8-K

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

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 27, 2006

Mercury Interactive Corporation
(Exact name of registrant as specified in its charter)

Delaware	0-22350	77-0224776
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

379 North Whisman Road, Mountain View, California 94043
(Address of Principal Executive Offices)

(Registrant's Telephone Number, Including Area Code)
(650) 603-5200

(former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Solicitation material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 241.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 Item 1.01. Entry into Material Definitive Agreement

Mercury Interactive Corporation (the “Company”) entered into an amendment effective as of January 27, 2006 (the “Amendment Agreement”) to the November 1, 2005 agreement by and between the Company and Amnon Landan, the Company’s former Chief Executive Officer. Pursuant to the Amendment Agreement, which was executed and negotiated on the Company’s behalf by the Special Committee of the Board of Directors of the Company, the Company and Mr. Landan agreed that Mr. Landan will not exercise Mr. Landan’s currently outstanding and vested options (collectively, the “Options”) prior to June 15, 2006 without prior notice from the Special Committee that the Special Committee has concluded that the Options are valid and enforceable and that the term for exercise of each of the Options is to be extended until July 15, 2006. The Company and Mr. Landan also agreed that Mr. Landan will return to the Company for cancellation the option to acquire 700,000 shares with a record grant date of January 8, 2001, and that the exercise prices of certain of Mr. Landan’s options will be increased. In the event that Mr. Landan exercises any of the Options, any resulting shares from such exercises (and any proceeds from the sale of such shares) shall be placed into escrow or a segregated account, or be subject to some other form of security until the Company has resolved any claims against Mr. Landan (either directly or derivatively) or until the United States Securities and Exchange Commission has resolved any action it may take against Mr. Landan, whichever is later. Mr. Landan and the Company have agreed that they will attempt to reach agreement by March 15, 2006 on the amount, if any, of vacation days and bonus due to Mr. Landan and an amount to be paid or repaid to the Company in connection with Mr. Landan’s stock options. In the event the Company and Mr. Landan are unable to agree on any of these matters, these amounts will be determined through arbitration.

The foregoing description of the Amendment Agreement does not purport to be complete, and is qualified in its entirety by reference to such agreement, a copy of which is filed as Exhibit 10.50 hereto and is incorporated herein by reference.

 Item 9.01. Financial Statements and Exhibits.

(c)	Exhibits
10.50	Amendment to Agreement by and between the Company and Amnon Landan effective as of January 27, 2006

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 2, 2006	MERCURY INTERACTIVE CORPORATION
	By: /s/ David J. Murphy
	Name: David J. Murphy
	Title: Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
10.50	Amendment to Agreement by and between the Company and Amnon Landan effective as of January 27, 2006

EX-10.50

Exhibit 10.50

AMENDMENT TO AGREEMENT

     This Amendment to Agreement, which is effective as of January 27, 2006, shall amend the November 1, 2005 Agreement into by and between Mercury Interactive Corporation (“Mercury”) and Amnon Landan (“Landan”), a copy of which is attached hereto. Except as amended, the November 1, 2005 Agreement shall remain in full force and effect.

     WHEREAS, the Special Committee has not yet determined whether the stock options previously granted to Landan to purchase Mercury common stock that currently are outstanding and vested (“Landan’s Options”) are valid and enforceable;

     In consideration of the covenants undertaken and contained herein, the adequacy of which is herein acknowledged, the parties agree as follows:

     1. The term of Landan’s Options will be extended until 5:00 p.m. California time on July 15, 2006.

     2. Landan will not exercise Landan’s Options prior to June 15, 2006, unless the Special Committee gives notice to Landan before June 15, 2006 that it has concluded that Landan’s Options are valid and enforceable. Landan acknowledges that Mercury makes no representation as to the tax treatment of Landan’s Options and that he will be responsible for any tax obligations that may arise there from.

     3. Landan acknowledges and agrees that (i) Landan will return to Mercury for cancellation the option to acquire 700,000 Shares with a record grant date of January 8, 2001, (ii) the option to acquire 322,680 Shares with a record grant date of January 9, 1998 will have an exercise price of $8.75 per share, (iii) the option to acquire 120,000 Shares with a record grant date of July 15, 1999 will have an exercise price of $21.94 per share, and (iv) the option to acquire 700,000 Shares with a record grant date of January 22, 2002 will have an exercise price of $36.43 per share. The parties understand that, as a result of these actions, Mercury will not incur any accounting charges as a result of the extension set forth in Paragraph 1, above.

     4. If Landan exercises any of Landan’s Options by paying the exercise price in cash, the shares of stock that he would otherwise be entitled to receive as a result of the exercise shall

AMENDMENT TO AGREEMENT PAGE 1

be placed into escrow or a segregated account, the terms of which are acceptable to Mercury and Landan or be subject to some other form of security, the terms of which are acceptable to Mercury and Landan. The escrow, segregated account or other form of security will continue until Mercury has resolved any and all claims it may have against Landan (either directly or derivatively) or until the United States Securities and Exchange Commission has resolved any action it may take against Landan, whichever is later. At the time of exercise, Landan will pay to Mercury the amount of any tax obligations that Mercury incurs because of the exercise. Landan will not exercise any of Landan’s Options until the parties have reached agreement regarding the terms of escrow, segregated account or other form of security referred above to in this paragraph.

     5. If the Special Committee concludes that Landan’s Options are valid and enforceable, Landan will be permitted to exercise his stock options by the same methods available to employees of the Company (which may include broker-assisted same day sales), except as otherwise provided in this Amendment to Agreement. If Landan exercises any of Landan’s Options by means of a “same day sale,” the broker, who shall be reasonably pre-approved by Mercury, shall deliver to Mercury payment for the options. The broker will place the remaining proceeds from the sale and any unsold shares of stock into escrow or a segregated account, the terms of which are acceptable to Mercury and Landan or be subject to some other form of security, the terms of which are acceptable to Mercury and Landan. The escrow, segregated account or other form of security will continue until Mercury has resolved any and all claims it may have against Landan (either directly or derivatively) or until the United States Securities and Exchange Commission has resolved any action it may take against Landan, whichever is later. At the time of exercise, Landan will pay to Mercury the amount of any withholding tax obligations that Mercury incurs because of the exercise. The proceeds from the sale of the stock shall not be used to pay said tax obligations, unless Landan provides Mercury with a letter of credit of an equal amount in a form acceptable to Mercury or a security interest in funds of an equal amount in a form acceptable to Mercury. Landan will not exercise any of the

AMENDMENT TO AGREEMENT PAGE 2

Landan Options until the parties have reached agreement regarding the terms of escrow, segregated account or other form of security referred to above in this paragraph.

     6. Unless the parties have reached agreement on the following issues by March 15, 2006, the following issues will be resolved by arbitration between Landan and Mercury: 1) the amount that Landan should reimburse Mercury for the additional exercise price that would have been payable by Landan if the options he previously exercised (not including the options set forth in Paragraph 3 above) had been priced at the fair market value of the Mercury stock on the date of the grant and 2) the amount, if any, that Landan should receive for his accrued Personal Time Off and target bonus for 2005. The arbitration hearing , if required, will begin on August 1, 2006 or as soon thereafter as practical, and will be limited to the above-described issues in this paragraph, and Mercury and Landan would specifically reserve the right to bring claims against each other with respect to any other issue. The parties agree that claims with respect to any other issues will not be barred by res judicata or any other reason as a result of the arbitration. The arbitration will be conducted pursuant to the procedures set forth in Paragraph 18 of the November 1, 2005 Agreement. This paragraph supersedes Paragraph 9 of the November 1, 2005 Agreement, which is no longer valid or enforceable.

     7. This Amendment to Agreement in no way prejudices or restricts the right or power (a) of the Special Committee to find that the Landan Options are invalid or otherwise unenforceable or (b) the right of Landan to dispute, litigate or arbitrate the validity of any such finding.

     8. Nothing contained in this Amendment to Agreement shall be deemed as an admission by any party.

     9. This Amendment to Agreement shall not be deemed to constitute a waiver of any rights, claims or defenses of any of the parties, other than with respect to the exercise prices of the options set forth in Paragraph 3, above. The November 1, 2005 Agreement and this Amendment to Agreement do not constitute a release of any claims that either party may have

AMENDMENT TO AGREEMENT PAGE 3

against the other. Nothing in this amendment is intended to limit the parties’ existing arbitration rights, including but not limited to rights under the November 1, 2005 Agreement or Landan’s Employment Agreement, except as expressly set forth herein.

     10. This Amendment to Agreement can be modified only in writing signed by the parties. The Amendment to Agreement and the November 1, 2005 Agreement shall constitute the entire understanding between the parties concerning the subject matter of that Agreement and Amendment and supersedes and replaces all prior negotiations, proposed agreements, and agreements, written or oral, relating to this subject.

     11. Both parties agree to cooperate with the other in taking any steps required to finalize this Amendment to Agreement.

     12. Both parties have cooperated in the drafting and preparation of this Amendment to Agreement. Hence, in any construction to be made of this Amendment to Agreement, the same shall not be construed against any party on the basis that the party was the drafter.

     13. This Amendment to Agreement may be executed in one or more counterparts, each of which shall constitute an original, and all of which shall constitute one instrument.

     14. In entering into this Amendment to Agreement, the parties represent that they have relied upon the advice of their attorneys, who are attorneys of their own choice, and that the terms of this Agreement have been completely read and explained to them by their attorneys, and that those terms are fully understood and voluntarily accepted by them.

     15. Notice to Landan under this Amendment to Agreement may be effected by hand delivery to Landan’s attorney, Jonathan Cohen at Kirkpatrick & Lockhart Nicholson Graham LLP, Four Embarcadero Center, 10^th Floor, San Francisco, CA 94111. Notice to Mercury may be effected by hand delivery to its attorney, Daniel Bookin at O’Melveny & Meyers, Embarcadero Center West, San Francisco, CA 94111.

     I have read the foregoing Agreement, and I accept and agree to the provisions it contains and hereby execute it voluntarily with full understanding of its consequences.

AMENDMENT TO AGREEMENT PAGE 4

MERCURY INTERACTIVE CORPORATION
By:	/s/ Clyde Ostler
Title:	Special Committee Chairman
Dated: 1/31/2006

AMNON LANDAN
By:	/s/ Amnon Landan
Dated: 1/30/2006

AMENDMENT TO AGREEMENT PAGE 5