Three top executives at Yehud-based Mercury Interactive, including chief executive and chairman Amnon Landan, have resigned from the company after an internal investigation showed they benefited from irregularities in the granting of stock options. The company said on Wednesday that the affair could lead to it being delisted from Nasdaq and that it is "not in a position" to provide a full earnings report for the third quarter ending September 30, for which it expects revenue of between $205 million and $210m. Investors reacted with dismay to the news and shares plummeted more than 30% to $24.33 in morning trading on Nasdaq. Mercury, which develops software that helps companies test, manage and integrate business applications, said CFO Douglas Smith and general counsel Susan Skaer had also quit. It appointed president and chief operating officer Anthony Zingale as CEO, senior vice president David Murphy as CFO, and board member Giora Yaron as chairman. The company appointed a special committee to conduct the probe in June in response to an inquiry initiated by the Securities and Exchange Commission in November 2004. The committee found that on 49 occasions from 1995, the stated date of a Mercury stock option grant was different from the date on which the option appears to have been granted. "In almost every such instance, the price on the actual date was higher than the price on the stated grant date," Mercury said. Landan, Smith and Skaer participated in and benefited from the practices, although they argued that they "did not focus on the fact that the practices and their related accounting were improper," Mercury said. "The special committee [nevertheless] concluded that each of them knew or should have known that the practices were contrary to the options plan and proper accounting," the company added. "Missing or overlooking a practice as basic and important as the proper granting of options is not acceptable," the special committee said. In addition, on at least three occasions between 1998 and 2001, the exercise dates for options exercised by Landan appear to have been incorrectly reported. "[This] would have had the effect of reducing Mr. Landan's income and exposing Mercury to possible penalties for failure to pay withholding taxes," Mercury said. It also appears that a $1m. company loan that Landan received in 1999 was neither approved by the board, nor was it clearly disclosed. The loan has been repaid. The irregularities in the granting of options appear to have ended by about April 2002, when Mercury changed its dating practices. The committee believes the changes will prevent the problems from recurring. The company is studying the impact of the affair on its current and historical financial statements, although it does not believe its previous revenues will be affected. However, its ability to file its amended reports by a deadline of November 30 is "in serious jeopardy." If it doesn't meet this deadline, Nasdaq may delist the company, which said it intends to provide a revised plan of compliance by November 15. Mercury also said it expects a "challenging" fourth quarter, although it didn't provide guidance.