Stock that may be issued in the future. The issuance of Preferred Stock may have the effect of delaying, deterring or preventing a change of control of Chordiant without further action by the stockholders and may adversely affect the voting and other rights of the holders of our common stock.

Further, certain provisions of our charter documents, including limiting the ability of stockholders to raise matters at a meeting of stockholders without giving advance notice, may have the effect of delaying or preventing changes in control or management of Chordiant, which could have an adverse effect on the market price of our stock. In addition, our charter documents do not permit cumulative voting, which may make it more difficult for a third party to gain control of our Board of Directors. Similarly, we have a classified Board of Directors whereby approximately one-third of our Board members are elected annually to serve for three-year terms, which may also make it more difficult for a third party to gain control of our Board of Directors.  Further, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which will prohibit us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, even if such combination is favored by a majority of stockholders, unless the business combination is approved in a prescribed manner. The application of Section 203 also could have the effect of delaying or preventing a change of control or management.

Our known backlog of business may not result in revenue.
 
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 or at all. 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. The risk that customers will reduce the scope of, delay or terminate projects, thus delaying or eliminating our ability to recognize backlog as revenue, is exacerbated in the current economic environment.



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, typically ranging from three to eighteen 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 a significant commitment of technical and financial resources that may be provided 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 we may experience a net loss on that customer engagement. 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. Certain of our customers have become more cautious regarding their technology purchases given the current economic conditions and specifically the issues that continue to impact the financial and credit markets. The result is that our sales cycles have lengthened in some instances, requiring more time to finalize transactions. In particular, in each of the past several quarters transactions that we expected to close before the end of the quarter were delayed or suspended.

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, each of whom we expect will continue to be a significant source of competition. 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.

 
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.

 
Application software vendors: we compete with providers of stand-alone point solutions for web-based customer relationship management as well as traditional client/server-based, call-center service customer and sales-force automation solution providers, many of whom offer broad suites of application and other software.


The enterprise software industry continues to undergo consolidation in sectors of the software industry in which we operate. For example, in 2007 and 2008, IBM acquired ILOG, Cognos, DataMirror and Watchfire Corporation; Oracle acquired Hyperion, Moniforce and BEA Systems; Sun Microsystems acquired MySQL; and SAP acquired BusinessObjects, YASU Technologies and Pilot Software. While we do not believe that ILOG, Cognos, DataMirror, Watchfire Corporation, Hyperion, Moniforce, BEA Systems, MySQL, BusinessObjects, YASU Technologies, or Pilot Software have been significant competitors of Chordiant in the past, the acquisition of these companies by IBM, Oracle, Sun Microsystems and SAP may indicate that we will face increased competition from larger and more established entities in the future.

Many of our competitors have greater resources, broader customer relationships and broader product and service offerings than we do. In addition, many of these competitors have extensive knowledge of our industry. Current and potential competitors have established, or may further 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.

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.
 
A portion of 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 accounting 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, but more recently we have entered into large transactions with payments from customers due over one or more years. 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 are not able to successfully manage our partner operations in India, our operations and financial results may be adversely affected.

In 2003, we entered into an agreement with Ness Technologies Inc., 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 testing and certain sustaining engineering functions. As of December 31, 2008, we use the services of approximately 144 consultants through Ness. In addition, as a result of the reductions in our workforce that took place in July 2005, October 2006, May 2008 and October 2008, by approximately 10% - 15% in each instance, we continue to have a significant dependence on Ness. 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 or termination 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 we become subject to intellectual property infringement claims, including copyright or 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. Additionally, we are seeing copyright infringement claims being asserted by certain third party software developers. 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, if at all. Royalty and licensing agreements, if required, may not be available on terms acceptable to us or at all.

In particular, if we are 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 defend such suit. We have received a letter from one such patent holding company alleging that our products may infringe one or more of their patents. We are also the subject of a suit by a person and related entity claiming that certain of our products infringe their copyrights. If any of our products were found to infringe such patents or copyrights, the patent or copyright 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 costly. A patent or copyright infringement claim could have a material adverse effect on our business, operating results and financial condition.

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

For the quarter ended December 31, 2008, international revenues were $15.3 million or approximately 65% of our total revenues. For the quarter ended December 31, 2007, international revenues were $13.5 million or approximately 46% of our total 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;

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

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, marketing and professional services personnel. In particular, in prior years we have had significant turnover of our executives as well as 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 the 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. In addition, in July 2005, October 2006, May 2008 and October 2008 we reduced the size of our workforce by approximately 10% - 15% in each instance, which may have a negative effect on our ability to attract and retain qualified personnel. Further, particularly in the current economic environment, employees or potential employees may choose to work for larger, more stable companies.

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 accounting 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.



In the past we have also entered into co-development projects with our customers to jointly develop new 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.
 
Geopolitical concerns could make the closing of license transactions with new and existing customers difficult.
 
Our revenues may further decrease in fiscal year 2009 or beyond if we are unable to enter into new large value license transactions with new and existing customers. The current state of the global financial markets and the global economic decline generally 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 globally will stabilize. 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 value license transactions also directly affects our ability to create additional consulting services and maintenance revenues, on which we also depend.

The company's common stock price has historically been and may continue to be volatile, which could result in substantial losses for stockholders. 

The market price of shares of the Company’s common stock has been, and is likely to continue to be, highly volatile and may be significantly affected by factors such as the following:

 
Actual or anticipated fluctuations in our operating results;

 
Changes in economic and political conditions in the United States and abroad;

 
Terrorist attacks, war or the threat of terrorist attacks or war;

 
The announcement of mergers or acquisitions by the Company or its competitors;

 
Financial difficulties or poor operating results announced by significant customers;

 
Developments in ongoing or threatened litigation;

 
Announcements of technological innovations;

 
Failure to comply with the requirements of Section 404 of the Sarbanes-Oxley Act;

 
New products or new contracts announced by the Company or its competitors;

 
Developments with respect to intellectual property laws;

 
Price and volume fluctuations in the stock market;

 
Changes in corporate purchasing of software by companies in the industry verticals supported by the Company;

 
Adoption of new accounting standards affecting the software industry; and

 
Changes in financial estimates by securities analysts.

In addition, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against such companies. If the Company is involved in such litigation, it could result in substantial costs and a diversion of management’s attention and resources and could materially harm the Company’s business, operating results and financial condition.



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, existing business alliance partners IBM, Ness, Electronic Data Systems, Tata Consultancy Services and HCL Technologies. 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 any of IBM, Ness, Electronic Data Systems, Tata Consultancy Services or HCL Technologies 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, Ness, Electronic Data Systems, Tata Consultancy Services and HCL Technologies and, as a result, these systems integrators may be more likely to recommend competitors’ products and services. In 2007 and 2008, IBM acquired ILOG, Cognos, DataMirror and Watchfire Corporation. While we do not believe that ILOG, Cognos, DataMirror or Watchfire Corporation had been a direct competitor of Chordiant in the past, IBM’s acquisition of these companies may indicate that IBM will become a competitor of ours in the future. While the Company currently has 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 takeover 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.

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 recorded an 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 fiscal 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 were remediated during fiscal year 2007 and management concluded internal controls over financial reporting were effective for the reporting period.

If we are not successful in maintaining 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 our 2006 Annual Report on Form 10-K.

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 we may experience a net loss on that customer engagement. 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 existing, 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 and may in the future discover software errors in our products as well as in third-party products, and as a result have experienced and may in the future experience delays in the shipment of our new products.

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 negatively impact the development, sales and support of our products.
 
In July 2005, October 2006, May 2008 and October 2008 we reduced the size of our workforce by approximately 10% - 15% 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, negatively impacting our operations. Our success depends largely on ensuring that we have adequate personnel to support our suite of products as well as the continued contributions of our key management, finance, engineering, sales, 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. 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 products, features and functionality in a timely manner, demand for our products may decline. We have in the past experienced delays in the planned release dates of new products or 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. Given the current economic environment, the risk that one or more of our suppliers or vendors may go out of business or be unable to meet their contractual obligations to us is exacerbated. 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, which could have a material adverse effect on our business, operating results and financial condition..

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 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 our reputation, and any necessary investigative work and repairs could cause us to incur significant expenses and delays in implementation, which could have a material adverse effect on our business, operating results and financial condition..
 
*If our products do not keep up with advancing technological requirements or 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, including 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. If our products do not keep up with advancing technological requirements or operate with the hardware and software platforms used by our customers, our customers may license competing products and our revenues will decline.

A failure in our 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.

In the fiscal year ended September 30, 2007, we 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 or markets. Mergers and acquisitions of high-technology companies are inherently risky, and the Company cannot be certain that any acquisition will be successful and will not materially harm the Company’s business, operating results or financial condition. Generally, acquisitions involve numerous risks, including the following: (i) the benefits of the acquisition (such as cost savings and synergies) not materializing as planned or not materializing within the time periods or to the extent anticipated; (ii) the Company’s ability to manage acquired entities’ people and processes, particularly those that are headquartered in separate geographical locations from the Company’s headquarters; (iii) the possibility that the Company will pay more than the value it derives from the acquisition; (iv) difficulties in integration of the operations, technologies, content and products of the acquired companies; (v) the assumption of certain known and unknown liabilities of the acquired companies; (vi) difficulties in retaining key relationships with customers, partners and suppliers of the acquired company; (vi) the risk of diverting management’s attention from normal daily operations of the business; (vii) the Company’s ability to issue new releases of the acquired company’s products on existing or other platforms; (viii) negative impact to the Company’s financial condition and results of operations and the potential write down of impaired goodwill and intangible assets resulting from combining the acquired company’s financial condition and results of operations with our financial statements; (ix) risks of entering markets in which the Company has no or limited direct prior experience; and (x) the potential loss of key employees of the acquired company. 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 and financial condition.
 
Changes in our revenue recognition model could result in short-term declines in revenue.

Historically, we have recognized revenue for a high percentage of our license transactions on the percentage-of-completion method of accounting or 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 might 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 encounter unexpected delays in maintaining the requisite internal controls over financial reporting and we expect to incur 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.
 
Management must report on, and our independent registered public accounting firm must attest to, our internal control over financial reporting as required by Section 404 of SOX, within the time frame required by Section 404. We may encounter unexpected delays in satisfying those requirements.  Accordingly, we cannot be certain about the timely completion of our evaluation, testing and remediation actions or the impact that these activities will have on our operations. We also expect to incur additional expenses and diversion of management’s time as a result of performing ongoing system and process evaluations and the 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.


    On January 28, 2009, the Board of Directors approved a new form of Indemnity Agreement (which will replace the indemnification agreements we have in place with certain officers and directors). The new form will be entered into with  members of Chordiant’s Board of Directors and certain identified officers, including Steven R. Springsteel, our Chairman, President and Chief Executive Officer, Peter S. Norman, our Vice President and Chief Financial Officer, David E. Cunningham, our Vice President, Worldwide Sales, Prashant K. (P.K.) Karnik, our Vice President and General Manager, Worldwide Professional Services and Products, Charles Altomare, our Vice President, Worldwide Engineering and David Zuckerman, our Vice President, General Counsel and Secretary. A copy of the Form of Indemnity Agreement is attached hereto as Exhibit 10.89. Pursuant to the Indemnity Agreement, we will indemnify these officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. In addition, we will be obligated to advance certain expenses incurred by such officer or director prior to any determination as to whether we are obligated to indemnify such officer or director for such liability.
 
    As previously reported in a current report filed on Form 8-K on November 25, 2008, the Board adopted revised equity award agreements as the Company’s standard forms of equity award agreements under the Company’s 2005 Equity Incentive Plan, including the Chordiant Software, Inc. 2005 Equity Incentive Plan Restricted Stock Unit Grant Notice and Chordiant Software, Inc. 2005 Equity Incentive Plan Restricted Stock Unit Agreement (the “RSU Agreement”). On January 28, 2009, the Board adopted revisions to the RSU Agreement which provides that any of the shares of our common stock issued pursuant to the RSU Agreement must be held by the recipient in an escrow account (excluding shares sold to pay applicable tax withholdings) until the earlier of (1) the second anniversary of the vesting date of such shares, (2) a Change in Control (as defined under the RSU Agreement), or (3) the termination of continuous service as a result of death or Disability (as defined under the RSU Agreement). A copy of the Form of RSU Agreement is attached hereto as Exhibit 10.69.



 
The exhibits listed on the accompanying index to exhibits are filed or incorporated by reference (as stated therein) as part of this Quarterly Report on Form 10-Q.

Chordiant Software, Inc.
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

 
CHORDIANT SOFTWARE, INC.
 
       
 
By:
/s/  PETER S. NORMAN
 
   
Peter S. Norman
Chief Financial Officer and
Principal Accounting Officer
 

 
Dated: January 29, 2009
 



EXHIBIT INDEX

       
Incorporated by Reference
   
Exhibit
Number
 
Description of Document
 
Form
 
Date Filed
 
Filed Herewith
                 
3.1
 
Amended and Restated Certificate of Incorporation of Chordiant Software, Inc.
 
Form 10-K
 
11/20/2008
   
                 
3.2
 
Amended and Restated Bylaws of Chordiant Software, Inc.
 
Form 8-K
 
6/3/2008
   
                 
3.3
 
Certificate of Designation of Series A Junior Participating Preferred Stock.
 
Form 8-K
 
7/11/2008
   
                 
4.1
 
Specimen Common Stock Certificate.
 
Form S-1 (No. 333-92187)
 
2/7/2000
   
                 
4.2
 
Rights Agreement dated as of July 10, 2008, by and between Chordiant Software, Inc. and American Stock Transfer & Trust Company, LLC.
 
Form 8-K
 
7/11/2008
   
                 
4.3
 
Form of Rights Certificate.
 
Form 8-K
 
7/11/2008
   
                 
10.68*
 
Form of Chordiant Software, Inc. 2005 Equity Incentive Plan Stock Option Grant Notice and Chordiant Software, Inc. 2005 Equity Incentive Plan Stock Option Agreement.
         
X
                 
10.69*
 
Form of Chordiant Software, Inc. 2005 Equity Incentive Plan Restricted Stock Unit Grant Notice and Chordiant Software, Inc. 2005 Equity Incentive Plan Restricted Stock Unit Agreement.
         
X
                 
10.70*
 
Form of Chordiant Software, Inc. 2005 Equity Incentive Plan Stock Option Grant Notice for Non-U.S. Employees and Chordiant Software, Inc. 2005 Equity Incentive Plan Stock Option Agreement for Non-U.S. Employees.
         
X
                 
10.71*
 
Amended and Restated Change of Control Agreement dated November 24, 2008 by and between Chordiant Software, Inc. and Steven R. Springsteel.
 
Form 8-K
 
11/25/2008
   
                 
10.72*
 
Amended and Restated Change of Control Agreement dated November 25, 2008 by and between Chordiant Software, Inc. and Peter S. Norman.
 
Form 8-K
 
11/25/2008
   
                 
10.73*
 
Amended and Restated Change of Control Agreement dated November 24, 2008 by and between Chordiant Software, Inc. and Prashant K. Karnik.
 
Form 8-K
 
11/25/2008
   
                 
10.74*
 
Change of Control Agreement dated November 24, 2008 by and between Chordiant Software, Inc. and Charles A. Altomare.
 
Form 8-K
 
11/25/2008
   
                 
10.75*
 
Change of Control Agreement dated November 24, 2008 by and between Chordiant Software, Inc. and David E. Cunningham.
 
Form 8-K
 
11/25/2008
   
                 
10.76*
 
Change of Control Agreement dated November 24, 2008 by and between Chordiant Software, Inc. and David M. Zuckerman.
 
Form 8-K
 
11/25/2008
   




       
Incorporated by Reference
   
Exhibit
Number
 
Description of Document
 
Form
 
Date Filed
 
Filed Herewith
                 
10.77*
 
Amended Form of Change of Control Agreement by and between Chordiant Software, Inc. and certain officers and key employees of Chordiant Software, Inc.
 
Form 8-K
 
11/25/2008
   
                 
10.78*†
 
Form of Chordiant Software, Inc. Fiscal Year 2009 Executive Incentive Bonus Plan
         
X
                 
10.79*†
 
Chordiant Software, Inc. Fiscal Year 2009 Executive Incentive Bonus Plan for Steven R. Springsteel
         
X
                 
10.80*†
 
Chordiant Software, Inc. Fiscal Year 2009 Executive Incentive Bonus Plan for Peter S. Norman
         
X
                 
10.81*†
 
Chordiant Software, Inc. Fiscal Year 2009 Executive Incentive Bonus Plan for Charles A. Altomare
         
X
                 
10.82*†
 
Chordiant Software, Inc. 2009 Vice President Worldwide Sales Incentive Bonus Plan.
         
X
                 
10.83*†
 
Chordiant Software, Inc. 2009 Vice President Worldwide Professional Services Incentive Bonus Plan.
         
X
                 
10.84*†
 
Chordiant Software, Inc. 2009 General Counsel Incentive Bonus Plan.
         
X
                 
10.85*
 
Amended and Restated 1999 Non-Employee Directors’ Stock Option Plan
         
X
                 
10.86†
 
Addendum C to the Master Services Agreement dated January 16, 2009, by and between Chordiant Software, Inc. and Ness USA, Inc.
         
X
                 
10.87*
 
Form of Chordiant Software, Inc. Amended and Restated 1999 Non-Employee Directors’ Stock Option Plan Restricted Stock Award Grant Notice and Chordiant Software, Inc. Amended and Restated 1999 Non-Employee Directors’ Stock Option Plan Restricted Stock Award Agreement.
         
X
                 
10.88*
 
Form of Chordiant Software, Inc. Amended and Restated 1999 Non-Employee Directors’ Stock Option Plan Restricted Stock Award Grant Notice for Non-U.S. Directors and Chordiant Software, Inc. Amended and Restated 1999 Non-Employee Directors’ Stock Option Plan Restricted Stock Award Agreement for Non-U.S. Directors.
         
X
                 
10.89*
 
Form of Indemnity Agreement by and between Chordiant Software, Inc. and its directors and officers.
         
X
                 



       
Incorporated by Reference
   
Exhibit
Number
 
Description of Document
 
Form
 
Date Filed
 
Filed Herewith
                 
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 as required by Rule 406 of Regulation C.

#
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-Q irrespective of any general incorporation language contained in such filing.

 
60

EX-10.68 2 ex1068.htm ex1068.htm
 
Exhibit 10.68

 
Chordiant Software, Inc.

2005 Equity Incentive Plan
Stock Option Grant Notice
 
Chordiant Software, Inc. (the “Company”), pursuant to its 2005 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below.  This option is subject to all of the terms and conditions as set forth herein, in the Stock Option Agreement and the Plan, both of which are attached hereto and incorporated herein in their entirety.
 
Optionholder:
 %%FIRST_NAME%-% %%LAST_NAME%-%
 
     
Address:
%%ADDRESS_LINE_1%-%
 
 
%%ADDRESS_LINE_2%-%
 
 
%%ADDRESS_LINE_3%-%
 
 
%%CITY%-%, %%STATE%-% %%ZIPCODE%-%
 
 
%%COUNTRY%-%
 
     
Date of Grant:
%%OPTION_DATE%-%
 
Vesting Commencement Date:
%%VEST_BASE_DATE%-%
 
Type of Grant1:
%%OPTION_TYPE%-%
 
Option Number:
%%OPTION_NUMBER%-%
 
     
Number of Shares Subject to Option:
%%TOTAL_SHARES_GRANTED%-%
 
Exercise Price (Per Share):
%%OPTION_PRICE%-%
 
Total Exercise Price:
%%TOTAL_OPTION_PRICE%-%
 
Exercise Schedule:
Same as vesting schedule below
 
Payment:
By one or a combination of the following items:
 
 
· By cash, check bank draft or money order payable to the Company
 
 
· Pursuant to a Regulation T Program if the shares are publicly traded
 
 
· Subject to the Company’s consent at the time of exercise, by delivery of already-owned shares
 
 
· Subject to the Company’s consent at the time of exercise, by a “net exercise” arrangement2
 
     

Shares in each period will become fully vested on the date shown.  Notwithstanding the foregoing, vesting will terminate upon the Optionholder’s termination of Continuous Service.

Shares
Vest Type
Full Vest
Expiration
%%SHARES_PERIOD1%-%
%%VEST_TYPE_PERIOD1%-%
%%VEST_DATE_PERIOD1%-%
%%EXPIRE_DATE_PERIOD1%-%
%%SHARES_PERIOD2%-%
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Additional Terms/Acknowledgements:  By accepting this option, the Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Stock Option Agreement, the Plan and the Plan Prospectus.  Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionholder with respect to the subject matter hereof.
 



 
1           If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year.  Any excess over $100,000 is a Nonstatutory Stock Option.
 
2           Any portion of this option intended to qualify as an Incentive Stock Option may not be exercised by net exercise.

 
 

 
Exhibit 10.68


 

 
Attachment I

Chordiant Software, Inc.

2005 Equity Incentive Plan
Stock Option Agreement

(Incentive Stock Option or Nonstatutory Stock Option)


Pursuant to your Stock Option Grant Notice (the “Grant Notice”) and this Stock Option Agreement, Chordiant Software, Inc. (the “Company”) has granted you an option under its 2005 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

The details of your option are as follows:

1.           Vesting. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.

2.           Number of Shares and Exercise Price. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.

3.           Exercise Restriction for Non-Exempt Employees.  In the event that you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt Employee”), you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant specified in your Grant Notice, notwithstanding any other provision of your option.  Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, upon your death or Disability, or upon a Corporate Transaction or a Change in Control in which the vesting of your option accelerates, your option, to the extent then vested, may be exercised earlier than six (6) months following the Date of Grant.  The foregoing provision is intended to operate so that any income derived by a Non-Exempt Employee in connection with the exercise or vesting of this option will be exempt from his or her regular rate of pay.

4.           Method of Payment. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the following:

(a)           In the Company’s sole discretion at the time your option is exercised and provided that at the time of exercise the Common Stock is publicly traded and quoted regularly, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

(b)           Subject to the consent of the Company at the time of exercise, provided that at the time of exercise the Common Stock is publicly traded and quoted regularly, by delivery of already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the Company’s reported earnings or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

(c)           If the option is a Nonstatutory Stock Option, subject to the consent of the Company at the time of exercise, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of your option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from you to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided further, however, that shares of Common Stock will no longer be outstanding under your option and will not be exercisable thereafter to the extent that (1) shares are used to pay the exercise price pursuant to the “net exercise,” (2) shares are delivered to you as a result of such exercise, and (3) shares are withheld to satisfy tax withholding obligations.

5.           Whole Shares. You may exercise your option only for whole shares of Common Stock.

6.           Securities Law Compliance. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

7.           Term. You may not exercise your option before the commencement of its term or after its term expires. The term of your option commences on the Date of Grant and expires upon the earliest of the following:

(a)           immediately upon the termination of your Continuous Service for Cause;

(b)           three (3) months after the termination of your Continuous Service for any reason other than Cause, Disability or death, provided that if during any part of such three (3) month period you may not exercise your option solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;

(c)           twelve (12) months after the termination of your Continuous Service due to your Disability;

(d)           eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason other than Cause;

(e)           the Expiration Date indicated in your Grant Notice; or

(f) the day before the tenth (10th) anniversary of the Date of Grant.

If your option is an Incentive Stock Option, note that, to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the Date of Grant of your option and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment terminates.

8.           Exercise.

(a)           You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

(b)           By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.

(c)           If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.

9.           Transferability.

(a)           Restrictions on Transfer.  Your option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during your lifetime only by you; provided, however, that the Board may, in its sole discretion, permit transfer of your options in a manner that is not prohibited by applicable tax and securities laws upon your request.
 
(b)           Domestic Relations Orders.  Notwithstanding the foregoing, your option may be transferred pursuant to a domestic relations order; provided, however, that if your option is an Incentive Stock Option, your option shall be deemed to be a Nonstatutory Stock Option as a result of such transfer.
 
(c)           Beneficiary Designation.  Notwithstanding the foregoing, you may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect option exercises, designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.  In the absence of such a designation, the executor or administrator of your estate shall be entitled to exercise your option.
 
10.           Option Not a Service Contract. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

11.           Withholding Obligations.

(a) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.
 
(b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes).  If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option.  Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise.  Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
 
(c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied.  Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.
 
12.           Tax Consequences. You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You shall not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that this option is exempt from Section 409A of the Code only if the exercise price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with the option.
 
13.           Notices. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.  Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this option by electronic means or to request your consent to participate in the Plan 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.           Governing Plan Document. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, 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. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.

15.           Other Documents.  You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
16.           Effect on Other Employee Benefit Plans.  The value of the option subject to this Stock Option Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.

17.           Choice of Law.  The interpretation, performance and enforcement of this Stock Option Agreement will be governed by the law of the state of Delaware without regard to such state’s conflicts of laws rules.

18.           Compliance with Section 409A of the Code.  This option is intended to comply with Treasury Regulation Section 1.409A-1(b)(5)(i)(A) and/or (ii).  Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).


 
 

 
Exhibit 10.68


Attachment II

Chordiant Software, Inc.
 
2005 Equity Incentive Plan
 

 
 

 

EX-10.69 3 ex1069.htm ex1069.htm

Exhibit 10.69
 
Chordiant Software, Inc.
 
Restricted Stock Unit Grant Notice
 
2005 Equity Incentive Plan
 
Chordiant Software, Inc. (the “Company”), pursuant to its 2005 Equity Incentive Plan (the “Plan”), hereby awards to Participant a Restricted Stock Unit Award for the number of shares of the Company’s Common Stock set forth below (the “Award”).  The Award is subject to all of the terms and conditions as set forth herein, in the Plan and in the Restricted Stock Unit Agreement, both of which are attached hereto and incorporated herein in their entirety.  Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan or the Restricted Stock Unit Agreement.  In the event of any conflict between the terms set forth herein and the Plan, the terms of the Plan shall control.
 
Participant:
     
Date of Grant:
     
Vesting Commencement Date:
     
Number of Shares Subject to Award:
     
Consideration:
Participant’s past services
   
       
Vesting Schedule:
[
 
]
 
Notwithstanding the foregoing, vesting shall terminate upon the Participant’s termination of Continuous Service.  In addition, subject to the Participant’s Continuous Service through the time that is immediately prior to a Change in Control, 100% of the shares subject to this Award will become fully vested as of immediately prior to the Change in Control.

Issuance Schedule:
The shares will be issued in accordance with the issuance schedule set forth in Section 8 of the Restricted Stock Unit Agreement.
 
Additional Terms/Acknowledgements:  The undersigned Participant acknowledges receipt of, and understands and agrees to, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Agreement, the Plan and the Plan prospectus.  Participant further acknowledges that as of the Date of Grant, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Agreement and the Plan set forth the entire understanding between Participant and the Company with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
 
Chordiant Software, Inc.
 
Participant:
       
By:
     
 
Signature
 
Signature
       
Title:
   
Date:
 
         
Date:
       


Attachments:
Restricted Stock Unit Agreement, 2005 Equity Incentive Plan



 
 
 

 

Attachment I

Chordiant Software, Inc.
2005 Equity Incentive Plan
 
Restricted Stock Unit Agreement
 
Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) and this Restricted Stock Unit Agreement (the “Agreement”) and in consideration of your services, Chordiant Software, Inc. (the “Company”) has awarded you a Restricted Stock Unit Award (the “Award”) under its 2005 Equity Incentive Plan (the “Plan”). Your Award is granted to you effective as of the Date of Grant set forth in the Grant Notice for this Award.  This Agreement shall be deemed to be agreed to by the Company and you upon the signing by you of the Grant Notice to which it is attached.  Defined terms not explicitly defined in this Agreement shall have the same meanings given to them in the Plan.  In the event of any conflict between the terms in this Agreement and the Plan, the terms of the Plan shall control.  The details of your Award, in addition to those set forth in the Grant Notice and the Plan, are as follows.
 
1. Grant of the Award.    This Award represents the right to be issued on a future date the number of shares of the Company’s Common Stock as indicated in the Grant Notice.  As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the “Account”) the number of shares of Common Stock subject to the Award.  This Award was granted in consideration of your services to the Company.  Except as otherwise provided herein, you will not be required to make any payment to the Company (other than past and future services to the Company) with respect to your receipt of the Award, the vesting of the shares or the delivery of the underlying Common Stock.
 
2. Vesting.  Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.   Upon such termination of your Continuous Service, the shares credited to the Account that were not vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such underlying shares of Common Stock.
 
3. Holding Period.  You agree that you will not sell or otherwise transfer (excluding transfers to certain family trusts as provided in Section 6 below) any of the shares of Common Stock issued under the Award until the earlier of (1) the second anniversary of the vesting date of such shares, (2) a Change in Control, or (3) the termination of your Continuous Service as a result of death or Disability (such period, the “Holding Period”).  Shares sold or withheld by the Company to cover applicable tax withholdings will not be deemed a violation of the Holding Period.  The shares of Common Stock issued pursuant to this Award shall be endorsed with appropriate legends as determined by the Company and subject to escrow (as provided in Section 7 below) in order to enforce the provisions of this Section 3, and you will enter into such other arrangements as determined reasonably necessary by the Company in order to enforce the provisions of this Section 3.
 
4. Number of Shares.
 
(a) The number of shares subject to your Award may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.
 
(b) Any shares, cash or other property that becomes subject to the Award pursuant to this Section 3, if any, shall be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other shares covered by your Award.
 
(c) Notwithstanding the provisions of this Section 4, no fractional shares or rights for fractional shares of Common Stock shall be created pursuant to this Section 4.  The Board shall, in its discretion, determine an equivalent benefit for any fractional shares or fractional shares that might be created by the adjustments referred to in this Section 4.
 
5. Securities Law Compliance.  You may not be issued any shares under your Award unless either (a) the shares are registered under the Securities Act; or (b) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award also must comply with other applicable laws and regulations governing the Award, and you will not receive such shares if the Company determines that such receipt would not be in material compliance with such laws and regulations.
 
6. Limitations on Transfer.  Your Award and any shares of Common Stock subject to the Holding Period are not transferable, except by will or by the laws of descent and distribution.  In addition to any other limitation on transfer created by applicable securities laws, you agree not to assign, hypothecate, donate, encumber or otherwise dispose of any interest in any of the shares of Common Stock subject to the Award until the shares are released from escrow in accordance with Section 7 of this Agreement.  After the shares have been released to you, you are free to assign, hypothecate, donate, encumber or otherwise dispose of any interest in such shares provided that any such actions are in compliance with the provisions herein and applicable securities laws.  Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may (a) designate a third party who, in the event of your death, shall thereafter be entitled to receive any distribution of Common Stock to which you were entitled at the time of your death pursuant to this Agreement and/or (b) instruct the Company to distribute shares of Common Stock to a spouse or former spouse pursuant to a domestic relations order.  In addition, notwithstanding the foregoing, you may transfer shares of Common Stock subject to the Holding Period to a trust for the benefit of you or your “immediate family”, provided that each such transferee agrees in a writing satisfactory to the Company that the provisions of this Agreement (including but not limited to Section 3 and Section 7) will continue to apply to the transferred shares in the hands of such transferee, and provided further that following such transfer, you continue to be deemed to be the “beneficial owner” of the shares for purposes of the Exchange Act.  As used herein, the term “immediate family” will mean your spouse, brother, sister, child, grandchild, adopted child, adopted grandchild, or the spouse of your child, grandchild, adopted child, or adopted grandchild.
 
7. Escrow of Shares Subject to Holding Period.  As security for your faithful performance of the terms of this Agreement (including Section 3), you agree to the following “Joint Escrow” and “Joint Escrow Instructions,” and you and the Company hereby authorize and direct the Corporate Secretary of the Company or the Corporate Secretary’s designee (“Escrow Agent”) to hold the documents delivered to Escrow Agent pursuant to the terms of this Agreement and of your Grant Notice, in accordance with the following Joint Escrow Instructions:
 
(a) At any closing involving the transfer or delivery of some or all of the property subject to the Grant Notice and this Agreement, Escrow Agent is directed (i) to date any stock assignments necessary for the transfer in question, (ii) to fill in the number of shares being transferred, and (iii) to deliver the same, together with the certificate, if any, evidencing the shares of Common Stock to be transferred, to you or the Company, as applicable.
 
(b) You irrevocably authorize the Company to deposit with Escrow Agent the certificates, if any, evidencing shares of Common Stock to be held by Escrow Agent hereunder and any additions and substitutions to such shares as specified in this Agreement.  You hereby irrevocably constitute and appoint Escrow Agent as your attorney-in-fact and agent for the term of this escrow to execute with respect to such securities and other property all documents of assignment and/or transfer and all stock certificates necessary or appropriate to make all securities negotiable and complete any transaction contemplated herein.
 
(c) This escrow shall terminate upon the later of the expiration of the Holding Period, and the completion of the tasks contemplated by these Joint Escrow Instructions.
 
(d) If at the time of termination of this escrow, Escrow Agent should have in its possession any documents, securities, or other property belonging to you, Escrow Agent shall deliver all of same to you and shall be discharged of all further obligations hereunder.
 
(e) Except as otherwise provided in these Joint Escrow Instructions, Escrow Agent’s duties hereunder may be altered, amended, modified, or revoked only by a writing signed by all of the parties hereto.
 
(f) Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by Escrow Agent to be genuine and to have been signed or presented by the proper party or parties or their assignees.  Escrow Agent shall not be personally liable for any act Escrow Agent may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for you while acting in good faith and any act done or omitted by Escrow Agent pursuant to the advice of Escrow Agent’s own attorneys shall be conclusive evidence of such good faith.
 
(g) Escrow Agent is hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders, judgments, decrees or process of courts of law, and is hereby expressly authorized to comply with and obey orders, judgments, or decrees of any court.  In case Escrow Agent obeys or complies with any such order, judgment, or decree of any court, Escrow Agent shall not be liable to any of the parties hereto or to any other person, firm, or corporation by reason of such compliance, notwithstanding any such order, judgment, or decree being subsequently reversed, modified, annulled, set aside, vacated, or found to have been entered without jurisdiction.
 
(h) Escrow Agent shall not be liable in any respect on account of the identity, authority, or rights of the parties executing or delivering or purporting to execute or deliver this Agreement or any documents or papers deposited or called for hereunder.
 
(i) Escrow Agent shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with Escrow Agent.
 
(j) Escrow Agent’s responsibilities as Escrow Agent hereunder shall terminate if Escrow Agent shall cease to be the Secretary of the Company, if applicable, or if Escrow Agent shall resign by written notice to each party.  In the event of any such termination, the Company may appoint any officer or assistant officer of the Company or any other person as successor Escrow Agent and you hereby confirm the appointment of such successor or successors as your attorney-in-fact and agent to the full extent of such successor Escrow Agent’s appointment.
 
(k) If Escrow Agent reasonably requires other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
 
(l) It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities, Escrow Agent is authorized and directed to retain in its possession without liability to anyone all or any part of such securities until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree, or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings.
 
(m) By signing this Agreement below Escrow Agent becomes a party hereto only for the purpose of the Joint Escrow Instructions in this Section 7; Escrow Agent does not become a party to any other rights and obligations of this Agreement apart from those in this Section 7.
 
(n) Escrow Agent shall be entitled to employ such legal counsel and other experts as Escrow Agent may deem necessary to properly advise Escrow Agent in connection with Escrow Agent’s obligations hereunder.  Escrow Agent may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.  The Company shall be responsible for all fees generated by such legal counsel in connection with Escrow Agent’s obligations hereunder.
 
(o) These Joint Escrow Instructions set forth in this Section 7 shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  It is understood and agreed that references to “Escrow Agent” herein refer to the original Escrow Agent and to any and all successor Escrow Agents.  It is understood and agreed that the Company may at any time or from time to time assign its rights under the Agreement and these Joint Escrow Instructions in whole or in part.
 
8. Date of Issuance.
 
(a) The Company will deliver to the Escrow Agent a number of shares of the Company’s Common Stock equal to the number of vested shares subject to your Award, including any additional shares received pursuant to Section 4 above that relate to those vested shares on the applicable vesting date(s).  However, if a scheduled delivery date falls on a date that is not a business day, such delivery date shall instead fall on the next following business day.
 
(b) Notwithstanding the foregoing, in the event that (i) you are subject to the Company’s policy (as in effect from time to time) permitting officers and directors to sell shares only during certain “window” periods or you are otherwise prohibited from selling shares of the Company’s Common Stock in the public market under applicable law and any shares covered by your Award are scheduled to be delivered on a day (the “Original Distribution Date”) that does not occur during an open “window period” applicable to you, as determined by the Company in accordance with such policy, or does not occur on a date when you are otherwise permitted under applicable law to sell shares of the Company’s Common Stock on the open market, and (ii) the Company elects not to satisfy its tax withholding obligations by withholding shares of Common Stock from your distribution under this Award and you do not otherwise make arrangements for the payment in cash of your tax obligations, then such shares shall not be delivered on such Original Distribution Date and shall instead be delivered on the first business day of the next occurring open “window period” applicable to you pursuant to such policy (regardless of whether you are still providing Continuous Service at such time) or the next business day when you are not prohibited from selling shares of the Company’s Common Stock in the open market, but in no event later than the fifteenth (15th) day of the third calendar month of the calendar year following the calendar year in which the Original Distribution Date occurs.  The form of such delivery (e.g., a stock certificate or electronic entry evidencing such shares) shall be determined by the Company.  In all cases, the delivery of shares under this Award is intended to comply with Treasury Regulation 1.409A-1(b)(4) and shall be construed and administered in such a manner.
 
9. Dividends.  You shall receive no benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment; provided, however, that this sentence shall not apply with respect to any shares of Common Stock that are delivered to you in connection with your Award after such shares have been delivered to you.
 
10. Award not a Service Contract.
 
(a) Your Continuous Service with the Company or an Affiliate is not for any specified term and may be terminated by you or by the Company or an Affiliate at any time, for any reason, with or without cause and with or without notice.  Nothing in this Agreement (including, but not limited to, the vesting of your Award pursuant to the schedule set forth in Section 2 herein or the issuance of the shares subject to your Award), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Agreement or the Plan shall:  (i) confer upon you any right to continue in the employ of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Agreement or Plan; or (iv) deprive the Company of the right to terminate you at will and without regard to any future vesting opportunity that you may have.
 
(b) By accepting this Award, you acknowledge and agree that the right to continue vesting in the Award pursuant to the schedule set forth in Section 2 is earned only by continuing as an employee, director or consultant at the will of the Company (not through the act of being hired, being granted this Award or any other award or benefit) and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a “reorganization”).  You further acknowledge and agree that such a reorganization could result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Agreement, including but not limited to, the termination of the right to continue vesting in the Award.  You further acknowledge and agree that this Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth herein or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant for the term of this Agreement, for any period, or at all, and shall not interfere in any way with your right or the Company’s right to terminate your Continuous Service at any time, with or without cause and with or without notice.
 
11. Withholding Obligations.
 
(a) On or before the time you receive a distribution of the shares subject to your Award, or at any time thereafter as requested by the Company, you hereby authorize any required withholding from the Common Stock issuable to you or the Escrow Agent and/or otherwise agree to make adequate provision in cash for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate which arise in connection with your Award (the “Withholding Taxes”).  Additionally, the Company may, in its sole discretion, satisfy all or any portion of the Withholding Taxes obligation relating to your Award by any of the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to you by the Company; (ii) causing you to tender a cash payment; (iii) permitting you to enter into a “same day sale” commitment with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”) whereby you irrevocably elect to sell a portion of the shares to be delivered under the Award to satisfy the Withholding Taxes and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Withholding Taxes directly to the Company and/or its Affiliates or (iv) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to you or the Escrow Agent in connection with the Award with a Fair Market Value (measured as of the date shares of Common Stock are issued pursuant to Section 8 equal to the amount of such Withholding Taxes; provided, however, that the number of such shares of Common Stock so withheld shall not exceed the amount necessary to satisfy the Company’s required tax withholding obligations using the minimum statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income.
 
(b) Unless the tax withholding obligations of the Company and/or any Affiliate are satisfied, the Company shall have no obligation to deliver to you any Common Stock.
 
(c) In the event the Company’s obligation to withhold arises prior to the delivery to you of Common Stock or it is determined after the delivery of Common Stock to you that the amount of the Company’s withholding obligation was greater than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper amount.
 
12. Unsecured Obligation.  Your Award is unfunded, and as a holder of a vested Award, you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares pursuant to this Agreement.  You shall not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Agreement until such shares are issued pursuant to Section 8 of this Agreement.   Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company.  Nothing contained in this 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.
 
13. Other Documents.  You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
 
14. Notices.  Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.  Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan 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.
 
15. Miscellaneous.
 
(a) The rights and obligations of the Company under your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. Your rights and obligations under your Award may only be assigned with the prior written consent of the Company.
 
(b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.
 
(c) You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award, and fully understand all provisions of your Award.
 
(d) This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
 
(e) All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
 
16. Governing Plan Document.  Your Award is subject to all the provisions of the Plan, 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.  Except as expressly provided herein, in the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.
 
17. Severability.  If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
 
18. Effect on Other Employee Benefit Plans.  The value of the Award subject to this Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.
 
19. Choice of Law.  The interpretation, performance and enforcement of this Agreement will be governed by the law of the state of Delaware without regard to such state’s conflicts of laws rules.
 
20. Amendment.  This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that no such amendment adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change shall be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.
 
21. Compliance with Section 409A of the Code.  This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4).  Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of the short-term deferral rule and is otherwise deferred compensation subject to Section 409A, and if you are a “Specified Employee” (within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6) months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six (6) months and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on you in respect of the shares under Section 409A of the Code.  Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).
 

 
Escrow Agent hereby acknowledges and accepts its rights and responsibilities pursuant to Section 7, above.


___________________________
 
Escrow Agent
 

                                                     ..
 
 

 

Attachment II

Chordiant Software, Inc.
 
2005 Equity Incentive Plan
 

 

                                                     ..
 
 

 

EX-10.70 4 ex1070.htm ex1070.htm
 
Exhibit 10.70
 
 
Chordiant Software, Inc.
2005 Equity Incentive Plan

Stock Option Grant Notice And Agreement
 
For Non-U.S. Employees
 
Chordiant Software, Inc. (the “Company”), pursuant to its 2005 Equity Incentive Plan (the “Plan”), hereby grants to the Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below.  This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement (including any appendix to the Stock Option Agreement for the Optionholder’s country (the “Appendix”)), and the Plan (including any sub-plan for the Optionholder’s country (the “Sub-Plan”)), both of which are attached hereto and incorporated herein in their entirety.

Optionholder:
 %%FIRST_NAME%-% %%LAST_NAME%-%
 
     
Address:
%%ADDRESS_LINE_1%-%
 
 
%%ADDRESS_LINE_2%-%
 
 
%%ADDRESS_LINE_3%-%
 
 
%%CITY%-%, %%STATE%-% %%ZIPCODE%-%
 
 
%%COUNTRY%-%
 
     
Date of Grant:
%%OPTION_DATE%-%
 
Vesting Commencement Date:
%%VEST_BASE_DATE%-%
 
Type of Grant
NONSTATUTORY STOCK OPTION
 
Option Number:
%%OPTION_NUMBER%-%
 
     
Number of Shares Subject to Option:
%%TOTAL_SHARES_GRANTED%-%
 
Exercise Price (Per Share):
%%OPTION_PRICE%-%
 
Total Exercise Price:
%%TOTAL_OPTION_PRICE%-%
 
Exercise Schedule:
Same as vesting schedule below
 
Payment:
By any method set forth in the Stock Option Agreement
 
 
and/or the Appendix
 

Shares in each period will become fully vested on the date shown.  Notwithstanding the foregoing, vesting will terminate upon the Optionholder’s termination of Continuous Service, as described in Section 10(l) of the Stock Option Agreement.

Shares
Vest Type
Full Vest
Expiration
%%SHARES_PERIOD1%-%
%%VEST_TYPE_PERIOD1%-%
%%VEST_DATE_PERIOD1%-%
%%EXPIRE_DATE_PERIOD1%-%
%%SHARES_PERIOD2%-%
%%VEST_TYPE_PERIOD2%-%
%%VEST_DATE_PERIOD2%-%
%%EXPIRE_DATE_PERIOD2%-%
%%SHARES_PERIOD3%-%
%%VEST_TYPE_PERIOD3%-%
%%VEST_DATE_PERIOD3%-%
%%EXPIRE_DATE_PERIOD3%-%
%%SHARES_PERIOD4%-%
%%VEST_TYPE_PERIOD4%-%
%%VEST_DATE_PERIOD4%-%
%%EXPIRE_DATE_PERIOD4%-%
%%SHARES_PERIOD5%-%
%%VEST_TYPE_PERIOD5%-%
%%VEST_DATE_PERIOD5%-%
%%EXPIRE_DATE_PERIOD5%-%
%%SHARES_PERIOD6%-%
%%VEST_TYPE_PERIOD6%-%
%%VEST_DATE_PERIOD6%-%
%%EXPIRE_DATE_PERIOD6%-%
%%SHARES_PERIOD7%-%
%%VEST_TYPE_PERIOD7%-%
%%VEST_DATE_PERIOD7%-%
%%EXPIRE_DATE_PERIOD7%-%
%%SHARES_PERIOD8%-%
%%VEST_TYPE_PERIOD8%-%
%%VEST_DATE_PERIOD8%-%
%%EXPIRE_DATE_PERIOD8%-%
%%SHARES_PERIOD9%-%
%%VEST_TYPE_PERIOD9%-%
%%VEST_DATE_PERIOD9%-%
%%EXPIRE_DATE_PERIOD9%-%
%%SHARES_PERIOD10%-%
%%VEST_TYPE_PERIOD10%-%
%%VEST_DATE_PERIOD10%-%
%%EXPIRE_DATE_PERIOD10%-%

 
Additional Terms/Acknowledgements:  By accepting this option, the Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Stock Option Agreement (including any Appendix), the Plan (including any Sub-Plan) and the Plan Prospectus.  Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Stock Option Agreement (including any Appendix) and the Plan (including any Sub-Plan) set forth the entire understanding between Optionholder and the Company with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionholder with respect to the subject matter hereof.
 
 

 
Exhibit 10.70
 
 
Attachment I

Chordiant Software, Inc.
2005 Equity Incentive Plan
 
Stock Option Agreement
 
 
For Non-U.S. Employees
 
Pursuant to your Stock Option Grant Notice (the “Grant Notice”) and this Stock Option Agreement, including any appendix for your country (the “Appendix”), Chordiant Software, Inc. (the “Company”) has granted you an option under its 2005 Equity Incentive Plan, including any sub-plan for your country (the “Sub-Plan”) (collectively, the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice.  Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

The details of your Option are as follows:

1. Vesting.  Subject to the limitations contained herein, your Option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service, as described in Section 10(l) below.
 
2. Number of Shares and Exercise Price.  The number of shares of Common Stock subject to your Option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.
 
3. Exercise Restriction for Non-Exempt Employees.  In the event that you are an Employee eligible for overtime compensation under the U.S. Fair Labor Standards Act of 1938, as amended (i.e., a “Non-Exempt Employee”), you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant specified in your Grant Notice, notwithstanding any other provision of your option.  Notwithstanding the foregoing, consistent with the provisions of the U.S. Worker Economic Opportunity Act, upon your death or Disability, or upon a Corporate Transaction or a Change in Control in which the vesting of your option accelerates, your option, to the extent then vested, may be exercised earlier than six (6) months following the Date of Grant.  The foregoing provision is intended to operate so that any income derived by a Non-Exempt Employee in connection with the exercise or vesting of this option will be exempt from his or her regular rate of pay.
 
4. Method of Payment. Payment of the exercise price is due in full upon exercise of all or any part of your Option. You may elect to make payment of the exercise price in cash or by check or by one or more of the following:
 
(a) In the Company’s sole discretion at the time your Option is exercised and provided that at the time of exercise the Common Stock is publicly traded and quoted regularly, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
 

(b) Subject to the consent of the Company at the time of exercise, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of your Option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from you to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided further, however, that shares of Common Stock will no longer be outstanding under your Option and will not be exercisable thereafter to the extent that (i) shares are used to pay the exercise price pursuant to the “net exercise,” (ii) shares are delivered to you as a result of such exercise, and (iii) shares are withheld to satisfy the Tax-Related Items (as defined in Section 11 below).
 
5. Whole Shares.  You may exercise your Option only for whole shares of Common Stock.
 
6. Securities Law Compliance.  Notwithstanding anything to the contrary contained herein, you may not exercise your Option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Option also must comply with other applicable laws and regulations governing your Option, and you may not exercise your Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
 
7. Term.  You may not exercise your Option before the commencement of its term or after its term expires. The term of your Option commences on the Date of Grant and expires upon the earliest of the following:
 
(a) immediately upon the termination of your Continuous Service (as described in Section 10(l) below) for Cause;
 
(b) three (3) months after the termination of your Continuous Service for any reason other than Cause, Disability or death, provided that if during any part of such three (3) month period you may not exercise your Option solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” your Option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service (as described in Section 10(l) below);
 
(c) twelve (12) months after the termination of your Continuous Service due to your Disability;
 
(d) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason other than Cause;
 
(e) the Expiration Date indicated in your Grant Notice; or
 
(f) the day before the tenth (10th) anniversary of the Date of Grant.
 
8. Exercise. You may exercise the vested portion of your Option during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price and any Tax-Related Items (as defined in Section 11 below) to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.
 
9. Transferability.
 
(a) Restrictions on Transfer.  Your Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during your lifetime only by you; provided, however, that the Board may, in its sole discretion, permit transfer of your Option in a manner that is not prohibited by applicable tax and securities laws upon your request.
 
(b) Domestic Relations Orders.  Notwithstanding the foregoing, your Option may be transferred pursuant to a domestic relations order (or equivalent order under local law).

10. Nature of Grant.  In accepting the Option, you acknowledge that:
 
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time;
 
(b) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past;
 
(c) all decisions with respect to future option grants, if any, will be at the sole discretion of the Company;
 
(d) your participation in the Plan shall not create a right to further employment with your employer (the “Employer”) and shall not interfere with the ability of the Employer to terminate your employment or service relationship at any time;
 
(e) you are voluntarily participating in the Plan;
 
(f) the Option and the shares of Common Stock subject to the Option are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which is outside the scope of your employment or service contract, if any;
 
(g) the Option and the shares of Common Stock subject to the Option are not intended to replace any pension rights or compensation;
 
(h) the Option and the shares of Common Stock subject to the Option are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company, the Employer or any Affiliate;
 
(i) the Option grant and your participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Company or any Affiliate;
 
(j) the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty;
 
(k) in consideration of the grant of the Option, no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from termination of your Continuous Service (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, you shall be deemed irrevocably to have waived your entitlement to pursue such claim;
 
(l) in the event of termination of your Continuous Service (whether or not in breach of local labor laws), your right to receive or vest in the Option under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of termination of your Continuous Service (whether or not in breach of local labor laws), your right to exercise the Option after termination of your Continuous Service, if any, will be measured by the date of termination of your active employment and will not be extended by any notice period mandated under local law; the Board shall have the exclusive discretion to determine when you are no longer actively employed for purposes of your Option grant; and
 
(m) the Option and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger, take-over or transfer of liability.
 
 
(a) Regardless of any action the Company or the Employer takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer.  You further acknowledge that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option, including, but not limited to, the grant, vesting or exercise of the Option, the subsequent sale of shares of Common Stock acquired pursuant to such exercise and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result.  You shall not make any claim against the Company, its Officers, Directors, Employees or Affiliates related to Tax-Related Items.  Further, if you have become subject to tax in more than one jurisdiction between the Date of Grant and the date of any relevant taxable event, you acknowledge that the Company and/or the Employer (or your former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
 
(b) Prior to any relevant taxable or tax withholding event, as applicable, you will pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items.  In this regard, you authorize the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:
 
(i)  
withholding from your wages or other cash compensation paid to you by the Company and/or the Employer;
 
(ii)  
withholding from proceeds of the sale of shares of Common Stock acquired upon exercise of the Option either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization); or
 
(iii)  
withholding in shares of Common Stock to be issued upon exercise of the Option.
 
To avoid negative accounting treatment, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates.  If the obligation for Tax-Related Items is satisfied by withholding in shares of Common Stock, for tax purposes, you are deemed to have been issued the full number of shares of Common Stock subject to the exercised portion of the Option, notwithstanding that a number of the shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of your participation in the Plan.
 
Finally, you shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described.

(c) You may not exercise your Option if you fail to comply with your obligations in connection with the Tax-Related Items.  Accordingly, you may not be able to exercise your Option when desired even though your Option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock unless you comply with your obligations in connection with the Tax-Related Items.
 
12. No Advice Regarding Grant.  The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Common Stock.  You are hereby advised to consult with your own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
 
13. Data Privacy.  You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in the Grant Notice, this Stock Option Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and any Affiliate for the exclusive purpose of implementing, administering and managing your participation in the Plan.
 
You understand that the Company and the Employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of Common Stock or directorships held in the Company, details of all Options or any other entitlement to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the exclusive purpose of implementing, administering and managing the Plan (“Data”).

You understand that Data will be transferred to E*TRADE, or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan.  You understand that the recipients of Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than your country.  You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative.  You authorize the Company, E*TRADE and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer Data, in electronic or other form, for the sole purpose of implementing, administering and managing your participation in the Plan.  You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan.  You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative.  You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan.  For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.
 
14. Language.  If you have received this Stock Option Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
 
15. Notices. Any notices provided for in connection with your Option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
 
16. Electronic Delivery and Participation.  The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan by electronic means or to request your consent to participate in the Plan by electronic means.  You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or third party designated by the Company.
 
17. Governing Plan Document.  Your Option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Option, 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. In the event of any conflict between the provisions of your Option and those of the Plan, the provisions of the Plan shall control.
 
18. Other Documents.  You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
 
19. Effect on Other Employee Benefit Plans.  The value of the Option subject to this Stock Option Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.
 
20. Choice of Law and Venue.  The interpretation, performance and enforcement of this Stock Option Agreement will be governed by the law of the state of Delaware without regard to such state’s conflict of laws rules.  For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or this Stock Option Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.
 
21. Compliance with Section 409A of the Code. This Option is intended to comply with Treasury Regulation Section 1.409A-1(b)(5)(i)(A).  However, you understand that this Option complies with such regulation only if (among other requirements) the exercise price per share specified in the Grant Notice is at least equal to the Fair Market Value per share of Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with the Option.  Each installment of shares of Common Stock that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).
 
22. Severability. The provisions of this Stock Option Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
 
23. Appendix. Notwithstanding any provisions in this Stock Option Agreement, the Option grant shall be subject to any special terms and conditions set forth in any Appendix to this Stock Option Agreement for your country.  Moreover, if you relocate to one of the countries included in the Appendix, the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan.  The Appendix constitutes part of this Stock Option Agreement.
 
24. Imposition of Other Requirements.  The Company reserves the right to impose other requirements on your participation in the Plan, on the Option and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
 

 
Exhibit 10.70
 
Appendix

Chordiant Software, Inc.
2005 Equity Incentive Plan

Stock Option Agreement
For Non-U.S. Employees



Terms and Conditions
 
This Appendix includes special terms and conditions applicable to Optionholders in the countries covered by the Appendix.  These terms and conditions are in addition to or, if so indicated, in place of, the terms and conditions set forth in the Stock Option Agreement.  Defined terms not explicitly defined in this Appendix but defined in the Plan or the Stock Option Agreement shall have the same definitions as in the Plan or the Stock Option Agreement, as the case may be.
 

Notifications
 
This Appendix also includes notifications relating to exchange control and other issues of which the Optionholder should be aware with respect to his or her participation in the Plan.  The information is based on the exchange control, securities and other laws in effect in the countries to which this Appendix refers as of October 2008.  Such laws are often complex and change frequently.  As a result, the Company strongly recommends that the Optionholder not rely on the notifications herein as the only source of information relating to the consequences of participation in the Plan because the information may be out of date at the time the Option is exercised or the shares of Common Stock purchased upon exercise of the Option are sold.

In addition, the notifications are general in nature and may not apply to the particular situation of the Optionholder.  The Company is not in a position to assure the Optionholder of any particular result.  Accordingly, each Optionholder is advised to seek appropriate professional advice as to how the relevant laws in his or her country may apply to his or her situation.  Finally, if the Optionholder is a citizen or resident of a country other than the one in which he or she is currently working, the information contained herein may not be applicable to the Optionholder.


 
Exhibit 10.70
 
Appendix for Canada
 

 
Chordiant Software, Inc.
2005 Equity Incentive Plan

Stock Option Agreement
For Non-U.S. Employees


 
Terms and Conditions
 
Method of Payment.  Notwithstanding anything to the contrary in the Plan, you are prohibited from delivering to the Company (either by actual delivery or attestation) shares of Common Stock that you already own to pay the exercise price of the Option.

The following provisions will also apply to Optionholders who are residents of Quebec:

Language Consent. The parties acknowledge that it is their express wish that the Stock Option Agreement, including this Appendix, as well as all documents, notices, and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

Consentement relatif à la langue utilisée.  Les parties reconnaissent avoir souhaité expressément que la convention («Stock Option Agreement») ainsi que cette Annexe, ainsi que tous les documents, les notices et la documentation juridique fournis ou mis en œuvre ou institués directement ou indirectement, relativement aux présentes, soient rédigés en anglais.
 
Data Privacy.  This provision supplements Section 13 of the Stock Option Agreement:

You hereby authorize the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan.  You further authorize the Company, any of its Affiliates and E*TRADE (or any other stock plan service provider as may be selected by the Company to assist with the Plan) to disclose and discuss the Plan with their respective advisors.  You further authorize the Company and any of its Affiliates to record such information and to keep such information in your employee file.
 

 
Exhibit 10.70
 
Appendix for Germany
 

 
Chordiant Software, Inc.
2005 Equity Incentive Plan

Stock Option Agreement
For Non-U.S. Employees



Notifications

Exchange Control Notification.  Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank.  If you use a German bank to transfer a cross-border payment in excess of €12,500 in connection with the purchase or sale of shares of Common Stock acquired under the Plan, the bank will make the report for you.  You must also report to the German Federal Bank any receivables or payables or debts in foreign currency exceeding an amount of €5,000,000 in any month.
 

 
Exhibit 10.70
 
Appendix for the Netherlands
 

 
Chordiant Software, Inc.
2005 Equity Incentive Plan

Stock Option Agreement
For Non-U.S. Employees



Notifications
 
Securities Law Notification. You should be aware of Dutch insider trading rules which may impact the sale of shares of Common Stock acquired under the Plan.  In particular, you may be prohibited from effecting certain transactions if you have insider information regarding the Company.
 
In accepting the Option and participating in the Plan, you acknowledge having read and understood this Securities Law Notification and further acknowledge that it is your responsibility to comply with the following Dutch insider trading rules:
 
Under Article 46 of the Act on the Supervision of the Securities Trade 1995, anyone who has “inside information” related to the Company is prohibited from effectuating a transaction in securities in or from the Netherlands.  “Inside information” is knowledge of a detail concerning the issuer to which the securities relate that is not public and which, if published, would reasonably be expected to affect the stock price, regardless of the development of the price.
 
Given the broad scope of the definition of inside information, certain employees of the Company working at an Affiliate in the Netherlands (including you) may have inside information and, thus, would be prohibited from effectuating a transaction in securities in the Netherlands at a time when they have such inside information.
 

 
Exhibit 10.70
 
Appendix for Poland
 

 
Chordiant Software, Inc.
2005 Equity Incentive Plan

Stock Option Agreement
For Non-U.S. Employees



Notifications
 
Exchange Control Notification. If you transfer funds in excess of €15,000 into or out of Poland in connection with the purchase or sale of shares of Common Stock acquired under the Plan, the funds must be transferred via a bank account.  You are required to retain the documents connected with a foreign exchange transaction for a period of five (5) years, as measured from the end of the year in which such transaction occurred.  If you hold shares of Common Stock acquired under the Plan and/or keep a bank account abroad, you will have reporting duties to the National Bank of Poland. Please consult with your personal legal advisor to determine what you must do to fulfill any applicable reporting duties.


 
Exhibit 10.70
 
Appendix for Russia
 

 
Chordiant Software, Inc.
2005 Equity Incentive Plan

Stock Option Agreement
For Non-U.S. Employees



Notifications
 
Exchange Control Notification. If you remit funds out of Russia to pay the exercise price, the funds must be remitted from a foreign currency account opened in your name at an authorized bank in Russia.  This requirement does not apply if you pay the exercise price pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds, because in this case there is no remittance of funds out of Russia.

Regardless of what method of payment you use to pay the exercise price, you must repatriate to Russia the proceeds from the sale of shares of Common Stock and any cash dividends received in relation to the shares within a reasonably short time of receipt.  The sale proceeds and any cash dividends received must be initially credited to you through a foreign currency account opened in your name at an authorized bank in Russia.  After the funds are initially received in Russia, they may be further remitted to foreign banks subject to the following limitations: (i) the foreign account may be opened only for individuals; (ii) the foreign account may not be used for business activities; and (iii) you must give notice to the Russian tax authorities about the opening or closing of each foreign account within one month of the account opening or closing, as applicable.

Securities Law Notification. The Stock Option Agreement, the Plan and all other materials you may receive regarding your Option and participation in the Plan do not constitute advertising or an offering of securities in Russia.  The issuance of shares of Common Stock under the Plan has not and will not be registered in Russia and, therefore, the shares of Common Stock described in any Plan documents may not be offered or placed in public circulation in Russia.

In no event will shares of Common Stock be delivered to you in Russia; all shares of Common Stock acquired under the Plan will be maintained on your behalf in the United States.

You are not permitted to sell shares of Common Stock directly to a Russian legal entity or resident.


 
Exhibit 10.70
 
Appendix for Spain
 

 
Chordiant Software, Inc.
2005 Equity Incentive Plan

Stock Option Agreement
For Non-U.S. Employees



Terms and Conditions
 
Nature of Grant. This provision supplements Section 10 of the Stock Option Agreement:

In accepting the Option, you consent to participate in the Plan and acknowledge having received and read a copy of the Plan.

Further, you understand that the Company has unilaterally, gratuitously and discretionally decided to grant options under the Plan to individuals who may be employees of the Company or one of its Affiliates throughout the world.  The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not bind the Company or any of its Affiliates.  Consequently, you understand that the Option is granted on the assumption and condition that such Option and any shares of Common Stock acquired upon exercise of the Option shall not become a part of any employment contract (either with the Company or any of its Affiliates) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever.  In addition, you understand that the Option would not granted but for the assumptions and conditions referred to above; thus, you acknowledge and freely accept that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any grant of the Option shall be null and void.

 
Notifications
 
Exchange Control Notification. You must declare the acquisition of shares of stock in a foreign company (including shares of Common Stock purchased upon exercise of the Option) to the Direccion General de Política Comercial y de Inversiones Extranjeras (the “DGPCIE”) of the Ministerio de Economia for statistical purposes.  You must also declare ownership of any shares of stock in a foreign company (including shares of Common Stock purchased upon exercise of the Option) with the Directorate of Foreign Transactions each January while the shares of stock are owned.  In addition, if you wish to import the ownership title of shares of stock in a foreign company (including shares of Common Stock purchased upon exercise of the Option) (i.e., stock certificates) into Spain, you must declare the importation of such securities to the DGPCIE.
 
When receiving foreign currency payments derived from the ownership of shares of stock (including shares of Common Stock purchased upon exercise of the Option) (e.g., cash dividends or sale proceeds), you must inform the financial institution receiving the payment of the basis upon which such payment is made.  You will need to provide the institution with the following information: (i) your name, address, and fiscal identification number; (ii) the name and corporate domicile of the Company; (iii) the amount of the payment; (iv) the currency used; (v) the country of origin; (vi) the reasons for the payment; and (vii) any further information that may be required.
 

 
Exhibit 10.70
 
Appendix for the United Kingdom
 

 
Chordiant Software, Inc.
2005 Equity Incentive Plan

Stock Option Agreement
For Non-U.S. Employees



Terms and Conditions

Tax Obligations.  This section supplements Section 11 of the Stock Option Agreement:

If payment or withholding of the Tax-Related Items is not made within ninety (90) days of the event giving rise to the Tax-Related Items or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “Due Date”), the amount of any uncollected Tax-Related Items shall constitute a loan owed by you to the Employer, effective as of the Due Date.  You agree that the loan will bear interest at the then-current official rate of Her Majesty’s Revenue & Customs (“HMRC”), it shall be immediately due and repayable, and the Company or the Employer may recover it at any time thereafter by any of the means referred to in Section 11 of the Stock Option Agreement.  Notwithstanding the foregoing, if you are a director or executive officer of the Company (within the meaning of Section 13(k) of the U.S. Securities and Exchange Act of 1934, as amended), you shall not be eligible for a loan from the Company to cover the Tax-Related Items.  In the event that you are a director or executive officer and Tax-Related Items are not collected from or paid by you by the Due Date, the amount of any uncollected Tax-Related Items will constitute a benefit to you on which additional income tax and national insurance contributions (“NICs”) will be payable.  You will be responsible for reporting any income tax and NICs due on this additional benefit directly to HMRC under the self-assessment regime.


 

 
Exhibit 10.70
 
Attachment II

Chordiant Software, Inc.
2005 Equity Incentive Plan

EX-10.78 5 ex1078.htm ex1078.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.
 

Chordiant Confidential Information
Exhibit 10.78
 
 
Chordiant Fiscal Year 2009 Executive Incentive Bonus Plan
 

This Executive Incentive Bonus Plan (the “Plan”) will cover all Executive Officers and Vice Presidents of the Company (except for the Vice President of Services, the Vice President of Sales, the General Counsel, and those paid on sales commission plans).  Bonuses under this Plan will be calculated and paid (if applicable) based on the Company’s financial results as filed on Forms 10-Q and 10-K (and the associated non-GAAP reconciliations historically included in press releases and filed on a Form 8-K) for the Company’s 2009 fiscal year versus the Company’s FY2009 Financial Plan on one quantitative measure: Revenue (as defined below).

A participant’s total bonus payments under the Plan shall not exceed 300% of his or her 2009 fiscal year target bonus.  Payments for any given quarter will be limited to a maximum of 100% of the participant’s target bonus for that quarter, plus any cumulative “catch up” payment for prior quarters.

The quarterly bonus calculations will be computed using year-to-date figures. Cumulative “catch up” payments will be made for any prior quarter shortfall against the goals.

[**], for quarterly payments to be made under the Plan, [**]. For the [**], for payments to be made under the Plan, the Company’s [**].

At the end of the fiscal year, the Company will evaluate its 2009 fiscal year revenue attainment against its 2009 fiscal year revenue goal. Payments for performance in excess of 100% of its annual revenue goal will be calculated and paid as provided in this Plan.

Plan Summary

Quantitative Component (in $US):
·  
GAAP Revenue

Maximum payout to a participant – 300%

Payments
·  
Quarterly.
·  
Limited to 100% maximum payment for a current quarter, plus any cumulative “catch-up” to bring any prior quarter to 100%.
·  
Overachievement above 100% paid at end of fiscal year.
·  
To qualify for payment, Company must [**] on a non-GAAP Operating Profit basis [**], and achieve [**].


Component – GAAP Revenue
Weighting – 100%
Revenue Goal per FY2009 Financial Plan (Reported GAAP Revenue in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]            [**]
Q2                                                      [**]         [**]
Q3                                                      [**]         [**]
Q4                                                      [**]         [**]
FY2009 [**]

                                                      Performance*     Payout*
Thresholds                                           80%         60%
                                                    100%         80%
                                                    120%         100%
                                                    160%         300%

*Performance and payout interpolate between levels


Profitability Requirements
Non-GAAP Operating Profit [**] Goal per FY2009 Financial Plan (Reported Non-GAAP Operating Profit in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]          [**]
Q2                                                      [**]          [**]


Revenue

“Revenue” is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

Each quarter, a participant is eligible to receive a bonus equal to twenty-five percent (25%) of his or her annual bonus target (plus “catch up” payments described elsewhere in this Plan).  Bonus payments are subject to the following:

· If the Company does not achieve at least 80% of its year-to-date Revenue goal, then no bonus will be paid for that quarter.
 
· If the Company achieves at least 80% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 60% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 80% (up to 100%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
·  If the Company achieves at least 100% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 80% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 100% (up to 120%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
· If the Company achieves at least 120% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 100% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 120% (up to 160%), participant will be paid an additional 5% of his or her target bonus for the quarter, up to the maximum payout of 300% of a participant’s target bonus for the quarter.
 

Non-GAAP Operating Profit

Non-GAAP Operating Profit is defined as Non-GAAP Operating Profit as reported on the Company’s quarterly Non-GAAP consolidated statement of operations in $US. Non-GAAP reconciliations historically have been included in press releases and filed on a Form 8-K at the end of each fiscal quarter.  Historically, these Non-GAAP results exclude expenses associated with the amortization of purchased intangible assets, stock-based compensation expense, reductions in workforce and other non-recurring charges. In fiscal year 2009, the Non-GAAP adjustments will include the non-cash tax expense associated with acquired NOL carry forwards.


Calculations

Participants joining the Company after the beginning of the Company’s 2009 fiscal year will only be entitled to a pro-rata portion of the quarterly bonus in the quarter they commence employment with the Company, a pro-rata portion of any bonus amount that exceeds 100%, and will not be eligible for any “catch-up” payments for quarters in which they were not employed by the Company.

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 or the Compensation Committee if so delegated by the Board.  In its discretion, the Board, or the Compensation Committee if so delegated by the Board, has the authority to approve a payment of up to 50% of a participant’s annual target bonus 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 sixty (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 the Revenue goal generally will be made not later than sixty (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 with the SEC.
 
Notwithstanding anything to the contrary herein, no bonus is earned until it is paid under this Plan.  Therefore, in the event the employment of a participant under this Plan is terminated (either by the Company or by the participant, whether voluntarily or involuntarily) before a bonus is paid, then the participant 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 participant who wishes not to participate in this 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 participant’s right or the Company’s right to terminate the participant’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.
 
This Plan contains the entire agreement between the Company and the participant on this subject, and supersedes all prior bonus compensation plans or programs between the Company and participant, and all previous oral or written statements regarding any such bonus compensation programs or plans.
 
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 2009 Executive Incentive Bonus Plan and hereby accept its terms.
 
           
Employee Name (Printed)
 
Employee Signature
 
Date
 
 
           
           
[Authorized Officer]
     
Date
 
           

 

EX-10.79 6 ex1079.htm ex1079.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.
 

Chordiant Confidential Information
Exhibit 10.79

 
Chordiant Fiscal Year 2009 Executive Incentive Bonus Plan
 

This Executive Incentive Bonus Plan (the “Plan”) will cover all Executive Officers and Vice Presidents of the Company (except for the Vice President of Services, the Vice President of Sales, the General Counsel, and those paid on sales commission plans).  Bonuses under this Plan will be calculated and paid (if applicable) based on the Company’s financial results as filed on Forms 10-Q and 10-K (and the associated non-GAAP reconciliations historically included in press releases and filed on a Form 8-K) for the Company’s 2009 fiscal year versus the Company’s FY2009 Financial Plan on one quantitative measure: Revenue (as defined below).

A participant’s total bonus payments under the Plan shall not exceed 300% of his or her 2009 fiscal year target bonus.  Payments for any given quarter will be limited to a maximum of 100% of the participant’s target bonus for that quarter, plus any cumulative “catch up” payment for prior quarters.

The quarterly bonus calculations will be computed using year-to-date figures. Cumulative “catch up” payments will be made for any prior quarter shortfall against the goals.

[**], for quarterly payments to be made under the Plan, [**]. For the [**], for payments to be made under the Plan, the Company’s [**].

At the end of the fiscal year, the Company will evaluate its 2009 fiscal year revenue attainment against its 2009 fiscal year revenue goal. Payments for performance in excess of 100% of its annual revenue goal will be calculated and paid as provided in this Plan.

Plan Summary

Quantitative Component (in $US):
·  
GAAP Revenue

Maximum payout to a participant – 300%

Payments
·  
Quarterly.
·  
Limited to 100% maximum payment for a current quarter, plus any cumulative “catch-up” to bring any prior quarter to 100%.
·  
Overachievement above 100% paid at end of fiscal year.
·  
To qualify for payment, Company must [**] on a non-GAAP Operating Profit basis [**], and achieve [**].


Component – GAAP Revenue
Weighting – 100%
Revenue Goal per FY2009 Financial Plan (Reported GAAP Revenue in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]              [**]
Q2                                                      [**]           [**]
Q3                                                      [**]           [**]
Q4                                                      [**]           [**]
FY2009 [**]

                                                      Performance*     Payout*
Thresholds                                            80%         60%
                                                    100%         80%
                                                    120%         100%
                                                    160%         300%

*Performance and payout interpolate between levels


Profitability Requirements
Non-GAAP Operating Profit [**] Goal per FY2009 Financial Plan (Reported Non-GAAP Operating Profit in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]             [**]
Q2                                                      [**]             [**]


Revenue

“Revenue” is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

Each quarter, a participant is eligible to receive a bonus equal to twenty-five percent (25%) of his or her annual bonus target (plus “catch up” payments described elsewhere in this Plan).  Bonus payments are subject to the following:

· If the Company does not achieve at least 80% of its year-to-date Revenue goal, then no bonus will be paid for that quarter.
 
· If the Company achieves at least 80% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 60% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 80% (up to 100%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
·  If the Company achieves at least 100% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 80% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 100% (up to 120%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
· If the Company achieves at least 120% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 100% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 120% (up to 160%), participant will be paid an additional 5% of his or her target bonus for the quarter, up to the maximum payout of 300% of a participant’s target bonus for the quarter.
 

Non-GAAP Operating Profit

Non-GAAP Operating Profit is defined as Non-GAAP Operating Profit as reported on the Company’s quarterly Non-GAAP consolidated statement of operations in $US. Non-GAAP reconciliations historically have been included in press releases and filed on a Form 8-K at the end of each fiscal quarter.  Historically, these Non-GAAP results exclude expenses associated with the amortization of purchased intangible assets, stock-based compensation expense, reductions in workforce and other non-recurring charges. In fiscal year 2009, the Non-GAAP adjustments will include the non-cash tax expense associated with acquired NOL carry forwards.


Calculations

Participants joining the Company after the beginning of the Company’s 2009 fiscal year will only be entitled to a pro-rata portion of the quarterly bonus in the quarter they commence employment with the Company, a pro-rata portion of any bonus amount that exceeds 100%, and will not be eligible for any “catch-up” payments for quarters in which they were not employed by the Company.

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 or the Compensation Committee if so delegated by the Board.  In its discretion, the Board, or the Compensation Committee if so delegated by the Board, has the authority to approve a payment of up to 50% of a participant’s annual target bonus 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 sixty (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 the Revenue goal generally will be made not later than sixty (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 with the SEC.
 
Notwithstanding anything to the contrary herein, no bonus is earned until it is paid under this Plan.  Therefore, in the event the employment of a participant under this Plan is terminated (either by the Company or by the participant, whether voluntarily or involuntarily) before a bonus is paid, then the participant 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 participant who wishes not to participate in this 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 participant’s right or the Company’s right to terminate the participant’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.
 
This Plan contains the entire agreement between the Company and the participant on this subject, and supersedes all prior bonus compensation plans or programs between the Company and participant, and all previous oral or written statements regarding any such bonus compensation programs or plans.
 
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 2009 Executive Incentive Bonus Plan and hereby accept its terms.
 

 
Steven R. Springsteel                                                      /s/ Steven R. Springsteel                                                                      11/24/08
Employee Name (Printed)                                                      Employee Signature                                                                             Date
 

 
/s/ Peter S. Norman                                           11/24/08                      
Peter S. Norman                                                                                                                         Date
Chief Financial Officer
 

EX-10.80 7 ex1080.htm ex1080.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.
 

Chordiant Confidential Information
Exhibit 10.80

 
Chordiant Fiscal Year 2009 Executive Incentive Bonus Plan
 

This Executive Incentive Bonus Plan (the “Plan”) will cover all Executive Officers and Vice Presidents of the Company (except for the Vice President of Services, the Vice President of Sales, the General Counsel, and those paid on sales commission plans).  Bonuses under this Plan will be calculated and paid (if applicable) based on the Company’s financial results as filed on Forms 10-Q and 10-K (and the associated non-GAAP reconciliations historically included in press releases and filed on a Form 8-K) for the Company’s 2009 fiscal year versus the Company’s FY2009 Financial Plan on one quantitative measure: Revenue (as defined below).

A participant’s total bonus payments under the Plan shall not exceed 300% of his or her 2009 fiscal year target bonus.  Payments for any given quarter will be limited to a maximum of 100% of the participant’s target bonus for that quarter, plus any cumulative “catch up” payment for prior quarters.

The quarterly bonus calculations will be computed using year-to-date figures. Cumulative “catch up” payments will be made for any prior quarter shortfall against the goals.

[**], for quarterly payments to be made under the Plan, [**]. For the [**], for payments to be made under the Plan, the Company’s [**].

At the end of the fiscal year, the Company will evaluate its 2009 fiscal year revenue attainment against its 2009 fiscal year revenue goal. Payments for performance in excess of 100% of its annual revenue goal will be calculated and paid as provided in this Plan.

Plan Summary

Quantitative Component (in $US):
·  
GAAP Revenue

Maximum payout to a participant – 300%

Payments
·  
Quarterly.
·  
Limited to 100% maximum payment for a current quarter, plus any cumulative “catch-up” to bring any prior quarter to 100%.
·  
Overachievement above 100% paid at end of fiscal year.
·  
To qualify for payment, Company must [**] on a non-GAAP Operating Profit basis [**], and achieve [**].


Component – GAAP Revenue
Weighting – 100%
Revenue Goal per FY2009 Financial Plan (Reported GAAP Revenue in $US)

                                                      Quarter       Year-to-Date
Q1                                                      [**]         [**]
Q2                                                      [**]         [**]
Q3                                                      [**]         [**]
Q4                                                      [**]         [**]
FY2009 [**]

                                                      Performance*     Payout*
Thresholds                                           80%                  60%
                                                    100%       80%
                                                    120%         100%
                                                    160%         300%

*Performance and payout interpolate between levels


Profitability Requirements
Non-GAAP Operating Profit [**] Goal per FY2009 Financial Plan (Reported Non-GAAP Operating Profit in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]             [**]
Q2                                                      [**]             [**]


Revenue

“Revenue” is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

Each quarter, a participant is eligible to receive a bonus equal to twenty-five percent (25%) of his or her annual bonus target (plus “catch up” payments described elsewhere in this Plan).  Bonus payments are subject to the following:

· If the Company does not achieve at least 80% of its year-to-date Revenue goal, then no bonus will be paid for that quarter.
 
· If the Company achieves at least 80% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 60% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 80% (up to 100%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
·  If the Company achieves at least 100% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 80% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 100% (up to 120%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
· If the Company achieves at least 120% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 100% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 120% (up to 160%), participant will be paid an additional 5% of his or her target bonus for the quarter, up to the maximum payout of 300% of a participant’s target bonus for the quarter.
 

Non-GAAP Operating Profit

Non-GAAP Operating Profit is defined as Non-GAAP Operating Profit as reported on the Company’s quarterly Non-GAAP consolidated statement of operations in $US. Non-GAAP reconciliations historically have been included in press releases and filed on a Form 8-K at the end of each fiscal quarter.  Historically, these Non-GAAP results exclude expenses associated with the amortization of purchased intangible assets, stock-based compensation expense, reductions in workforce and other non-recurring charges. In fiscal year 2009, the Non-GAAP adjustments will include the non-cash tax expense associated with acquired NOL carry forwards.


Calculations

Participants joining the Company after the beginning of the Company’s 2009 fiscal year will only be entitled to a pro-rata portion of the quarterly bonus in the quarter they commence employment with the Company, a pro-rata portion of any bonus amount that exceeds 100%, and will not be eligible for any “catch-up” payments for quarters in which they were not employed by the Company.

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 or the Compensation Committee if so delegated by the Board.  In its discretion, the Board, or the Compensation Committee if so delegated by the Board, has the authority to approve a payment of up to 50% of a participant’s annual target bonus 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 sixty (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 the Revenue goal generally will be made not later than sixty (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 with the SEC.
 
Notwithstanding anything to the contrary herein, no bonus is earned until it is paid under this Plan.  Therefore, in the event the employment of a participant under this Plan is terminated (either by the Company or by the participant, whether voluntarily or involuntarily) before a bonus is paid, then the participant 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 participant who wishes not to participate in this 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 participant’s right or the Company’s right to terminate the participant’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.
 
This Plan contains the entire agreement between the Company and the participant on this subject, and supersedes all prior bonus compensation plans or programs between the Company and participant, and all previous oral or written statements regarding any such bonus compensation programs or plans.
 
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 2009 Executive Incentive Bonus Plan and hereby accept its terms.
 

 
Peter Norman                                           /s/ Peter Norman                                           11/25/08                      
Employee Name (Printed)                                       Employee Signature                                                      Date
 

 
/s/ Steven R. Springsteel                                                      11/25/08
Steven R. Springsteel                                                                                                                     Date
Chief Executive Officer
 

EX-10.81 8 ex1081.htm ex1081.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.
 

Chordiant Confidential Information
Exhibit 10.81

Chordiant Fiscal Year 2009 Executive Incentive Bonus Plan
 

This Executive Incentive Bonus Plan (the “Plan”) will cover all Executive Officers and Vice Presidents of the Company (except for the Vice President of Services, the Vice President of Sales, the General Counsel, and those paid on sales commission plans).  Bonuses under this Plan will be calculated and paid (if applicable) based on the Company’s financial results as filed on Forms 10-Q and 10-K (and the associated non-GAAP reconciliations historically included in press releases and filed on a Form 8-K) for the Company’s 2009 fiscal year versus the Company’s FY2009 Financial Plan on one quantitative measure: Revenue (as defined below).

A participant’s total bonus payments under the Plan shall not exceed 300% of his or her 2009 fiscal year target bonus.  Payments for any given quarter will be limited to a maximum of 100% of the participant’s target bonus for that quarter, plus any cumulative “catch up” payment for prior quarters.

The quarterly bonus calculations will be computed using year-to-date figures. Cumulative “catch up” payments will be made for any prior quarter shortfall against the goals.

[**], for quarterly payments to be made under the Plan, [**]. For the [**], for payments to be made under the Plan, the Company’s [**].

At the end of the fiscal year, the Company will evaluate its 2009 fiscal year revenue attainment against its 2009 fiscal year revenue goal. Payments for performance in excess of 100% of its annual revenue goal will be calculated and paid as provided in this Plan.

Plan Summary

Quantitative Component (in $US):
·  
GAAP Revenue

Maximum payout to a participant – 300%

Payments
·  
Quarterly.
·  
Limited to 100% maximum payment for a current quarter, plus any cumulative “catch-up” to bring any prior quarter to 100%.
·  
Overachievement above 100% paid at end of fiscal year.
·  
To qualify for payment, Company must [**] on a non-GAAP Operating Profit basis [**], and achieve [**].


Component – GAAP Revenue
Weighting – 100%
Revenue Goal per FY2009 Financial Plan (Reported GAAP Revenue in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]              [**]
Q2                                                      [**]              [**]
Q3                                                      [**]           [**]
Q4                                                      [**]           [**]
FY2009 [**]

                                                      Performance*         Payout*
Thresholds                                            80%             60%
                                                    100%             80%
                                                    120%             100%
                                                    160%             300%

*Performance and payout interpolate between levels


Profitability Requirements
Non-GAAP Operating Profit [**] Goal per FY2009 Financial Plan (Reported Non-GAAP Operating Profit in $US)

                                                      Quarter           Year-to-Date
Q1                                                      [**]            [**]
Q2                                                      [**]            [**]


Revenue

“Revenue” is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

Each quarter, a participant is eligible to receive a bonus equal to twenty-five percent (25%) of his or her annual bonus target (plus “catch up” payments described elsewhere in this Plan).  Bonus payments are subject to the following:

· If the Company does not achieve at least 80% of its year-to-date Revenue goal, then no bonus will be paid for that quarter.
 
· If the Company achieves at least 80% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 60% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 80% (up to 100%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
·  If the Company achieves at least 100% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 80% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 100% (up to 120%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
· If the Company achieves at least 120% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 100% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 120% (up to 160%), participant will be paid an additional 5% of his or her target bonus for the quarter, up to the maximum payout of 300% of a participant’s target bonus for the quarter.
 

Non-GAAP Operating Profit

Non-GAAP Operating Profit is defined as Non-GAAP Operating Profit as reported on the Company’s quarterly Non-GAAP consolidated statement of operations in $US. Non-GAAP reconciliations historically have been included in press releases and filed on a Form 8-K at the end of each fiscal quarter.  Historically, these Non-GAAP results exclude expenses associated with the amortization of purchased intangible assets, stock-based compensation expense, reductions in workforce and other non-recurring charges. In fiscal year 2009, the Non-GAAP adjustments will include the non-cash tax expense associated with acquired NOL carry forwards.


Calculations

Participants joining the Company after the beginning of the Company’s 2009 fiscal year will only be entitled to a pro-rata portion of the quarterly bonus in the quarter they commence employment with the Company, a pro-rata portion of any bonus amount that exceeds 100%, and will not be eligible for any “catch-up” payments for quarters in which they were not employed by the Company.

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 or the Compensation Committee if so delegated by the Board.  In its discretion, the Board, or the Compensation Committee if so delegated by the Board, has the authority to approve a payment of up to 50% of a participant’s annual target bonus 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 sixty (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 the Revenue goal generally will be made not later than sixty (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 with the SEC.
 
Notwithstanding anything to the contrary herein, no bonus is earned until it is paid under this Plan.  Therefore, in the event the employment of a participant under this Plan is terminated (either by the Company or by the participant, whether voluntarily or involuntarily) before a bonus is paid, then the participant 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 participant who wishes not to participate in this 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 participant’s right or the Company’s right to terminate the participant’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.
 
This Plan contains the entire agreement between the Company and the participant on this subject, and supersedes all prior bonus compensation plans or programs between the Company and participant, and all previous oral or written statements regarding any such bonus compensation programs or plans.
 
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 2009 Executive Incentive Bonus Plan and hereby accept its terms.
 

 
Charles Altomare                                           /s/ Charles Altomare                                           11-24-08                      
Employee Name (Printed)                                               Employee Signature                                                      Date
 

 
/s/ Steven R. Springsteel                                                      11/24/08
Steven R. Springsteel                                                                                                                                     Date
Chief Executive Officer
 

EX-10.82 9 ex1082.htm ex1082.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.
 
Exhibit 10.82

 
2009 Vice President Worldwide Sales Incentive Bonus Plan


November 24, 2008


David Cunningham,

The letter is to document your variable compensation plan for Chordiant’s 2009 fiscal year which begins on October 1, 2008 and ends September 30, 2009.  Your variable compensation element, which has a target equal to 83.33% of your annual base salary, 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 2009 Executive Incentive Bonus Plan (attachment A)
 
·  
75% based on based on the criteria and payment calculation formulas established in the 2009 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 its Form 10-K, 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.



/s/ David Cunningham                                                                11-24-2008
David Cunningham                                                                                                               Date
Vice President Worldwide Sales


/s/ Steven R. Springsteel                                                                11/24/08                      
Steven R. Springsteel                                                                                                                     Date
Chief Executive Officer






 
 

 
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 10.82


Attachment A

Chordiant Fiscal Year 2009 Executive Incentive Bonus Plan
 

This Executive Incentive Bonus Plan (the “Plan”) will cover all Executive Officers and Vice Presidents of the Company (except for the Vice President of Services, the Vice President of Sales, the General Counsel, and those paid on sales commission plans).  Bonuses under this Plan will be calculated and paid (if applicable) based on the Company’s financial results as filed on Forms 10-Q and 10-K (and the associated non-GAAP reconciliations historically included in press releases and filed on a Form 8-K) for the Company’s 2009 fiscal year versus the Company’s FY2009 Financial Plan on one quantitative measure: Revenue (as defined below).

A participant’s total bonus payments under the Plan shall not exceed 300% of his or her 2009 fiscal year target bonus.  Payments for any given quarter will be limited to a maximum of 100% of the participant’s target bonus for that quarter, plus any cumulative “catch up” payment for prior quarters.

The quarterly bonus calculations will be computed using year-to-date figures. Cumulative “catch up” payments will be made for any prior quarter shortfall against the goals.

[**], for quarterly payments to be made under the Plan, [**]. For the [**], for payments to be made under the Plan, the Company’s [**].

At the end of the fiscal year, the Company will evaluate its 2009 fiscal year revenue attainment against its 2009 fiscal year revenue goal. Payments for performance in excess of 100% of its annual revenue goal will be calculated and paid as provided in this Plan.

Plan Summary

Quantitative Component (in $US):
·  
GAAP Revenue

Maximum payout to a participant – 300%

Payments
·  
Quarterly.
·  
Limited to 100% maximum payment for a current quarter, plus any cumulative “catch-up” to bring any prior quarter to 100%.
·  
Overachievement above 100% paid at end of fiscal year.
·  
To qualify for payment, Company must [**] on a non-GAAP Operating Profit basis [**], and achieve [**].



Component – GAAP Revenue
Weighting – 100%
Revenue Goal per FY2009 Financial Plan (Reported GAAP Revenue in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]             [**]
Q2                                                      [**]             [**]
Q3                                                      [**]             [**]
Q4                                                      [**]             [**]
FY2009 [**]

                                                      Performance*         Payout*
Thresholds                                           80%             60%
                                                    100%             80%
                                                    120%             100%
                                                    160%             300%

*Performance and payout interpolate between levels


Profitability Requirements
Non-GAAP Operating Profit [**] Goal per FY2009 Financial Plan (Reported Non-GAAP Operating Profit in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]             [**]
Q2                                                      [**]             [**]



Revenue

“Revenue” is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

Each quarter, a participant is eligible to receive a bonus equal to twenty-five percent (25%) of his or her annual bonus target (plus “catch up” payments described elsewhere in this Plan).  Bonus payments are subject to the following:

· If the Company does not achieve at least 80% of its year-to-date Revenue goal, then no bonus will be paid for that quarter.
 
· If the Company achieves at least 80% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 60% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 80% (up to 100%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
·  If the Company achieves at least 100% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 80% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 100% (up to 120%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
· If the Company achieves at least 120% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 100% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 120% (up to 160%), participant will be paid an additional 5% of his or her target bonus for the quarter, up to the maximum payout of 300% of a participant’s target bonus for the quarter.
 

Non-GAAP Operating Profit

Non-GAAP Operating Profit is defined as Non-GAAP Operating Profit as reported on the Company’s quarterly Non-GAAP consolidated statement of operations in $US. Non-GAAP reconciliations historically have been included in press releases and filed on a Form 8-K at the end of each fiscal quarter.  Historically, these Non-GAAP results exclude expenses associated with the amortization of purchased intangible assets, stock-based compensation expense, reductions in workforce and other non-recurring charges. In fiscal year 2009, the Non-GAAP adjustments will include the non-cash tax expense associated with acquired NOL carry forwards.


Calculations

Participants joining the Company after the beginning of the Company’s 2009 fiscal year will only be entitled to a pro-rata portion of the quarterly bonus in the quarter they commence employment with the Company, a pro-rata portion of any bonus amount that exceeds 100%, and will not be eligible for any “catch-up” payments for quarters in which they were not employed by the Company.

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 or the Compensation Committee if so delegated by the Board.  In its discretion, the Board, or the Compensation Committee if so delegated by the Board, has the authority to approve a payment of up to 50% of a participant’s annual target bonus 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 sixty (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 the Revenue goal generally will be made not later than sixty (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 with the SEC.
 
Notwithstanding anything to the contrary herein, no bonus is earned until it is paid under this Plan.  Therefore, in the event the employment of a participant under this Plan is terminated (either by the Company or by the participant, whether voluntarily or involuntarily) before a bonus is paid, then the participant 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 participant who wishes not to participate in this 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 participant’s right or the Company’s right to terminate the participant’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.
 
This Plan contains the entire agreement between the Company and the participant on this subject, and supersedes all prior bonus compensation plans or programs between the Company and participant, and all previous oral or written statements regarding any such bonus compensation programs or plans.
 
This Plan shall be governed by and construed under the laws of the State of California.
 
*   *   *
 

 
 

 
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 10.82
 
Attachment B

CHORDIANT SOFTWARE, INC.
2009 Vice President Worldwide Sales Compensation Plan
General Terms and Conditions

1.  
Objectives of Plan.
A. To provide compensation to the Vice President Worldwide Sales for 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 October 1, 2008 and it shall continue through September 30, 2009.  The 2009 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 2009 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 October 1, 2008 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. You must be a regular full-time employee of the Company.
B. You must be the Vice President Worldwide Sales.
C. You must acknowledge that you have received a copy of this Plan; have read, understand and accept its terms; understand your Assignment; and understand that your 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 October 1, 2008 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 and 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(A) through 5(G) 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 5(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.

By signing this agreement you agree to 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) there are not any other concessions and conditions or terms outside the express written terms of the license/support agreement.

F. Salesforce.com

You further agree to 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

You 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 you are found to be non-responsive in assisting with obtaining the aforementioned letters.

*           *           *
 
Any exception to conditions 5(A) through 5(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) – (G) 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 the approval of the License Transaction is required by the Compensation Committee.

6.  
Non-Qualifying Orders.
 
You may be assigned responsibilities involving sales of the nature described in subparagraphs A through G 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.  These payment dates are contingent upon the Company filing its periodic Forms 10-Q and 10-K with the SEC. 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.
 

 
Your Quota is divided into Quota performance tiers with each tier containing an associated commission rate.  Commissions are calculated starting with the lowest tier first. You 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 you 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.

 
You 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.

 
You 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.

 
You 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 you to termination of employment and revocation of any commissions under this Plan to which you 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, you acknowledge that you have read and understood this Sales Compensation Plan; agree to its terms and conditions (including the sales Quota); and understand and agree that nothing in this Plan otherwise alters the at-will nature of your employment relationship with the Company, which can be terminated by you or the Company at any time, with or without cause, and with or without advance notice.

 
This agreement is effective as of October 1, 2008.



/s/ David Cunningham
Vice President Worldwide Sales

 
/s/ Steven R. Springsteel
Chief Executive Officer




 
 

 
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 10.82
 
 
Quota Assignment and Commission Factor term sheet for Sales Personnel

[** one page omitted]

EX-10.83 10 ex1083.htm ex1083.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.
 
Exhibit 10.83

2009 Vice President Worldwide Professional Services Incentive Bonus Plan
 

November 24, 2008


PK,

The letter is to document your variable compensation plan for Chordiant’s 2009 fiscal year which begins October 1st, 2008 and ends September 30th, 2009.  Your variable compensation element, which has a target equal to 60% of your annual base salary, 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 2009 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 2009, 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 Chief Executive Officer.  Such adjustments must be agreed to in writing by both Chordiant’s Vice President of Worldwide Field Operations and the 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.  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.

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 its 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.



/s/ Prashant K. (PK) Karnik                                                                           11/24/08                      
Prashant K (PK) Karnik                                                                                                        Date
Vice President, Worldwide Professional Services



/s/ Steven R. Springsteel                                                                          11/24/08                      
Steven R. Springsteel                                                                                                                          Date
Chief Executive Officer



 
 

 
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 10.83


Attachment A

Chordiant Fiscal Year 2009 Executive Incentive Bonus Plan
 

This Executive Incentive Bonus Plan (the “Plan”) will cover all Executive Officers and Vice Presidents of the Company (except for the Vice President of Services, the Vice President of Sales, the General Counsel, and those paid on sales commission plans).  Bonuses under this Plan will be calculated and paid (if applicable) based on the Company’s financial results as filed on Forms 10-Q and 10-K (and the associated non-GAAP reconciliations historically included in press releases and filed on a Form 8-K) for the Company’s 2009 fiscal year versus the Company’s FY2009 Financial Plan on one quantitative measure: Revenue (as defined below).

A participant’s total bonus payments under the Plan shall not exceed 300% of his or her 2009 fiscal year target bonus.  Payments for any given quarter will be limited to a maximum of 100% of the participant’s target bonus for that quarter, plus any cumulative “catch up” payment for prior quarters.

The quarterly bonus calculations will be computed using year-to-date figures. Cumulative “catch up” payments will be made for any prior quarter shortfall against the goals.

[**], for quarterly payments to be made under the Plan, [**]. For the [**], for payments to be made under the Plan, the Company’s [**].

At the end of the fiscal year, the Company will evaluate its 2009 fiscal year revenue attainment against its 2009 fiscal year revenue goal. Payments for performance in excess of 100% of its annual revenue goal will be calculated and paid as provided in this Plan.

Plan Summary

Quantitative Component (in $US):
·  
GAAP Revenue

Maximum payout to a participant – 300%

Payments
·  
Quarterly.
·  
Limited to 100% maximum payment for a current quarter, plus any cumulative “catch-up” to bring any prior quarter to 100%.
·  
Overachievement above 100% paid at end of fiscal year.
·  
To qualify for payment, Company must [**] on a non-GAAP Operating Profit basis [**], and achieve [**].


Component – GAAP Revenue
Weighting – 100%
Revenue Goal per FY2009 Financial Plan (Reported GAAP Revenue in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]             [**]
Q2                                                      [**]             [**]
Q3                                                      [**]             [**]
Q4                                                      [**]             [**]
FY2009 [**]

                                                      Performance*         Payout*
Thresholds                                           80%              60%
                                                    100%             80%
                                                    120%             100%
                                                    160%             300%

*Performance and payout interpolate between levels


Profitability Requirements
Non-GAAP Operating Profit [**] Goal per FY2009 Financial Plan (Reported Non-GAAP Operating Profit in $US)

                                                      Quarter             Year-to-Date
Q1                                                      [**]                 [**]
Q2                                                      [**]                 [**]


Revenue

“Revenue” is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

Each quarter, a participant is eligible to receive a bonus equal to twenty-five percent (25%) of his or her annual bonus target (plus “catch up” payments described elsewhere in this Plan).  Bonus payments are subject to the following:

· If the Company does not achieve at least 80% of its year-to-date Revenue goal, then no bonus will be paid for that quarter.
 
· If the Company achieves at least 80% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 60% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 80% (up to 100%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
·  If the Company achieves at least 100% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 80% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 100% (up to 120%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
· If the Company achieves at least 120% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 100% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 120% (up to 160%), participant will be paid an additional 5% of his or her target bonus for the quarter, up to the maximum payout of 300% of a participant’s target bonus for the quarter.
 

Non-GAAP Operating Profit

Non-GAAP Operating Profit is defined as Non-GAAP Operating Profit as reported on the Company’s quarterly Non-GAAP consolidated statement of operations in $US. Non-GAAP reconciliations historically have been included in press releases and filed on a Form 8-K at the end of each fiscal quarter.  Historically, these Non-GAAP results exclude expenses associated with the amortization of purchased intangible assets, stock-based compensation expense, reductions in workforce and other non-recurring charges. In fiscal year 2009, the Non-GAAP adjustments will include the non-cash tax expense associated with acquired NOL carry forwards.


Calculations

Participants joining the Company after the beginning of the Company’s 2009 fiscal year will only be entitled to a pro-rata portion of the quarterly bonus in the quarter they commence employment with the Company, a pro-rata portion of any bonus amount that exceeds 100%, and will not be eligible for any “catch-up” payments for quarters in which they were not employed by the Company.

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 or the Compensation Committee if so delegated by the Board.  In its discretion, the Board, or the Compensation Committee if so delegated by the Board, has the authority to approve a payment of up to 50% of a participant’s annual target bonus 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 sixty (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 the Revenue goal generally will be made not later than sixty (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 with the SEC.
 
Notwithstanding anything to the contrary herein, no bonus is earned until it is paid under this Plan.  Therefore, in the event the employment of a participant under this Plan is terminated (either by the Company or by the participant, whether voluntarily or involuntarily) before a bonus is paid, then the participant 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 participant who wishes not to participate in this 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 participant’s right or the Company’s right to terminate the participant’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.
 
This Plan contains the entire agreement between the Company and the participant on this subject, and supersedes all prior bonus compensation plans or programs between the Company and participant, and all previous oral or written statements regarding any such bonus compensation programs or plans.
 
This Plan shall be governed by and construed under the laws of the State of California.
 
*   *   *
 
 
 
 

 
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 10.83

Attachment B
Professional Services Direct Controllable Contribution Margin % (“PS DCCM %”) plan numbers

[**one page omitted]




EX-10.84 11 ex1084.htm ex1084.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.
 
Exhibit 10.84


2009 General Counsel Incentive Bonus Plan


November 24, 2008


David Zuckerman,

The letter is to document your variable compensation plan for Chordiant’s 2009 fiscal year which begins October 1st, 2008 and ends September 30th, 2009.  Your variable compensation element, which has a target equal to 50% of your annual base salary, will be calculated and paid (if applicable) quarterly based on the following criteria.

The General Counsel Bonus Plan applies to the Vice President and General Counsel and is comprised of two components—the quantitative portion and the qualitative portion.

The quantitative portion under this plan will be calculated and paid (if applicable) quarterly based on the criteria stipulated in the Chordiant Fiscal Year 2009 Executive Incentive Bonus Plan.

The qualitative portion of the bonus, as described below, 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.

Quantitative Measures – 75% of Bonus Opportunity

Based on the criteria and payment calculation formulas established in the Chordiant Fiscal Year 2009 Executive Incentive Bonus Plan (attachment A)
 

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 the General Counsel shall submit a report to the Audit or Compensation Committee on his activities in this role for evaluation by the Committee(s).  At year end, based upon a performance evaluation, the Compensation Committee shall recommend a scoring of full, partial or no payout to the Board for its final determination.  Should the quantitative metrics justify a bonus payment above 100%, the payment under this opportunity shall be increased proportionately.
 

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 2009 Executive Bonus Plan and hereby accept its terms.
 

 
/s/ David Zuckerman                                                                           _11/24/08
David Zuckerman                                                                                                        Date
Vice President, General Counsel


/s/ Steven R. Springsteel__________                                                                                       _11/24/08
Steven R. Springsteel                                                                                                                 Date
Chief Executive Officer
 
 
 

 
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 10.84

Attachment A

Chordiant Fiscal Year 2009 Executive Incentive Bonus Plan
 

This Executive Incentive Bonus Plan (the “Plan”) will cover all Executive Officers and Vice Presidents of the Company (except for the Vice President of Services, the Vice President of Sales, the General Counsel, and those paid on sales commission plans).  Bonuses under this Plan will be calculated and paid (if applicable) based on the Company’s financial results as filed on Forms 10-Q and 10-K (and the associated non-GAAP reconciliations historically included in press releases and filed on a Form 8-K) for the Company’s 2009 fiscal year versus the Company’s FY2009 Financial Plan on one quantitative measure: Revenue (as defined below).

A participant’s total bonus payments under the Plan shall not exceed 300% of his or her 2009 fiscal year target bonus.  Payments for any given quarter will be limited to a maximum of 100% of the participant’s target bonus for that quarter, plus any cumulative “catch up” payment for prior quarters.

The quarterly bonus calculations will be computed using year-to-date figures. Cumulative “catch up” payments will be made for any prior quarter shortfall against the goals.

[**], for quarterly payments to be made under the Plan, [**]. For the [**], for payments to be made under the Plan, the Company’s [**].

At the end of the fiscal year, the Company will evaluate its 2009 fiscal year revenue attainment against its 2009 fiscal year revenue goal. Payments for performance in excess of 100% of its annual revenue goal will be calculated and paid as provided in this Plan.

Plan Summary

Quantitative Component (in $US):
·  
GAAP Revenue

Maximum payout to a participant – 300%

Payments
·  
Quarterly.
·  
Limited to 100% maximum payment for a current quarter, plus any cumulative “catch-up” to bring any prior quarter to 100%.
·  
Overachievement above 100% paid at end of fiscal year.
·  
To qualify for payment, Company must [**] on a non-GAAP Operating Profit basis [**], and achieve [**].



Component – GAAP Revenue
Weighting – 100%
Revenue Goal per FY2009 Financial Plan (Reported GAAP Revenue in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]             [**]
Q2                                                      [**]             [**]
Q3                                                      [**]             [**]
Q4                                                      [**]             [**]
FY2009 [**]

                                                      Performance*     Payout*
Thresholds                                           80%          60%
                                                    100%         80%
                                                    120%         100%
                                                    160%         300%

*Performance and payout interpolate between levels


Profitability Requirements
Non-GAAP Operating Profit [**] Goal per FY2009 Financial Plan (Reported Non-GAAP Operating Profit in $US)

                                                      Quarter         Year-to-Date
Q1                                                      [**]             [**]
Q2                                                      [**]             [**]



Revenue

“Revenue” is defined as revenue as recognized under GAAP on the Company’s quarterly consolidated statement of operations in $US.

Each quarter, a participant is eligible to receive a bonus equal to twenty-five percent (25%) of his or her annual bonus target (plus “catch up” payments described elsewhere in this Plan).  Bonus payments are subject to the following:

· If the Company does not achieve at least 80% of its year-to-date Revenue goal, then no bonus will be paid for that quarter.
 
· If the Company achieves at least 80% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 60% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 80% (up to 100%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
·  If the Company achieves at least 100% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 80% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 100% (up to 120%), participant will be paid an additional 1% of his or her target bonus for the quarter.
 
· If the Company achieves at least 120% of its year-to-date Revenue goal (and satisfies the non-GAAP Operating Profit [**] criteria) participant will be paid 100% of his or her target bonus for the quarter.  For each 1.00% of the Revenue goal achieved above 120% (up to 160%), participant will be paid an additional 5% of his or her target bonus for the quarter, up to the maximum payout of 300% of a participant’s target bonus for the quarter.
 

Non-GAAP Operating Profit

Non-GAAP Operating Profit is defined as Non-GAAP Operating Profit as reported on the Company’s quarterly Non-GAAP consolidated statement of operations in $US. Non-GAAP reconciliations historically have been included in press releases and filed on a Form 8-K at the end of each fiscal quarter.  Historically, these Non-GAAP results exclude expenses associated with the amortization of purchased intangible assets, stock-based compensation expense, reductions in workforce and other non-recurring charges. In fiscal year 2009, the Non-GAAP adjustments will include the non-cash tax expense associated with acquired NOL carry forwards.


Calculations

Participants joining the Company after the beginning of the Company’s 2009 fiscal year will only be entitled to a pro-rata portion of the quarterly bonus in the quarter they commence employment with the Company, a pro-rata portion of any bonus amount that exceeds 100%, and will not be eligible for any “catch-up” payments for quarters in which they were not employed by the Company.

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 or the Compensation Committee if so delegated by the Board.  In its discretion, the Board, or the Compensation Committee if so delegated by the Board, has the authority to approve a payment of up to 50% of a participant’s annual target bonus 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 sixty (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 the Revenue goal generally will be made not later than sixty (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 with the SEC.
 
Notwithstanding anything to the contrary herein, no bonus is earned until it is paid under this Plan.  Therefore, in the event the employment of a participant under this Plan is terminated (either by the Company or by the participant, whether voluntarily or involuntarily) before a bonus is paid, then the participant 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 participant who wishes not to participate in this 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 participant’s right or the Company’s right to terminate the participant’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.
 
This Plan contains the entire agreement between the Company and the participant on this subject, and supersedes all prior bonus compensation plans or programs between the Company and participant, and all previous oral or written statements regarding any such bonus compensation programs or plans.
 
This Plan shall be governed by and construed under the laws of the State of California.
 
*   *   *
 

 
EX-10.85 12 ex1085.htm ex1085.htm
Exhibit 10.85
 
CHORDIANT SOFTWARE, INC.
 

 
AMENDED AND RESTATED 1999 NON-EMPLOYEE
 
DIRECTORS’ STOCK OPTION PLAN
 

 
Amended by the Board of Directors:  December 11, 2007
 
Approved by Stockholders: February 1, 2008
 
Amended by the Board of Directors:  November 19, 2008
 

 
Effective Date: Date of Initial Public Offering
 
Termination Date: None
 
1. PURPOSES.
 
(A) Eligible Award Recipients.  The persons eligible to receive Awards are the Non-Employee Directors of the Company.
 
(B) Available Awards.  The purpose of the Plan is to provide a means by which Non-Employee Directors may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Nonstatutory Stock Options, Restricted Stock Awards, and Restricted Stock Unit Awards.
 
(C) General Purpose.  The Company, by means of the Plan, seeks to retain the services of its Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.
 
2. DEFINITIONS.
 
(A) Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.
 
(B) Annual Grant” means an Award granted annually to eligible Non-Employee Directors pursuant to subsection 6(b) of the Plan.
 
(C) Annual Meeting” means the annual meeting of the stockholders of the Company.
 
       (D) Award” means an Option, Restricted Stock Award or Restricted Stock Unit Award.
 
       (E) Award Agreement” means an Option Agreement, a Restricted Stock Award Agreement or a Restricted Stock Unit Award Agreement.
 
(F) Board” means the Board of Directors of the Company.
 
(G) Code” means the Internal Revenue Code of 1986, as amended.
 
(H) Common Stock” means the common stock of the Company.
 
(I) Company” means Chordiant Software, Inc., a Delaware corporation.
 
(J) Consultant” means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate.  However, the term “Consultant” shall not include either Directors of the Company who are not compensated by the Company for their services as Directors or Directors of the Company who are merely paid a director’s fee by the Company for their services as Directors.
 
(K) Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated.  The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which he or she renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which he or she renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service.  For example, a change in status from a Non-Employee Director of the Company to a Consultant of an Affiliate or an Employee of the Company will not constitute an interruption of Continuous Service.  The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.
 
(L) Director” means a member of the Board of Directors of the Company.
 
(M) Disability” means the inability of a person, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of that person’s position with the Company or an Affiliate of the Company because of the sickness or injury of the person.
 
(N) Employee” means any person employed by the Company or an Affiliate.  Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
 
(O) Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(P) Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:
 
(i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of grant, or if the date of grant is not a trading day, then on the last market trading day prior to the day of grant, as reported in The Wall Street Journal or such other source as the Board deems reliable.
 
(ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.
 
(Q) Initial Grant” means an Award granted to an eligible Non-Employee Director pursuant to subsection 6(a) of the Plan.
 
(R) Non-Employee Director” means a Director who is not an Employee.
 
(S) Nonstatutory Stock Option” means an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
 
(T) Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
 
(U) Option” means a Nonstatutory Stock Option granted pursuant to the Plan.
 
(V) Option Agreement” means a written agreement between the Company and an Participant evidencing the terms and conditions of an individual Option grant.  Each Option Agreement shall be subject to the terms and conditions of the Plan.
 
(W) Participant” means a person to whom an Award is granted pursuant to the Plan.
 
(X) Plan” means this Chordiant Software, Inc. Amended and Restated 1999 Non-Employee Directors’ Stock Option Plan.
 
       (Y) Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of the Plan.
 
      (Z) Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award.  Each such Award Agreement shall be subject to the terms and conditions of the Plan.
 
      (AA) Restricted Stock Unit Award means a bookkeeping entry where each unit represents the opportunity to vest in and be issued one share of Common Stock, which right is granted pursuant to the terms and conditions of the Plan.
    
      (BB) Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award.  Each such Award Agreement shall be subject to the terms and conditions of the Plan.
 
(CC) Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
 
(DD) Securities Act” means the Securities Act of 1933, as amended.
 
(EE) Unforeseeable Emergency” means a severe financial hardship to the Participant after the vesting of the shares under the Award, which hardship results from (1) an illness or accident of the Participant or his or her  spouse, registered domestic partner, parent or child; (2) loss of the Participant’s property due to casualty (including the need to rebuild the 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 Participant.
 
3. ADMINISTRATION.
 
(A) Administration by Board.  The Board shall administer the Plan.  The Board may not delegate administration of the Plan to a committee.
 
(B) Powers of Board.  The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
 
(i) To determine the provisions of each Award to the extent not specified in the Plan.
 
(ii) To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration.  The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
 
(iii) To amend the Plan or an Award as provided in Section 12.
 
(iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company that are not in conflict with the provisions of the Plan.
 
(C) Effect of Board’s Decision.  All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.
 
4. SHARES SUBJECT TO THE PLAN.
 
(A) Share Reserve.  Subject to the provisions of Section 11 relating to adjustments upon changes in the Common Stock, the Common Stock that may be issued pursuant to Awards shall not exceed in the aggregate 463,000 (four hundred sixty three thousand) shares of Common Stock.
 
(B) Reversion of Shares to the Share Reserve.  If any Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Award shall revert to and again become available for issuance under the Plan.  If the Company repurchases (or reacquires upon a failure to vest) any unvested shares of Common Stock issued under an Award, such shares of Common Stock shall revert to and again become available for issuance under the Plan.
 
(C) Source of Shares.  The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
 
5. ELIGIBILITY.
 
The Awards as set forth in section 6 automatically shall be granted under the Plan to all eligible Non-Employee Directors.
 
6. NON-DISCRETIONARY GRANTS.
 
Without any further action of the Board, each Non-Employee Director shall be granted the following Awards:
 
(A) Initial Grants.  Each person who is elected or appointed, other than on the date of an Annual Meeting, for the first time, to be a Non-Employee Director  automatically shall, upon the date of his or her initial election or appointment to be a Non-Employee Director by the Board or stockholders of the Company (such date, the “Initial Grant Date”), be granted an Initial Grant consisting of a Restricted Stock Award covering that number of shares of Common Stock equal to (1) the product of (a) $100,000 and (b) a fraction, the numerator of which is the number of full months between the Initial Grant Date and first anniversary of the most recent Annual Meeting prior to the Initial Grant Date (rounding down for any partial month) (such period, the “Initial Period”), and the denominator of which is 12, (2) divided by the Fair Market Value of a share of Common Stock on the Initial Grant Date.  Subject to the Participant’s Continuous Service, such Award shall vest in full on the earlier of (a) the first anniversary of the most recent Annual Meeting prior to the Initial Grant Date and (b) the date of the first Annual Meeting following the Initial Grant Date.  The Initial Grant will be subject to the terms of this Plan and the form of Restricted Stock Award Agreement most recently approved by the Board for use under this Plan.  The Initial Grant shall be made in consideration for future services to be rendered to the Company, and no purchase price shall be required to be paid for the shares of Common Stock issued under the Initial Grant, except to the extent required by applicable law, in which case, the par value of each share of Common Stock issued under the Initial Grant shall be deemed to have been paid through past services actually rendered to the Company or an Affiliate.
 
(B) Annual Grants.  On the day of each Annual Meeting (the “Annual Grant Date”), each person who, at such Annual Meeting, is elected or appointed to serve (or who shall otherwise thereafter continue to serve) as a Non-Employee Director automatically shall be granted an Annual Grant consisting of a Restricted Stock Award covering that number of shares of Common Stock equal to (1) $100,000 divided by (2) the Fair Market Value of a share of Common Stock on the Annual Grant Date.  Subject to the Participant’s Continuous Service, such Award shall vest in full on the date that is the earlier of (a) the first anniversary of the Annual Grant Date and (b) the date of the first Annual Meeting following the Annual Grant Date.  The Annual Grant will be subject to the terms of this Plan and the form of Restricted Stock Award Agreement most recently approved by the Board for use under this Plan.  The Annual Grant shall be made in consideration for future services to be rendered to the Company, and no purchase price shall be required to be paid for the shares of Common Stock issued under the Annual Grant, except to the extent required by applicable law, in which case, the par value of each share of Common Stock issued under the Annual Grant shall be deemed to have been paid through past services actually rendered to the Company or an Affiliate.  Notwithstanding anything to the contrary in this Section 6(b), the maximum number of shares of Common Stock that may be granted pursuant to an Annual Grant of a Restricted Stock Award under this Section 6(b) shall be 15,000 shares. 
 
(C) Holding Period.  Each Initial Grant and Annual Grant made on or after the date of the Company’s Annual Meeting held in 2008 will be subject to a post-vesting holding period, such that the Participant may not sell or otherwise transfer (excluding transfers to family trusts for tax planning purposes for which the 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 Award until the earliest of (1) the second anniversary of the vesting date of the Award, (2) the closing of a transaction described in subsection 12(b) below (other than a merger or consolidation for the purpose of a change in domicile), (3) the certification by the Board that the Participant has suffered an Unforeseeable Emergency or (4) the termination of the Participant’s Continuous Service as a result of death or Disability (such period, the “Holding Period”).  Shares sold or withheld by the Company to cover applicable tax withholdings will not be deemed a violation of the Holding Period.  The shares of Common Stock issued pursuant to the Award shall be endorsed with appropriate legends as determined by the Company, and the Participant will enter into such other arrangements as determined reasonably necessary by the Company (including an escrow arrangement) in order to enforce the provisions of this subsection 6(c).
 
7. OPTION PROVISIONS.
 
Any Option granted under this Plan shall be in such form and shall contain such terms and conditions as required by the Plan.  Each Option shall contain such additional terms and conditions, not inconsistent with the Plan, as the Board shall deem appropriate.  Each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
 
(A) Term.  No Option shall be exercisable after the expiration of ten (10) years from the date it was granted.
 
(B) Exercise.  Each Option shall be exercisable only once it has vested.
 
(C) Exercise Price.  The exercise price of each Option shall be one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted.  Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Sections 409A and 424(a) of the Code.
 
(D) Consideration.  The purchase price of stock acquired pursuant to an Option may be paid, to the extent permitted by applicable statutes and regulations and the form of Option Agreement, in any combination of (i) cash or check, (ii) delivery to the Company of other Common Stock, (iii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds, (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other permitted payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, further, that shares of Common Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (A) shares are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations, or (v) any other form of legal consideration that may be acceptable to the Board.  The purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes).  At any time that the Company is incorporated in Delaware, payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment.
 
(E) Transferability.  An Option shall not be transferable except (i) by will or by the laws of descent and distribution and (ii) to the further extent permitted under the rules for a Form S-8 registration statement under the Securities Act.  The Option shall be exercisable during the lifetime of the Participant only by the Participant or a permitted transferee.  Notwithstanding the foregoing, the Participant may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Participant, shall thereafter be entitled to exercise the Option.
 
(F) Vesting Generally.  The Board may impose such restrictions or conditions to the vesting of the Award as it, in its sole discretion, deems appropriate and as set forth in Section 6 above or as otherwise set forth in the applicable Award Agreement.
 
(G) Termination of Continuous Service.  In the event an Participant’s Continuous Service terminates (other than upon the Participant’s death or Disability), the Participant may exercise his or her Option (to the extent that the Participant was entitled to exercise it as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Participant’s Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination, the Participant does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.
 
(H) Extension of Termination Date.  If the exercise of the Option following the termination of the Participant’s Continuous Service (other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in subsection 7(a) or (ii) the expiration of a period of three (3) months after the termination of the Participant’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.
 
(I) Disability of Participant.  In the event an Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option (to the extent that the Participant was entitled to exercise it as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination, the Participant does not exercise his or her Option within the time specified herein, the Option shall terminate.
 
(J) Death of Participant.  In the event (i) an Participant’s Continuous Service terminates as a result of the Participant’s death or (ii) the Participant dies within the three-month period after the termination of the Participant’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Participant was entitled to exercise the Option as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Participant’s death, but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death or (2) the expiration of the term of such Option as set forth in the Option Agreement.  If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.
 
8. Provisions of Stock Awards other than Options.
 
(A) Restricted Stock Awards.  Each Restricted Stock Award Agreement shall be in such form and shall contain such terms and conditions as required by the Plan and such additional terms and conditions, not inconsistent with the Plan, as the Board shall deem appropriate.  To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (i) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (ii) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock Award Agreements shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
 
(i) Purchase Price.  The Board will determine the price to be paid, if any, by the Participant for each share of Common Stock subject to the Award.  To the extent required by applicable law, the price to be paid by the Participant for each share of the Award will not be less than the par value of a share of Common Stock.
 
(ii) Consideration.  A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company; (B) past or future services actually or to be rendered to the Company or an Affiliate; or (C) any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.
 
(iii) Vesting.  The Board may impose such restrictions or conditions to the vesting of the Award as it, in its sole discretion, deems appropriate and as set forth in Section 6 above or as otherwise set forth in the applicable Award Agreement.
 
(iv) Termination of Participant’s Continuous Service.  In the event that a Participant’s Continuous Service terminates, the Company shall have the right, but not the obligation, to repurchase or otherwise reacquire, any or all of the shares of Common Stock held by the Participant that have not vested under the Award as of the date of termination under the terms of the Award Agreement.  At the Board’s election, the price paid for all shares of Common Stock so repurchased or reacquired by the Company may be at the lesser of: (A) the Fair Market Value on the relevant date, or (B) the Participant’s original cost for such shares.  The Company shall not be required to exercise its repurchase or reacquisition option until at least six (6) months (or such longer or shorter period of time necessary to avoid a charge to earnings for financial accounting purposes) have elapsed following the Participant’s purchase of the shares of Common Stock acquired pursuant to the Award unless otherwise determined by the Board or provided in the Award Agreement.
 
(v) Transferability.  Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award remains subject to the terms of the Restricted Stock Award Agreement.
 
(B) Restricted Stock Unit Awards.  Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as required by the Plan and such additional terms and conditions, not inconsistent with the Plan, as the Board shall deem appropriate.  The terms and conditions of Restricted Stock Unit Award Agreements shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
 
(i) Consideration.  The Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award.  The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.
 
(ii) Vesting.  The Board may impose such restrictions or conditions to the vesting of the Award as it, in its sole discretion, deems appropriate and as set forth in Section 6 above or as otherwise set forth in the applicable Award Agreement.
 
(iii) Payment.  A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
 
(iv) Additional Restrictions.  At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.
 
(v) Dividend Equivalents.  Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.  At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board.  Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.
 
(vi) Termination of Participant’s Continuous Service.  Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited without consideration upon the Participant’s termination of Continuous Service.
 
9. COVENANTS OF THE COMPANY.
 
(A) Availability of Shares.  During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.
 
(B) Securities Law Compliance.  The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Award or any stock issued or issuable pursuant to any such Award.  If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such Awards unless and until such authority is obtained.
 
10. USE OF PROCEEDS FROM STOCK.
 
Proceeds from the sale of stock pursuant to Awards shall constitute general funds of the Company.
 
11. MISCELLANEOUS.
 
(A) Stockholder Rights.  No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Award unless and until such Particpant has satisfied all requirements for exercise of the Award pursuant to its terms.
 
(B) No Service Rights.  Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company as a Non-Employee Director or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of 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.
 
(C) Investment Assurances.  The Company may require an Participant, as a condition of exercising or acquiring stock under any Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring the stock subject to the Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the stock.  The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (iii) the issuance of the shares upon the exercise or acquisition of stock under the Award has been registered under a then currently effective registration statement under the Securities Act or (iv) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock.
 
(D) Withholding Obligations.  The Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of the Common Stock.
 
(E) Electronic Delivery.  Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.
 
(F) Deferrals.  To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants.  Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee.  The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of employment or retirement, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.
 
(G) Compliance with Section 409A.  To the extent that the Board determines that any Award granted under the Plan is, or may reasonably be, subject to Section 409A of the Code (together, with any state law of similar effect, “Section 409A”), the Award Agreement evidencing such Award shall incorporate the terms and conditions necessary to avoid the consequences described in Section 409A(a)(1) of the Code (or any similar provision).  To the extent applicable and permitted by law, the Plan and Award Agreements shall be interpreted in accordance with Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued or amended after the Effective Date.
 
Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Board determines that any Award is, or may reasonably be, subject to Section 409A and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Board may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (A) exempt the Award from Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (B) comply with the requirements of Section 409A and related Department of Treasury guidance.
 
In addition, and except as otherwise set forth in the applicable Award Agreement, if the Company determines that any Award granted under this Plan constitutes, or may reasonably constitute, “deferred compensation” under Section 409A and the Participant is a “specified employee” of the Company at the relevant date, as such term is defined in Section 409A(a)(2)(B)(i) (a “Specified Employee”), then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the time at which cash payments shall be paid, or shares of Common Stock issued, to such Participant shall be automatically delayed as follows:  on the earlier to occur of (A) the date that is six months and one day after the date of termination of the Participant’s Continuous Service or (B) the date of the Participant’s death (such earlier date, the “Delayed Initial Payment Date”), the Company shall (I) pay to the Participant a lump sum amount equal to the sum of the cash payments, and issue to the Participant that number of shares of Common Stock, that the Participant would otherwise have received through the Delayed Initial Payment Date if such issuance or payment had not been delayed pursuant to this Section 11(g), in each case, without liability to the Participant for interest during such period of delay, and (II) commence paying or issuing the balance of the amounts due under the Award in accordance with the applicable schedules set forth in the Award Agreement.
 
Notwithstanding anything to the contrary contained herein, neither the Company nor any of its Affiliates shall be responsible for, or required to reimburse or otherwise make any participant whole for, any tax or penalty imposed on, or losses incurred by, any Participant that arises in connection with the potential or actual application of Section 409A to any Award granted hereunder.
 
12. ADJUSTMENTS UPON CHANGES IN STOCK.
 
(A) Capitalization Adjustments.  If any change is made in the shares of Common Stock subject to the Plan, or subject to any Award (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject both to the Plan pursuant to subsection 4(a) and to the nondiscretionary Awards specified in Section 6, and the outstanding Awards will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Awards.  The Board shall make such adjustments, and its determination shall be final, binding and conclusive.  (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)
 
(B) Change in Control.  In the event of a: (1) a dissolution, liquidation or sale of all or substantially all of the assets of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) the acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or any Affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, then: (i) any surviving corporation or acquiring corporation shall assume any Awards outstanding under the Plan or shall substitute similar awards (including an option to acquire the same consideration paid to the stockholders in the transaction described in this subsection 12(b)) for those outstanding under the Plan, or (ii) in the event any surviving corporation or acquiring corporation refuses to assume such Awards or to substitute similar awards for those outstanding under the Plan, (A) with respect to Awards held by persons then performing services as Employees, Directors or Consultants, the vesting of such Awards (and, if applicable, the time during which such Awards may be exercised) shall be accelerated prior to such event and the Awards terminated if not exercised after such acceleration and at or prior to such event, and (B) with respect to any other Awards outstanding under the Plan, such Awards shall be terminated if not exercised (if applicable) prior to such event.
 
(C) Acceleration of Vesting.
 
(i) Awards Granted Prior to the Annual Meeting in 2008.  In the event of any transaction described in subsection 12(b) (other than a merger or consolidation for the purpose of a change in domicile) and subject to any limitation set forth in an Award, with respect to Awards granted under this Plan prior to the Annual Meeting held in 2008, which Awards are held by persons then performing Continuous Service, the vesting of such Awards shall be automatically accelerated immediately prior to such transaction such that each such Award shall be exercisable for such number of vested shares that would have been vested in the ordinary course as of the date one year following the date of the transaction.  In the event the Award Agreement covering such an Award make different provisions for acceleration of vesting due to a transaction described in subsection 12(b) or a similar transaction, the acceleration provisions of this subsection 12(c)(i) shall not be applicable to such Award.
 
(ii) Awards Granted At or After the Annual Meeting in 2008.  In the event of any transaction described in subsection 12(b) (other than a merger or consolidation for the purpose of a change in domicile) and subject to any limitation set forth in an Award, with respect to Awards granted under this Plan at or after the Annual Meeting held in 2008, which Awards are held by persons then performing Continuous Service, the vesting of such Awards shall be automatically accelerated in full as of immediately prior to such transaction.  In the event the Award Agreement covering such an Award make different provisions for acceleration of vesting due to a transaction described in subsection 12(b) or a similar transaction, the acceleration provisions of this subsection 12(c)(ii) shall not be applicable to such Award.
 
13. AMENDMENT OF THE PLAN AND AWARDS.
 
(A) Amendment of Plan.  The Board at any time, and from time to time, may amend the Plan.  However, except as provided in Section 12 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or securities exchange listing requirements.
 
(B) Stockholder Approval.  The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval.
 
(C) No Impairment of Rights.  Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
 
(D) Amendment of Awards.  The Board at any time, and from time to time, may amend the terms of any one or more Awards; provided, however, that the rights under any Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
 
14. TERMINATION OR SUSPENSION OF THE PLAN.
 
(A) Plan Term.  The Board may suspend or terminate the Plan at any time.  No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
 
(B) No Impairment of Rights.  Suspension or termination of the Plan shall not impair rights and obligations under any Award granted while the Plan is in effect except with the written consent of the Participant.
 
15. EFFECTIVE DATE OF PLAN.
 
The Plan became effective on February 14, 2000, the effective date of the initial public offering of the Common Stock.
 
16. CHOICE OF LAW.
 
All questions concerning the construction, validity and interpretation of this Plan shall be governed by the law of the State of Delaware, without regard to such state’s conflict of laws rules.
 

EX-10.86 13 ex1086.htm ex1086.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.
 
Exhibit 10.86
 
 
 


ADDENDUM “C”

TO MASTER SERVICES AGREEMENT


This agreement between Ness USA, Inc., located at 160 Technology Drive, Canonsburg, PA 15317 (“SUPPLIER”) and Chordiant Software, Inc. located at 20400 Stevens Creek Blvd., Cupertino, CA 95014 (“CHORDIANT”) is an Addendum dated this 1st day of January, 2009, (the “Addendum”) to the Master Services Agreement executed on December 15, 2003 (the “Agreement”) between SUPPLIER and CHORDIANT.

WHEREAS the parties hereto wish to modify certain terms of the Agreement and to memorialize additional terms, as more fully set forth below.

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 this Agreement shall be extended through and including December 31, 2011.

2.  
CHORDIANT shall receive a [**] discount on the current EDC billing rate of [**] per billable person per month for Calendar Quarter Four (4) in the year 2008.

3.  
For calendar year 2009, CHORDIANT shall receive a discount on the current EDC billing rate of [**] per billable resource per month in the event that the billable headcount for a given month is in accordance with the discount structure.  The discount structure shall be as follows:

 
Discount Structure per billable headcount
·  
In the event that billable headcount shall equal or exceed [**] resources, CHORDIANT shall receive a [**] discount.

·  
In the event that billable headcount shall be between [**] and [**] resources, CHORDIANT shall receive a [**] discount.

·  
In the event that billable headcount shall be between [**] and [**] resources, CHORDIANT shall receive a [**] discount.

·  
In the event that billable headcount shall be below [**] resources, CHORDIANT shall not receive a discount and the full [**] rate shall apply.


4.  
In addition to the remedies for termination for convenience provided in Section 24.1 of the Agreement titled Termination for Convenience and in addition to the fees for Transfer outlined in Section 30 and Exhibit 22 of the Agreement, in the event that CHORDIANT terminates for convenience through and including December 31st, 2009 or in the event CHORDIANT executes the Transfer Option in accordance with Section 30 through and including December 31st, 2009, SUPPLIER shall receive a termination penalty (the “Termination for Convenience penalty”) from CHORDIANT.  The Termination for Convenience penalty shall be equal to the cumulative difference between the actual amount paid for each of the billable resources on-board during calendar year 2009 up to the date of termination and the amount CHORDIANT would have paid under the [**] per billable resource per month for each such billable resource up to a maximum amount of $450,000. The Termination for Convenience penalty shall not exceed $450,000.

5.  
Such Termination for Convenience penalty described in Section 4 of this Addendum shall not be applicable to CHORDIANT after December 31st, 2009.  If CHORDIANT terminates for convenience after December 31st, 2009, CHORDIANT shall only pay the Termination Fee, if any, as determined in accordance with Attachment 4-C, Termination Fee, of Exhibit 4 in accordance with Section 24.1 of the Agreement titled Termination for Convenience. If CHORDIANT exercises the Transfer Option in accordance with Section 30 after December 31st, 2009, SUPPLIER shall not receive any termination penalty as specified in Section 4 above.

6.  
Further, the Termination for Convenience penalty described in Section 4 of this Addendum shall not apply at any time in the event that CHORDIANT terminates the Agreement for any other reason apart for termination for convenience in accordance with Section 24.1.

7.  
The then-current rate per billable resource per month for the months of October 2009 and October 2010, respectively, as determined in accordance with this Addendum, shall be used as the cost basis for the billing rate negotiations for the calendar years 2010 and 2011, respectively.  CHORDIANT and SUPPLIER shall by written mutual agreement agree on a billing rate for calendar years 2010 and 2011 in accordance with Section 17.2 titled Adjustments; provided that if the parties mutually agree in good faith, each in their sole discretion, that the economic situation in any given calendar year so warrants, then they may agree to a rate increase not to exceed [**] total for the next calendar year.  The parties agree that all rate increase discussion and agreements must be made no later than November 15, 2009 and November 15, 2010 respectively, for the calendar years 2010 and 2011, respectively.  For the sake of clarification, the discount structure set forth in Paragraph 3 above shall not apply to the billing rates for calendar years 2010 and 2011.

8.  
The buffer resource and four (4) week training period shall remain in accordance with Section 11.4(e) of the Agreement titled Staff Training and Section 11.6 of the Agreement titled Supplier Buffer Resources.  At such times as staffing vacancies occur or new positions are created, CHORDIANT agrees to use a good faith effort to utilize existing and trained buffer resources whom CHORDIANT deems qualified to fill such positions. In such cases, no free period will apply where the buffer resource has spent a minimum of 4 weeks in training.

9.  
With the exception of the foregoing changes, the terms and conditions of the Agreement shall remain in full force and effort.


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/ Peter S. Norman                                                      
Name:         Rocco Cozza                                                                  Name:    Peter S. Norman
Title:           General Counsel                                                               Title:             Vice President & Chief Financial Officer

Date:           1/12/09                                     Date:            1/16/09

For:            Ness USA, Inc.                                                                 For:             Chordiant Software, Inc.
EX-10.87 14 ex1087.htm ex1087.htm

Exhibit 10.87

Chordiant Software, Inc.

AMENDED AND RESTATED 1999 NON-EMPLOYEE
DIRECTORS’ STOCK OPTION PLAN

Restricted Stock Award Grant Notice
 
Chordiant Software, Inc. (the “Company”), pursuant to its 1999 Amended and Restated Non-Employee Directors’ Stock Option Plan (the “Plan”), hereby awards to Participant the award of shares of restricted stock of the Company (the “Award”) set forth below.  This Award is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Award Agreement (the “Award Agreement”) 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.  In the event of any conflict between the terms in the Award and the Plan, the terms of the Plan shall control.
 

 
Participant:
 
Date of Grant:
 
Vesting Commencement Date:
Date of Grant
Number of Shares Subject to Award:
[           ] shares of Common Stock
Consideration:
Participant’s past services

 
Vesting Schedule:   Subject to the Participant’s Continuous Service, this Award shall vest in full on the earlier of (a) the first anniversary of the most recent Annual Meeting and (b) the date of the first Annual Meeting following the Date of Grant.
 
Additional Terms/Acknowledgements:  The undersigned Participant acknowledges receipt of, and understands and agrees to, this Award Grant Notice, the Award Agreement and the Plan (collectively, the “Award Documents”) and has received the Plan prospectus.  Participant further acknowledges that as of the Date of Grant, the Award Documents set forth the entire understanding between Participant and the Company with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
 
Chordiant Software, Inc.
 
Participant:
       
By:
     
 
Signature
 
Signature
       
Title:
   
Date:
 
         
Date:
       

 
Attachments:
Restricted Stock Award Agreement, 1999 Amended and Restated Non-Employee Directors’ Stock Option Plan

 
 
 

 

 
Attachment I
 
Chordiant Software, Inc.

AMENDED AND RESTATED 1999 NON-EMPLOYEE
DIRECTORS’ STOCK OPTION PLAN

Restricted Stock Award Agreement
 
Pursuant to the Restricted Stock Award Grant Notice (the “Grant Notice”) and this Restricted Stock Award Agreement (“Award Agreement”), Chordiant Software, Inc. (the “Company”) has awarded you, pursuant to its 1999 Amended and Restated Non-Employee Directors’ Stock Option 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.
 
The details of your Award, in addition to those set forth in the Grant Notice and the Plan, are as follows.
 
1. Entitlement to Shares.
 
(a) Award.  The Award shall be as set forth in the Grant Notice.  By signing the Grant Notice, you hereby agree to acquire from the Company, and the Company hereby agrees to issue to you, the aggregate number of shares of Common Stock specified in your Grant Notice for the consideration set forth in Section 1(c) below, and subject to all of the terms and conditions of this Award Agreement and the Plan.  You may not acquire less than the aggregate number of shares specified in the Grant Notice.
 
(b) Closing.  You will acquire the shares by delivering your Grant Notice, executed by you in the manner required by the Company, to the Corporate Secretary of the Company, or to such other person as the Company may designate, during regular business hours, on the date that you have executed the Grant Notice (or at such other time and place as you and the Company may mutually agree upon in writing) (such date, not later than thirty (30) days following the Grant Date, the “Closing Date”) along with any consideration, other than your services, if any, required to be delivered by you by law on the Closing Date and such additional documents as the Company may then require.  The Company will direct the transfer agent for the Company to deliver to Escrow Agent (as defined in Section 8 below) pursuant to the terms of Section 8 below, the certificate or certificates evidencing the shares of Common Stock being acquired by you.  You acknowledge and agree that any such shares may be held in book entry form directly registered with the transfer agent or in such other form as the Company may determine.
 
(c) Consideration.  Unless otherwise required by law, the shares of Common Stock to be delivered to you on the Closing Date shall be deemed paid, in whole or in part in exchange for the services rendered or to be rendered by you to the Company or an Affiliate in the amounts and to the extent required by law.  In the event additional consideration is required by law so that the Common Stock acquired under this Award Agreement is deemed fully paid and nonassessable, the Board shall determine the amount and character of such additional consideration to be paid.
 

(d) Vesting.  The Award shall be subject to vesting in accordance with the Vesting Schedule set forth on the Grant Notice, as modified by this Section 1(d).  Shares acquired by you that have vested in accordance with the Vesting Schedule set forth in the Award Documents are “Vested Shares.”  Shares acquired by you pursuant to this Award Agreement that are not Vested Shares are “Unvested Shares.”
 
(i) Termination of Continuous Service; Reacquisition Right. The Company shall simultaneously with the termination of your Continuous Service automatically reacquire (the “Reacquisition Right”) for no consideration all of the Unvested Shares, unless the Company agrees to waive its Reacquisition Right as to some or all of the Unvested Shares.  Any such waiver shall be exercised by the Company by written notice to you or your representative (with a copy to Escrow Agent, as defined below) within ninety (90) days after the termination of your Continuous Service, and Escrow Agent may then release to you the number of Unvested Shares not being reacquired by the Company.  If the Company does not waive its Reacquisition Right as to all of the Unvested Shares, then upon such termination of your Continuous Service, Escrow Agent shall transfer to the Company the number of Unvested Shares the Company is reacquiring.  The Reacquisition Right shall expire when all of the shares have become Vested Shares.  Notwithstanding the foregoing, the Company shall not exercise its Reacquisition Right for such period of time following your acquisition of the shares of Common Stock issued pursuant to this Award as necessary to avoid a charge to earnings for financial accounting purposes, as determined in good faith by the Board.
 
(ii) Accelerated Vesting on Change in Control.   In the event of a: (1) a dissolution, liquidation or sale of all or substantially all of the assets of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) the acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or any Affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, in each case other than a merger or consolidation for the purpose of a change in domicile, and provided you remain in Continuous Service with the Company as of immediately prior to such transaction, then the vesting of this Award will be automatically accelerated in full as of immediately prior to such transaction.
 
(iii) Assumption of Award.  As provided in Section 12(B) of the Plan, in the event of a transaction described in Section 12(B) of the Plan, the Reacquisition Right may be assigned by the Company to the successor of the Company (or such successor’s parent corporation), if any, in connection with such transaction.  To the extent the Reacquisition Right remains in effect following such transaction, it shall apply to the new capital stock or other property received in exchange for the Common Stock in consummation of such transaction.
 
2. Holding Period.  You agree that you will not sell or otherwise transfer (excluding transfers to certain family trusts as provided in Section 7 below) any of the shares of Common Stock issued under the Award until the earlier of (1) the second anniversary of the vesting date of the Award, (2) the closing of a transaction described in Section 1(d)(ii) above, (3) the certification by the Board that you have suffered an Unforeseeable Emergency or (4) the termination of your Continuous Service as a result of death or Disability (such period, the “Holding Period”).  Shares sold or withheld by the Company to cover applicable tax withholdings will not be deemed a violation of the Holding Period.  The shares of Common Stock issued pursuant to this Award shall be endorsed with appropriate legends as determined by the Company and subject to escrow (as provided in Section 8 below) in order to enforce the provisions of this Section 2, and you will enter into such other arrangements as determined reasonably necessary by the Company in order to enforce the provisions of this Section 2.
 
3. 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 of vesting of shares 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 Financial Industry Regulatory Authority (a “FINRA 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 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.  In the event the Company’s obligation to withhold arises prior to the delivery to you of Common Stock or it is determined after the delivery of Common Stock to you that the amount of the Company’s withholding obligation was greater than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper amount.
 
4. Rights as Stockholder. Subject to the provisions of this Award Agreement, you shall have the right to exercise all rights and privileges of a stockholder of the Company with respect to the shares of Common Stock deposited in the Joint Escrow.  You shall be deemed to be the holder of the shares of Common Stock for purposes of receiving any dividends that may be paid with respect to such shares and for purposes of exercising any voting rights relating to such shares, even if some or all of the shares are Unvested Shares.
 
5. 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 12(A) of the Plan.  Any shares, cash or other property received in respect of the shares of Common Stock subject to this Award, whether pursuant to an adjustment made under Section 12(A) or otherwise, will be subject to the terms and conditions of this Award to the extent such terms are then applicable to such shares of Common Stock.
 
6. Securities Law Compliance.  The grant of your Award and the issuance of any shares of Common Stock pursuant to an 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 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 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 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 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.
 
7. Transferability.  Your Award and any Unvested Shares and any Vested Shares subject to the Holding Period are not transferable, except by will or by the laws of descent and distribution.  Notwithstanding the foregoing, you may transfer such shares of Common Stock to a trust for the benefit of you or your “immediate family”, provided that each such transferee agrees in a writing satisfactory to the Company that the provisions of this Award Agreement (including but not limited to Section 2 and Section 8) will continue to apply to the transferred shares in the hands of such transferee, and provided further that following such transfer, you continue to be deemed to be the “beneficial owner” of the shares for purposes of the Exchange Act.  As used herein, the term “immediate family” will mean your spouse, brother or sister, adopted child or grandchild, or the spouse of your child, adopted child, grandchild or adopted grandchild.  In addition, by delivering written notice to the Company, in a form satisfactory to the Company, you may (a) designate a third party who, in the event of your death, shall thereafter be entitled to receive any distribution of shares of Common Stock pursuant to this Award Agreement and/or (b) instruct the Company to distribute shares of Common Stock upon release from escrow to a spouse or former spouse pursuant to a domestic relations order.
 
8. Escrow of Unvested Shares. As security for your faithful performance of the terms of this Award Agreement (including Section 2) and to insure the availability for delivery of your Common Stock upon execution of the Reacquisition Right, you agree to the following “Joint Escrow” and “Joint Escrow Instructions,” and you and the Company hereby authorize and direct the Corporate Secretary of the Company or the Corporate Secretary’s designee (“Escrow Agent”) to hold the documents delivered to Escrow Agent pursuant to the terms of this Award Agreement and of your Grant Notice, in accordance with the following Joint Escrow Instructions:
 
(a) In the event you cease your Continuous Service, the Company shall pursuant to the Reacquisition Right, automatically reacquire for no consideration all Unvested Shares, as of the date of such termination, unless the Company elects to waive such right as to some or all of the Unvested Shares.  If the Company elects to waive the Reacquisition Right, the Company will give you and Escrow Agent a written notice specifying the number of Unvested Shares not to be reacquired. You and the Company hereby irrevocably authorize and direct Escrow Agent to close the transaction contemplated by such notice as soon as practicable following the date of termination of Continuous Service in accordance with the terms of this Award Agreement and the notice of waiver, if any.
 
(b) Vested Shares shall be delivered to you upon your request given in the manner provided in Section 15 for providing notice.
 
(c) At any closing involving the transfer or delivery of some or all of the property subject to the Grant Notice and this Award Agreement, Escrow Agent is directed (i) to date any stock assignments necessary for the transfer in question, (ii) to fill in the number of shares being transferred, and (iii) to deliver the same, together with the certificate, if any, evidencing the shares of Common Stock to be transferred, to you or the Company, as applicable.
 
(d) You irrevocably authorize the Company to deposit with Escrow Agent the certificates, if any, evidencing shares of Common Stock to be held by Escrow Agent hereunder and any additions and substitutions to such shares as specified in this Award Agreement.  You hereby irrevocably constitute and appoint Escrow Agent as your attorney-in-fact and agent for the term of this escrow to execute with respect to such securities and other property all documents of assignment and/or transfer and all stock certificates necessary or appropriate to make all securities negotiable and complete any transaction contemplated herein.
 
(e) This escrow shall terminate upon the later of (i) the expiration or application in full of the Reacquisition Right and (ii) the expiration of the Holding Period, and the completion of the tasks contemplated by these Joint Escrow Instructions.
 
(f) If at the time of termination of this escrow, Escrow Agent should have in its possession any documents, securities, or other property belonging to you, Escrow Agent shall deliver all of same to you and shall be discharged of all further obligations hereunder.
 
(g) Except as otherwise provided in these Joint Escrow Instructions, Escrow Agent’s duties hereunder may be altered, amended, modified, or revoked only by a writing signed by all of the parties hereto.
 
(h) Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by Escrow Agent to be genuine and to have been signed or presented by the proper party or parties or their assignees.  Escrow Agent shall not be personally liable for any act Escrow Agent may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for you while acting in good faith and any act done or omitted by Escrow Agent pursuant to the advice of Escrow Agent’s own attorneys shall be conclusive evidence of such good faith.
 
(i) Escrow Agent is hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders, judgments, decrees or process of courts of law, and is hereby expressly authorized to comply with and obey orders, judgments, or decrees of any court.  In case Escrow Agent obeys or complies with any such order, judgment, or decree of any court, Escrow Agent shall not be liable to any of the parties hereto or to any other person, firm, or corporation by reason of such compliance, notwithstanding any such order, judgment, or decree being subsequently reversed, modified, annulled, set aside, vacated, or found to have been entered without jurisdiction.
 
(j) Escrow Agent shall not be liable in any respect on account of the identity, authority, or rights of the parties executing or delivering or purporting to execute or deliver this Award Agreement or any documents or papers deposited or called for hereunder.
 
(k) Escrow Agent shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with Escrow Agent.
 
(l) Escrow Agent’s responsibilities as Escrow Agent hereunder shall terminate if Escrow Agent shall cease to be the Secretary of the Company, if applicable, or if Escrow Agent shall resign by written notice to each party.  In the event of any such termination, the Company may appoint any officer or assistant officer of the Company or any other person as successor Escrow Agent and you hereby confirm the appointment of such successor or successors as your attorney-in-fact and agent to the full extent of such successor Escrow Agent’s appointment.
 
(m) If Escrow Agent reasonably requires other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
 
(n) It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities, Escrow Agent is authorized and directed to retain in its possession without liability to anyone all or any part of such securities until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree, or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings.
 
(o) By signing this Award Agreement below Escrow Agent becomes a party hereto only for the purpose of the Joint Escrow Instructions in this Section 8; Escrow Agent does not become a party to any other rights and obligations of this Award Agreement apart from those in this Section 8.
 
(p) Escrow Agent shall be entitled to employ such legal counsel and other experts as Escrow Agent may deem necessary to properly advise Escrow Agent in connection with Escrow Agent’s obligations hereunder.  Escrow Agent may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.  The Company shall be responsible for all fees generated by such legal counsel in connection with Escrow Agent’s obligations hereunder.
 
(q) These Joint Escrow Instructions set forth in this Section 8 shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  It is understood and agreed that references to “Escrow Agent” herein refer to the original Escrow Agent and to any and all successor Escrow Agents.  It is understood and agreed that the Company may at any time or from time to time assign its rights under the Award Agreement and these Joint Escrow Instructions in whole or in part.
 
9. Irrevocable Power of Attorney. You constitute and appoint the Company’s Secretary as attorney-in-fact and agent to transfer the Common Stock on the books of the Company with full power of substitution in the premises, and to execute with respect to such securities and other property all documents of assignment and/or transfer and all stock certificates necessary or appropriate to make all securities negotiable and complete any transaction contemplated herein.  This is a special power of attorney coupled with an interest (specifically, the Company’s underlying security interest in retaining the shares of Common Stock in the event you do not perform the requisite services for the Company), and is irrevocable and shall survive your death or legal incapacity.  This power of attorney is limited to the matters specified in this Award Agreement.
 
10. Tax Consequences. You agree to review with your own tax advisors the federal, state, local and foreign tax consequences of the Award and the transactions contemplated by this Award Agreement.  You shall rely solely on such advisors and not on any statements or representations of the Company or any of its agents.  You understand that you (and not the Company) shall be responsible for your own tax liability that may arise as a result of the Award or the transactions contemplated by this Award Agreement.  You acknowledge that you shall be solely responsible for making any filings or elections, including any election under Section 83(b) of the Code, even if you request the Company or its representatives to make any filing on your behalf.
 
11. Successors and Assigns.  Except to the extent otherwise provided in this Award Agreement, the provisions of this Award 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 Award 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 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 and this Award by electronic means or to request your consent to participate in the Plan 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 Award Agreement will be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision will (i) 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 (ii) not affect any other provision of this Award Agreement or part thereof, each of which will remain in full force and effect.
 
15. Notices. Any notice or request required or permitted under the Plan or hereunder shall be given in writing to each of the other parties hereto and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid.  All notices shall be addressed (i) if to the Company, to the attention of the Company’s general counsel at the Company’s principal office, (ii) if to Escrow Agent, to the attention of the Company’s Corporate Secretary at the Company’s principal office, and (iii) if to you, to the last address you provided to the Company.
 
16. Governing Plan Document.  Your Award is subject to all the provisions of the Plan, 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.  In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.
 
17. Applicable Law.  This Award Agreement shall be governed by the laws of the State of Delaware.
 
18. Other Documents.  You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
 

19. Compliance with Section 409A of the Code.  This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4) and the exception from the application of Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(6).  Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of these exceptions and is otherwise deferred compensation subject to Section 409A, and if you are a “Specified Employee” (within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6) months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six (6) months and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on you in respect of the shares under Section 409A of the Code.  Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).
 
Escrow Agent hereby acknowledges and accepts its rights and responsibilities pursuant to Section 8 above.
 


___________________________
Escrow Agent


                                                        ..
 
 

 


Attachment II
 
AMENDED AND RESTATED 1999 NON-EMPLOYEE
DIRECTORS’ STOCK OPTION PLAN

                                                      ..
 
 

 

EX-10.88 15 ex1088.htm ex1088.htm

Exhibit 10.88
Chordiant Software, Inc.

Amended and Restated 1999 Non-Employee
Directors’ Stock Option Plan

Restricted Stock Award Grant Notice
For Non-U.S. Directors
 
Chordiant Software, Inc. (the “Company”), pursuant to its 1999 Amended and Restated Non-Employee Directors’ Stock Option Plan (the “Plan”), hereby awards to Participant the award of shares of restricted stock of the Company (the “Award”) set forth below.  This Award is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Award Agreement (the “Award Agreement”) (including any appendix to the Award Agreement for Participant’s country (the “Appendix”)) 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.  In the event of any conflict between the terms set forth herein and the Plan, the terms of the Plan shall control.
 
Participant:
 
Date of Grant:
 
Vesting Commencement Date:
Date of Grant
Number of Shares Subject to Award:
[           ] shares of Common Stock
Consideration:
Participant’s past services

 
Vesting Schedule:   Subject to the Participant’s Continuous Service, this Award shall vest in full on the earlier of (a) the first anniversary of the most recent Annual Meeting and (b) the date of the first Annual Meeting following the Date of Grant.
 
Additional Terms/Acknowledgements:  The undersigned Participant acknowledges receipt of, and understands and agrees to, this Award Grant Notice, the Award Agreement (including any Appendix) and the Plan (collectively, the “Award Documents”) and has received the Plan prospectus.  Participant further acknowledges that, as of the Date of Grant, the Award Documents set forth the entire understanding between Participant and the Company with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
 
Chordiant Software, Inc.
 
Participant:
       
By:
     
 
Signature
 
Signature
       
Title:
   
Date:
 
         
Date:
       
 
 
Attachments:
Restricted Stock Award Agreement (including any Appendix), 1999 Amended and Restated Non-Employee Directors’ Stock Option Plan

 
 
 

 

 
Attachment I
 
Chordiant Software, Inc.
Amended and Restated 1999 Non-Employee
Directors’ Stock Option Plan

Restricted Stock Award Agreement
For Non-U.S. Directors
 
Pursuant to the Restricted Stock Award Grant Notice (the “Grant Notice”) and this Restricted Stock Award Agreement (the “Award Agreement”), including any appendix for your country (the “Appendix”), Chordiant Software, Inc. (the “Company”) has awarded you, pursuant to its 1999 Amended and Restated Non-Employee Directors’ Stock Option 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.
 
The details of your Award, in addition to those set forth in the Grant Notice and the Plan, are as follows.
 
1. Entitlement to Shares.
 
(a) Award.  The Award shall be as set forth in the Grant Notice.  By signing the Grant Notice, you hereby agree to acquire from the Company, and the Company hereby agrees to issue to you, the aggregate number of shares of Common Stock specified in your Grant Notice for the consideration set forth in Section 1(c) below, and subject to all of the terms and conditions of this Award Agreement and the Plan.  You may not acquire less than the aggregate number of shares specified in the Grant Notice.
 
(b) Closing.  You will acquire the shares by delivering your Grant Notice, executed by you in the manner required by the Company, to the Corporate Secretary of the Company, or to such other person as the Company may designate, during regular business hours, on the date that you have executed the Grant Notice (or at such other time and place as you and the Company may mutually agree upon in writing) (such date, not later than thirty (30) days following the Grant Date, the “Closing Date”) along with any consideration, other than your services, if any, required to be delivered by you by law on the Closing Date and such additional documents as the Company may then require.  The Company will direct the transfer agent for the Company to deliver to Escrow Agent (as defined in Section 8 below) pursuant to the terms of Section 8 below, the certificate or certificates evidencing the shares of Common Stock being acquired by you.  You acknowledge and agree that any such shares may be held in book entry form directly registered with the transfer agent or in such other form as the Company may determine.
 
(c) Consideration.  Unless otherwise required by law, the shares of Common Stock to be delivered to you on the Closing Date shall be deemed paid, in whole or in part in exchange for the services rendered or to be rendered by you to the Company or an Affiliate in the amounts and to the extent required by law.  In the event additional consideration is required by law so that the Common Stock acquired under this Award Agreement is deemed fully paid and nonassessable, the Board shall determine the amount and character of such additional consideration to be paid.
 
(d) Vesting.  The Award shall be subject to vesting in accordance with the Vesting Schedule set forth on the Grant Notice, as modified by this Section 1(d).  Shares acquired by you that have vested in accordance with the Vesting Schedule set forth in the Award Documents are “Vested Shares.”  Shares acquired by you pursuant to this Award Agreement that are not Vested Shares are “Unvested Shares.”
 
(i) Termination of Continuous Service; Reacquisition Right. The Company shall simultaneously with the termination of your Continuous Service automatically reacquire (the “Reacquisition Right”) for no consideration all of the Unvested Shares, unless the Company agrees to waive its Reacquisition Right as to some or all of the Unvested Shares.  Any such waiver shall be exercised by the Company by written notice to you or your representative (with a copy to Escrow Agent, as defined below) within ninety (90) days after the termination of your Continuous Service, and Escrow Agent may then release to you the number of Unvested Shares not being reacquired by the Company.  If the Company does not waive its Reacquisition Right as to all of the Unvested Shares, then upon such termination of your Continuous Service, Escrow Agent shall transfer to the Company the number of Unvested Shares the Company is reacquiring.  The Reacquisition Right shall expire when all of the shares have become Vested Shares.  Notwithstanding the foregoing, the Company shall not exercise its Reacquisition Right for such period of time following your acquisition of the shares of Common Stock issued pursuant to this Award as necessary to avoid a charge to earnings for financial accounting purposes, as determined in good faith by the Board.
 
(ii) Accelerated Vesting on Change in Control.   In the event of a: (1) a dissolution, liquidation or sale of all or substantially all of the assets of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the Company is the surviving corporation but the shares of the Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) the acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or any Affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors, in each case other than a merger or consolidation for the purpose of a change in domicile, and provided you remain in Continuous Service with the Company as of immediately prior to such transaction, then the vesting of this Award will be automatically accelerated in full as of immediately prior to such transaction.
 
(iii) Assumption of Award.  As provided in Section 12(B) of the Plan, in the event of a transaction described in Section 12(B) of the Plan, the Reacquisition Right may be assigned by the Company to the successor of the Company (or such successor’s parent corporation), if any, in connection with such transaction.  To the extent the Reacquisition Right remains in effect following such transaction, it shall apply to the new capital stock or other property received in exchange for the Common Stock in consummation of such transaction.
 
2. Holding Period.  You agree that you will not sell or otherwise transfer (excluding transfers to certain family trusts as provided in Section 7 below) any of the shares of Common Stock issued under the Award until the earlier of (1) the second anniversary of the vesting date of the Award, (2) the closing of a transaction described in Section 1(d)(ii)  above, (3) the certification by the Board that you have suffered an Unforeseeable Emergency or (4) the termination of your Continuous Service as a result of death or Disability (such period, the “Holding Period”).  Shares sold or withheld by the Company to cover applicable withholding for Tax-Related Items (as defined in Section 3 below) will not be deemed a violation of the Holding Period.  The shares of Common Stock issued pursuant to this Award shall be endorsed with appropriate legends as determined by the Company and subject to escrow (as provided in Section 8 below) in order to enforce the provisions of this Section 2, and you will enter into such other arrangements as determined reasonably necessary by the Company in order to enforce the provisions of this Section 2.
 
3. Withholding Obligations.
 
(a) Regardless of any action the Company or an Affiliate takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or an Affiliate.  You acknowledge that the Company and/or any Affiliate (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant or vesting of the Award, the issuance of shares of Common Stock, the expiration of the Reacquisition Right and the Holding Period, the sale of shares of Common Stock acquired under the Plan and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result.  Further, if you have become subject to tax in more than one jurisdiction between the Date of Grant set forth in the Grant Notice and the date of any relevant taxable or tax withholding event, as applicable, you acknowledge that the Company and/or an Affiliate may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
 
(b) Prior to any relevant taxable or tax withholding event, as applicable, you will pay or make adequate arrangements satisfactory to the Company and/or an Affiliate to satisfy all Tax-Related Items.  In this regard, you authorize the Company and/or an Affiliate, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:
 
(i)  
withholding from your wages or other cash compensation paid to you by the Company and/or an Affiliate; or
 
(ii)  
causing you to tender a cash payment to the Company in the amount of the Tax-Related Items; or
 
(iii)  
withholding from proceeds of the sale of shares of Common Stock issued to you upon vesting of the Award pursuant to you entering into a “same day sale” commitment with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”) whereby you irrevocably elect to sell a portion of the shares of Common Stock subject to the Award to satisfy the Tax-Related Items and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Tax-Related Items directly to the Company and/or an Affiliate; or
 
(iv)  
withholding shares of Common Stock from the shares of Common Stock otherwise issuable to you in connection with the Award with a Fair Market Value equal to the amount of the Tax-Related Items.
 
To avoid negative accounting treatment, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates.  If the obligation for Tax-Related Items is satisfied by withholding shares of Common Stock, for tax purposes, you are deemed to have been issued the full number of shares of Common Stock subject to the Award, notwithstanding that a number of the shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of your participation in the Plan.
 
(c) Unless the withholding obligations of the Company and/or any Affiliate with regard to all Tax-Related Items are satisfied, the Company shall have no obligation to deliver any shares of Common Stock to you.  Finally, you agree to indemnify and hold the Company and/or any Affiliate harmless from any failure by the Company and/or any Affiliate to withhold the proper amount.
 
4. Rights as Stockholder. Subject to the provisions of this Award Agreement, you shall have the right to exercise all rights and privileges of a stockholder of the Company with respect to the shares of Common Stock deposited in the Joint Escrow (as defined in Section 8 below).  You shall be deemed to be the holder of the shares of Common Stock for purposes of receiving any dividends that may be paid with respect to such shares and for purposes of exercising any voting rights relating to such shares, even if some or all of the shares are Unvested Shares.
 
5. 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 12(A) of the Plan.  Any shares, cash or other property received in respect of the shares of Common Stock subject to this Award, whether pursuant to an adjustment made under Section 12(A) or otherwise, will be subject to the terms and conditions of this Award to the extent such terms are then applicable to such shares of Common Stock.
 
6. Securities Law Compliance.  The grant of your Award and the issuance of any shares of Common Stock pursuant to an 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 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 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 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 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.
 
7. Transferability.  Your Award and any Unvested Shares and any Vested Shares subject to the Holding Period are not transferable, except by will or by the laws of descent and distribution.  Notwithstanding the foregoing, you may transfer such shares of Common Stock to a trust for the benefit of you or your “immediate family,” provided that each such transferee agrees in a writing satisfactory to the Company that the provisions of this Award Agreement (including but not limited to Section 2 and Section 8) will continue to apply to the transferred shares in the hands of such transferee, and provided further that following such transfer, you continue to be deemed to be the “beneficial owner” of the shares for purposes of the Exchange Act.  As used herein, the term “immediate family” will mean your spouse, brother or sister, adopted child or grandchild, or the spouse of your child, adopted child, grandchild or adopted grandchild.  In addition, by delivering written notice to the Company, in a form satisfactory to the Company, you may instruct the Company to distribute shares of Common Stock upon release from escrow to a spouse or former spouse pursuant to a domestic relations order (or equivalent order under local law).
 
8. Escrow of Unvested Shares. As security for your faithful performance of the terms of this Award Agreement (including Section 2) and to insure the availability for delivery of your Common Stock upon execution of the Reacquisition Right, you agree to the following “Joint Escrow” and “Joint Escrow Instructions,” and you and the Company hereby authorize and direct the Corporate Secretary of the Company or the Corporate Secretary’s designee (“Escrow Agent”) to hold the documents delivered to Escrow Agent pursuant to the terms of this Award Agreement and of your Grant Notice, in accordance with the following Joint Escrow Instructions:
 
(a) In the event you cease your Continuous Service, the Company shall pursuant to the Reacquisition Right, automatically reacquire for no consideration all Unvested Shares, as of the date of such termination, unless the Company elects to waive such right as to some or all of the Unvested Shares.  If the Company elects to waive the Reacquisition Right, the Company will give you and Escrow Agent a written notice specifying the number of Unvested Shares not to be reacquired. You and the Company hereby irrevocably authorize and direct Escrow Agent to close the transaction contemplated by such notice as soon as practicable following the date of termination of Continuous Service in accordance with the terms of this Award Agreement and the notice of waiver, if any.
 
(b) Vested Shares shall be delivered to you upon your request given in the manner provided in Section 16 for providing notice.
 
(c) At any closing involving the transfer or delivery of some or all of the property subject to the Grant Notice and this Award Agreement, Escrow Agent is directed (i) to date any stock assignments necessary for the transfer in question, (ii) to fill in the number of shares being transferred, and (iii) to deliver the same, together with the certificate, if any, evidencing the shares of Common Stock to be transferred, to you or the Company, as applicable.
 
(d) You irrevocably authorize the Company to deposit with Escrow Agent the certificates, if any, evidencing shares of Common Stock to be held by Escrow Agent hereunder and any additions and substitutions to such shares as specified in this Award Agreement.  You hereby irrevocably constitute and appoint Escrow Agent as your attorney-in-fact and agent for the term of this escrow to execute with respect to such securities and other property all documents of assignment and/or transfer and all stock certificates necessary or appropriate to make all securities negotiable and complete any transaction contemplated herein.
 
(e) This escrow shall terminate upon the later of (i) the expiration or application in full of the Reacquisition Right and (ii) the expiration of the Holding Period, and the completion of the tasks contemplated by these Joint Escrow Instructions.
 
(f) If at the time of termination of this escrow, Escrow Agent should have in its possession any documents, securities, or other property belonging to you, Escrow Agent shall deliver all of same to you and shall be discharged of all further obligations hereunder.
 
(g) Except as otherwise provided in these Joint Escrow Instructions, Escrow Agent’s duties hereunder may be altered, amended, modified, or revoked only by a writing signed by all of the parties hereto.
 
(h) Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by Escrow Agent to be genuine and to have been signed or presented by the proper party or parties or their assignees.  Escrow Agent shall not be personally liable for any act Escrow Agent may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for you while acting in good faith and any act done or omitted by Escrow Agent pursuant to the advice of Escrow Agent’s own attorneys shall be conclusive evidence of such good faith.
 
(i) Escrow Agent is hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders, judgments, decrees or process of courts of law, and is hereby expressly authorized to comply with and obey orders, judgments, or decrees of any court.  In case Escrow Agent obeys or complies with any such order, judgment, or decree of any court, Escrow Agent shall not be liable to any of the parties hereto or to any other person, firm, or corporation by reason of such compliance, notwithstanding any such order, judgment, or decree being subsequently reversed, modified, annulled, set aside, vacated, or found to have been entered without jurisdiction.
 
(j) Escrow Agent shall not be liable in any respect on account of the identity, authority, or rights of the parties executing or delivering or purporting to execute or deliver this Award Agreement or any documents or papers deposited or called for hereunder.
 
(k) Escrow Agent shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with Escrow Agent.
 
(l) Escrow Agent’s responsibilities as Escrow Agent hereunder shall terminate if Escrow Agent shall cease to be the Secretary of the Company, if applicable, or if Escrow Agent shall resign by written notice to each party.  In the event of any such termination, the Company may appoint any officer or assistant officer of the Company or any other person as successor Escrow Agent and you hereby confirm the appointment of such successor or successors as your attorney-in-fact and agent to the full extent of such successor Escrow Agent’s appointment.
 
(m) If Escrow Agent reasonably requires other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
 
(n) It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities, Escrow Agent is authorized and directed to retain in its possession without liability to anyone all or any part of such securities until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree, or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings.
 
(o) By signing this Award Agreement below, Escrow Agent becomes a party hereto only for the purpose of the Joint Escrow Instructions in this Section 8; Escrow Agent does not become a party to any other rights and obligations of this Award Agreement apart from those in this Section 8.
 
(p) Escrow Agent shall be entitled to employ such legal counsel and other experts as Escrow Agent may deem necessary to properly advise Escrow Agent in connection with Escrow Agent’s obligations hereunder.  Escrow Agent may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.  The Company shall be responsible for all fees generated by such legal counsel in connection with Escrow Agent’s obligations hereunder.
 
(q) These Joint Escrow Instructions set forth in this Section 8 shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  It is understood and agreed that references to “Escrow Agent” herein refer to the original Escrow Agent and to any and all successor Escrow Agents.  It is understood and agreed that the Company may at any time or from time to time assign its rights under the Award Agreement and these Joint Escrow Instructions in whole or in part.
 
9. Irrevocable Power of Attorney. You constitute and appoint the Company’s Secretary as attorney-in-fact and agent to transfer the Common Stock on the books of the Company with full power of substitution in the premises, and to execute with respect to such securities and other property all documents of assignment and/or transfer and all stock certificates necessary or appropriate to make all securities negotiable and complete any transaction contemplated herein.  This is a special power of attorney coupled with an interest (specifically, the Company’s underlying security interest in retaining the shares of Common Stock in the event you do not perform the requisite services for the Company), and is irrevocable and shall survive your death or legal incapacity.  This power of attorney is limited to the matters specified in this Award Agreement.
 
10. Successors and Assigns.  Except to the extent otherwise provided in this Award Agreement, the provisions of this Award 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 and the heirs and legatees of your estate.
 
11. Nature of Grant.  In accepting the Award, you acknowledge that:
 
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time;
 
(b) the grant of the Award is voluntary and occasional and does not create any contractual or other right to receive future grants of restricted stock, or benefits in lieu of restricted stock, even if restricted stock awards have been granted repeatedly in the past;
 
(c) all decisions with respect to future restricted stock unit grants or other awards, if any, will be at the sole discretion of the Company;
 
(d) your participation in the Plan shall not create 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 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;
 
(e) you are voluntarily participating in the Plan;
 
(f) because you are not an employee of the Company or any Affiliate, the Award and your participation in the Plan will not be interpreted to form an employment contract with the Company or any Affiliate;
 
(g) the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty; and
 
(h) in consideration of the grant of the Award, no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from termination of your Continuous Service (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release the Company and any Affiliate from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, you shall be deemed irrevocably to have waived your entitlement to pursue such claim.
 
12. No Advice Regarding Grant.  The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan or your acquisition or sale of the underlying shares of Common Stock.  You are hereby advised to consult with your own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
 
13. Data Privacy.  You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in the Grant Notice, this Award Agreement and any other Award materials by and among, as applicable, the Company and any Affiliate for the exclusive purpose of implementing, administering and managing your participation in the Plan.
 
You understand that the Company and any Affiliate may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of Common Stock or directorships held in the Company, details of all Awards or any other entitlement to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the exclusive purpose of implementing, administering and managing the Plan (“Data”).

You understand that Data will be transferred to E*TRADE, or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan.  You understand that the recipients of Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than your country.  You understand that you may request a list with the names and addresses of any potential recipients of Data by contacting your local human resources representative.  You authorize the Company E*TRADE and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer Data, in electronic or other form, for the sole purpose of implementing, administering and managing your participation in the Plan.  You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan.  You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Company’s Corporate Secretary.  You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan.  For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact Company’s Corporate Secretary.
 
14. Electronic Delivery and Participation.  The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means.  You hereby consent to receive such documents by electronic delivery and 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.
 
15. Severability. If any provision of this Award Agreement will be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision will (i) 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 (ii) not affect any other provision of this Award Agreement or part thereof, each of which will remain in full force and effect.
 
16. Notices. Any notice or request required or permitted under the Plan or hereunder shall be given in writing to each of the other parties hereto and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid.  All notices shall be addressed (i) if to the Company, to the attention of the Company’s general counsel at the Company’s principal office, (ii) if to Escrow Agent, to the attention of the Company’s Corporate Secretary at the Company’s principal office, and (iii) if to you, to the last address you provided to the Company.
 
17. Governing Plan Document.  Your Award is subject to all the provisions of the Plan, 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.  In the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall control.
 
18. Applicable Law and Venue.  This Award Agreement shall be governed by the laws of the State of Delaware without regard to such state’s conflict of laws rules.  For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or this Award Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.
 
19. Other Documents.  You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
 
20. Compliance with Section 409A of the Code.  This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4) and the exception from the application of Code Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(6).  Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of these exceptions and is otherwise deferred compensation subject to Section 409A, and if you are a “Specified Employee” (within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6) months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six (6) months and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on you in respect of the shares under Section 409A of the Code.  Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).
 
21. Language.  If you have received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
 
22. Appendix.  Notwithstanding any provisions in this Award Agreement, the Award shall be subject to any special terms and conditions set forth in any Appendix to this Award Agreement for your country.  Moreover, if you relocate to one of the countries included in the Appendix, the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan.  The Appendix constitutes part of this Award Agreement.
 
23. Imposition of Other Requirements.  The Company reserves the right to impose other requirements on your participation in the Plan, on the Award and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
 


Escrow Agent hereby acknowledges and accepts its rights and responsibilities pursuant to Section 8 above.


___________________________
Escrow Agent

                                                          ..
 
 

 

Appendix for the United Kingdom
 
Chordiant Software, Inc.
Amended and Restated 1999 Non-Employee
Directors’ Stock Option Plan

Restricted Stock Award Agreement
For Non-U.S. Directors


Withholding Obligations.  This section supplements Section 3 of the Award Agreement:

You are engaged with the Company as a Non-Employee Director on an independent contractor basis and it is your responsibility to report any income you derive from the Award and to pay any Tax-Related Items on such income.

Notwithstanding the foregoing, the terms of Section 3 remain in effect to the extent applicable.  Further, in the event that the Company or an Affiliate has a withholding obligation with respect to the Tax-Related Items, if payment or withholding of the Tax-Related Items is not made within ninety (90) days of the event giving rise to the Tax-Related Items or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “Due Date”), the amount of any uncollected Tax-Related Items shall constitute a benefit to you on which additional income tax and national insurance contributions (“NICs”), if any, will be payable.  You will be responsible for reporting any income tax and NICs due on this additional benefit directly to Her Majesty’s Revenue and Customs under the self-assessment regime.

                                                        ..
 
 

 


Attachment II
 
Chordiant Software, Inc.
Amended and Restated 1999 Non-Employee
Directors’ Stock Option Plan

                                                    ..
 
 

 

EX-10.89 16 ex1089.htm ex1089.htm

Exhibit 10.89
 
INDEMNITY AGREEMENT
 
This Indemnity Agreement (this “Agreement”) dated as of _____________________, 20__, is made by and between Chordiant Software, Inc., a Delaware corporation (the “Company”), and ___________________________ (“Indemnitee”).
 
Recitals
 
A.           The Company desires to attract and retain the services of highly qualified individuals as directors, officers, employees and agents.
 
B.           The Company’s bylaws (the “Bylaws”) require that the Company indemnify its directors and officers, and shall have the power to indemnify its employees and agents, as authorized by the Delaware General Corporation Law, as amended (the “Code”), under which the Company is organized and such Bylaws expressly provide that the indemnification provided therein is not exclusive and contemplates that the Company may enter into separate agreements with its directors, officers and other persons to set forth specific indemnification provisions.
 
C.           Indemnitee does not regard the protection currently provided by applicable law, the Company’s governing documents and available insurance as adequate under the present circumstances, and the Company has determined that Indemnitee and other directors, officers, employees and agents of the Company may not be willing to serve or continue to serve in such capacities without additional protection.
 
D.           The Company desires and has requested Indemnitee to serve or continue to serve as a director, officer, employee or agent of the Company, as the case may be, and has proffered this Agreement to Indemnitee as an additional inducement to serve in such capacity.
 
E.           Indemnitee is willing to serve, or to continue to serve, as a director, officer, employee or agent of the Company, as the case may be, if Indemnitee is furnished the indemnity provided for herein by the Company.
 
Agreement
 
Now Therefore, in consideration of the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:
 
1. Definitions.
 
(a) Agent.  For purposes of this Agreement, the term “agent” of the Company means any person who:  (i) is or was a director, officer, employee or other fiduciary of the Company or a subsidiary of the Company; or (ii) is or was serving at the request or for the convenience of, or representing the interests of, the Company or a subsidiary of the Company, as a director, officer, employee or other fiduciary of a foreign or domestic corporation, partnership,  joint venture, trust or other enterprise.
 
(b) Expenses.  For purposes of this Agreement, the term “expenses” shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’, witness or other professional fees and related disbursements, and other out-of-pocket costs of whatever nature), actually and reasonably incurred by Indemnitee in connection with the investigation, defense or appeal of a proceeding, or establishing or enforcing a right to indemnification under this Agreement, the Code or otherwise, and amounts paid in settlement by or on behalf of Indemnitee, but shall not include any judgments, fines or penalties actually levied against Indemnitee for such individual’s violations of law.  The term “expenses” shall also include reasonable compensation for time spent by Indemnitee for which he is not compensated by the Company or any subsidiary or third party (i) for any period during which Indemnitee is not an agent, in the employment of, or providing services for compensation to, the Company or any subsidiary; and (ii) if the rate of compensation and estimated time involved is approved by the directors of the Company who are not parties to any action with respect to which expenses are incurred, for Indemnitee while an agent of, employed by, or providing services for compensation to, the Company or any subsidiary.
 
(c) Proceedings.  For purposes of this Agreement, the term “proceeding” shall be broadly construed and shall include, without limitation, any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, and whether formal or informal in any case, in which Indemnitee was, is or will be involved as a party or otherwise by reason of:  (i) the fact that Indemnitee is or was a director or officer of the Company; (ii) the fact that any action was taken by Indemnitee or on Indemnitee’s part while acting as a director, officer, employee or agent of the Company; or (iii) the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and in any such case described above, whether or not serving in any such capacity at the time any liability or expense is incurred for which indemnification, reimbursement or advancement of expenses may be provided under this Agreement.
 
(d) Subsidiary.  For purposes of this Agreement, the term “subsidiary” means any corporation or limited liability company of which more than 50% of the outstanding voting securities or equity interests are owned, directly or indirectly, by the Company and one or more of its subsidiaries, and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary.
 
(e) Independent Counsel.  For purposes of this Agreement, the term “independent counsel” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “independent counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
 
2. Agreement to Serve.  Indemnitee will serve, or continue to serve, as a director, officer, employee or agent of the Company or any subsidiary, as the case may be, faithfully and to the best of his or her ability, at the will of such corporation (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an agent of such corporation, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the bylaws or other applicable charter documents of such corporation, or until such time as Indemnitee tenders his or her resignation in writing; provided, however, that nothing contained in this Agreement is intended as an employment agreement between Indemnitee and the Company or any of its subsidiaries or to create any right to continued employment of Indemnitee with the Company or any of its subsidiaries in any capacity.
 
The Company acknowledges that it has entered into this Agreement and assumes the obligations imposed on it hereby, in addition to and separate from its obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve, or continue to serve, as a director, officer, employee or agent of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer, employee or agent of the Company.
 
3. Indemnification.
 
(a) Indemnification in Third Party Proceedings.  Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the Code, as the same may be amended from time to time (but, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the Code permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding, for any and all expenses, actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such proceeding.
 
(b) Indemnification in Derivative Actions and Direct Actions by the Company.  Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the Code, as the same may be amended from time to time (but, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the Code permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding by or in the right of the Company to procure a judgment in its favor, against any and all expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such proceedings.
 
4. Indemnification of Expenses of Successful Party.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of any action without prejudice, the Company shall indemnify Indemnitee against all expenses actually and reasonably incurred in connection with the investigation, defense or appeal of such proceeding.
 
5. Partial Indemnification.  If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses actually and reasonably incurred by Indemnitee in the investigation, defense, settlement or appeal of a proceeding, but is precluded by applicable law or the specific terms of this Agreement to indemnification for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
 
6. Advancement of Expenses.  To the extent not prohibited by law, the Company shall advance  the expenses incurred by Indemnitee in connection with any proceeding, and such advancement shall be made within twenty (20) days after the receipt by the Company of a statement or statements requesting such advances (which shall include invoices received by Indemnitee in connection with such expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice) and upon request of the Company, Indemnitee shall provide to the Company an undertaking to repay the advancement of expenses if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company.  Advances shall be unsecured, interest free and without regard to Indemnitee’s ability to repay the expenses. Advances shall include any and all expenses actually and reasonably incurred by Indemnitee pursuing an action to enforce Indemnitee’s right to indemnification under this Agreement, or otherwise, and this right of advancement.  Indemnitee acknowledges that the execution and delivery of this Agreement shall constitute an undertaking providing that Indemnitee shall, to the fullest extent required by law, repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company.  The right to advances under this Section shall continue until final disposition of any proceeding, including any appeal therein.  This Section 6 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10(b).
 
7. Notice and Other Indemnification Procedures.
 
(a) Notification of Proceeding.  Indemnitee will notify the Company in writing promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any proceeding or matter which may be subject to indemnification or advancement of expenses covered hereunder.  The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise.
 
(b) Request for Indemnification and Indemnification Payments.  Indemnitee shall notify the Company promptly in writing upon receiving notice of any demand, judgment or other requirement for payment that Indemnitee reasonably believes to be subject to indemnification under the terms of this Agreement, and shall request payment thereof by the Company.  Indemnification payments requested by Indemnitee under this Section 7(b) or Section 3 hereof shall be made by the Company no later than sixty (60) days after receipt of the written request of Indemnitee.  Claims for advancement of expenses shall be made under the provisions of Section 6 herein.
 
(c) Application for Enforcement.  In the event the Company fails to make timely payments as set forth in Sections 6 or 7(b) above, Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification or advancement of expenses pursuant to this Agreement.  In such an enforcement hearing or proceeding, the burden of proof shall be on the Company to prove that indemnification or advancement of expenses to Indemnitee is not required under this Agreement or permitted by applicable law.  Any determination by the Company (including its Board of Directors, stockholders or independent counsel) that Indemnitee is not entitled to indemnification hereunder shall not be a defense by the Company to the action nor create any presumption that Indemnitee is not entitled to indemnification or advancement of expenses hereunder.
 
(d) Indemnification of Certain Expenses.  The Company shall indemnify Indemnitee against all expenses incurred in connection with any hearing or proceeding under this Section 7 unless the Company prevails in such hearing or proceeding on the merits in all material respects.
 
8. Assumption of Defense.  In the event the Company shall be requested by Indemnitee to pay the expenses of any proceeding, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, or to participate to the extent permissible in such proceeding, with counsel reasonably acceptable to Indemnitee.  Upon assumption of the defense by the Company and the retention of such counsel by the Company, the Company shall not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that Indemnitee shall have the right to employ separate counsel in such proceeding at Indemnitee’s sole cost and expense.  Notwithstanding the foregoing, if Indemnitee’s counsel delivers a written notice to the Company stating that such counsel has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or the Company shall not, in fact, have employed counsel or otherwise actively pursued the defense of such proceeding within a reasonable time, then in any such event the fees and expenses of Indemnitee’s counsel to defend such proceeding shall be subject to the indemnification and advancement of expenses provisions of this Agreement.
 
9. Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any subsidiary (“D&O Insurance”), Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies.  If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
 
10. Exceptions.
 
(a) Certain Matters.  Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of any proceeding with respect to (i) remuneration paid to Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law (and, in this respect, both the Company and Indemnitee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication, as indicated in Section 10(d) below); (ii) a final judgment rendered against Indemnitee for an accounting, disgorgement or repayment of profits made from the purchase or sale by Indemnitee of securities of the Company or in connection with a settlement by or on behalf of Indemnitee to the extent it is acknowledged by Indemnitee and the Company that such amount paid in settlement resulted from Indemnitee's conduct from which Indemnitee received monetary personal profit, pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or other provisions of any federal, state or local statute or rules and regulations thereunder; (iii) a final judgment or other final adjudication that Indemnitee’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct (but only to the extent of such specific determination); or (iv) on account of conduct that is established by a final judgment as constituting a breach of Indemnitee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Indemnitee is not legally entitled.  For purposes of the foregoing sentence, a final judgment or other adjudication may be reached in either the underlying proceeding or action in connection with which indemnification is sought or a separate proceeding or action to establish rights and liabilities under this Agreement.
 
(b) Claims Initiated by Indemnitee.  Any provision herein to the contrary notwithstanding, the Company shall not be obligated to indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought by Indemnitee against the Company or its directors, officers, employees or other agents and not by way of defense, except (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or under any other agreement, provision in the Bylaws or Certificate of Incorporation or applicable law, or (ii) with respect to any other proceeding initiated by Indemnitee that is either approved by the Board of Directors or Indemnitee’s participation is required by applicable law.  However, indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors determines it to be appropriate.
 
(c) Unauthorized Settlements.  Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee under this Agreement for any amounts paid in settlement of a proceeding effected without the Company’s written consent.  Neither the Company nor Indemnitee shall unreasonably withhold consent to any proposed settlement; provided, however, that the Company may in any event decline to consent to (or to otherwise admit or agree to any liability for indemnification hereunder in respect of) any proposed settlement if the Company is also a party in such proceeding and determines in good faith that such settlement is not in the best interests of the Company and its stockholders.
 
(d) Securities Act Liabilities.  Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act of 1933, as amended (the “Act”), or in any registration statement filed with the SEC under the Act.  Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K currently generally requires the Company to undertake in connection with any registration statement filed under the Act to submit the issue of the enforceability of Indemnitee’s rights under this Agreement in connection with any liability under the Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue.  Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.
 
11. Nonexclusivity and Survival of Rights.  The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may at any time be entitled under any provision of applicable law, the Company’s Certificate of Incorporation, Bylaws or other agreements, both as to action in Indemnitee’s official capacity and Indemnitee’s action as an agent of the Company, in any court in which a proceeding is brought, and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors, administrators and assigns of Indemnitee.  The obligations and duties of the Company to Indemnitee under this Agreement shall be binding on the Company and its successors and assigns until terminated in accordance with its terms.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
 
No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her corporate status prior to such amendment, alteration or repeal.  To the extent that a change in the Code, whether by statute or judicial decision, permits greater indemnification or advancement of expenses than would be afforded currently under the Company’s Certificate of Incorporation, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, by Indemnitee shall not prevent the concurrent assertion or employment of any other right or remedy by Indemnitee.
 
12. Term.  This Agreement shall continue until and terminate upon the later of: (a) five (5) years after the date that Indemnitee shall have ceased to serve as a director and/or officer, employee or agent of the Company; or (b) one (1) year after the final termination of any proceeding, including any appeal then pending, in respect to which Indemnitee was granted rights of indemnification or advancement of expenses hereunder.
 
No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against an Indemnitee or an Indemnitee's estate, spouse, heirs, executors or personal or legal representatives after the expiration of five (5) years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such five-year period; provided, however, that if any shorter period of limitations is otherwise applicable to such cause of action, such shorter period shall govern.
 
13. Subrogation.  In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
 
14. Interpretation of Agreement.  It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law.
 
15. Severability.  If any provision of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 14 hereof.
 
16. Amendment and Waiver.  No supplement, modification, amendment, or cancellation of this Agreement shall be binding unless executed in writing by the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
 
17. Notice.  Except as otherwise provided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon the parties hereto shall be in writing and, if by telegram, telecopy or telex, shall be deemed to have been validly served, given or delivered when sent, if by overnight delivery, courier or personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given or delivered three (3) business days after deposit in the United States mail, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice).  If to the Company, notices and demands shall be delivered to the attention of the Secretary of the Company.
 
18. Governing Law.  This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.
 
19. Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement.  Only one such counterpart need be produced to evidence the existence of this Agreement.
 
20. Headings.  The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.
 
21. Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, that this Agreement is a supplement to and in furtherance of the Company’s Certificate of Incorporation, Bylaws, the Code and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of Indemnitee thereunder.
 


.
 
 

 

In Witness Whereof, the parties hereto have entered into this Agreement effective as of the date first written above.
 
   
CHORDIANT SOFTWARE, INC.
 
   
20400 Stevens Creek Boulevard, Suite 400
 
   
Cupertino, CA 95014
 
         
   
By:
   
         
   
Name:
   
         
   
Title:
   
         
   
INDEMNITEE
 
       
   
By:
   
         
   
Name:
   
         
   
Title:
   
         
   
Address:
   
         
         

 

 
 

 

EX-31.1 17 ex311.htm ex311.htm

Exhibit 31.1
 
CERTIFICATION

I, Steven R. Springsteel, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

       
 
By:
/s/ STEVEN R. SPRINGSTEEL
 
   
Steven R. Springsteel
Chairman, President and Chief Executive Officer
 
 
 
Date: January 29, 2009
EX-31.2 18 ex312.htm ex312.htm
 
Exhibit 31.2
 
CERTIFICATION

I, Peter S. Norman, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

       
 
By:
/s/ PETER S. NORMAN
 
   
Peter S. Norman
Chief Financial Officer and
Principal Accounting Officer
 

 
Date: January 29, 2009

EX-32.1 19 ex321.htm ex321.htm

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 of the Company, each hereby certifies that, to the best of his knowledge:
 
1. The Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2008, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
 
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
In Witness Whereof, the undersigned have set their hands hereto as of the 29th day of January, 2009.
 
 
/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-Q 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 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.


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