ex1070.htm


    EXHIBIT 10.70

    
 

    
      	
              SCHIFFRIN
      BARROWAY

              TOPAZ
      & KESSLER, LLP

              Alan
      R. Plutzik (Bar No. 077785)

              2125
      Oak Grove Road, Suite 120

              Walnut
      Creek, California 94598

              Telephone:  (925)
      945-0200

              Facsimile:  (925)
      945-8792

               

              SCHIFFRIN
      BARROWAY TOPAZ

              &
      KESSLER, LLP

              Lee
      D. Rudy

              Michael
      C. Wagner

              280
      King of Prussia Road

              Radnor,
      PA 19087

              Telephone  (610)
      667-7706

              Facsimile:  (610)
      667-7056

               

              Lead
      Counsel for Plaintiffs

              JESSE
      BROWN and LUIS SUBA

               

              Additional
      Counsel Listed on Signature Page

            	
              COOLEY
      GODWARD KRONISH LLP

              Christopher
      Sundermeier (SBN 16533)

              Aaron
      Olsen (SBN 224947)

              Five
      Palo Alto Square

              3000
      El Camino Real

              Palo
      Alto, CA 94306-2155

              Telephone:
      (650) 843-5000

              Facsimile:
      (650) 843-0663

               

              Attorneys
      for Nominal Defendant

              CHORDIANT
      SOFTWARE, INC.

               

               

            


    

    


    UNITED
STATES DISTRICT COURT

    NORTHERN
DISTRICT OF CALIFORNIA

    SAN
JOSE DIVISION

    


    
      	
              IN
      RE CHORDIANT DERIVATIVE LITIGATION

              This
      Document Relates To:

              All
      Actions

            	
              Case
      No. C 06-04671 JW

              Memorandum
      of Understanding re Compromise and
Settlement

            


    

    


    
      
        
          
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            Memorandum
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    This Memorandum of
Understanding re Compromise and Settlement (“MOU”) is made and entered into as
of the date of the last signature below, by and among (i) Lead
Plaintiffs  Jesse Brown and Louis Suba, who have brought suit
derivatively on behalf of Nominal Defendant Chordiant Software, Inc. in the
United States District Court for the Northern District of California, and (ii)
individual defendants Stephen Kelly, David R. Springett, Cary G. Morgan, Steve
G. Vogel, Samuel T. Spadafora, Donald J. Morrison, Allen Swann, Jeremy Coote,
Kathryn C. Gould, William Raduchel, Steven R. Springsteel, Charles E. Hoffman,
Richard G. Stevens, David A. Weymouth, and George Reyes, and (iii) Nominal
Defendant Chordiant.

    
      	
              I.  

            	
              DEFINITIONS

            


    

     

    As
used in this MOU, the following terms shall have the meanings specified
below:

    1.1 “Action”
means the consolidated derivative action captioned in In re Chordiant Shareholder
Derivative Litigation, Case No. C 06-04671 JW.

    1.2 “Amended
Complaint” means the Verified Amended Consolidated Shareholder Derivative
Complaint filed in the Action.

    1.3 “Board”
means the Board of Directors of Chordiant.

    1.4 “Chordiant,”
“Company,” or “Nominal Defendant” means Chordiant Software, Inc., a Delaware
corporation.

    1.5 “Court”
means the United States District Court for the Northern District of
California.

    1.6 “Current
Chordiant Stockholders” means all record and beneficial owners of Chordiant
common stock as of the date of the Stipulation.

    1.7 “Defendants”
means the Individual Defendants and the Nominal Defendant,
collectively.

    1.8 “Defendants’
Counsel” means all counsel for the Individual Defendants and the Nominal
Defendant, collectively, as designated in the signature page(s)
hereto.

    1.9 “Effective
Date” means the date of completion of the following:

    
      
        
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    A. Entry
of the Final Judgment, which approves in all material respects the dismissal of
the Action and the releases provided for in Section XI below; and

    B. Either
(i) expiration of the time to appeal or otherwise seek review of the Order and
Final Judgment without any appeal having been taken or review sought, (ii) the
expiration of five (5) days after an appeal or review shall have been dismissed
or finally determined by the highest court before which such appeal or review is
sought and which affirms the material terms of the Settlement and/or Order and
Final Judgment and is not subject to further judicial review.

    1.10 “Escrow”
means the escrow established pursuant to the Escrow Agreement by and between
Chordiant and Plaintiffs’ Counsel and executed concurrently with the
Stipulation.

    1.11  “Final”
means no longer subject to review upon appeal or review in connection with a
Petition for Writ of Certiorari or other similar writ, whether by exhaustion of
any possible appeal, lapse of time or otherwise.

    1.12 “Final
Judgment” means the Order and Final Judgment to be entered by the Court
approving the Settlement, to be submitted to the Court contemporaneously with
the Stipulation.

    1.13 “Independent
Director,” shall have the same meaning as the definition of the same term in the
version of NASDAQ Rule 4200(a)(15) in effect as of the date of this
Stipulation.

    1.14 “Individual
Defendants” means Stephen Kelly, David R. Springett, Cary G. Morgan, Steve G.
Vogel, Samuel T. Spadafora, Donald J. Morrison, Allen Swann, Jeremy Coote,
Kathryn C. Gould, William Raduchel, Steven R. Springsteel, Charles E. Hoffman,
Richard G. Stevens, David A. Weymouth, George Reyes and George de
Urioste.

    1.15 “Lead
Plaintiffs” means Jesse Brown and Louis Suba.

    1.16  “Notice”
means the Notice of Pendency and Settlement of Action, to be submitted to the
Court contemporaneously with the Stipulation.

    1.17 “Parties”
means the Lead Plaintiffs and Defendants.

    1.18 “Person”
means a natural person, individual, corporation, partnership, limited
partnership, limited liability partnership, limited liability company,
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    joint
stock company, estate, legal representative, trust, unincorporated association,
government or any political subdivision or agency thereof, any business or legal
entity, and any spouse, heir, legatee, executor, administrator, predecessor,
successor, representative, or assign of any of the foregoing.

    1.19  “Plaintiffs’
Counsel” means Schiffrin Barroway Topaz & Kessler, LLP.

    1.20 “Preliminary
Order” means an order preliminarily approving the Stipulation and the form of
Notice, to be submitted to the Court contemporaneously with the
Stipulation.

    1.21 “Related
Persons” means, with respect to any Person, such Person’s past or present spouse
or other members of their immediate families, or any trust of which any Person
is the settlor or which is for the benefit of such Person and/or member of his
or her family, and each of a Person’s present and former parent entities,
subsidiaries (direct or indirect) and affiliates, and each of their respective
present and former shareholders, officers, directors, employees, agents,
representatives, insurers, heirs, executors, personal or legal representatives,
estates, administrators, predecessors, successors and assigns.

    1.22 “Released
Claims” means any statutory or common law claims, rights, demands, suits,
matters, issues or causes of action under federal, state, local, foreign law, or
any other law, rule or regulation that were, could have been, or might have been
asserted against any or all of the Released Parties by Lead Plaintiffs or any
other holder of Chordiant common stock, derivatively on behalf of Chordiant, in
any court of competent jurisdiction or any other adjudicatory tribunal, in
connection with, arising out of, related to, based upon, in whole or in part,
directly or indirectly, in any way, the facts, transactions, events,
occurrences, acts, disclosures, oral or written statements, representations,
filings, publications, disseminations, press releases, presentations, accounting
practices or procedures, compensation practices or procedures, omissions or
failures to act that were or that could have been alleged in the
Action.  The Released Claims refer to any and all claims alleged in
the Action or that are related to Chordiant’s historical stock option grant
practices and related accounting and public disclosures, and shall include
claims for alleged breach of fiduciary duties, insider trading, misappropriation
of information, failure to disclose, abuse of 

     

    
      
        
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      control,
breach of Chordiant’s policies or procedures, waste, mismanagement, gross
mismanagement, unjust enrichment, misrepresentation, fraud, violations of law,
money damages, injunctive relief, corrective disclosure, damages, penalties,
disgorgement, restitution, interest, attorneys’ fees, expert or consulting fees,
and any and all other costs, expenses or liability whatsoever, whether based on
federal, state, local, foreign, statutory, common law or any other law, rule or
regulation, whether fixed or contingent, accrued or un-accrued, liquidated or
un-liquidated, at law or in equity, matured or un-matured, known or unknown,
which were alleged in the Action or which are related to Chordiant’s historical
stock option grant practices and related accounting and public
disclosures.

    

    1.23 “Released
Parties” means the Defendants and their Related Persons.

    1.24 “SEC”
means the Securities and Exchange Commission.

    1.25 “Section
16 Officers” means Company officers that are insiders pursuant to Section 16 of
the Securities and Exchange Act of 1934

    1.26  “Settlement”
means the proposed settlement and compromise of the Action as provided for
herein.

    1.27 “Settlement
Hearing” means the hearing or hearings at which the Court will review the
adequacy, fairness, and reasonableness of the Settlement, and whether the
agreement for payment of the Fee Payment Plaintiffs’ Counsel should be
approved.

    1.28 “Stipulation”
means the Stipulation of Compromise and Settlement contemplated by this
MOU.

     

    
      	
              II.  

            	
              FACTUAL
      AND PROCEDURAL HISTORY

            


    

     

    2.1 On
June 30, 2006, the Company’s Board instructed the Audit Committee to review the
Company’s historical stock option grant procedures.  The Audit
Committee subsequently hired an independent law firm to undertake a special
investigation of the Company’s historical stock option grant
procedures.

    2.2 On
July 24, 2006, Chordiant publicly announced that the Company’s Audit Committee


     

    
      
        
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    had
begun a voluntary internal review of its historical stock option grant practices
and that it would not file its quarterly report with the SEC on Form 10-Q for
the quarter ended June 30, 2006, until the review was completed.

    2.3 After
research and investigation, plaintiff Jesse Brown filed a shareholder derivative
action captioned Jesse Brown
v. Stephen Kelly, et al., Case No. C 06-04671 JW (the “Brown Action”) on
August 1, 2006 in this Court.

    2.4 Subsequently,
after research and investigation, plaintiff Louis Suba filed a second
shareholder derivative action captioned Louis Suba v. Stephen Kelly, et
al., Case No. C 06-05603 JW (the “Suba Action”) on September 13, 2006 in
the Court.

    2.5 The
Brown Action and Suba Action were brought by shareholders of Chordiant on behalf
of Nominal Defendant Chordiant, and allege, inter alia, that from 2000 to
2002, stock options to officers and directors of the Company were improperly
retroactively granted in order to benefit the recipients thereof, and to the
detriment of Chordiant.

    2.6 By
Order dated November 27, 2006, the Court consolidated the Brown Action and the
Suba Action as In re Chordiant
Derivative Litigation, Case No. C 06-04671 JW, appointed plaintiffs Brown
and Suba as Lead Plaintiffs, and appointed Schiffrin Barroway Topaz &
Kessler, LLP as Lead Counsel.

    2.7 On
November 30, 2006, the Company filed with the SEC a Form 8-K in which Chordiant
announced that the Audit Committee had concluded that measurement dates for
certain Chordiant stock option grants from 2000 through and including 2006
differed from the recorded dates for such awards, and that the Company expected
that it would record a non-cash stock-based compensation charge of approximately
$8.3 million in connection therewith.

    2.8 On
February 9, 2007, the Company filed with the SEC a Form 10-K in which Chordiant
announced that it recorded approximately $8.3 million as a non-cash stock-based
compensation expense charge related to previously granted stock options, as well
as $2.2 million in expenses arising from the investigation, the restatement, and
related activities.

    2.9 In
or around March 2007, the Parties began a dialogue that would eventually
lead

     

    
      
        
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     to
settlement negotiations.

    2.10 In
June and July 2007, Chordiant shared with Plaintiffs’ Counsel certain nonpublic
documents relating to the Company’s stock option granting practices during the
relevant period.  On June 28, 2007, counsel for Chordiant met with
Plaintiffs’ Counsel to discuss the findings of the special investigation
performed at the direction of the Chordiant Audit Committee.  In
connection with the June 28, 2007 meeting, Plaintiffs’ Counsel reviewed the
documents provided by counsel for Chordiant, reviewed a presentation by counsel
for Chordiant concerning the Special Investigation, and engaged in discussion
with counsel for Chordiant concerning the contents of the documents and
presentation.  Between July and November, Plaintiffs’ Counsel
conferred with counsel for Chordiant on multiple occasions to further discuss
the contents of the documents previously provided to Plaintiffs’ Counsel, and to
discuss a possible resolution of the Action, including certain remedial measures
to be implemented at Chordiant in response to Lead Plaintiffs’ allegations in
the Action.

    2.11 On
November 14, 2007, after further research and investigation, Lead Plaintiffs
filed the Amended Complaint, in which Lead Plaintiffs alleged that, from 2000
through and including 2006, stock options to officers and directors of the
Company were improperly retroactively granted in order to benefit the recipients
thereof, and to the detriment of Chordiant.

    2.12 On
December 14, 2007, Chordiant and the Individual Defendants filed motions to
dismiss the Amended Complaint.

    2.13 On
January 14, 2008, Lead Plaintiffs filed oppositions to Defendants’ motions to
dismiss the Amended Complaint.

    2.14 The
Parties, by and through their undersigned attorneys, have engaged in good faith,
arm’s-length discussions with regard to the settlement of the Action and the
parties have reached an agreement with respect to the terms of the
Settlement.  This agreement-in-principle is subject only to the
completion of certain confirmatory investigative efforts by Lead
Plaintiffs.  Lead Plaintiffs’ confirmatory discovery has included
additional review of certain nonpublic documents provided by counsel for
Chordiant following the filing of Lead Plaintiffs’ oppositions

     

    
      
        
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     to
Defendants motions to dismiss the Amended Complaint.  Lead Plaintiffs’
confirmatory discovery shall further include conducting an interview of an Audit
Committee member involved in the Special Investigation of the stock option
issues conducted by Chordiant.  Upon satisfactory completion of
confirmatory discovery, the Parties shall in good faith endeavor to execute the
Stipulation and such other documents (collectively, the “Settlement Documents”)
as may be required in order to obtain a final judgment approving the Settlement
and dismissing with prejudice the Action upon the terms set forth herein. To
facilitate the confirmatory investigative efforts and to effectuate the
Settlement, the Parties hereby enter into this MOU.

    2.15           The
Parties believe that the proposed Settlement on the terms and conditions set
forth below is in the best interests of Chordiant and Current Chordiant
Stockholders, and for that reason enter into this
MOU.

    2.16           The
Parties shall work in good faith to complete the confirmatory investigative
efforts and to agree upon and execute appropriate Stipulation and Settlement
Documents on or before June 9, 2008.  Any Stipulation entered into by
the Parties will include the provisions set forth in Sections III through VII
herein.

     

    
      	
              III.  

            	
              TERMS
      OF THE SETTLEMENT

            


    

     

    A.           Corporate
Governance Component of Settlement

     

    3.1 Chordiant
acknowledges that the pendency, prosecution and Settlement of the Action was a
material causal factor in the Company’s decision to implement the following
corporate governance reforms set forth in paragraphs 3.2 – 3.7:

    3.2 Chordiant
shall commit to implementing or retaining, where changes have already been
implemented, the following corporate governance reforms for a minimum of six
years following final Court approval of the Settlement, subject only to such
revisions as may be necessary to comply with evolving legal standards and
controlling laws and governmental or exchange regulations.

    3.3 Board
Composition and Meetings

    3.3.1  Chordiant
shall maintain a Lead Independent Director.

    
      
        
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    3.3.2   The
Nominating and Corporate Governance Committee of the Board shall solicit
nominees for potential Board members from the Company’s shareholders by
including a statement in the Company’s proxy statements inviting shareholders to
make written suggestions for nominees to the Board in accordance with
Chordiant’s bylaws.

    3.3.3   Chordiant
shall maintain a policy to encourage that at least two thirds (2/3) of the Board
will be comprised of “independent” directors, as defined in Section 3.4,
below.

    3.3.4   The
Board shall maintain a requirement to meet at least four (4) times per year, or
more often as necessary, but in any event no less than once per fiscal
quarter.

    3.4 Director
Independence

    3.4.1   Chordiant
shall enhance its definition of “independent” such that this term shall mean
that a director:

    a.           Must
not have been employed by the Company or its subsidiaries or entities under
common control with the Company within the last three fiscal years;

    b.           Must
not have received, during the current fiscal year or any of the three
immediately preceding fiscal years, remuneration, directly or indirectly, other
than de minimis
remuneration,1 as a result of service as, or being affiliated
with as an executive officer, general partner or member of, an entity that
serves as an advisor, consultant, or legal counsel to the Company;

    c.           Does
not have any personal service contract(s) with the Company, or any member of the
Company’s senior management;

    d.           Is
not an employee or officer with a not-for-profit entity that receives
significant contributions from the Company;

    e.           During
the current fiscal year or any of the three immediate preceding fiscal years,
has not had any business relationship with the Company for which the


    
      1 De
minimis remuneration is
defined as (a) direct remuneration of $60,000 or less received from the Company,
its subsidiaries, or affiliates during a calendar year (other than director
compensation); or (b) indirect remuneration paid to an entity if such
remuneration does not exceed the lesser of $5 million or one percent of the
gross revenues of the entity, and did not directly result in an increase in the
compensation received by the director from that
entity.

    

    
      
        
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    Company
has been required to make disclosure under Regulation S-K of the Securities and
Exchange Commission (“SEC”), other than for service as a director or officer of
a customer or supplier of the Company or for which relationship no more than
de minimis remuneration
was received in any one such year;

    f.           Is
not employed at a public company at which an executive officer of the Company
serves as a director;

    g.           Is
not a member of the immediate family of any person described in paragraphs a-e
above; and

    h.           Does
not have beneficial ownership interest of five percent (5%) or more in an entity
that has received remuneration, other than de minims remuneration, from
the Company, its subsidiaries, or affiliates.

    3.5 Stock
Option and Compensation Practices

    3.5.1  The Company
shall designate a compliance representative to monitor compliance with the
policies adopted herein and the terms of stock option plans, and shall propose
monitoring mechanisms in support of these policies.

    3.5.2  The Company
shall annually asses the adequacy of its internal controls with regard to stock
option grants and shall report any material weakness in the Company’s annual
report on internal controls pursuant to section 404 of the Sarbanes-Oxley
Act.

    3.5.3  The
Compensation Committee shall recommend to the Board and the Board (excluding any
director who does not qualify as an outside director for purposes of Section
162(m) of the Internal Revenue Code) shall determine the grantees, amounts and
dates of all grants of stock options to the CEO and the executive officers of
the Company and shall not delegate these responsibilities.  The price
of the options shall be set in accordance with the applicable definition of Fair
Market Value in the applicable stock option plan.

    3.5.4  All stock
option grants to Section 16 officers who are executive officers and to Company
directors shall continue to be made only on dates set in advance by way of
formula, which shall be determined by the Board and disclosed to the Company
shareholders in each proxy

     

    
      
        
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     statement
filed after Final court approval of the Settlement.

    3.5.5  All grants of
stock options to executive officers shall continue to be approved on or before
the date of grant by a majority of the Board (excluding any director who does
not qualify as an outside director for purposes of Section 162(m) of the
Internal Revenue Code).

    3.5.6  The exercise
prices of all stock options shall be at least 100% of the closing price of the
Company’s stock on the date of grant.

    3.5.7  The Company
shall not lower the exercise price of any stock options after they are granted,
nor exchange stock options for options with lower exercise prices, except with
the unanimous approval of the Board.

    3.5.8  The Company
shall adopt a general policy of not using unanimous written consents to document
the approval of stock option grants as a general rule except in situations where
it is impracticable to hold a meeting of the Compensation Committee or of the
Board, as the case may be.  All stock option grants made via unanimous
written consent shall be effective as of the date on which the Company has
received signatures from all directors on such written consent.

    3.5.9   The
Company shall maintain records documenting the approval of and granting of all
stock option for seven years after the expiration of the pertinent stock
options.

    3.6 Compensation
Committee Composition and Procedural Reforms

    3.6.1   At
least once every three years for the next six years following final Court
approval of the Settlement, the Compensation Committee shall select and retain
an independent consultant to assist the Committee in its evaluation of the
Company’s executive compensation policies, practices, and procedures and prepare
and submit to the Compensation Committee a report on the results of such
study.

    3.6.2  The
Compensation Committee shall amend its Charter such that the Committee shall
consist of at least three (3) independent members of the Board.

    3.6.3  The
Compensation Committee shall meet at least four (4) times per year, or more
often as necessary, but in any event no less than once per fiscal
quarter.

     

    
      
        
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    3.7 Audit
Committee Composition and Procedural Reforms

    3.7.1  At least once
every three years for the next six years following final Court approval of the
Settlement, the Audit Committee shall select and retain an independent auditing
firm, which may be the Company’s independent external auditors, to conduct a
review and assessment of the Company’s internal controls over financial
reporting.

    3.7.2  At least
annually, the Audit Committee shall meet with the Company’s independent auditors
to review and discuss the Company’s accounting for stock-based
compensation.

    3.7.3  The Audit
Committee shall meet at least four (4) times per year, or more often as
necessary, but in any event no less than once per fiscal quarter.

    3.7.4  The Company
shall maintain a compliance representative (or department) who reports directly
to the Audit Committee or the Company’s Board of Directors.

     

    B.           Financial
Component of Settlement

     

    4.1           In
addition to the foregoing corporate governance measures, Defendants acknowledge
that the pendency, prosecution and settlement of the Action was a material
causal factor contributing to certain of the Company’s current and former
officers and directors agreeing to disgorge the excess benefit realized from the
exercise of certain stock options determined to be mispriced, or otherwise
surrendering and forfeiting the excess value of certain stock options determined
to be mispriced, affecting more than 750,000 Chordiant stock options granted
from 2000-2006.

    C.           Substantial
Benefit of the Settlement

    5.1           The
Parties represent that they believe that the foregoing remedies have, and will
continue to materially benefit the Company and Current Chordiant
Stockholders.

     

    D.           Defendants’
Denials Of Wrongdoing

     

    6.1           Chordiant
and each of the Individual Defendants have denied and continue to deny having
committed, aided, or attempted to commit any violations of law or breach of any
duty of 

     

    
      
        
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    any
kind or otherwise acted in any improper manner.  Chordiant and each of
the Individual Defendants are entering into the MOU and the Settlement because
the Settlement would eliminate the expenses, burdens, and risks associated with
further litigation of the Action.  Chordiant is entering into the MOU
for the further reason that it believes that the Settlement confers benefits
upon Chordiant and Current Chordiant Stockholders and is in the interest of
Chordiant and Current Chordiant Stockholders.

     

    E.           Research
and Investigation by Lead Plaintiffs and Plaintiffs’ Counsel

     

    7.1           Lead Plaintiffs and Plaintiffs’ Counsel
conducted an extensive investigation during the development and prosecution of
the Action.  This investigation has included or will include,
inter
alia, (i) inspecting,
reviewing and analyzing the Company’s financial filings and documents produced
to or prepared for Plaintiffs’ Counsel; (ii) developing statistical models to
determine likely backdated options; (iii) researching corporate governance
issues; (iv) participating in in-person and numerous telephonic meetings with
counsel for Chordiant; (v) interviewing a member of Chordiant’s Audit Committee
which oversaw Chordiant’s Special Investigation into its historical stock option
practices; and (vi) researching the applicable law with respect to the claims
asserted in the Action and the potential defenses thereto.

     

    F.           Plaintiffs’
Position Regarding Settlement

     

    8.1           Lead
Plaintiffs and Plaintiffs’ Counsel believe that the claims asserted in the
Action have merit and that their investigation supports the claims
asserted.  However, Lead Plaintiffs and Plaintiffs’ Counsel recognize
and acknowledge the expense and length of continued proceedings necessary to
prosecute the Action against the Individual Defendants through trial and
appeals.  Lead Plaintiffs and Plaintiffs’ Counsel have also taken into
account the uncertain outcome and the risk of any litigation, especially in
complex shareholder litigation such as the Action, as well as the difficulties
and delays inherent in such litigation.  Lead Plaintiffs and
Plaintiffs’ Counsel also are mindful of the inherent problems of proof under,
and possible defenses to, the violations asserted in the
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    Lead
Plaintiffs and Plaintiffs’ Counsel believe that the Settlement contemplated by
this MOU confers substantial benefits upon Plaintiffs, Chordiant and Current
Chordiant Stockholders and is in the best interests of Chordiant and Current
Chordiant Stockholders.

     

    G.           Attorneys’
Fees And Expenses

     

    9.1           
Subject to Court approval of the Settlement, Chordiant and/or its insurer shall
pay, on behalf of and for the benefit of the Defendants, to Plaintiffs’ Counsel,
attorneys’ fees and reimbursement of expenses in the aggregate amount of up to
Eight Hundred and Fifty Thousand Dollars ($850,000) (the “Fee
Payment”).  The Parties agree that the Fee Payment shall be paid on
behalf of the Defendants into the Escrow within twenty (20) days after the date
on which the Court enters the Preliminary Order.  The Fee Payment
shall be released to Plaintiffs’ Counsel from the Escrow Account in accordance
with the terms of the Escrow within twenty (20) days of the Effective
Date.  If, as a result of any further proceedings, appeal or
collateral attack, this Settlement never becomes Final or the amount of the Fee
Payment is reduced or denied, Plaintiffs’ Counsel shall, within thirty (30) days
after entry of an order affecting Plaintiffs’ Counsel’s entitlement to the Fee
Payment, repay and refund to Chordiant and/or its insurer any portion of the Fee
Payment to which they are not entitled.  Except as expressly provided
in the Settlement, Lead Plaintiffs and Plaintiffs’ Counsel shall bear their own
fees, costs and expenses and no Defendant shall assert any claim for expenses,
costs and fees against Plaintiffs, or Plaintiffs’ Counsel.

    9.2           Defendants
and their respective Related Parties shall have no responsibility for, and no
liability whatsoever with respect to, the fee allocation among Plaintiffs’
Counsel, and any other Person who may assert some claim thereto, of any portion
of the Fee Payment.

     

    
      	
              IV.  

            	
              PRELIMINARY
      ORDER AND SETTLEMENT HEARING

            


    

     

    10.1           Within
ten (10) days after the execution of the Stipulation, the Parties shall jointly
submit the Settlement Documents to the Court, and the Parties shall apply for
the Preliminary Order by filing proper notice and supporting papers with the
Court:

     

    
      
        
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    A. Approving
the form of the Notice substantially in the form of such submitted
contemporaneously therewith;

    B. Setting
forth the method for providing Notice to Current Chordiant Stockholders of the
Settlement and Settlement Hearing;

    C. Finding
that the methods of providing Notice set forth in the Preliminary Order
constitute the best Notice practicable under the circumstances and meet all
requirements of Rule 23.1 of the Federal Rules of Civil Procedure and due
process concerns under the U.S. Constitution;

    D. Requesting
that the Court set a date for the Settlement Hearing to determine whether the
Settlement should be approved as reasonable, adequate and in the best interests
of Chordiant and its shareholders, and to approve the Fee Payment;
and

    E. Ordering
that, subject to any agreement between Chordiant and its insurance carriers,
Chordiant shall be responsible for paying all costs associated with
disseminating Notice, as the Court orders, to Current Chordiant
Stockholders.

     

    
      	
              V.  

            	
              EFFECTIVE
      DATE OF SETTLEMENT, WAIVER, OR
TERMINATION

            


    

     

    11.1           The
Settlement shall become effective on the Effective Date.

    11.2           If
the conditions necessary for the Effective Date, fail to occur, then any of
Parties may terminate the Stipulation and withdraw from the Settlement by
providing written notice of such action to undersigned counsel for all of the
Parties within thirty (30) days after the failure of such
condition.   In the event that the Settlement is not approved or
is terminated, the Settlement and any actions taken in connection therewith
shall be vacated and terminated and shall become null and void for all purposes,
and all negotiations, transactions, and proceedings connected with
it:  (i) shall be without prejudice to the rights of any Party hereto;
(ii) shall not be deemed to be or construed as evidence of, or an admission by
any Party of, any fact, matter, or thing; and (iii) shall not be admissible in
evidence or be used for any purpose in any subsequent proceedings in the Action
or any other action or proceeding.  The Parties to the Stipulation
shall be deemed to

     

    
      
        
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     have
reverted to their respective status in the Action as of the date and time
immediately prior to the execution of the MOU, and, except as otherwise
expressly provided, the Parties shall proceed in all respects as if the
Stipulation and any related orders had not been entered.

     

    
      	
              VI.  

            	
              RELEASES
      IN STIPULATION

            


    

     

    12.1           Upon
the Effective Date, Plaintiffs, on their own behalf and derivatively on behalf
of Chordiant (as Nominal Defendant), Chordiant and Current Chordiant
Stockholders (in their capacity as stockholders only) shall fully, finally, and
forever release, relinquish, and discharge the Individual Defendants and their
Related Persons and the Nominal Defendant and its Related Persons from any and
all Released Claims, which any of them has or may come to have against the
Individual Defendants and their Related Persons and/or the Nominal Defendant and
its Related Persons.  

    12.2           Upon
the Effective Date, Nominal Defendant Chordiant and each of the Individual
Defendants shall fully, finally, and forever release, relinquish, and discharge
the Plaintiffs and their Related Persons, Plaintiff’s Counsel and its Related
Persons, and Chordiant and its Related Persons from any and all claims,
liabilities, obligations, causes of action, expenses, damages, losses, or any
other matters, whether known or unknown, foreseen or unforeseeable, certain or
contingent, which any of them has or may come to have against the Plaintiffs and
their Related Persons, Plaintiff’s Counsel and its Related Persons, and Nominal
Defendant and its Related Persons that arise out of, arise in connection with,
or relate to the institution, prosecution, assertion, settlement or resolution
of the Action or the Released Claims.  Notwithstanding the preceding
sentence, this release is not intended to and does not release:  (1)
Chordiant from its statutory or contractual indemnity obligations to the
Individuals Defendants; or (2) any claims that the Individual Defendants have
for recovery under any policy of liability or other insurance. 

    12.3           In
granting the releases herein, the parties acknowledge that they have read
California Civil Code Section 1542, which reads as follows:

     

    
      
        
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    A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

    


    The
Parties expressly waive and relinquish all rights and benefits under Section
1542 and any law or legal principle of similar effect in any jurisdiction with
respect to the release of unknown or unsuspected claims.  In addition,
the Current Chordiant Stockholders, by operation of the Judgment, are deemed to
have expressly waived and relinquished all rights and benefits under Section
1542 and any law or legal principle of similar effect in any jurisdiction with
respect to the release of unknown or unsuspected claims.  The Parties,
and by operation of the Judgment the Current Chordiant Stockholders, acknowledge
that the foregoing waiver was separately bargained for and a key element of the
settlement of which this release is a material and essential part of this
Settlement.  The Parties acknowledge that they may hereafter discover
facts different from, or in addition to, those which they now know or believe to
be true with respect to the claims they have released, and agree that the
releases contained in this Stipulation shall be and remain effective in all
respects.

     

    
      	
              VII.  

            	
              MISCELLANEOUS
      PROVISIONS OF SETTLEMENT

            


    

     

    13.1           Cooperation
of the Parties.  The Parties (a)
acknowledge that it is their intent to consummate this Settlement, and (b) agree
to cooperate to the extent reasonably necessary to effectuate and implement all
terms and conditions of the Stipulation and to exercise their reasonable efforts
to accomplish the foregoing terms and conditions of the
Stipulation.  The Parties will seek the Court’s approval of the
Preliminary Order and, when appropriate, the Final Order and
Judgment.

    13.2   Acknowledgment
of Adequate Consideration.  The Parties acknowledge, represent
and warrant to each other that the terms of the Settlement are such that each of
the Parties is to receive adequate consideration for the consideration
given.

    13.3  No
Admissions.  Neither the Stipulation, nor the Settlement, nor
any act performed

     

    
      
        
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     or
document executed pursuant to or in furtherance of the Stipulation, or the
Settlement:  (a) is or may be deemed to be or may be used as an
admission of, or evidence of the validity or lack of validity of any Released
Claims, or any wrongdoing or liability of the Parties or any of their Related
Persons; (b) is or may be deemed to be or may be used as an admission of, or
evidence of, any fault or omission of any of the Parties or any of their Related
Persons in any civil, criminal, or administrative proceeding in any court,
administrative agency, or other tribunal; or (c) is or may be alleged or
mentioned so as to contravene clause (a) above in any litigation or other action
unrelated to the enforcement of the Stipulation.  Notwithstanding the
foregoing, the Parties may file the Stipulation or any judgment or order of the
Court related hereto in any action that may be brought against them in order to
support a defense or a counterclaim based on res judicata, collateral
estoppel, release, good-faith settlement, judgment bar or reduction, or any
other theory of claim preclusion or issue preclusion, or similar defense or
counterclaim.

    13.4           Confidentiality
Agreements. All agreements made during the course of the negotiations
relating to the confidentiality of information shall survive the Stipulation,
and the Settlement, including, but not limited to, the Confidentiality Agreement
dated June 28, 2007.

    13.5           Costs.  Except
as otherwise expressly provided herein, the Parties shall bear their own
costs.

    13.6           Entire
Agreement.  The Stipulation constitutes the entire agreement
between the Parties with respect to the Settlement of the Action and supersede
any and all prior negotiations, discussions, agreements, or undertakings,
whether oral or written, with respect to the Settlement of the
Action.

    13.7  Counterparts.  The
Stipulation may be executed in one or more counterparts, and all such
counterparts together shall be deemed to be one and the same
instrument.

    13.8  Binding
Effect.  The MOU and the Stipulation shall be binding upon, and
inure to the benefit of all Parties.  The MOU and the Stipulation
are  not intended, and shall not be construed, to create rights in or
confer benefits on any other Persons, and there shall not be any third-party
beneficiaries hereto, except as expressly provided hereby with respect to such


     

    
      
        
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    aforementioned
Persons who are not Parties hereto.

    13.9           Judicial
Enforcement.  The Court shall retain jurisdiction with respect
to the implementation and enforcement of the terms of the MOU, the Stipulation,
and the Settlement, and the Parties submit to the jurisdiction of the Court for
purposes of implementing and enforcing the terms of the MOU, the Stipulation and
Settlement.

    13.10                      Choice of
Law.  The MOU, the Stipulation, and the Settlement shall be
governed by the laws of the State of California, without regard to California’s
choice of law rules.

    13.11                      Warrant
of Authority.  Each counsel or person executing the Stipulation
or any of the related documents on behalf of any Party hereto hereby warrants
that such Person has the full authority to do so.

    13.12                      Waiver of
Breach.  The Parties may not waive or vary any right hereunder
except by an express written waiver or variation.  Any failure to
exercise or any delay in exercising any of such rights, or any partial or
defective exercise of such rights, shall not operate as a waiver or variation of
that or any other such right.  The waiver by one Party of any breach
of the MOU or the Stipulation by another Party shall not be deemed a waiver of
any other prior or subsequent breach of the MOU or the Stipulation.

    13.13  Fair
Construction.  The MOU and the Stipulation shall not be
construed more strictly against one Party than another merely by virtue of the
fact that it, or any part of it, may have been prepared by counsel for one of
the Parties, it is recognized as the result of arm’s length negotiations between
the Parties, and all Parties have contributed substantially and materially to
the preparation of the Stipulation.

    13.14  No
Assignment of Claims.  Lead Plaintiffs hereby represent and
warrant that they have not assigned any rights, claims, or causes of action that
were asserted or could have been asserted in connection with, under or arising
out of any of the claims being settled or released herein.

    13.15   Facsimile
and Scanned Signatures.  Any signature to the Stipulation, to the
extent signed and delivered by means of a facsimile machine or electronically
scanned and sent via 

     

    
      
        
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    email,
shall be treated in all manner and respects as an original signature and shall
be considered to have the same binding legal effect as if it were the original
signed version thereof delivered in person.  At the request of a Party
to the Stipulation, any other Party to the Stipulation so executing and
delivering this document by means of a facsimile machine or via email shall
re-execute original forms thereof and deliver them to the requesting
Party.  No Party to the Stipulation shall raise the use of a facsimile
machine or email to deliver a signature or the fact that any signature or
agreement was transmitted or communicated through the use of a facsimile machine
as a defense to the formation or the enforceability of the Stipulation and each
such Person forever waives any such defense.

    13.16                      Extensions
of Time.  The Parties hereto may agree to reasonable extensions
of time to carry out any of the provisions of the Stipulation, and where
necessary, shall jointly seek court approval for such extensions.

     

    VIII.                      MISCELLANEOUS
PROVISIONS OF MOU

     

    14.1           This
MOU shall be null and void and of no force and effect if the confirmatory
investigative efforts reveal that the facts relating to the Company’s historical
stock option practices are substantially and materially different than
represented by Chordiant’s counsel during prior settlement
discussions.  In the event the Settlement is not consummated for any
reason: (a) the parties will revert to their litigation positions immediately
prior to the execution of this MOU; (b) the fact and terms of this MOU shall not
be admissible in any trial of this Action;  (c) this MOU shall not be
deemed to prejudice in any way the positions of the Parties with respect to the
Action, or to constitute an admission of fact by any Party in any respect, and
shall not entitle any Party to recover any costs or expenses incurred in
connection with the implementation of this MOU; and (d) none of the terms of
this MOU shall be effective or enforceable, except for this
paragraph.

    14.2           Cooperation
of the Parties.  The Parties (a)
acknowledge that it is their intent to consummate the Settlement contemplated by
this MOU, and (b) agree to cooperate to the extent 

     

    
      
        
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    reasonably
necessary to effectuate and implement all terms and conditions of the MOU and
Stipulation and to exercise their reasonable efforts to accomplish the foregoing
terms and conditions of the Stipulation.  The Parties will seek the
Court’s approval of the Preliminary Order and, when appropriate, the Final Order
and Judgment.

    14.3  Standstill
Agreement.  Upon execution of this MOU and pending entry
of  the Judgment based on the Settlement provided for in the
Stipulation, Lead Plaintiffs are barred and enjoined from commencing,
prosecuting, instigating, or in any way participating in the commencement or
prosecution of any action asserting any Released Claims, either directly,
representatively, derivatively, or in any other capacity, against Chordiant or
any Individual Defendant, that have been or could have been asserted, or that
arise out of or relate in any way to any of the transactions or events described
in the complaints in the Action.

    14.4           No
Admissions.  Neither the MOU, nor any act performed or document
executed pursuant to or in furtherance of the MOU:  (a) is or may be
deemed to be or may be used as an admission of, or evidence of the validity or
lack of validity of any Released Claims, or any wrongdoing or liability of the
Parties or any of their Related Persons; (b) is or may be deemed to be or may be
used as an admission of, or evidence of, any fault or omission of any of the
Parties or any of their Related Persons in any civil, criminal, or
administrative proceeding in any court, administrative agency, or other
tribunal; or (c) is or may be alleged or mentioned so as to contravene clause
(a) above in any litigation or other action unrelated to the enforcement of the
MOU or the Stipulation.

    14.5           Confidentiality
Agreements. All agreements made during the course of the negotiations
relating to the confidentiality of information shall survive the MOU, including,
but not limited to, the Confidentiality Agreement dated June 28,
2007.

     

    14.6           Warrant
of Authority.  Each Person executing the MOU or any of the
related documents on behalf of any Party hereto hereby warrants that such Person
has the full authority to do so.

     

    
      
        
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    14.7            Counterparts.  This
MOU may be executed in one or more counterparts, and all such counterparts
together shall be deemed to be one and the same instrument.

     

    14.8   Facsimile
and Scanned Signatures. Any signature to the MOU to the extent signed and
delivered by means of a facsimile machine or electronically scanned and sent via
email, shall be treated in all manner and respects as an original signature and
shall be considered to have the same binding legal effect as if it were the
original signed version thereof delivered in person.  At the request
of a Party to the MOU, any other Party to the MOU so executing and delivering
this document by means of a facsimile machine or via email shall re-execute
original forms thereof and deliver them to the requesting Party.  No
Party to the MOU shall raise the use of a facsimile machine or email to deliver
a signature or the fact that any signature or agreement was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or the enforceability of the MOU and each such Person forever waives
any such defense.

    14.9           Extensions
of Time.  The Parties hereto may agree to reasonable extensions
of time to carry out any of the provisions of the Stipulation, and where
necessary, shall jointly seek court approval for such extensions.

    WHEREAS, the Parties have
caused the MOU to be duly executed and delivered by their counsel of
record.  It is hereby agreed by the undersigned as dated
below.

    
      
        
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              Dated:  May
      29, 2008

               

              SCHIFFRIN
      BARROWAY TOPAZ

              &
      KESSLER, LLP

              2125
      Oak Grove Road, Suite 120

              Walnut
      Creek, California 94598

              and

              SCHIFFRIN
      BARROWAY TOPAZ

              &
      KESSLER, LLP

              Lee
      D. Rudy

              Michael
      C. Wagner

              280
      King of Prussia Road

              Radnor,
      Pennsylvania 19087

               

               

               

              /s/ Michael C.
      Wagner  __________________

              Michael
      C. Wagner

              Attorneys
      for Plaintiffs JESSE BROWN and LOUIS SUBA

               

            	
              Dated:  May
      29, 2008

               

              COOLEY
      GODWARD KRONISH, LLP

              Five
      Palo Alto Square

              3000
      El Camino Real

              Palo
      Alto, CA 94306-2155

               

               

               

              /s/ Christopher
      Sundermeier____________

               

              Christopher
      Sundermeier

              Attorney
      for Nominal Defendant CHORDIANT

              SOFTWARE,
      INC.

            
	
              Dated:  May
      29, 2008

               

              GOODWIN
      PROCTER LLP

              181
      Lytton Avenue

              Palo
      Alto, CA 94301

              and

              GOODWIN
      PROCTER LLP

              Exchange
      Place

              53
      State Street

              Boston,
      MA 02109

               

               

              _/s/ Alison
      Douglass_____________________

              Alison
      Douglass

              Brian
      Pastuszenski

              Attorneys
      for Defendant WILLIAM RADUCHEL

               

            	
              Dated:  May
      29, 2008

               

              SHEPPARD,
      MULLIN, RICHTER & HAMPTON,

              LLP

              Steven
      H. Winick

              Four
      Embarcadero Center, 17th Floor

              San
      Francisco, CA 94111

              415-774-2970

              and

              SHEPPARD,
      MULLIN, RICHTER & HAMPTON,

              LLP

              John
      Stigi

              333
      South Hope Street

              Los
      Angeles, California 90071-1448

               

               

               

              _/s/ Steven H.
      Winick___________________

              Steven
      H. Winick

              John
      Stigi

              Attorneys
      for Defendants

              STEPHEN
      KELLY, DAVID R. SPRINGETT, CARY G. MORGAN, STEVE G. VOGEL, SAMUEL T.
      SPADAFORA, DONALD J. MORRISON, ALLEN SWANN, JEREMY COOTE, KATHRYN C.
      GOULD, , STEVEN R. SPRINGSTEEL, CHARLES E. HOFFMAN, RICHARD G. STEVENS,
      DAVID A. WEYMOUTH AND GEORGE REYES

            


    

    


      
       

    

    


    
      
        
          
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