<PAGE>
As Filed with the Securities and Exchange Commission on April 5, 2000
Registration No. 333-95097
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MERCURY INTERACTIVE CORPORATION
(Exact name of Registrant as specified in its charter)
---------------
<TABLE>
<S> <C>
Delaware 77-0224776
(State or other jurisdiction of (I.R.S. Employer
incorporation organization) Identification Number)
</TABLE>
1325 Borregas Avenue
Sunnyvale, California 94089
(408) 822-5200
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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AMNON LANDAN
Chairman of the Board, President and Chief Executive Officer
1325 Borregas Avenue
Sunnyvale, California 94089
(408) 822-5200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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SUSAN J. SKAER, ESQ.
GENERAL COUNSEL ASSOCIATES LLP
1891 Landings Drive
Mountain View, California 94043
(650) 428-3900
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Proposed maximum Proposed maximum Amount of
securities to Amount to be offering price per aggregate offering registration fee
be registered registered share (1) price (1) (2)
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<S> <C> <C> <C> <C>
Common stock, $.002 par
value................. 775,780(3) $93.625 $36,316,389 $9,587.53
</TABLE>
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(1) Estimated solely for purposes of calculation of the registration fee.
(2) Computed pursuant to Rule 457(c) based upon the average high and low sales
prices reported on the Nasdaq National Market for January 14, 2000. The
registration fee was previously paid with this Registration Statement and
based on 387,892 post-split shares.
(3) Pursuant to Rule 416, all share numbers in this registration statement have
been adjusted to reflect the 2-for-1 stock split in the form of a dividend
that was paid to Mercury stockholders on February 11, 2000.
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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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<PAGE>
PROSPECTUS
387,892 Shares
MERCURY INTERACTIVE CORPORATION
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Common Stock
----------------
This prospectus relates to the public offering, which is not being
underwritten, of 387,892 shares of our common stock which is held by some of
our current shareholders.
The prices at which such shareholders may sell the shares will be determined
by the prevailing market price for the shares or in negotiated transactions. We
will not receive any of the proceeds from the sale of the shares.
Our common stock is quoted on the Nasdaq National Market under the symbol
"MERQ." On April 3, 2000, the average of the high and low price for the common
stock was $72.25.
Investing in our common stock involves risks. See the section entitled "Risk
Factors" beginning on page 3 of this prospectus for certain risks and
uncertainties that you should consider.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.
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The date of this prospectus is April 6, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Where You Can Find More Information........................................ 1
The Company................................................................ 2
Recent Developments........................................................ 2
Risk Factors............................................................... 3
Plan of Distribution....................................................... 11
Selling Shareholders....................................................... 13
Legal Matters.............................................................. 15
Experts.................................................................... 15
</TABLE>
No person is authorized to give any information or to make any
representations, other than those contained in this prospectus, in connection
with the offering described herein, and, if given or made, such information or
representations must not be relied upon as having been authorized by Mercury
or the selling shareholders. This prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, nor shall there be any sale of
these securities by any person in any jurisdiction in which it is unlawful for
such person to make such offer, solicitation or sale. Neither the delivery of
this prospectus nor any sale made hereunder shall under any circumstances
create an implication that the information contained herein is correct as of
any time subsequent to the date hereof.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Section 13a, 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
our offering is completed.
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1999, filed March 22, 2000,
(b) Mercury's Definitive Proxy Statement filed in connection with
Mercury's 1999 Annual Meeting of Shareholders;
(c) The description of Mercury Interactive Common Stock contained in its
registration statement on Form 8-A filed September 9, 1993, including any
amendments or reports filed for the purpose of updating such descriptions;
and
(d) The description of Mercury's Preferred Stock Purchase Rights,
contained in its registration statement on Form 8-A filed on July 8, 1996,
including any amendments or reports filed for the purpose of updating such
description.
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You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Director of Investor Relations
Mercury Interactive Corporation
1325 Borregas Avenue
Sunnyvale, CA 94089
408-822-5200
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have authorized
no one to provide you with different information. We are not making an offer
of these securities in any state where the offer is not permitted. You should
not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of the
document.
THE COMPANY
Mercury's principal executive offices are located at 1325 Borregas Avenue,
Sunnyvale, California 94089 and its telephone number at that address is (408)
822-5200.
RECENT DEVELOPMENTS
On March 22, 2000, Mercury announced that it intended to offer, subject to
market and other conditions, $400 million in convertible subordinated notes
due 2007 in an offering to qualified institutional investors. As part of the
offering, Mercury would grant the initial purchasers a 30-day option to
purchase an additional $100 million of notes to cover over-allotments, if any.
However, depending upon market conditions, this offering may be delayed or may
not consummated at the anticipated size, or at all.
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<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in shares of our common stock. Our business, operating
results and financial condition could be adversely affected by any of the
following risks. The trading price of our common stock could decline due to any
of these risks, and you could lose all or part of your investment. You should
also refer to the other information set forth or incorporated by reference in
this prospectus, including our financial statements and the related notes.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. These statements relate to our future plans, objectives,
expectations and intentions, and the assumptions underlying or relating to any
of these statements. These statements may be identified by the use of words
such as "expects," "anticipates," "intends," and "plans" and similar
expressions. Our actual results could differ materially from those discussed in
these statements. Factors that could contribute to such differences include,
but are not limited to, those discussed below and elsewhere in this prospectus.
Our future success depends on our ability to respond to rapid market and
technological changes by introducing new products and to continually improve
the performance, features and reliability of our existing products and respond
to competitive offerings. Our business will suffer if we do not successfully
respond to rapid technological changes. The market for our software products is
characterized by:
. rapidly changing technology;
. frequent introduction of new products and enhancements to existing
products by our competitors;
. increasing complexity and interdependence of Internet related
applications;
. changes in industry standards and practices; and
. changes in customer requirements and demands.
To maintain our competitive position, we must continue to enhance our
existing software testing and application performance management products and
to develop new products and services, functionality and technology that address
the increasingly sophisticated and varied needs of our prospective customers.
The development of new products and services, and enhancement of existing
products and services, entail significant technical and business risks and
require substantial lead-time and significant investments in product
development. If we fail to anticipate new technology developments, customer
requirements or industry standards, or if we are unable to develop new products
and services that adequately address these new developments, requirements and
standards in a timely manner, our products may become obsolete, our ability to
compete may be impaired and our revenues could decline.
We expect our quarterly revenues and operating results to fluctuate, which
may cause the price of our stock and the notes to decline. Our revenues and
operating results have varied in the past and are likely to vary significantly
from quarter to quarter in the future. These fluctuations are due to a number
of factors, many of which are outside of our control, including:
. fluctuations in demand for and sales of our products and services;
. our success in developing and introducing new products and the timing of
new product introductions;
. our ability to introduce enhancements to our existing products in a
timely manner;
. the introduction of new or enhanced products by our competitors and
changes in the pricing policies of these competitors;
. the discretionary nature of our customers' purchase and budget cycles;
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. the amount and timing of operating costs and capital expenditures
relating to the expansion of our business;
. deferrals by our customers of orders in anticipation of new products or
product enhancements; and
. the mix of our domestic and international sales, together with
fluctuations in foreign currency exchange rates.
In addition, the timing of our license revenues is difficult to predict
because our sales cycles are typically short and can vary substantially from
product to product and customer to customer. We base our operating expenses on
our expectations regarding future revenue levels. As a result, if total
revenues for a particular quarter are below our expectations, we could not
proportionately reduce operating expenses for that quarter.
We have experienced seasonality in our revenues and earnings, with the
fourth quarter of the year typically having the highest revenue and earnings
for the year and higher revenue and earnings than the first quarter of the
following year. We believe that this seasonality results primarily from the
budgeting cycles of our customers and from the structure of our sales
commission program. We expect this seasonality to continue in the future.
Due to these and other factors, we believe that period-to-period
comparisons of our results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. If our
operating results are below the expectations of investors or securities
analysts, the price of our common stock, and therefore the notes, could
decline.
We expect to face increasing competition in the future, which could cause
reduced sales levels and result in price reductions, reduced gross margins or
loss of market share. The market for our testing and application performance
management products and services is extremely competitive, dynamic and subject
to frequent technological changes. There are few substantial barriers to entry
in our market. In addition, the rapid growth and use of Internet for e-
business is a recent and emerging phenomenon. The Internet lowers the barriers
to entry for other companies to compete with us in the testing and application
performance management markets. As a result of the increased competition, our
success will depend, in large part, on our ability to identify and respond to
the needs of potential customers, and to new technological and market
opportunities, before our competitors identify and respond to these needs and
opportunities. We may fail to respond quickly enough to these needs and
opportunities.
In the market for solutions for testing of applications, our principal
competitors include Compuware, Radview, Rational Software, RSW (a division of
Teradyne) and Segue Software. In the new and rapidly changing market for
application performance management solutions, our competitors include
providers of hosted services such as Keynote Systems and Service Metrics (a
division of Exodus Communications), and emerging application providers such as
Freshwater. In addition, we face potential competition in this market from
existing providers of testing solutions such as Segue. Finally, in both the
market for testing solutions and the market for application performance
management solutions, we face potential competition from established providers
of systems and network management software such as BMC Software and Computer
Associates.
The software industry is increasingly experiencing consolidation, and this
could increase the resources available to our competitors and the scope of
their product offerings. Our competitors and potential competitors may
undertake more extensive marketing campaigns, adopt more aggressive pricing
policies or make more attractive offers to distribution partners and to
employees.
If we fail to maintain our existing distribution channels and develop
additional channels in the future, our revenues will decline. We derive a
substantial portion of our revenues from sales of our products through
distribution channels such as system integrators, value-added resellers. We
expect that sales of our products through these channels will continue to
account for a substantial portion of our revenues for the foreseeable future.
We have also entered into private labelling arrangements with ASPs and an
enterprise software company who incorporate our products and services into
theirs. We may not experience increased revenues from these new channels,
which could harm our business.
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The loss of one or more of our system integrators, value-added resellers or
ASPs, or any reduction or delay in their sales of our products and services
could result in reductions in our revenue in future periods. In addition, our
ability to increase our revenue in the future depends on our ability to expand
our indirect distribution channels.
Our dependence on indirect distribution channels presents a number of risks,
including:
. each of our system integrators, value-added resellers and ASPs can cease
marketing our products and services with limited or no notice and with
little or no penalty;
. our existing system integrators, value-added resellers and ASPs may not
be able to effectively sell any new products and services that we may
introduce;
. we may not be able to replace existing or recruit additional system
integrators, value-added resellers and ASPs if we lose any of our
existing ones;
. our system integrators, value-added resellers and ASPs also offer
competitive products and services from third parties;
. we may face conflicts between the activities of our indirect channels
and our direct sales and marketing activities; and
. our system integrators, value-added resellers and ASPs may not give
priority to the marketing of our products and services as compared to
our competitors' products.
In March 1999, we entered into an agreement with Tivoli Systems, a
subsidiary of IBM, for the joint development and marketing of a family of
products for enterprise application performance management, incorporating
elements of our technology, which would be marketed and sold only by Tivoli.
Under this agreement, we agreed that until October 2002, we will not license
this technology to any other party for purposes of developing a product
similar to any developed under this agreement. In addition, we agreed that
until October 2002, we will not enter into technology relationships to create
similar products with specified competitors of Tivoli as long as Tivoli
continues to agree to pay minimum royalties. These restrictions may limit our
ability to enter into new private labelling relationships. In addition, Tivoli
may not succeed in developing and selling these new products.
We depend on strategic relationships and business alliances for continued
growth of our business. Our development, marketing and distribution strategies
rely increasingly on our ability to form strategic relationships with software
and other technology companies. These business relationships often consist of
cooperative marketing programs, joint customer seminars, lead referrals and
cooperation in product development. Many of these relationships are not
contractual and depend on the continued voluntary cooperation of each party
with us. Divergence in strategy or change in focus by, or competitive product
offerings by, any of these companies may interfere with our ability to
develop, market, sell or support our products, which in turn could harm our
business. Further, if these companies enter into strategic alliances with
other companies or are acquired, they could reduce their support of our
products. Our existing relationships may be jeopardized if we enter into
alliances with competitors of our strategic partners. In addition, one or more
of these companies may use the information they gain from their relationship
with us to develop or market competing products.
If we are unable to manage our growth, our business may be harmed. Since
1991, we have experienced significant annual increases in revenue, employees
and number of product and service offerings. This growth has placed and, if it
continues, will place a significant strain on our management and our
financial, operational, marketing and sales systems. If we cannot manage our
growth effectively, our business, competitive position, operating results and
financial condition could suffer. Although we are implementing a variety of
new or expanded business and financial systems, procedures and controls,
including the improvement of our sales and
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customer support systems, the implementation of these systems, procedures and
controls may not be completed successfully, or may disrupt our operations. Any
failure by us to properly manage these transitions could impair our ability to
attract and service customers and could cause us to incur higher operating
costs and experience delays in the execution of our business plan.
The success of our business depends on the efforts and abilities of our
senior key personnel. We depend on the continued services and performance of
our senior management and other key personnel. We do not have long term
employment agreements with any of our key personnel. The loss of any of our
executive officers or other key employees could hurt our business.
If we cannot hire qualified personnel, our ability to manage our business,
develop new products and increase our revenues will suffer. We believe that
our ability to attract and retain qualified personnel at all levels in our
organization is essential to the successful management of our growth. In
particular, our ability to achieve revenue growth in the future will depend in
large part on our success in expanding our direct sales force and in
maintaining a high level of technical consulting, training and customer
support. There is substantial competition for experienced personnel in the
software and technology industry. If we are unable to retain our existing key
personnel or attract and retain additional qualified individuals, we may from
time to time experience inadequate levels of staffing to perform services for
our customers. As a result, our growth could be limited due to our lack of
capacity to develop and market our products to our customers.
We depend on our international operations for a substantial portion of our
revenues. Sales to customers located outside the United States have
historically accounted for a significant percentage of our revenue and we
anticipates that such sales will continue to be a significant percentage of
our revenue. As a percentage of our total revenues, sales to customers outside
the United States were approximately 34% in 1999, 35% in 1998 and 36% in 1997.
In addition, we have substantial research and development operations in
Israel. We face risks associated with our international operations, including:
. changes in taxes and regulatory requirements;
. difficulties in staffing and managing foreign operations;
. reduced protection for intellectual property rights in some countries;
. the need to localize products for sale in international markets;
. longer payment cycles to collect accounts receivable in some countries;
. seasonal reductions in business activity in other parts of the world in
which we operate;
. political and economic instability; and
. economic downturns in international markets.
Any of these risks could harm our international operations and cause lower
international sales. For example, some European countries already have laws
and regulations related to technologies used on the Internet that are more
strict than those currently in force in the United States. Any or all of these
factors could cause our business to be harmed.
Because our research and development operations are primarily located in
Israel, we may be affected by volatile economic, political and military
conditions in that country and by restrictions imposed by that country on the
transfer of technology. Our operations depend on the availability of highly-
skilled and relatively low-cost scientific and technical personnel in Israel.
Our business also depends on trading relationships between Israel and other
countries. In addition to the risks associated with international sales and
operations generally, our operations could be adversely affected if major
hostilities involving Israel should occur or if trade between Israel and its
current trading partners were interrupted or curtailed.
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These risks are compounded due to the restrictions on our ability to
manufacture or transfer outside of Israel any technology developed under
research and development grants from the government of Israel, without the
prior written consent of the government of Israel. If we are unable to obtain
the consent of the government of Israel, we may not be able to take advantage
of strategic manufacturing and other opportunities outside of Israel. We have,
in the past, obtained royalty-bearing grants from various Israeli government
agencies. In addition, we participate in special Israeli government programs
that provide significant tax advantages. The loss of or any material decrease
in these tax benefits could negatively affect our financial results.
We are subject to the risk of increased taxes. We have structured our
operations in a manner designed to maximize income in Israel where tax rate
incentives have been extended to encourage foreign investment. Our taxes could
increase if these tax rate incentives are not renewed upon expiration or tax
rates applicable to us are increased. Tax authorities could challenge the
manner in which profits are allocated among us and our subsidiaries, and we
may not prevail in any such challenge. If the profits recognized by our
subsidiaries in jurisdictions where taxes are lower became subject to income
taxes in other jurisdictions, our worldwide effective tax rate would increase.
Our financial results may be negatively impacted by foreign currency
fluctuations. Our foreign operations are generally transacted through our
international sales subsidiaries. As a result, these sales and related
expenses are denominated in currencies other than the U.S. Dollar. Because our
financial results are reported in U.S. Dollars, our results of operations may
be harmed by fluctuations in the rates of exchange between the U.S. Dollar and
other currencies, including:
. a decrease in the value of Pacific Rim or European currencies relative
to the U.S. Dollar, which would decrease our reported U.S. Dollar
revenue, as we generate revenues in these local currencies and report
the related revenues in U.S. Dollars; and
. an increase in the value of Pacific Rim, European or Israeli currencies
relative to the U.S. Dollar, which would increase our sales and
marketing costs in these countries and would increase research and
development costs in Israel.
We attempt to limit foreign exchange exposure through operational
strategies and by using forward contracts to offset the effects of exchange
rate changes on intercompany trade balances. This requires us to estimate the
volume of transactions in various currencies. We may not be successful in
making these estimates. If these estimates are overstated or understated
during periods of currency volatility, we could experience material currency
gains or losses.
Our ability to successfully implement our business strategy depends on the
continued growth of the Internet. In order for our business to be successful,
the Internet must continue to grow as a medium for conducting business.
However, as the Internet continues to experience significant growth in the
number of users and the complexity of Web-based applications, the Internet
infrastructure may not be able to support the demands placed on it or the
performance or reliability of the Internet might be adversely affected.
Security and privacy concerns may also slow the growth of the Internet.
Because our revenues ultimately depend upon the Internet generally, our
business may suffer as a result of limited or reduced growth.
Our recent acquisition and any future acquisitions may be difficult to
integrate, disrupt our business, dilute stockholder value or divert the
attention of our management. We have acquired, and in the future we may
acquire or make investments in other companies with similar products and
technologies. For example, in November 1999, we completed our acquisition of
Conduct Ltd. In the event of any future acquisitions or investments, we could:
. issue stock that would dilute the ownership of our then-existing
stockholders;
. incur debt;
. assume liabilities;
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. incur amortization expense related to goodwill and other intangible
assets; or
. incur large write-offs.
If we fail to achieve the financial and strategic benefits of past and
future acquisitions, our operating results will suffer. Acquisitions and
investments involve numerous other risks, including:
. difficulties integrating the acquired operations, technologies or
products with ours;
. failure to achieve targeted synergies;
. unanticipated costs and liabilities;
. diversion of management's attention from our core business;
. adverse effects on our existing business relationships with suppliers
and customers or those of the acquired organization;
. difficulties entering markets in which we have no or limited prior
experience; and
. potential loss of key employees, particularly those of the acquired
organizations.
The price of our common stock may fluctuate significantly, which may result
in losses for investors and possible lawsuits. The market price for our common
stock has been and may continue to be volatile. For example, during the 52-
week period ended March 31, 2000, the closing prices of our common stock as
reported on the Nasdaq National Market ranged from a high of $132.13 to a low
of $10.94. We expect our stock price to be subject to fluctuations as a result
of a variety of factors, including factors beyond our control. These factors
include:
. actual or anticipated variations in our quarterly operating results;
. announcements of technological innovations or new products or services
by us or our competitors;
. announcements relating to strategic relationships or acquisitions;
. changes in financial estimates or other statements by securities
analysts;
. changes in general economic conditions;
. conditions or trends affecting the software industry and the Internet;
and
. changes in the economic performance and/or market valuations of other
software and high-technology companies.
Because of this volatility, we may fail to meet the expectations of our
stockholders or of securities analysts at some time in the future, and our
stock price could decline as a result.
In addition, the stock market has experienced significant price and volume
fluctuations that have particularly affected the trading prices of equity
securities of many high technology companies. These fluctuations have often
been unrelated or disproportionate to the operating performance of these
companies. Any negative change in the public's perception of software or
Internet software companies could depress our stock price regardless of our
operating results.
If we fail to adequately protect our proprietary rights and intellectual
property, we may lose a valuable asset, experience reduced revenues and incur
costly litigation to protect our rights. We rely on a combination of patents,
copyrights, trademark, service mark and trade secret laws and contractual
restrictions to establish and protect our proprietary rights in our products
and services. We will not be able to protect our intellectual property if we
are unable to enforce our rights or if we do not detect unauthorized use of
our intellectual property. Despite our precautions, it may be possible for
unauthorized third parties to copy our products and use information that we
regard as proprietary to create products that compete with ours. Some license
provisions protecting against
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unauthorized use, copying, transfer and disclosure of our licensed programs
may be unenforceable under the laws of certain jurisdictions and foreign
countries. Further, the laws of some countries do not protect proprietary
rights to the same extent as the laws of the United States. To the extent that
we increase our international activities, our exposure to unauthorized copying
and use of our products and proprietary information will increase.
In many cases, we enter into confidentiality or license agreements with our
employees and consultants and with the customers and corporations with whom we
have strategic relationships and business alliances. No assurance can be given
that these agreements will be effective in controlling access to and
distribution of our products and proprietary information. Further, these
agreements do not prevent our competitors from independently developing
technologies that are substantially equivalent or superior to our products.
Litigation may be necessary in the future to enforce our intellectual
property rights and to protect our trade secrets. Litigation like this,
whether successful or unsuccessful, could result in substantial costs and
diversions of our management resources, either of which could seriously harm
our business.
Third parties could assert that our products and services infringe their
intellectual property rights, which could expose us to litigation that, with
or without merit, could be costly to defend. We may from time to time be
subject to claims of infringement of other parties' proprietary rights. We
could incur substantial costs in defending ourselves sand our customers
against these claims. Parties making these claims may be able to obtain
injunctive or other equitable relief that could effectively block our ability
to sell our products in the United States and abroad and could result in an
award of substantial damages against us. In the event of a claim of
infringement, we may be required to obtain licenses from third parties,
develop alternative technology or to alter our products or processes or cease
activities that infringe the intellectual property rights of third parties. If
we are required to obtain licenses, we cannot be sure that we will be able to
do so at a commercially reasonable cost, or at all. Defense of any lawsuit or
failure to obtain required licenses could delay shipment of our products and
increase our costs. In addition, any such lawsuit could result in our
incurring significant costs or the diversion of the attention of our
management.
Defects in our products may subject us to product liability claims and make
it more difficult for us to achieve market acceptance for these products,
which could harm our operating results. Our products may contain errors or
"bugs" that may be detected at any point in the life of the product. Any
future product defects discovered after shipment of our products could result
in loss of revenues and a delay in the market acceptance of these products
that could adversely impact our future operating results.
In selling our products, we frequently rely on "shrink wrap" or "click
wrap" licenses that are not signed by licensees. Under the laws of various
jurisdictions, the provisions in these licenses limiting our exposure to
potential product liability claims may be unenforceable. We currently carry
errors and omissions insurance against such claims, however, we cannot assure
you that this insurance will continue to be available on commercially
reasonable terms, or at all, or that this insurance will provide us with
adequate protection against product liability and other claims. In the event
of a products liability claim, we may be found liable and required to pay
damages which would seriously harm our business.
We have adopted anti-takeover defenses that could delay or prevent an
acquisition of our company, including an acquisition that would be beneficial
to our stockholders. Our Board of Directors has the authority to issue up to
5,000,000 shares of preferred stock and to determine the price, rights,
preferences and privileges of those shares without any further vote or action
by the stockholders. The rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of our outstanding
voting stock. We have no present plans to issue shares of preferred stock.
Furthermore, certain provisions of our Certificate of Incorporation and of
Delaware law may have the effect of delaying or preventing changes in our
control or management, which could adversely affect the market price of our
common stock.
9
<PAGE>
Leverage and debt service obligations may adversely affect our cash
flow. If we complete the currently proposed offering of up to $500,000,000
principal amount of convertible subordinated notes, we will have a substantial
amount of outstanding indebtedness, primarily the notes. There is the
possibility that we may be unable to generate cash sufficient to pay the
principal of, interest on and other amounts due in respect of our indebtedness
when due. Our leverage could have significant negative consequences,
including:
. increasing our vulnerability to general adverse economic and industry
conditions;
. requiring the dedication of a substantial portion of our expected cash
flow from operations to service our indebtedness, thereby reducing the
amount of our expected cash flow available for other purposes, including
capital expenditures; and
. limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete.
10
<PAGE>
PLAN OF DISTRIBUTION
Mercury is registering all 775,780 shares on behalf of certain selling
shareholders. All of the shares were issued by us in connection with our
acquisition of Conduct, Ltd. Conduct Ltd. is now our wholly-owned subsidiary.
Mercury will receive no proceeds from this offering. The selling shareholders
named in the table below or pledgees, donees, transferees or other successors-
in-interest selling shares received from a named selling shareholder as a gift,
partnership distribution or other non-sale-related transfer after the date of
this prospectus (collectively, the Selling Shareholders) may sell the shares
from time to time. The Selling Shareholders will act independently of Mercury
in making decisions with respect to the timing, manner and size of each sale.
The sales may be made on one or more exchanges or in the over-the-counter
market or otherwise, at prices and at terms then prevailing or at prices
related to the then current market price, or in negotiated transactions. The
Selling Shareholders may effect such transactions by selling the shares to or
through broker-dealers. The shares may be sold by one or more of, or a
combination of, the following:
. a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction,
. purchases by a broker-dealer as principal and resale by such broker-
dealer for its account pursuant to this prospectus,
. an exchange distribution in accordance with the rules of such exchange,
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
. in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. In effecting sales,
broker-dealers engaged by the Selling Shareholders may arrange for other
broker-dealers to participate in the resales.
The Selling Shareholders may enter into hedging transactions with broker-
dealers in connection with distributions of the shares or otherwise. In such
transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with Selling Shareholders. The
Selling Shareholders also may sell shares short and redeliver the shares to
close out such short positions. The Selling Shareholders may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The Selling Shareholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell
the shares so loaned, or upon a default the broker-dealer may sell the pledged
shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Shareholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connection with the
sale. Broker-dealers or agents and any other participating broker-dealers or
the Selling Shareholders may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act in connection with sales of the shares.
Accordingly, any such commission, discount or concession received by them and
any profit on the resale of the shares purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act. Because Selling
Shareholders may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, the Selling Shareholders will be subject to the
prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 promulgated under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus. The Selling Shareholders have advised Mercury that
they have not entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their securities.
There is no underwriter or coordinating broker acting in connection with the
proposed sale of shares by Selling Shareholders.
11
<PAGE>
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to our common stock for a period of two
business days prior to the commencement of such distribution. In addition, each
Selling Shareholder will be subject to applicable provisions of the Exchange
Act and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the Selling Shareholders. Mercury will make
copies of this prospectus available to the Selling Shareholders and has
informed the of the need for delivery of copies of this prospectus to
purchasers at or prior to the time of any sale of the shares.
Mercury will file a supplement to this prospectus, if required, pursuant to
Rule 424(b) under the Securities Act upon being notified by a Selling
Shareholder that any material arrangement has been entered into with a broker-
dealer for the sale of shares through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer.
Such supplement will disclose:
. the name of each such Selling Shareholder and of the participating
broker-dealer(s),
. the number of shares involved,
. the price at which such shares were sold,
. the commissions paid or discounts or concessions allowed to such broker-
dealer(s), where applicable,
. that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus,
and
. other facts material to the transaction.
Mercury will bear all costs, expenses and fees in connection with the
registration of the shares. The Selling Shareholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The Selling
Shareholders may agree to indemnify any broker-dealer or agent that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.
12
<PAGE>
SELLING SHAREHOLDERS
The table below lists the selling shareholders, the number of shares of
Mercury common stock which each owned prior to the offering, the number of
shares of Mercury common stock subject to sale pursuant to this prospectus, and
the number of the shares of Mercury common stock which each would own assuming
that such number of shares were offered and assuming the sale of all such
shares permitted to be sold.
<TABLE>
<CAPTION>
Shares Shares to be Shares
Beneficially Owned Sold in the Beneficially Owned
Selling Shareholders (1) Prior to Offering (2) Offering (2) After the Offering (2)
- ------------------------ --------------------- ------------ ----------------------
<S> <C> <C> <C>
Isaac Appelbaum......... 1,168 1,168 0
837 Longridge Road
Oakland, CA 94610
Sharon Azulai........... 51,680 51,680 0
1035 Aster Avenue #2198
Sunnyvale, CA 94086
David Barzilai.......... 51,680 51,680 0
923 Kintyre Way
Sunnyvale, CA 94087
David J. Blumberg....... 7,280 7,280 0
580 Howard Street #401
San Francisco, CA
94105-3002
Cassin 1997 Charitable
Trust.................. 11,644 11,644 0
UTA dated 1/28/97
Brendan Joseph Cassin,
Trustee
3000 Sand Hill Road
Suite 3-210
Menlo Park, CA 94025
The Cassin Foundation... 9,316 9,316 0
Attn: Brendan Joseph
Cassin
3000 Sand Hill Road
Suite 3-210
Menlo Park, CA 94025
Donald L. Lucas......... 30,018 30,018 0
SUCCTTEE, Donald L.
Lucas Profit
Sharing Trust DTD 1-1-
84
3000 Sand Hill Road
Suite 3-210
Menlo Park, CA 94025
Forval Creative, Inc.... 117,394 117,394 0
5-52-2 Jingumae
Shibuya-ku
Tokyo 150-0001
Japan
Investec Clali Trust
Company Ltd............ 472 472 0
C/o Iris Shlevin
29 Yavne Street
Tel Aviv, Israel
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Shares Shares to be Shares
Beneficially Owned Sold in the Beneficially Owned
Selling Shareholders (1) Prior to Offering (2) Offering (2) After the Offering (2)
- ------------------------ --------------------- ------------ ----------------------
<S> <C> <C> <C>
Ran Levy................ 53,970 53,970 0
Palmah Street 8
Herzliya 46793
Israel
RWI Group II, L.P....... 55,638 55,638 0
c/o Mr. Donald A. Lucas
720 University Avenue
# 103
Palo Alto, CA 94301
Sand Hill Financial
Company................ 23,290 23,290 0
3000 Sand Hill Road
# 3-210
Menlo Park, CA 94025
Santa Clara University.. 4,658 4,658 0
c/o Paul Locatelli,
S.J.
President
500 El Camino Real
Santa Clara, CA 95053
Susan J. Skaer Esq. (FBO
Sharon Azulai)......... 26,280 26,280 0
c/o General Counsel
Associates LLP
1891 Landings Drive
Mountain View, CA 94043
Susan J. Skaer Esq. (FBO
David Barzilai)........ 26,280 26,280 0
c/o General Counsel
Associates LLP
1891 Landings Drive
Mountain View, CA 94043
Tida Shamir............. 2,644 2,644 0
3A Jabotinsky Street
Diamond Tower, 25th
Floor
Ramat-Gan 52520
Israel
St. Francis Growth
Fund................... 2,328 2,328 0
c/o Kevin Makley
1885 Miramonte Avenue
Mountain View, CA 94040
Saint Mary's College of
California............. 2,328 2,328 0
c/o Mr. William McCleod
P.O. Box 3554
Moraga, CA 94575
Silicon Valley
Bancshares............. 3,916 3,916 0
Attn: Pete Lopez
Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Shares Shares to be Shares
Beneficially Owned Sold in the Beneficially Owned
Selling Shareholders (1) Prior to Offering(2) Offering(2) After the Offering(2)
- ------------------------ -------------------- ------------ ---------------------
<S> <C> <C> <C>
Gil Sudai............... 3,544 3,544 0
347 Fern Street
San Francisco, CA 94109
Telos Venture Partners
L.P.................... 213,556 213,556 0
c/o Mr. Bruce Bourbon
2350 Mission College
Blvd.
Suite 1070
Santa Clara, CA 95054
Teton Capital Company... 62,886 62,886 0
c/o Mr. Donald L. Lucas
3000 Sand Hill Road
# 3-210
Menlo Park, CA 94025
Roy Twersky............. 5,634 5,634 0
1040 Dolores Street
Apt. 202
San Francisco, CA 94110
Unicycle Trading
Company................ 5,848 5,848 0
c/o Michael Chasalow
2938 Wicklow Road
Los Angeles, CA 90064
Bert L. Zaccaria........ 2,328 2,328 0
3000 Sand Hill Road
# 3-210
Menlo Park, CA 94025
Totals.................. 775,780 775,780 0
</TABLE>
- --------
(1) The selling shareholders each own less than 1% of the outstanding shares of
common stock of Mercury. The selling shareholders are former shareholders
of Conduct, Ltd.
(2) All share numbers in this table have been adjusted to reflect the 2-for-1
stock split in the form of a dividend that was paid to Mercury stockholders
on February 11, 2000.
LEGAL MATTERS
Counsel for Mercury, General Counsel Associates LLP, 1891 Landings Drive,
Mountain View, California 94043, has rendered an opinion to the effect that the
common stock offered hereby is duly and validly issued, fully paid and non-
assessable.
EXPERTS
The financial statements incorporated in this prospectus by reference to the
Annual Report on Form 10-K of Mercury Interactive Corporation for the year
ended December 31, 1999 have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
15
<PAGE>
MERCURY INTERACTIVE CORPORATION
REGISTRATION STATEMENT ON FORM S-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14 Other Expenses of Issuance and Distribution.*
The following table sets forth costs and expenses of the sale and
distribution of the securities being registered. All amounts except Securities
and Exchange Commission and National Association of Securities Dealers fees are
estimates.
<TABLE>
<S> <C>
Registration fee--Securities and Exchange Commission............. $ 9,587.53
National Association of Securities Dealers fees.................. 8,160.00
Accounting fees.................................................. 10,000.00
Legal fees....................................................... 10,000.00
Miscellaneous.................................................... 3,000.00
----------
Total.......................................................... $40,747.53
</TABLE>
- --------
* Represents expenses relating to the distribution by the selling shareholders
pursuant to the prospectus prepared in accordance with the requirements of
Form S-3. These expenses will be borne by Mercury on behalf of the selling
shareholders.
Item 15 Indemnification of Directors and Officers.
As permitted by the Delaware General Corporation Law, Mercury has included
in its certificate of incorporation a provision to eliminate the personal
liability of its directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors, subject to certain exceptions. In
addition, the bylaws of Mercury provide that Mercury is required to indemnify
its officers and directors under certain circumstances, including the
circumstances in which indemnification would otherwise be discretionary, and
Mercury is required to advance expenses to its officers and directors as
incurred in connection with proceedings against them for which they may be
indemnified. Mercury has entered into indemnification agreements with its
officers and directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements may require Mercury, among
other things, to idemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance expenses incurred as a result of any proceeding against
them as to which they could be indemnified, and to obtain directors' and
officers' insurance if available on reasonable terms. Mercury believes that its
charter provisions and indemnification agreements are necessary to attract and
retan qualified persons as directors and officers. Mercury understands that the
staff of the Securities and Exchange Commission is of the opinion that
statutory charter and contractual provisions as are described above have no
effect on claims arising under the federal securities law.
Item 16 Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
4.1(/1/) Certificate of Amendment of Restated Certificate of Incorporation of
Registrant
5.1(/1/) Opinion of General Counsel Associates LLP
23.1 Consent of Independent Accountants
23.2(/1/) Consent of General Counsel Associates LLP (Included in Exhibit 5.1)
24.1(/1/) Power of Attorney (contained on Page II-3)
</TABLE>
- --------
(1) Previously filed with the Registration Statement on Form S-3 (No. 333-
95097).
II-1
<PAGE>
Item 17 Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933,
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate
represent a fundamental change in the information set forth in the
registration statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934, as amended (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934, as amended) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
as that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Mercury Interactive Corporation, a corporation organized and existing under the
laws of the State of Delaware, certifies that it has reasonable cause to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Amendment No. 2 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Sunnyvale, State of California, on April 4, 2000.
Mercury Interactive Corporation
*
By: _________________________________
Sharlene Abrams,
Vice President of Finance and
Administration,
Chief Financial Officer and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* President, Chief Executive Officer April 4, 2000
____________________________________ and Chairman of the Board of
(Amnon Landan) Directors (Principal Executive
Officer)
* Vice President of Finance and April 4, 2000
____________________________________ Administration and Chief Financial
(Sharlene Abrams) Officer (Principal Financial and
Accounting Officer) and Secretary
* Director April 4, 2000
____________________________________
(Igal Kohavi)
* Director April 4, 2000
____________________________________
(Yair Shamir)
* Director April 4, 2000
____________________________________
(Giora Yaron)
/s/ Susan J. Skaer
*By: _________________________________
Susan J. Skaer
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
MERCURY INTERACTIVE CORPORATION
REGISTRATION STATEMENT ON FORM S-3
April 5, 2000
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
23.1 Consent of Independent Accountants.
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated January 20, 2000, except as to Note
9, which is as of February 11, 2000, relating to the financial statements for
the year ended December 31, 1999 which appear in Mercury Interactive
Corporation's Annual Report on Form 10-K. We also consent to the reference to
us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 5, 2000
1
