<PAGE>
                                                                   EXHIBIT 10.04

                                     EMPLOYMENT AGREEMENT

        This Employment Agreement ("Agreement") is entered into by and between
Niku Corporation, a Delaware corporation (the "Company") and Farzad Dibachi (the
"Executive") (together the "Parties") as of October 18, 2002.

                                           RECITALS

            WHEREAS, the Executive is currently the Chief Executive Officer of
the Company;

            WHEREAS, the Company and the Executive have not set forth the terms
and conditions governing their employment relationship;

            WHEREAS, the Company and the Executive desire to set forth the terms
and conditions governing such relationship; and

            WHEREAS, the Company also wishes to obtain certain other agreements
from Executive, including a Proprietary Information and Invention Assignment
Agreement, a Tag-Along Agreement with Limar Realty Corp. #30, a Waiver and
Release Agreement, a Voting Agreement, a Non-Solicitation and Non-Interference
Agreement and the other agreements set forth herein.

            NOW, THEREFORE, intending to be legally bound hereby, the Parties
hereto agree as follows:

      1.    AT-WILL EMPLOYMENT. The Executive's employment with the Company is,
            and will continue to be, at-will and, accordingly, may be terminated
            by either party at any time and for any reason, subject to the
            provisions of Section 3 below.

      2.    COMPENSATION.

            a.    Base Salary. In consideration of the services to be rendered
                  hereunder, effective September 1, 2002, the Executive shall be
                  paid a base salary of Three Hundred Sixty Thousand Dollars
                  ($360,000) per year (the "Base Salary"), payable at the time
                  and pursuant to the procedures regularly established by the
                  Company.

            b.    Bonuses. At the sole and complete discretion of the
                  Compensation Committee (the "Committee") of the Company's
                  Board of Directors (the "Board"), the Executive may be
                  eligible to receive an annual performance-based bonus. Such
                  bonus, if any, shall be payable as determined by the
                  Committee.

            c.    Benefits. The Executive shall be entitled to participate in
                  such benefit plans, programs, policies and arrangements as
                  maintained by the Company, from time to time, for employees of
                  the Executive's level, so long as the Executive is eligible
                  under such benefit plans in accordance with their respective
                  terms.

<PAGE>
      3.    PROPRIETARY INFORMATION AND INVENTION ASSIGNMENT AGREEMENT. The
            Executive agrees that as a condition of the Company entering into
            this Agreement and agreeing to make the payments hereunder, he will
            promptly execute a copy of the Company's Standard Proprietary
            Information and Invention Assignment Agreement, covering all periods
            of his employment with the Company.

      4.    TAG-ALONG AGREEMENT. The Executive agrees that, as a condition of
            the Company entering into this Agreement and agreeing to make the
            payments hereunder, he will, if requested to do so by the Company,
            execute a Tag-Along Agreement substantially in the form attached
            hereto as Exhibit A.

      5.    TERMINATION OF EMPLOYMENT. In the event that the Company terminates
            the Executive's employment with the Company for any reason other
            than "Cause" (as defined below), or in the event the Executive
            voluntarily resigns his employment for "Good Reason" (as defined
            below), then:

            (a)   The Company shall pay the Executive Thirty Thousand Dollars
                  ($30,000.00) per month for a period of six months, with the
                  first payment due within one (1) business day of the date of
                  termination or resignation.

            (b)   The Company shall provide the medical, dental and vision
                  benefits accorded to other executives of the Company for a
                  period of twelve (12) months from the date of termination or
                  resignation either directly or, at the option of the Company,
                  through reimbursement of COBRA payments.

            (c)   The Company shall treat Executive's Company stock options in
                  accordance with the plan and/or agreement governing such stock
                  options.

            (d)   The Executive (and the Executive's Family Trust, in the case
                  of subsection 5(d)(ii)) shall promptly execute the agreements
                  set forth in this Section 5(d):

                  (i)   A Waiver and Release Agreement releasing any and all
                        actual or potential claims he may have against the
                        Company as of the date of the Waiver and Release
                        Agreement;

                  (ii)  A Voting Agreement in a form reasonably satisfactory to
                        the Company agreeing to vote all shares owned or
                        controlled by him in the manner recommended unanimously
                        by the Board for a period ending upon the earlier of (A)
                        the date that is three (3) years from the date of
                        termination or resignation, or (B) the date immediately
                        following the date of closing of a merger or
                        consolidation of the Company with any other corporation
                        or entity, or other corporation reorganization of the
                        Company, in which the holders of the Company's
                        outstanding voting stock immediately prior to such
                        transaction own, immediately after such transaction,
                        securities representing less then fifty percent (50%) of
                        the voting power of the corporation or other entity
                        surviving


                                       2
<PAGE>
                        such transaction, or the closing of the sale of all or
                        substantially all of the assets of the Company; and

                  (iii) A Non-Solicitation and Non-Interference Agreement
                        providing that, for a period of one (1) year from the
                        date of termination or resignation, he will not, either
                        directly or indirectly:

                        (A)   Attempt to recruit or solicit any employee of the
                              Company or make known to any person, firm or
                              corporation the names or addresses of, or any
                              information pertaining to, any current or former
                              employees of the Company.

                        (B)   Attempt to call on, solicit or take away any
                              customers or clients of the Company or any other
                              persons, entities, or corporations with which the
                              Company has had or has contemplated any business
                              transaction or relationship during the Executive's
                              employment with the Company, including, but not
                              limited to, investments, licenses, joint ventures,
                              and agreements for development.

            (e)   Upon execution of the agreements set forth in Section 5(d),
                  the Company shall pay the Executive the following additional
                  amounts at the times set forth below:

                  (i)   $50,000 within one (1) business day of upon execution of
                        the agreements set forth in Section 5(d); and

                  (ii)  $84,792 per quarter for three quarters, with the first
                        quarterly payment occurring within one (1) business day
                        of execution of the agreements set forth in Section
                        5(d), the second occurring ninety (90) days after the
                        date of the first payment, and the third quarterly
                        payment occurring one hundred eighty (180) days after
                        the date of the first payment, provided, however, that
                        if the Company fails to make any quarterly payment
                        within five (5) business days of its due date, then all
                        remaining quarterly payments shall become immediately
                        due and payable, and all agreements set forth in Section
                        5(d) shall be cancelled and of no further force or
                        effect.

            (f)   The Executive acknowledges and agrees that, aside from the
                  payments set forth in the Section 5, the Executive shall not
                  be entitled to receive any other severance or other form of
                  compensation or benefits from the Company upon the termination
                  of his employment.

            (g)   For purposes of this Agreement, "Cause" shall mean (i) the
                  Executive's commission of a felony or other criminal act
                  involving moral turpitude or any criminal act of dishonesty
                  that is detrimental to the Company, or (ii) the Executive's
                  willful and repeated violation of written Company policies
                  after the Executive has received written notice of such
                  violation. For purposes of this Agreement, "Good Reason" shall
                  mean (a) the Company's reduction of the Executive's duties and
                  responsibilities and/or compensation without the Executive's
                  consent, (b) the


                                       3
<PAGE>
               Board's failure to provide the Executive with its unanimous
               support for his continuation as Chief Executive Officer, or (c)
               the Company's relocation of the Executive to a facility or
               location more than 25 miles from the Company's current principal
               offices in Redwood City, California without the Executive's
               consent.

      6.    NON-DISPARAGEMENT. The Company, including its Directors, and the
            Executive agree that, both during the Executive's employment with
            the Company and after the termination of his employment, they will
            not, at any time, make, directly or indirectly, any oral or written
            statements that are disparaging of the other party or, in the case
            of the Company, any of its present or former officers, directors,
            agents, or employees. This provision will continue to be applicable
            even after any Director's departure from the Board.

      7.    WITHHOLDING. The Executive acknowledges and agrees that any payments
            made under the terms of this Agreement shall be subject to all
            applicable tax withholding.

      8.    SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
            shall inure to the benefit of the Company and its successors and
            assigns. This Agreement shall be binding upon the Executive and
            shall not be assignable by Executive. The provisions of this
            Agreement shall continue in force notwithstanding Executive's death
            or disability.

      9.    SPECIFIC PERFORMANCE AND INJUNCTIVE RELIEF. The Company and
            Executive agree that in the event of any breach by either Party of
            any provision contained in this Agreement, the Company and Executive
            shall be entitled (in addition to any other remedy that may be
            available to them) to the extent permitted by applicable law (i) a
            decree or order of specific performance to enforce the observance
            and performance of such covenant, obligation or other provision, and
            (ii) an injunction restraining such breach or threatened breach.

      10.   WAIVER. The Company's waiver of the Executive's breach of any
            provision of this Agreement shall not operate or be construed as a
            waiver of any subsequent breach by the Executive.

      11.   ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
            between the Company and the Executive relating to the Executive's
            employment with, and termination from, the Company and this
            Agreement supersedes and replaces any prior verbal or written
            agreements between the Parties as to the matters covered herein.
            This Agreement may be amended or altered only in a writing signed by
            a designee of the Board and the Executive.

      12.   APPLICABLE LAW. This Agreement and all rights, duties and remedies
            hereunder shall be governed by, construed and enforced in accordance
            with the laws of the State of California, without reference to its
            choice of law rules.


                                       4
<PAGE>
      13.   SEVERABILITY. Each provision of this Agreement is severable from the
            others, accordingly should any provision, portion or part of this
            Agreement be held by a court of competent jurisdiction to be
            invalid, void or unenforceable, the remaining provisions, portions
            or parts shall be unaffected and shall continue in full force and
            effect, and said invalid, void or unenforceable provision(s),
            portion(s) or part(s) shall be deemed not to be part of this
            Agreement.

            IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date first written above.

     THE COMPANY                           THE EXECUTIVE

By:  /s/ Joshua Pickus                     /s/ Farzad Dibachi
     -------------------------------       -------------------------------------
                                           Farzad Dibachi
Its: CFO


                                       5