Exhibit 10.15

 

MICROMUSE INC.

 

NOTICE OF STOCK OPTION GRANT AND STOCK OPTION AGREEMENT

 

(500,000 Shares)

 

Optionee:   Lloyd A. Carney Grant Date:  

February 9, 2004

Vesting Commencement Date:  

Grant date specified immediately above.

Exercise Price:  

$8.11

Number of Option Shares:  

five hundred thousand (500,000) shares of common stock

Expiration Date:  

February 9, 2014

Type of Option:  

Non-statutory stock option

Employment Agreement:   Optionee agrees that the Option is granted subject to
and in accordance with, and agrees to be bound in respect of the Option by, the
terms of the Employment Agreement dated as of July 28, 2003, between him and
Micromuse Inc. (the “Employment Agreement”), and the attached Stock Option
Agreement, and except as otherwise provided in the foregoing agreements, the
Micromuse Inc. 1997 Stock Option/Stock Issuance Plan (the “Plan”). Nothing in
this Notice or the Stock Option Agreement shall confer upon Optionee any right
to continue in Service for any period of specific duration. Dates Exercisable
and Vested:   Options covering 500,000 shares shall become fully exercisable and
vested upon the earlier of: (A) Mr. Carney completing six (6) continuous years
of full-time employment measured from the date of grant; or (B) the date on
which the Company files a periodic report on Form 10-Q or Form 10-K (or any
equivalent successor form) for a fiscal period ending no later than March 31,
2006, in which the Company reports total revenues from license and maintenance
and services for the fiscal quarter reported (or, in the case of a Form 10-K,
for the Company’s fourth fiscal quarter) that are at least two (2) times the
total revenues from license and maintenance and services in the fiscal

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    quarter ended December 31, 2003, as reported in the Company’s Form 10-Q
filed with the SEC for that period. Of these 500,000 option shares, the vesting
of 100,000 of such shares shall be subject to the requirement and condition that
in addition to meeting the vesting requirement in the preceding sentence, the
Company on at least an annual basis within 6 months after the end of each fiscal
year beginning with the year ending September 30, 2004: (i) conducts a review of
its Code of Business Conduct with all of the worldwide employees of the Company
and its subsidiaries and (ii) provides targeted financial reporting and ethics
compliance training to its finance and sales personnel and such other personnel
as identified in advance of the end of each fiscal year by the Nominating and
Corporate Governance Committee of the Board. The options for such latter 100,000
option shares shall lapse and terminate automatically if such review and
compliance training are not completed for any reason with respect to each fiscal
year ending at least six months prior to the date on which the 100,000 option
shares would otherwise vest under this first sentence of this paragraph. The
failure or refusal of an immaterial number of employees to complete any such
review or training due to reasons beyond the Company’s control shall not be
considered to violate the foregoing requirement and condition provided that
reasonable steps were taken to assure attendance by all employees described
above.     (I) The following revenue shall not accelerate the vesting of the
foregoing option grant and shall not otherwise be measured or included for
purposes of the foregoing option grant: (AA) revenue for any period ending after
March 31, 2006; (BB) revenue generated by any products or services developed by
corporations or other entities acquired by Micromuse after December 31, 2003;
and (CC) revenue generated by products or services developed by entities other
than the Company and that are re-licensed or re-sold by the Company; provided,
however the revenue generated by products that fill a gap in the Company’s
current line of products and that are re-licensed, sublicensed or re-sold by the
Company before March 31, 2006 shall be measured and included in the calculation
of revenue for determining the acceleration of the vesting of the aforementioned
options covering 500,000 shares; and

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    (II) All press releases and Forms 8-K the Company may issue or furnish to
report historical fiscal period results shall be disregarded for purposes of
this option grant; and     (III) If any misconduct by Mr. Carney is a
substantial factor in causing a restatement of revenue that previously triggered
vesting of these options, the Company shall, as of the date of the restatement,
have the right to rescind and cancel all options described herein and shares
held by Mr. Carney from the exercise of such options, and also have the right to
recover all proceeds in excess of the aggregate exercise price from any sales of
any shares under such options that occurred on, prior to or after the date of
the restatement, net of any taxes paid in connection with the exercise of such
options and sale of shares obtained upon exercise, which taxes are not refunded
to Mr. Carney after he uses good faith efforts to obtain a refund from the
Internal Revenue Service (“IRS”) and relevant state tax authorities, and
together with interest on the foregoing recoverable proceeds at the rate of 10%
per annum from the date of written demand by the Company upon or after any such
restatement until all outstanding sums are fully paid to the Company. A
“restatement” for this purpose means any revised revenue figures in a periodic
report filed with the SEC that correct any material inaccuracy in previously
reported revenue Definitions:   Capitalized terms used but not defined in this
Notice of Stock Option Grant have the meanings given to them in the attached
Stock Option Agreement.

 

The parties have signed this Notice of Stock Option Grant as of the grant date
set forth above, and their signatures to this notice also constitute signatures
to the attached Stock Option Agreement.

 

Micromuse Inc.  

/s/ Lloyd A. Carney

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        Optionee Signature

By

 

/s/ James B. De Golia

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Print Name:

 

Lloyd A. Carney

Print Name:

 

James B. De Golia

 

Address:

 

 

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Title:

 

Senior Vice President & Secretary

 

 

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MICROMUSE INC.

STOCK OPTION AGREEMENT

 

RECITALS

 

A. Optionee is to render valuable services to the Corporation (or a Parent or
Subsidiary) pursuant to the Employment Agreement, and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan and the
Employment Agreement in connection with the Corporation’s grant of an option to
Optionee.

 

B. All capitalized terms in this Agreement shall have the meanings assigned to
them in the attached Appendix.

 

NOW, THEREFORE, it is hereby agreed as follows:

 

1. Grant of Option. The Corporation hereby grants to Optionee, as of the Grant
Date, an option (the “Option”) to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the Option term specified in Paragraph 2 at the Exercise Price.

 

2. Option Term. The Option shall have a term of ten (10) years measured from the
Grant Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6,
or in the circumstance specified in Section 7(a)(iii) of the Employment
Agreement.

 

3. Limited Transferability. During Optionee’s lifetime, the Option shall be
exercisable only by Optionee and shall not be assignable or transferable other
than by will or by the laws of descent and distribution following Optionee’s
death, except that the Option is transferable to members of Optionee’s immediate
family or to trusts or partnerships formed for the benefit of Optionee or
members of Optionee’s immediate family.

 

4. Dates of Exercise. The Option shall become exercisable for the Option Shares
in one or more installments as specified in the Grant Notice. As the Option
becomes exercisable for such installments, those installments shall accumulate
and the Option shall remain exercisable for the accumulated installments until
the Expiration Date or sooner termination of the Option term under Paragraph 5.

 

5. Cessation of Service. The Option term specified in Paragraph 2 shall
terminate (and the Option shall cease to be outstanding) prior to the Expiration
Date should any of the following provisions become applicable:

 

(a) Should Optionee cease to remain in Service for any reason (other than death,
Disability or Cause as defined in the Employment Agreement) while the Option is
outstanding, then Optionee shall have a period of three (3) months (commencing
with the date of such cessation of Service) during which to exercise the Option,
but in no event shall the Option be exercisable at any time after the Expiration
Date.

 

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(b) Should Optionee die while the Option is outstanding, then the personal
representative of Optionee’s estate or the person or persons to whom the Option
is transferred pursuant to Optionee’s will or in accordance with the laws of
inheritance shall have the right to exercise the Option. Such right shall lapse,
and the Option shall cease to be outstanding, upon the earlier of (i) the
expiration of the twelve (12)-month period measured from the date of Optionee’s
death or (ii) the Expiration Date.

 

(c) Should Optionee cease Service by reason of Disability while the Option is
outstanding, then Optionee shall have a period of twelve (12) months (commencing
with the date of such cessation of Service) during which to exercise the Option.
In no event shall the Option be exercisable at any time after the Expiration
Date.

 

(d) Should Optionee’s Service be terminated for Cause as defined in the
Employment Agreement, while the Option is outstanding, then the Optionee shall
have a period of ten (10) days (commencing with the date of such cessation of
Service) during which to exercise the Option. In no event shall the Option be
exercisable at any time after the Expiration Date.

 

(e) Notwithstanding the foregoing, if and to the extent Section 7(a) of the
Employment Agreement shall apply by reason of a Change of Control as defined in
the Employment Agreement which is a Corporate Transaction and in which the
acquiring or surviving corporate elects to assume or substitute new options for
the then outstanding Option, then, pursuant to the provisions of that Section
7(a), Optionee shall have a period of one (1) year (commencing with the date of
cessation of Service) during which to exercise the Option after the Company
terminates his Service for any reason other than Cause or Permanent Disability
or Optionee resigns from his Service for Good Reason as the foregoing terms are
defined in the Employment Agreement. In no event shall the Option be exercisable
at any time after the Expiration Date.

 

(f) During the limited period of post-Service exercisability, the Option may not
be exercised in the aggregate for more than the number of Option Shares in which
Optionee is, at the time of Optionee’s cessation of Service, vested pursuant to
the Vesting Schedule specified in the Grant Notice or the special vesting
acceleration provisions of the Employment Agreement referred to in Paragraph 6
below. Upon the expiration of such limited exercise period or (if earlier) upon
the Expiration Date, the Option shall terminate and cease to be outstanding for
any vested Option Shares for which the Option has not been exercised. To the
extent Optionee is not vested in the Option Shares at the time of Optionee’s
cessation of Service, the Option shall immediately terminate and cease to be
outstanding with respect to those shares.

 

6. Accelerated Vesting. The exercisability and vesting of the Option, to the
extent outstanding but not otherwise fully exercisable, shall automatically
accelerate to the extent provided in, and pursuant to, Sections 6 and 7 of the
Employment Agreement.

 

7. Adjustment in Option Shares. Nothing in this Agreement affects the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its

 

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business or assets. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation’s receipt of consideration, appropriate
adjustments shall be made to (i) the total number and/or class of securities
subject to the Option and (ii) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.

 

8. Stockholder Rights. The holder of the Option shall not have any stockholder
rights with respect to the Option Shares until such person shall have exercised
the Option, paid the Exercise Price and become a holder of record of the
purchased shares.

 

9. Manner of Exercising Option.

 

(a) In order to exercise the Option with respect to all or any part of the
Option Shares for which the Option is at the time exercisable, Optionee (or any
other person or persons exercising the Option) must take the following actions:

 

(i) Execute and deliver to the Corporation a Notice of Exercise for the Option
Shares for which the Option is exercised.

 

(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of
the following forms:

 

(A) cash or check made payable to the Corporation; or

 

(B) in shares of Common Stock held by Optionee (or any other person or persons
exercising the Option) for the requisite period necessary to avoid a charge to
the Corporation’s earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date; or

 

(C) to the extent the Option is exercised for vested Option Shares, through a
special sale and remittance procedure pursuant to which Optionee (or any other
person or persons exercising the Option) shall concurrently provide irrevocable
instructions (I) to a brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all Federal, state and
local income and employment taxes required to be withheld by the Corporation by
reason of such exercise, and (II) to the Corporation to deliver the certificates
for the purchased shares directly to such brokerage firm, after sufficient funds
have been remitted to the Corporation, in order to complete the sale.

 

Except to the extent the sale and remittance procedure is utilized in connection
with the Option exercise, payment of the Exercise Price must accompany the
Notice of Exercise delivered to the Corporation in connection with the Option
exercise.

 

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(iii) Furnish to the Corporation appropriate documentation that the person or
persons exercising the Option (if other than Optionee) have the right to
exercise the Option.

 

(iv) Execute and deliver to the Corporation such written representations as may
be requested by the Corporation in order for it to comply with the applicable
requirements of Federal and state securities laws.

 

(v) Make appropriate arrangements with the Corporation (or Parent or Subsidiary
employing or retaining Optionee) for the satisfaction of all Federal, state and
local income and employment tax withholding requirements applicable to the
Option exercise.

 

(b) As soon as practical after the Exercise Date, the Corporation shall issue to
or on behalf of Optionee (or any other person or persons exercising the Option)
a certificate or electronic book entry for the purchased Option Shares, with the
appropriate legends affixed thereto.

 

(c) In no event may the Option be exercised for any fractional shares.

 

10. Compliance with Laws and Regulations.

 

(a) The exercise of the Option and the issuance of the Option Shares upon such
exercise shall be subject to compliance by the Corporation and Optionee with all
applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange (or the Nasdaq National Market, if applicable)
on which the Common Stock may be listed for trading at the time of such exercise
and issuance.

 

(b) The inability of the Corporation to obtain approval from any regulatory body
having authority deemed by the Corporation to be necessary to the lawful
issuance and sale of any Common Stock pursuant to the Option shall relieve the
Corporation of any liability with respect to the non-issuance or sale of the
Common Stock as to which such approval shall not have been obtained. The
Corporation, however, shall use its best efforts to obtain all such approvals.

 

11. Successors and Assigns. Except to the extent otherwise provided in Paragraph
3, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the Corporation and its successors and assigns and Optionee,
Optionee’s assigns and the legal representatives, heirs and legatees of
Optionee’s estate.

 

12. Notices. Any notice required to be given or delivered to the Corporation
under the terms of this Agreement shall be in writing and addressed to the
Corporation at its principal corporate offices. Any notice required to be given
or delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated below Optionee’s signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

 

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13. Construction. This Agreement and the Option evidenced hereby are made and
granted pursuant to the Plan and are in all respects limited by and subject to
the terms of the Plan. All decisions of the Plan Administrator with respect to
any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in the Option.

 

14. Governing Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Delaware without resort
to that State’s conflicts of law rules.

 

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APPENDIX TO STOCK OPTION AGREEMENT:

 

The following definitions shall be in effect under the Agreement:

 

Agreement shall mean this Stock Option Agreement.

 

Board shall mean the Corporation’s Board of Directors.

 

Code shall mean the Internal Revenue Code of 1986, as amended.

 

Common Stock shall mean the Corporation’s common stock.

 

Corporate Transaction shall mean either of the following stockholder-approved
transactions to which the Corporation is a party: (i) a merger or consolidation
in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation’s outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction, or (ii) the sale, transfer or
other disposition of all or substantially all of the Corporation’s assets in
complete liquidation or dissolution of the Corporation.

 

Corporation shall mean Micromuse Inc., a Delaware corporation, and any successor
corporation to all or substantially all of the assets or voting stock of
Micromuse Inc. which shall by appropriate action adopt the Plan.

 

Employee shall mean an individual who is in the employ of the Corporation (or
any Parent or Subsidiary), subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.

 

Exercise Date shall mean the date on which the Option shall have been exercised
in accordance with Paragraph 9 of the Agreement.

 

Exercise Price shall mean the exercise price payable per Option Share as
specified in the Grant Notice.

 

Expiration Date shall mean the date on which the Option expires as specified in
the Grant Notice.

 

Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:

 

(i) If the Common Stock is at the time traded on the Nasdaq National Market,
then the Fair Market Value shall be the closing price per share of Common Stock
on the date in question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor system. If
there is no closing price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing price on the last preceding date for
which such quotation exists.

 

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(ii) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

 

(iii) If the Common Stock is at the time neither listed on any Stock Exchange
nor traded on the Nasdaq National Market, then the Fair Market Value shall be
determined by the Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate.

 

Grant Date shall mean the date of grant of the Option as specified in the Grant
Notice.

 

Grant Notice shall mean the Notice of Grant of Stock Option accompanying the
Agreement, pursuant to which Optionee has been informed of the basic terms of
the option evidenced hereby.

 

1934 Act shall mean the Securities Exchange Act of 1934, as amended.

 

Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.

 

Option shall have the meaning set forth in Section 1 of this Agreement.

 

Option Shares shall mean the number of shares of Common Stock subject to the
Option.

 

Optionee shall mean the person to whom the Option is granted as specified in the
Grant Notice.

 

Parent shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

Permanent Disability shall mean the definition of Permanent Disability contained
in the Employment Agreement.

 

Plan shall mean the Corporation’s 1997 Stock Option/Stock Issuance Plan.

 

Plan Administrator shall mean either the Board or a committee of the Board
acting in its capacity as administrator of the Plan.

 

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Service shall mean the Optionee’s performance of services for the Corporation
(or any Parent or Subsidiary) in the capacity of an Employee, a non-employee
member of the board of directors or an independent consultant.

 

Stock Exchange shall mean the American Stock Exchange or the New York Stock
Exchange.

 

Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

 

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