SEC FORM 4

SEC Form 4

FORM 4

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934
or Section 30(h) of the Investment Company Act of 1940

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Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

1. Name and Address of Reporting Person^*

CARNEY LLOYD

(Last)

(First)

(Middle)

650 TOWNSEND STREET, SUITE 475

(Street)

SAN FRANCISCO

94103

(City)

(State)

(Zip)

2. Issuer Name and Ticker or Trading Symbol
MICROMUSE INC [ MUSE ]

5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)

X	Director	10% Owner
X	Officer (give title below)	Other (specify below)
	Chairman and CEO

3. Date of Earliest Transaction (Month/Day/Year)
02/14/2006

4. If Amendment, Date of Original Filed (Month/Day/Year)

6. Individual or Joint/Group Filing (Check Applicable Line)

X	Form filed by One Reporting Person
	Form filed by More than One Reporting Person

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	3. Transaction Code (Instr. 8)		4. Securities Acquired (A) or Disposed Of (D) (Instr. 3, 4 and 5)			5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4)	6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	Amount	(A) or (D)	Price		6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
Common Stock	02/14/2006		D		151,514	D	⁽¹⁾	0	D

Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned (e.g., puts, calls, warrants, options, convertible securities)
1. Title of Derivative Security (Instr. 3)	2. Conversion or Exercise Price of Derivative Security	3. Transaction Date (Month/Day/Year)	3A. Deemed Execution Date, if any (Month/Day/Year)	4. Transaction Code (Instr. 8)		5. Number of Derivative Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5)		6. Date Exercisable and Expiration Date (Month/Day/Year)		7. Title and Amount of Securities Underlying Derivative Security (Instr. 3 and 4)		8. Price of Derivative Security (Instr. 5)	9. Number of derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4)	10. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	11. Nature of Indirect Beneficial Ownership (Instr. 4)
1. Title of Derivative Security (Instr. 3)	2. Conversion or Exercise Price of Derivative Security	3. Transaction Date (Month/Day/Year)	3A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	(A)	(D)	Date Exercisable	Expiration Date	Title	Amount or Number of Shares	8. Price of Derivative Security (Instr. 5)		10. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	11. Nature of Indirect Beneficial Ownership (Instr. 4)
Non-Qualified Stock Option (right to buy)	$7.27	02/14/2006		D			62,499	⁽²⁾	07/28/2013	Common Stock	62,499	⁽²⁾	0	D
Non-Qualified Stock Option (right to buy)	$7.27	02/14/2006		D			1,437,501	⁽³⁾	07/28/2013	Common Stock	1,437,501	$2.73	0	D
Non-Qualified Stock Option (right to buy)	$8.11	02/14/2006		D			125,000	⁽⁴⁾	02/09/2014	Common Stock	125,000	⁽⁴⁾	0	D
Non-Qualified Stock Option (right to buy)	$8.11	02/14/2006		D			375,000	⁽⁵⁾	02/09/2014	Common Stock	375,000	$1.89	0	D
Non-Qualified Stock Option (right to buy)	$5.51	02/14/2006		D			47,921	⁽⁶⁾	12/20/2011	Common Stock	47,921	⁽⁶⁾	0	D
Non-Qualified Stock Option (right to buy)	$5.51	02/14/2006		D			152,096	⁽⁷⁾	12/20/2011	Common Stock	152,096	$4.49	0	D

Explanation of Responses:

1. Disposed of pursuant to merger agreement by and among issuer, International Business Machines Corporation, and Rooster Acquisition Corp. in exchange for a cash payment of approximately $1,515,140, without interest and less any applicable withholding tax, representing the $10.00 per share merger consideration on the effective date of the merger as detailed in the definitive proxy statement of the issuer dated January 9, 2006.

2. This option, which provided for vesting over a three (3) year period with 250,020 shares becoming vested and exercisable upon the executive completing his initial six (6) months of service from and after 7/28/03, and thereafter 41,666 shares becoming exercisable and vested monthly upon the executive completing each additional month of service over the succeeding thirty (30) month period commencing on the 6 month anniversary of 7/28/03, was converted into an option to acquire, on the same terms and conditions as were applicable prior to the effective time of the merger (other than the exercise price), approximately 7,749 shares of International Business Machines Corporation's common stock for approximately $58.63 per share as detailed in the definitive proxy statement of the issuer dated January 9, 2006.

3. This option, which provided for vesting over a three (3) year period with 250,020 shares becoming vested and exercisable upon the executive completing his initial six (6) months of service from and after 7/28/03, and thereafter 41,666 shares becoming exercisable and vested monthly upon the executive completing each additional month of service over the succeeding thirty (30) month period commencing on the 6 month anniversary of 7/28/03, was canceled in the merger in exchange for a cash payment of approximately $3,924,377, representing an amount in cash equal to (i) the excess of the merger consideration ($10.00 per share) over the exercise price per share of the issuer's common stock subject to such canceled option, multiplied by (ii) the number of shares of the issuer's common stock subject to such canceled option, subject to any required withholding of taxes, as detailed in the definitive proxy statement of the issuer dated January 9, 2006.

4. This option, which provided for vesting with respect to 500,000 of the option shares upon the earlier of (i) the executive completing six (6) continuous years of full-time employment measured from 2/9/2004 or (ii) the date that certain financial targets or other events described in the applicable option agreement are met, was converted into an option to acquire, on the same terms and conditions as were applicable prior to the effective time of the merger (other than the exercise price), approximately 15,500 shares of International Business Machines Corporation's common stock for approximately $65.41 per share as detailed in the definitive proxy statement of the issuer dated January 9, 2006.

5. This option, which provided for vesting with respect to 500,000 of the option shares upon the earlier of (i) the executive completing six (6) continuous years of full-time employment measured from 2/9/2004 or (ii) the date that certain financial targets or other events described in the applicable option agreement are met, was canceled in the merger in exchange for a cash payment of approximately $708,750, representing an amount in cash equal to (i) the excess of the merger consideration ($10.00 per share) over the exercise price per share of the issuer's common stock subject to such canceled option, multiplied by (ii) the number of shares of the issuer's common stock subject to such canceled option, subject to any required withholding of taxes, as detailed in the definitive proxy statement of the issuer dated January 9, 2006.

6. This option, which provided for vesting with respect to (i) one-sixth (1/6) of the option shares upon optionee's completion of six (6) months of service measured from 12/20/2004 and (ii) the balance of the option shares in a series of thirty (30) successive equal monthly installments upon optionee's completion of each additional month of service over the thirty (30) month period measured from the six (6) month anniversary of 12/20/2004, was converted into an option to acquire, on the same terms and conditions as were applicable prior to the effective time of the merger (other than the exercise price), approximately 5,942 shares of International Business Machines Corporation's common stock for approximately $44.44 per share as detailed in the definitive proxy statement of the issuer dated January 9, 2006.

7. This option, which provided for vesting with respect to (i) one-sixth (1/6) of the option shares upon optionee's completion of six (6) months of service measured from 12/20/2004 and (ii) the balance of the option shares in a series of thirty (30) successive equal monthly installments upon optionee's completion of each additional month of service over the thirty (30) month period measured from the six (6) month anniversary of 12/20/2004, was canceled in the merger in exchange for a cash payment of approximately $682,908, representing an amount in cash equal to (i) the excess of the merger consideration ($10.00 per share) over the exercise price per share of the issuer's common stock subject to such canceled option, multiplied by (ii) the number of shares of the issuer's common stock subject to such canceled option, subject to any required withholding of taxes, as detailed in the definitive proxy statement of the issuer dated January 9, 2006.

	/s/ Nell O'Donnell, Attorney in Fact For: Lloyd A. Carney	02/16/2006
	** Signature of Reporting Person	Date
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