Amendment No. 1 to Employment Agreement



 Exhibit 10.16 
  
 Exhibit A 
  
 AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT 
  
 This Amendment No. 1 (“Amendment”) to the Employment Agreement between Arun Oberoi (“Executive”) and Micromuse Inc. (“Company”) dated
January 12, 2004 (“Employment Agreement”) is made as of September 30, 2004 (the “Amendment Effective Date”). 
  
 WHEREAS, the Company wishes to clarify certain aspects of Executive’s Employment Agreement regarding variable compensation; 
  
 WHEREAS, Executive has performed and continues to perform under the
Employment Agreement as of the date he commenced employment with the Company; 
  
 WHEREAS, the Company wishes to provide certain bonus incentives to Executive to continue his employment with the Company; and 
  
 WHEREAS, the Company has sought and obtained approval from the Compensation Committee of the Company’s Board of
Directors for this Amendment. 
  
 NOW THEREFORE, in consideration
of the promises, mutual covenants and conditions contained herein, the parties hereto agree as follows: 
  

	 	1.	Paragraph 2(b) of the Employment Agreement is deleted in its entirety and replaced with new Paragraph 2(b), a copy of which is attached hereto. 

  

	 	2.	Except as specifically set forth herein, the Employment Agreement remains unmodified and in full force and effect. 

  
 IN WITNESS WHEREOF, the parties have executed this Amendment as of the Amendment
Effective Date. 
  

							
	MICROMUSE INC. (“Company”)	 	ARUN OBEROI (“Executive”)
				
	 By:
	 	 /s/ James B. De Golia

	 	 By:
	 	 /s/ Arun Oberoi


	 Name:
	 	 James B. De Golia
	 	 Date:
	 	 October 22, 2004


	 Title:
	 	 Senior Vice President
	 	 	 	 
	 Date:
	 	 September 30, 2004

	 	 	 	 

  

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 Paragraph 2 
  
 (b) On Target Bonuses. In addition to Base Compensation, the Executive shall be eligible to receive an incentive bonus with a target bonus amount
(the “On Target Bonus”) set forth in the tables below in this Section 2(b), payable quarterly (or otherwise in accordance with the Company’s payment of bonuses to other senior executives). The On Target Bonus (if any) shall be awarded
based on criteria of performance by the Executive and/or the Company (the “Target”) established in advance by the Compensation Committee of the Board that will include consideration of the recommendations of the Chief Executive Officer.
For the remainder of Fiscal Year 2004, the criteria of performance for the award of an On-Target Bonus to Executive will be the market consensus estimates of the Company’s quarterly (and annual) revenue. For Fiscal Year 2005 (commencing on
October 1, 2004), the criteria of performance will be established in advance by the Compensation Committee (together with the criteria of performance for the Company’s CEO and CFO), and will include revenue and earnings targets established by
the Compensation Committee or Board. The reasonable determinations of the Compensation Committee with respect to the On Target Bonus shall be final and binding, subject to Section 10(g). The On Target Bonus shall be up to the following amounts,
respectively payable on a “cliff” basis if and only if the percentages of the Target are achieved (and without interpolation or pro rata adjustments below or within or above the percentage thresholds set forth below): 
  

										
	% of Target
Achieved

	 	On Target Bonus
(Annual Amount)

	 	On Target Bonus
(Quarterly Amount)

	 	Maximum Base
Compensation and On
Target Bonus (Annual
Amount)


	75%	 	$	120,000	 	$	30,000	 	$	420,000
	80%	 	$	150,000	 	$	37,500	 	$	450,000
	90%	 	$	200,000	 	$	50,000	 	$	500,000
	100%	 	$	250,000	 	$	62,500	 	$	550,000
	110%	 	$	345,000	 	$	86,250	 	$	645,000
	120%	 	$	585,000	 	$	146,250	 	$	885,000
	130%	 	$	637,917	 	$	159,480	 	$	937,917
	140% or more	 	$	690,833	 	$	172,710	 	$	990,833

  

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