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                                                                   Exhibit 10.16

                           LOAN MODIFICATION AGREEMENT

         This Loan Modification Agreement is entered into as of October 1,
2002, by and between VITRIA TECHNOLOGY, INC. ("Borrower") and SILICON VALLEY
BANK ("Bank").

         1.     DESCRIPTION OF EXISTING INDEBTEDNESS: Borrower and Bank are
parties to, among other documents, a Loan and Security Agreement, dated June 28,
2002 (the "Loan Agreement"). The Loan Agreement provided for, among other
things, a Committed Revolving Line of up to Fifteen Million Dollars
($15,000,000). Additionally, Borrower and Bank are parties to a Non-Recourse
Receivables Purchase Agreement, dated as of June 28, 2002, which provides for
the purchase by Borrower and sale of receivables by Bank not to exceed an amount
outstanding equal to $5,000,000 in the aggregate. Defined terms used but not
otherwise defined herein shall have the same meanings as in the Loan Agreement.

                Hereinafter, all indebtedness owing by Borrower to Bank shall be
referred to as the "Indebtedness."

         2.     DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the
Indebtedness is secured by the Collateral as described in the Loan Agreement.

                Hereinafter, the above-described security documents and
guaranties, together with all other documents securing repayment of the
Indebtedness shall be referred to as the "Security Documents". Hereinafter, the
Security Documents, together with all other documents evidencing or securing the
Indebtedness shall be referred to as the "Existing Loan Documents".

         3.     DESCRIPTION OF CHANGE IN TERMS.

                A.     Modification(s) to Loan Agreement.

                       1.     Section 6.8 of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:

                       6.8    Control Agreements.

                       With respect to deposit accounts or investment accounts
         maintained at financial institutions other than Bank, within 10 days of
         the opening of any such deposit account or investment account, Borrower
         will execute and deliver to Bank, control agreements in form
         satisfactory to Bank in order for Bank to perfect its security
         interest; provided, however, that notwithstanding the foregoing, so
         long as Bank has a perfected security interest in no less than
         $50,000,000 of Borrower's deposit and investment accounts at all times,
         (including accounts maintained at Bank or any of its affiliates),
         Borrower will not be required to deliver any control agreements for any
         accounts in excess of such $50,000,000.

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                       2.     Section 6.10 of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:

                       6.10   Minimum Cash.

                       Borrower will maintain at all times unrestricted cash
         plus short-term investments (per GAAP) of no less than $90,000,000.

         4.     CONSISTENT CHANGES. The Existing Loan Documents are hereby
amended wherever necessary to reflect the changes described above.

         5.     NO DEFENSES OF BORROWER. Borrower (and each guarantor and
pledgor signing below) agrees that, as of the date hereof, it has no defenses
against the obligations to pay any amounts under the Indebtedness.

         6.     CONTINUING VALIDITY. Borrower (and each guarantor and pledgor
signing below) understands and agrees that in modifying the existing
Indebtedness, Bank is relying upon Borrower's representations, warranties, and
agreements, as set forth in the Existing Loan Documents. Except as expressly
modified pursuant to this Loan Modification Agreement, the terms of the Existing
Loan Documents remain unchanged and in full force and effect. Bank's agreement
to modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement. The
terms of this paragraph apply not only to this Loan Modification Agreement, but
also to all subsequent loan modification agreements.

                A.     CONDITIONS. The effectiveness of this Loan Modification
Agreement is conditioned upon the receipt by Bank of a fully executed copy of
this Loan Modification Agreement.

This Loan Modification Agreement is executed as of the date first written above.

BORROWER:                                    BANK:

VITRIA TECHNOLOGY, INC.                      SILICON VALLEY BANK

By: _____________________________            By: ____________________________

Name: ___________________________            Name: __________________________

Title: __________________________            Title: _________________________

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