Item
1.01 Entry into Material Definitive Agreement
Order
Form Agreement with CitiCorp
On
December 8, 2006, Citicorp
Credit Services, Inc. (USA) (“Citi”),
entered into an Order Form Agreement (the “Agreement”) with the Company. Citi
and the Company have previously entered into a Master License Agreement
dated as
of March 21, 2006 (the “License Agreement”) and a Master Services Agreement
dated June 7, 2006 (the “Services Agreement”) each of which contain terms and
conditions under which Citi may order software products or services from
Chordiant. Citi and the Company also previously entered into three term
development licenses in the amounts of $5,000,000; $2,500,000 and $1,250,000.
These term development licenses were non-cancelable, non-refundable and
were
provided on an unsupported basis. Each of these term development licenses
have
since expired. The $5,000,000 and $2,500,000 were recognized as license
revenue
during the three months ended March 31, 2006 and June 30, 2006, respectively.
The $1,250,000 term development license was entered into in October
2006.
The
material terms of the Agreement are:
1.
The Company has granted perpetual licenses of certain of its software products
(the “Software Products”) to Citi, pursuant to an Order Form placed under the
License Agreement. Citi’s right to use the Software Products extends to use of
the products in North American Contact-Center, Internet, Portal, IVR and
ATM
Branch businesses.
2.
Citi will pay the Company a license fee of $20,000,000 for the Software
Products. This amount became due and payable upon the signing of the Agreement.
Of this amount, $1,200,000 is attributable to a collections application
under
development that is expected to reach general availability release in the
third
fiscal quarter ending June 30, 2007.
3.
As part of this license, Citi received a 1,000 seat concurrent user license
to
use Chordiant
Call Center Advisor Browser, which is necessary for Citi’s employees and
contractors to access the functionality of certain of the other Software
Products licensed under the License Agreement. As
part of this license, Citi also received a 100 seat concurrent user license
to
use Chordiant
Teller.
4.
Citi has the right to purchase additional concurrent user licenses of the
Call
Center Advisor Browser for $325,000 for each 500 seat increment. Citi also
has
the right to purchase additional concurrent user licenses of Chordiant
Teller
for $30,000 for each 100 seat increment. This pricing is valid through
September
of 2012.
5.
If the total amount of license fees paid under the License Agreement for
this
Agreement and future license orders equals $50,000,000 prior to end of
the year
2012, then the license will convert to an enterprise license such that
no
additional license fees will be required for additional seats of the Software
Products. The $8,750,000 paid under the three term development licenses
referenced above will not count against this $50,000,000 amount.
6.
There will be no charge for the first year of support and maintenance and
in the
second year support and maintenance will be provided based on an annual
rate
equal to $240 per concurrent user. Thereafter support and maintenance will
be
provided at the option of Citi for a fee equal to the higher of four percent
(4%) of license fees paid or $240 per concurrent user, up to a maximum
of
$20,000,000 per annum.
7.
The Company has also entered into various Statements of Work with Citi
under the
Services Agreement whereby the Company has agreed to provide services for
the
purpose of developing an application that will run in conjunction with
the
Company’s Software Products. These services will be provided on a time and
materials basis.
Anticipated
Accounting Treatment for Financial Reporting Purposes:
Because
the Agreement includes the collections application under development that
is yet
to be delivered and is expected to reach general availability release in
the
third fiscal quarter ending June 30, 2007, all revenue, including services
and
support, will be deferred until the collections application is delivered.
Additionally, because support and maintenance is being provided at no cost
in
year one and at a cost that is lower than our established fair value for
such
services in future periods, a significant portion of the license fees under
the
Agreement will be reallocated to support and maintenance revenue and recognized
over the next five year period. The remaining license revenue of approximately
$9,000,000 from this transaction is expected to be recognized
as revenue under
the percentage of completion method
commencing upon the delivery of the collections application and thereafter
as
services are performed up to the point where the Company’s products are placed
into production. Assuming no changes to the scope of the Company’s involvement
in the initial project implementation of the collections application, it
is
currently anticipated that the implementation of the collections application,
together with the implementation of the other software products included
in the
Agreement, will be completed by the end of the Company’s fiscal year ending
September 30, 2007, and the $9.0 million is expected to be recognized as
license
revenue over that period.
Item
2.02 Results of Operations and Financial Condition.
On
December 13, 2006, the Company issued a press release announcing fiscal
year
2007 financial guidance and preliminary unaudited financial results for
the
fiscal year 2006. A copy of the press release is attached as Exhibit 99.1
to
this current report on Form 8-K and is incorporated by reference
herein.
Item
9.01 Financial Statements and Exhibits.
(c)
Exhibits
99.1
Press release issued by Chordiant Software, Inc. dated December 13,
2006.
Safe
Harbor Statement
This
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 release 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, whether we will
be
successful in completing the development of the collections application
required
under the Citi Agreement, the result of potential changes in accounting
estimates associated with percentage of completion accounting applicable
to the
Citi Agreement and the result of potential changes in accounting standards
which
could impact our anticipated accounting treatment of the Citi
Agreement.
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.