Exhibit 10.21

 

Revised Employment Agreement

 

This Agreement is entered into as of January 27, 2005, by and between Steven
Vattuone (the “Executive”) and Micromuse Inc., a Delaware corporation (the
“Company”).

 

1. Duties and Scope of Employment.

 

(a) Position. For the term of his employment under this Agreement
(“Employment”), the Company agrees to employ the Executive in the position of
Vice President, Finance and Corporate Controller. The Executive shall report to
the Company’s Chief Financial Officer.

 

(b) Obligations to the Company. During the term of his Employment, except as set
forth below in Section 1(d), the Executive shall devote his full business
efforts and time to the Company consistent with his duties determined from time
to time by the Company’s Chief Financial Officer. During the term of his
Employment, and without the prior written approval of the Company’s Board of
Directors (the “Board”), the Executive shall not render services in any capacity
to any person or entity other than the Company and its subsidiaries, and shall
not act as a sole proprietor or partner or manager of any other person or
entity, or as a shareholder or other equity owner owning more than one percent
of the stock or any profits or voting interest of any other corporation or other
entity, respectively. The Executive will be entitled to expend a reasonable
amount of time performing civic and volunteer activities if these activities are
first disclosed to the Company’s Chief Executive Officer and Chief Financial
Officer and do not interfere with his duties to the Company.

 

(c) No Conflicting Obligations. The Executive represents and warrants to the
Company that:

 

(i) he is under no obligations or commitments, whether contractual or otherwise,
that are inconsistent with his obligations under this Agreement;

 

(ii) he will not use or disclose, in connection with his employment by the
Company, any trade secrets or other proprietary information or intellectual
property in which any former employer or other third party has any right, title
or interest,

 

(iii) his employment by the Company as contemplated by this Agreement will not
infringe or violate the rights of any other person; and

 

(iv) he has returned to the persons entitled thereto all property and
confidential information belonging to any prior employer.

 

(d) Commencement Date. The Executive shall commence his employment relationship
with the Company and full-time Employment as Vice President, Finance and
Corporate Controller as soon as reasonably practicable after the date of this
Agreement, but not later than January 28, 2005. The date that the Executive
reports for full-time employment will be the date of employment for purposes of
computing compensation as an executive. Micromuse has agreed to allow Executive
to provide on-site assistance to his former employer, but not to

 

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exceed twelve (12) full working days. Executive may provide reasonable
additional assistance to his former employer via telephone or e-mail.

 

(e) Principal Office of the Executive. The Executive’s principal office for the
performance of services under this Agreement shall be at the Company’s current
corporate headquarters in San Francisco, California, or other location within
the San Francisco Bay Area as may be designated by the Company in the event the
Company relocates its corporate headquarters. The Executive will also travel for
business as reasonably needed in connection with his executive duties.

 

2. Cash and Incentive Compensation.

 

(a) Salary. The Company shall pay the Executive as compensation for his services
a base salary at a gross annual rate of not less than $175,000. Such salary
shall be payable in semi-monthly increments in accordance with the Company’s
standard payroll procedures. The annual compensation specified in this
Section 2(a), together with any increases in such compensation that the Board
may grant from time to time, is referred to in this Agreement as “Base
Compensation.”

 

(b) On Target Bonuses. In addition to Base Compensation, the Executive shall be
eligible to receive bonuses (“Bonus”) in accordance with the Incentive
Compensation Plan. Executive’s annual target Bonus amount will be $50,000 per
year ($12,500 per quarter).

 

(c) Stock Options. The Company shall grant the Executive non-statutory stock
options covering a total of seventy five thousand (75,000) shares of the
Company’s common stock, under the Company’s 1997 Stock Option/Stock Issuance
Plan, as amended (the “Plan”), as follows:

 

(i) The Compensation Committee of the Board shall grant these options to the
Executive on the date that the Executive commences full-time employment with the
Company under this Agreement, if commercially possible. The exercise price of
the options shall be equal to the fair market value of the Company’s common
stock on the date of grant as determined by the Compensation Committee under the
Plan. The term of these options shall be 7 years, subject to earlier expiration
in the event of the termination of the Executive’s Employment as set forth in
this Agreement and the Plan.

 

(ii) The option shares shall become exercisable and vested over a four (4) year
period as follows: 18,750 shares become exercisable and vested upon the
Executive completing his initial twelve (12) continuous months of full-time
Employment measured from the date of grant, and thereafter 1/48th of the 75,000
shares become exercisable and vested monthly upon the Executive completing each
additional month of Employment over the succeeding 36 month period commencing on
the 12 month anniversary of the date of grant, with any fractional shares being
addressed upon exercise by the Company in accordance with the Plan.

 

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(iii) The grant of the foregoing options shall be evidenced by the Notice of
Grant and Stock Option Agreement attached as Exhibit A. The foregoing summary of
option terms is qualified by reference to the provisions of Exhibit A, the Plan
included in Exhibit B, and other applicable provisions of this Agreement.

 

(iv) The grant of the foregoing options is not intended to preclude additional
stock option or other equity awards, if any, that may be made in the discretion
of the Compensation Committee of the Company’s Board of Directors.

 

3. Vacation and Executive Benefits.

 

(a) Vacation. During the term of his Employment, the Executive shall be eligible
for paid vacation of up to fifteen (15) days per year accruing as of
Commencement Date and up to six (6) paid days per calendar year for illness or
personal business (in each case prorated for any partial year and in addition to
any generally applicable Company holidays) and otherwise in accordance with the
Company’s standard policy applicable to its executive officers, as it may be
amended from time to time.

 

(b) Other Benefits. During the term of his Employment, the Executive shall be
eligible to participate in any benefit plans maintained by the Company in which
the Company’s employees generally or executive officers as a group are eligible
to participate, subject in each case to the generally applicable terms and
conditions of the plan in question and to the determinations of any person or
committee administering such plan. Subject to the foregoing, and as the same may
be changed or terminated by the Company in its discretion on a group basis, the
foregoing benefits currently consist of group medical, dental, vision and EAP
insurance paid by the Company for the Executive, group long term disability
insurance and life insurance and AD&D coverage for one times annual base salary
paid by the Company for the Executive, and eligibility to participate in a
flexible spending account plan and 401(k) plan subject to the terms of
participation established from time to time for those plans.

 

4. Business Expenses. During the term of his Employment, the Executive shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with his duties hereunder. The Company shall
reimburse the Executive for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company’s generally applicable policies.

 

5. Term of Employment.

 

(a) Basic Rule. The Company agrees to continue the Executive’s Employment, and
the Executive agrees to remain in Employment with the Company, from the
commencement date set forth in Section 1(d) until the date when the Executive’s
Employment terminates pursuant to Subsection (b) or (c) below. The Executive’s
Employment with the Company shall be “at will.” Any contrary representations
that may have been made or implied to the Executive are superseded by this
Agreement. This Agreement, including Sections 6 and 7 below, shall constitute
the full and complete agreement between the Executive and the Company on the “at
will” nature of the Executive’s Employment, which may only be changed in an
express written

 

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agreement signed by the Executive and a duly authorized officer of the Company
other than the Executive.

 

(b) Termination. The Company may terminate the Executive’s Employment at any
time and for any reason (or no reason), and with or without Cause as defined in
Section 6, by giving the Executive notice in writing. The Executive may
terminate his Employment at any time and for any reason (or no reason), and with
or without Good Reason as defined in Section 6, by giving the Company notice in
writing not less than thirty (30) days prior to the intended date of
termination. The Executive’s Employment shall terminate automatically in the
event of his death.

 

(c) Permanent Disability. The Company may terminate the Executive’s active
Employment due to Permanent Disability by giving the Executive notice in
writing. For all purposes under this Agreement, “Permanent Disability” shall
mean that the Executive, at the time notice is given, has failed to perform his
duties under this Agreement for not less than one hundred (100) days during any
period of 12 consecutive months as the result of his incapacity due to physical
or mental injury, disability or illness.

 

(d) Rights upon Termination. Except as expressly provided in Section 6 or 7,
upon the termination of the Executive’s Employment pursuant to this Section 5,
the Executive shall only be entitled to the compensation, benefits and
reimbursements described in Sections 2, 3 and 4 earned and accrued for the
period through the effective date of the termination. The Company shall pay the
Executive all accrued but unpaid salary, bonus and reimbursements owed as of the
date of the termination of his Employment, and otherwise provide the Executive
COBRA and other accrued but unpaid payments or benefits, if any, that may be
required by applicable law. The payments under this Agreement shall fully
discharge all responsibilities of the Company to the Executive.

 

(e) Termination of Agreement. This Agreement shall terminate when all
obligations of the parties hereunder have been satisfied. The termination of
this Agreement shall not limit or otherwise affect any of the Executive’s
obligations under Section 8.

 

6. Termination Benefits.

 

(a) General Release. Any other provision of this Agreement notwithstanding,
Subsections (b) and (c) below and Section 7 shall not apply unless the Executive
has executed (and not revoked under any revocation right, if any, allowed by
law) a general release (in substantially the form attached to this Agreement as
Exhibit C) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company, except that he shall not be
required to release any rights he may otherwise have under any indemnity
agreement or any available insurance described in Section 10(j), nor any vested
benefits or rights under the Company’s employee benefit plans and programs.

 

(b) Severance Pay. If, during the term of this Agreement, the Company terminates
the Executive’s Employment for any reason other than Cause or Permanent
Disability or the Executive resigns his Employment for Good Reason, then:

 

(i) the Company shall pay the Executive his Base Compensation for a period of
six (6) months following the termination of his Employment at the rate in effect
at the time of the termination of Employment, which shall be paid in accordance
with the Company’s standard payroll procedures or in a lump sum, at Company’s
election; and

 

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(ii) the Company shall pay the Executive an amount equal to the On Target Bonus
amount in effect at the time of termination of Employment as a Target Bonus if
and only if that amount would otherwise have been payable under Section 2(b)
with respect to the period of six (6) months following termination of his
employment under the then most recent Target established under Section 2(b) if
he had remained employed by the Company, due at such date or dates such a Target
Bonus would otherwise have been determinable and payable, or in a lump sum, at
Company’s election.

 

(iii) With regard to payments provided under this Subsection (b) or other post
termination compensation or benefits, the Executive shall be under no duty to
mitigate his damages, and the Company shall be entitled to no offset rights in
the event the Executive secures other employment.

 

(c) Definition of “Cause.” For all purposes under this Agreement, “Cause” shall
mean any of the following acts or omissions of the Executive:

 

(i) Refusal to perform his duties under this Agreement or any other material
breach of this Agreement, or any material breach of the Proprietary Information
and Inventions Agreement between the Executive and the Company or the code of
conduct referred to in Section 10(c);

 

(ii) Conviction of, or a plea of “guilty” or “no contest” to, a felony or crime
involving moral turpitude under the laws of the United States or any state
thereof;

 

(iii) Fraud, embezzlement or misappropriation of the assets of the Company or
other deliberate acts of dishonesty or misfeasance at the expense of the Company
or its subsidiaries, successors or assignees;

 

(iv) Willful misconduct or gross negligence in the performance of duties
assigned to the Executive under this Agreement, or

 

(v) Willful or grossly negligent failure to comply with securities or other laws
applicable to the Executive, or for which the Executive is responsible for
assuring compliance, that results in significant harm to the Company;

 

Provided that, despite the foregoing, such definitions of Cause shall not apply
to acts or omissions otherwise listed above that are both (A) isolated or
inadvertent and did not occur willfully or in bad faith, and (B) insubstantial
in their effect on the Company, unless the Company has given reasonable written
notice to the Executive describing the proscribed action in reasonable detail
and the Executive has failed to remedy the acts or omissions described in such
notice within thirty (30) days after the Executive is given such notice.

 

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(e) Definition of “Good Reason.” For all purposes under this Agreement, “Good
Reason” shall mean:

 

(i) The assignment to the Executive, without his prior consent, of any duties or
any other action by the Company that result in (A) a requirement for him to
report to an officer or office of the Company other than the Chief Financial
Officer and/or the Chief Executive Officer and/or any appointed Chief Operating
Officer and/or the Board of Directors or any committee thereof, or (B) an
overall and substantial diminution in his responsibilities in the area of
finance; or

 

(ii) Any failure by the Company to comply with any of the material provisions of
this Agreement;

 

Provided that, despite the foregoing, such definitions of “Good Reason” shall
not apply to any acts or omissions of the Company unless the Executive has given
written notice to the Company describing the proscribed action in reasonable
detail, and the Company has failed to remedy the acts or omissions described in
such notice within forty-five (45) days (or such other period as reasonably
agreed by the parties) after the Company is given such notice.

 

7. Change in Control. If the Company is subject to a Change in Control or
Corporate Transaction as defined in the Plan that is consummated during the term
of the Executive’s Employment under this Agreement, and the Company or its
successor terminates the Executive’s Employment for any reason other than Cause
or Permanent Disability, or the Executive resigns his Employment for Good
Reason, in each case upon or within twelve (12) months after such consummation,
then:

 

(a) The Executive shall be entitled to receive the Base Compensation and Target
Bonus amount specified in Section 6(b); and

 

(b) The following additional provisions shall apply to the options to purchase
75,000 shares of the Company’s common stock described in Section 2(c), but
subsequent options, if any, awarded to the Executive outside of this Agreement
shall be governed by their specific terms and/or the Plan, and not this
Section 7 unless otherwise specified in such future grants:

 

(i) If the Change in Control or Corporate Transaction is consummated on or
within the first nine (9) months after the date the Employment commences under
Section 1(d) of this Agreement, and if and only if the Executive’s Employment
ends as provided above in this Section 7, then the Executive will receive
immediate vesting of a portion of the options that are unvested as of the date
of Executive’s termination so that a maximum of 18,750 option shares is then
vested.

 

(ii) If the Change in Control or Corporate Transaction is consummated following
the end of the initial nine (9) months after the Employment commences under
Section 1(d) of this Agreement, and if and only if his employment ends as
provided above in this Section 7, the

 

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Executive will receive immediate vesting of fifty percent (50%) of any unvested
portion of the options as of the date of termination.

 

(iii) Notwithstanding the foregoing, if there is Corporate Transaction and the
acquiring or surviving corporation does not elect to assume, or substitute new
options for, the options granted to the Executive under this Agreement, the
Executive shall have the right to exercise the options granted to him under this
Agreement (A) up to a maximum of 18,750 option shares immediately prior to the
closing of a Corporate Transaction that is consummated on or within nine
(9) months after the date of this Agreement (whether or not his employment ends
as provided in this Section 7), and (B) up to a maximum of fifty percent
(50%) of any then unvested options (plus any previously vested options),
immediately prior to the closing of a Corporate Transaction that is consummated
more than nine (9) months after the date of this Agreement (whether or not his
employment ends as provided in this Section 7). If this clause (iii) applies,
then, as provided in the Plan, immediately following the consummation of the
Corporate Transaction, all outstanding options held by the Executive shall
terminate and cease to be outstanding.

 

(iv) The provisions of this Section 7 shall supercede and govern in lieu of any
inconsistent or contrary provisions of the Plan relating to a Corporate
Transaction or Change of Control.

 

(v) The number of shares referred to in Section 7(b) shall be adjusted to
reflect a stock split or similar other change in the capital structure of the
Company as provided in the Plan.

 

8. Executive’s Restrictive Covenants.

 

(a) Non-Competition. During the period commencing on the date of this Agreement
and continuing until the date on which Executive’s Employment terminates for any
reason, the Executive shall not, directly or indirectly (other than with the
Company’s prior written consent), commence or otherwise engage in a Competitive
Business Activity. The term “Competitive Business Activity” shall mean:
(i) engaging in, or managing or directing persons engaged in, the development,
licensing, leasing, sale or distribution of network management software or
service assurance or fault detection software or any other business, defined by
the Company with similar specificity, which the Company or any of the Company’s
affiliates can demonstrate that it is, at the time of such termination, actively
engaged in (“Competing Business”), whether independently or as an executive,
agent, consultant, advisor, independent contractor, proprietor, partner,
officer, director or otherwise; (ii) acquiring or having an ownership interest
in any entity that derives more than 15% of its gross revenues from any
Competing Business, except for ownership of 1% or less of any entity whose
securities are freely tradable on an established market or 5% or less if not so
tradable; or (iii) participating in the planning, financing, operation,
management or control of any firm, partnership, corporation, entity or business
described in clause (ii) above.

 

(b) Non-Solicitation. During the period commencing on the date of this Agreement
, the Executive shall not directly or indirectly, personally or through others,
solicit or attempt to

 

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solicit (on the Executive’s own behalf or on behalf of any other person or
entity) either (i) the employment of any employee in the finance division, or
any executive, of the Company or any of the Company’s affiliates for a period of
one (1) year from the date when the Executive’s employment terminates for any
reason , or (ii) the business of any customer of the Company or any of the
Company’s affiliates with whom the Executive had material contact during his
Employment for a period of six (6) months from the date when the Executive’s
employment terminates for any reason, to the extent this clause (ii) is lawfully
enforceable to protect the Company’s trade secrets.

 

(c) Non-Disclosure. The Executive has entered into a Proprietary Information and
Inventions Agreement with the Company, which is incorporated herein by
reference, a copy of which is attached as Exhibit D.

 

(d) Injunctive Relief. The Executive acknowledges and agrees that his failure to
perform any of his covenants in this Section 8 would cause irreparable injury to
the Company and cause damages to the Company that would be difficult or
impossible to ascertain or quantify. Accordingly, without limiting any other
remedies that may be available with respect to any breach of this Agreement, the
Executive consents to the entry of an injunction to restrain any breach of this
Section 8.

 

(e) Survival. The covenants in this Section 8 shall survive any cancellation,
termination, rescission or expiration of this Agreement and the termination of
the Executive’s Employment with the Company for any reason.

 

9. Successors.

 

(a) Company’s Successors. This Agreement shall be binding upon any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company’s business and/or assets. For all purposes under this Agreement, the
term “Company” shall include any successor to the Company’s business and/or
assets that becomes bound by this Agreement.

 

(b) Executive’s Successors. This Agreement and all rights of the Executive
hereunder shall inure to the benefit of, and be enforceable by, and binding
upon, the Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.

 

10. Miscellaneous Provisions.

 

(a) Notice. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when
(i) personally delivered, (ii) delivered to the U.S. Postal Service for delivery
by registered or certified mail or (iii) delivered to a comparable private
service offering guaranteed deliveries in the ordinary course of its business.
Notice under clauses (ii) and (iii) shall be valid only if delivery charges have
been prepaid and a return receipt will be furnished. In the case of the
Executive, notice under clauses (ii) and (iii) shall be addressed to him at the
home address that he most recently communicated to

 

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the Company in writing. In the case of the Company, notice under clauses
(ii) and (iii) shall be addressed to its corporate headquarters and directed to
the attention of its Secretary.

 

(b) Modifications and Waivers. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Executive and by an authorized officer of the
Company (other than the Executive). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.

 

(c) Whole Agreement. This Agreement and the attached Exhibits A through D
contain the entire understanding of the parties with respect to the subject
matter hereof, and supercede any other prior or contemporaneous term sheets,
agreements, representations or understandings (whether oral or written and
whether express or implied). Notwithstanding the foregoing, the Executive
acknowledges that Nasdaq listing standards require the Company to maintain a
code of business conduct that meets the definition of a code of ethics as
defined in SEC rules (Regulation S-K Item 406) and that is applicable to all
directors, officers and employees of the Company. The Executive agrees to abide
by the obligations of the code of business conduct that generally apply to
officers and employees of the Company, as set forth in the code that the Company
from time to time publishes on its website or files with the SEC. In the event
of a conflict between the terms of this Agreement and the terms of the Exhibits
to this Agreement, the terms of this Agreement will supersede the terms of the
Exhibits.

 

(d) Withholding Taxes. All payments and compensatory benefits made and to be
made under this Agreement shall be subject to reduction to reflect all taxes or
other charges required to be withheld by all applicable laws.

 

(e) Choice of Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the internal laws of the State of California
without regard to principles of conflicts of law.

 

(f) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

 

(g) Arbitration. Subject to the rights of either party to seek injunctive or
other relief from a court relating to matters covered by Section 8 or trade
secret or proprietary information claims, any controversy or claim arising out
of or relating to this Agreement or the breach thereof, or the Executive’s
Employment or the termination thereof, shall be settled in the metropolitan area
in which the Executive’s principal office is or was most recently located, by
arbitration in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association. The Executive and
the Company expressly waive all rights to have such disputes resolved via trial
before a judge and/or jury. The decision of the arbitrator shall be final and
binding on the parties, and judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof. The parties hereby agree
that the arbitrator shall be empowered to enter an equitable decree mandating
specific enforcement of

 

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the terms of this Agreement. The Company shall initially pay all fees and
expenses of the arbitrator. However, the Company or the Executive, as the case
may be, shall bear all fees and expenses of the arbitrator and all of the
reasonable legal fees and out-of-pocket expenses of the other party if the
arbitrator determines that the claim or position of the Company or the
Executive, as the case may be, was without reasonable foundation. The Executive
and the Company hereby consent to personal jurisdiction of the state and federal
courts located in the state where the Executive’s principal office is or most
recently was located for any action or proceeding arising from or relating to
this Agreement or relating to any arbitration in which the parties are
participants. The parties will be entitled to reasonable discovery of essential
matters as determined by the arbitrator. In the arbitration, the parties will be
entitled to all remedies that would have been available if the matter were
litigated in a court of law. The arbitrator shall issue a written award that
sets forth the essential findings of fact and conclusions of law on which the
award is based.

 

(h) No Assignment. This Agreement and all rights and obligations of the
Executive hereunder are personal to the Executive and may not be transferred or
assigned by the Executive at any time. The Company may assign its rights under
this Agreement to any entity that assumes the Company’s obligations hereunder in
connection with any sale or transfer of all or substantially all of the
Company’s assets to such entity.

 

(i) Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.

 

Micromuse Inc.                                 /s/   Steven Vattuone            
        Steven Vattuone By:   /s/ Nell O’Donnell                 Title:   Senior
Vice President and General Counsel                

 

Exhibit List

 

Exhibit A    Notice of Grant and Stock Option Agreement Exhibit B    Prospectus
and copy of 1997 Stock Option/Stock Issuance Plan Exhibit C    Form of Release
under Section 6(a) Exhibit D    Proprietary Information and Inventions Agreement

 

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