ITEM 4.02
NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED AUDIT
REPORT
OR COMPLETED INTERIM REVIEW.
As
previously disclosed in July 2006, the Board of Directors of Chordiant Software,
Inc. (Chordiant) initiated a review of Chordiant’s historical stock option grant
practices and appointed the Audit Committee to oversee the investigation.
The
Audit Committee’s review has focused on processes used to establish the option
exercise price and obtain required approvals of stock option grants and the
related measurement dates used for financial reporting purposes. The Audit
Committee is continuing its review of certain exercises of stock options
in 2001
and 2002 by former senior officers of Chordiant.
During
the course of the review, the Audit Committee has reached the conclusion
that,
pursuant to the requirements of Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees” (APB 25), the correct measurement
dates for certain stock option grants made by Chordiant during the period
2000
to 2006 differ from the measurement dates previously used to account for
such
option grants. Based on that conclusion of the Audit Committee, management
and
the Audit Committee of Chordiant’s Board of Directors have determined that
non-cash stock-based compensation expense should have been recorded with
respect
to those stock option
grants and recognized over the vesting period of the options, and that the
amount of such additional non-cash expense for the period 2001 through 2006
is
expected to be approximately $8 million. The
Company is continuing its review of factors that may have led to incorrect
measurement dates. The majority of the errors having significant financial
statement impact relate to options that were granted from late 2000 to mid
2003
and generally vested over periods ranging from one to four years if not canceled
or forfeited by the recipient. On November 26, 2006, the Board of Directors,
upon the recommendation of the Audit Committee and management, after considering
the quantitative and qualitative analysis prepared by management relating
to
these issues, concluded that Chordiant should restate its historical financial
statements for the years ended December 31, 2001, 2002 and 2003, the nine-month
period ended September 30, 2004, the fiscal year ended September 30, 2005,
and
the quarters ended December 31, 2005 and March 31, 2006 because the differences
were deemed to be material. Accordingly, the financial statements and all
earnings press releases and similar communications issued by Chordiant relating
to those periods should not be relied upon pending completion of the
restatements. The
amount of additional non-cash stock-based compensation expense to be recorded
in
any specific period or in any future period and the resulting tax and accounting
impact have not been finalized.
Chordiant
has discussed the above matters with BDO Seidman, LLP, the Company’s independent
registered public accounting firm, and Pricewaterhouse Coopers LLP, the
Company’s predecessor independent registered public accounting
firm.
Chordiant
expects that expenses arising from the investigation, the restatement and
related activities, which will be recorded in the periods incurred, will
be
significant. The cost of the investigation and related accounting cost incurred
through October 31, 2006 was approximately $1.5 million.
The
press release issued by Chordiant on November 30, 2006 in connection with
this
matter is attached hereto as Exhibit 99.1
Item
5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On
November 30, 2006, the Board of Directors of Chordiant Software, Inc. (the
“Company”), accepted the resignation, effective immediately, of Samuel
Spadafora, as Chairman of the Board and his retirement as the Chief Strategy
Officer of the Company. The Board of Directors also appointed Steven R.
Springsteel, the Company’s President and Chief Executive Officer, as the
Chairman of the Board.
On
November 30, 2006, the Company entered into a separation agreement with Mr.
Spadafora. The material terms of the separation agreement are:
1.
Mr. Spadafora will resign as a director and as an employee of the Company
effective immediately.
2.
The Company will pay Mr. Spadafora a severance payment in the amount of
$125,000, subject to standard payroll deductions and withholdings.
3.
Mr. Spadafora will sign a release excluding certain indemnification
rights.
4.
Mr. Spadafora will be entitled to reimbursement of the premiums for health
insurance for himself and his dependants through May 30, 2009.
5.
The Company is extending the post-termination exercise period applicable
to Mr.
Spadafora’s outstanding options to the later of (i) the original expiration of
the post-termination exercise period of the options (as set forth in the
applicable stock option agreements) or (ii) the last day of the 30-day period
measured from the first day that the options can be exercised in compliance
with
applicable securities laws (e.g., the 30th day following the date on which
the
Company’s Registration Statement on Form S-8 is “re-activated”), but in no event
later than the expiration of the ten year term of the options. In all other
respects, the options will continue to be governed by the terms and conditions
of the Options and the governing plan documents.
6.
Mr. Spadafora will be allowed to keep his computer, monitor and cell
phone.
A
copy of the separation agreement dated November 30, 2006 between Mr. Spadafora
and the Company is filed herewith as Exhibit 99.2.
Item
9.01. Financial Statements and Exhibits.
99.1
Text of press
release of Chordiant Software, Inc. issued on November 30, 2006.
99.2
Separation agreement dated November 30, 2006 between Mr. Spadafora and the
Company.
Safe
Harbor Statement
This
current report on Form 8-K includes "forward-looking statements" that are
subject to risks, uncertainties and other factors that could cause actual
results or outcomes to differ materially from those contemplated by the
forward-looking statements. Forward-looking statements in this report are
generally identified by words, such as "believes," "anticipates," "plans,"
"expects," "will," "would," "guidance," "projects" and similar expressions
which
are intended to identify forward-looking statements. There are a number of
important factors that could cause the results or outcomes discussed herein
to
differ materially from those indicated by these forward-looking statements,
including, among others, the final conclusions of the audit committee of
the
board of directors concerning matters relating to the Chordiant’s stock option
grants including, but not limited to, the accuracy of the stated dates of
historical option grants and whether all proper corporate procedures were
followed; the impact of any restatement of financial statements of Chordiant
or
other actions that may be taken or required as a result of such review or
the
results of the inquiry being conducted by the Securities and Exchange Commission
(“SEC”) in connection with Chordiant’s historical option grant practices.
Chordiant does not undertake an obligation to update forward-looking or other
statements in this report.
SIGNATURE
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 hereunto
duly authorized.
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Dated
November 30, 2006
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CHORDIANT
SOFTWARE, INC
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By:
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/s/ STEVEN
R. SPRINGSTEEL
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Steven
R. Springsteel
President
and Chief Executive Officer
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