Item
1.01 Entry into Material Definitive Agreement
Order
Form Agreement with IBM
On
December 19, 2006, the Company, through its wholly owned German subsidiary
Chordiant Software International GmbH, entered into an Order Form Agreement
(the
“Agreement”) with IBM Deutschland GmbH, a German subsidiary of International
Business Machines Corporation (“IBM”).
IBM is one of the Company’s business alliance partners. IBM and the Company have
entered into a strategic relationship agreement which includes a joint marketing
program and a technology partnership. IBM provides selling and support efforts
to the Company. The Company has also trained professionals at IBM for the
implementation and support of Chordiant solutions. IBM also voluntarily provides
the Company with early releases of new technology platforms, education related
to those platforms and limited access to its technical resources to facilitate
adoption of its technology.
The
material terms of the Agreement are:
1.
The Company has agreed to license certain of its software to IBM’s customer,
Deutsche
Angestellten-Krankenkasse (“DAK”)
a large German health insurance provider, pursuant to a license agreement
(the
“License Agreement”) between Chordiant Software International GmbH and DAK. The
License Agreement has been executed.
2.
IBM will pay the Company a license fee of €11,017,000. The total amount is
payable within ten days of December 19, 2006.
3.
There will be no charge for support and maintenance through December 31,
2009.
Thereafter support and maintenance will be provided at the option of DAK
for a
fee payable to Chordiant of equal to €1,440,000 per annum.
4.
As part of this license, DAK received a 20,000 seat concurrent user license
to
use Chordiant
Call Center Advisor Browser, which is necessary for DAK’s employees and
contractors to access the functionality of certain of the other Software
Products licensed under the License Agreement.
5.
DAK has the right to purchase additional concurrent user licenses of the
Call
Center Advisor Browser from Chordiant for €3,330,000
for each 10,000 seat increment with support available at€532,800
per annum, commencing at the time such additional concurrent user
licenses are acquired by DAK.
6.
IBM is responsible for the installation of the software.
Anticipated
Accounting Treatment for Financial Reporting Purposes:
Because
support and maintenance is being provided at no cost through December 31,
2009,
a portion of the license fees currently estimated to aggregate €4.3 million,
will be reallocated to support and maintenance revenue and recognized over
the
three year period ending December 31, 2009. The accounting treatment and
the
timing of the revenue recognition for the remaining license revenue of
approximately €6.7 million has yet to be finalized. Factors that impact this
accounting include the level of services, if any, that the Company may perform
for DAK or IBM. These estimates have yet to be finalized, as IBM is responsible
for the installation.