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

FORM 10-K/A
(Amendment No. 1)

(Mark One)


		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended: December 31, 2001, OR
		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission file number: 0-20679

MECHANICAL DYNAMICS, INC.
(Exact name of registrant as specified in its charter)


Michigan (State of incorporation)		38-2163045 (I.R.S. Employer Identification No.)

2300 Traverwood Drive
Ann Arbor, Michigan 48105
(734) 994-3800
(Address of principal executive offices, including zip
code, and telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class: None		Name of each exchange on which registered: None

Securities registered pursuant to Section 12(g) of the Act:
Common Shares, no par value
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes						No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X IN BALLOT BOX

The aggregate market value of the voting stock of the Registrant held by non-affiliates of the Registrant as of March 28, 2002, computed by reference to The Nasdaq Stock Market closing price on such date, was approximately $100,338,000.

The number of outstanding shares of the Registrant’s common stock, as of March 28, 2002, was 6,206,862.

This amendment to the Annual Report on Form 10-K for Mechanical Dynamics, Inc. for the year ended December 31, 2001 is being filed to modify Part III, Items 10, 11, and 12, and Part IV, Item 14, only.

TABLE OF CONTENTS


PART III
SUMMARY COMPENSATION TABLE
OPTION GRANTS IN LAST FISCAL YEAR
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
PART IV
SIGNATURES
Exhibit Index
EX-10.5 Employment Agreement - Michael Hoffmann
EX-10.6 Amendment to Employment Agreement

PART III

Item 10. Directors and Executive Officers of the Registrant

The directors and executive officers of the Company as of March 28, 2002 are listed below:


Name	Age	Position

Directors in Office
Herbert S. Amster	67	Director
David E. Cole	64	Director
Joseph F. Gloudeman	66	Director
Michael E. Korybalski	55	Chief Executive Officer, Chairman of the Board and Director
Mitchell I. Quain	50	Director
Robert R. Ryan	44	President, Chief Operating Officer and Director
Other Current Executive Officers
Michael Hoffmann	45	Senior Vice President — Worldwide Marketing, Sales & Service
David Peralta	34	Vice President, Chief Financial Officer and Treasurer
Douglas M. Peterson	36	Vice President, Chief Technical Officer

Herbert S. Amster has served as a director of the Company since 1990. He is now an independent management consultant. Mr. Amster was Chairman of the Board and Chief Executive Officer of Irwin Magnetic Systems, Inc., a manufacturer of minicartridge tape drives, from 1985 through 1989; Senior Vice President Corporate Development, and a director, of Cipher Data Products Inc., from 1989 through 1990; and Senior Vice President Corporate Development of Archive Corp. in 1991. He is currently a director of Jacobson Stores Inc.

David E. Cole has served as a director of the Company since 1995. Dr. Cole has served as President, since 2001, and Director, since 2000, of the Center for Automotive Research, The Altarum Institute (formally Environmental Research Institute of Michigan), and as the President of Applied Theory Inc., an automotive consulting firm since 1979. From 1971 through 2000 he served as an Associate Professor of Mechanical Engineering and Applied Mechanics and was Director of the Office for the Study of Automotive Transportation at The University of Michigan. He is currently a director of MSX International, Inc., Saturn Electronics & Engineering Corp., Thyssen North America Inc., Plastech Inc., and R. L. Polk Company.

Joseph F. Gloudeman has served as a director of the Company since 1993. Dr. Gloudeman has served as President of Gloudeman Consulting, a high-tech consulting firm, since 1992; as Chairman of the Board, since 1992, and President, USA Operations, since 1994, of R.O.S.E. Informatik GmbH, a German software company. Dr. Gloudeman is the former President and Chief Executive Officer of The MacNeal Schwendler Corporation, and a former Vice President, Marketing for CRAY Research-Supercomputer. He is currently a director of Automatic Intuition, Inc.

Michael E. Korybalski, a co-founder of MDI, is currently Chief Executive Officer, Chairman of the Board and a director of the Company. From 1984 to February 1997, Mr. Korybalski served as President of the Company. From 1977 to 1984, Mr. Korybalski served as Vice President and General Manager of the Company. From 1973 to 1977, he was employed as a product engineer with Ford Motor Company. Mr. Korybalski holds B.S.E. and M.S.E. degrees in mechanical engineering, as well as an M.B.A., from the University of Michigan.

Mitchell I. Quain has served as a director of the Company since 1996. He has served as Chairman of the Board of the Industrial Manufacturing Institute since 2001. From 1997 to 2001, Mr. Quain was employed at ABN Amro, formally ING Barings, where he most recently served as Vice Chairman. From 1975 to 1997, Mr. Quain was employed at Schroder Wertheim & Company, where he most recently served as Managing Director, Head of Equity Capital Markets. Mr. Quain is a director of MagneTek, Inc., Register.com, Strategic Distribution, Inc., and Titan International, Inc.

Robert R. Ryan became the President of the Company in February 1997 and since 1991 has served as the Chief Operating Officer of the Company. Mr. Ryan was elected a director of the Company in May 1997. Mr. Ryan served as the Company’s Executive Vice President from 1991 to February 1997. From 1988 through 1991, Mr. Ryan served as the Company’s Vice President of Product Development. Before joining the Company, Mr. Ryan held various positions in sales and engineering services at Structural Dynamics Research Corporation, and served briefly on the engineering faculty at the University of Michigan. Mr. Ryan holds a B.S. degree from the University of Cincinnati and M.S. and Ph.D. degrees in applied mechanics from Stanford University.

Michael Hoffmann became the Company’s Senior Vice President — Worldwide Marketing, Sales and Service in November 1997. Dr. Hoffmann served as the Company’s Vice President — European Operations from November 1996 to November 1997. Dr. Hoffmann served as the Company’s Managing Director — European Operations from 1994 to November 1996. From 1993 through 1994, Dr. Hoffmann served as Managing Director of TEDAS Mechanical Systems GmbH, a shareholder of the Company. From 1991 through 1992, he served as Technical Director of TEDAS GmbH. Dr. Hoffmann holds masters and doctorate degrees in civil engineering from the Technological University of Darmstadt.

David Peralta became the Company’s Vice President, Chief Financial Officer and Treasurer in February 1997, and served as Controller of the Company from 1993 to February 1997. From 1992 to 1993, Mr. Peralta served as Assistant Corporate Controller at OVAKO Ajax, Inc. From 1989 through 1992, he served as an auditor at Coopers & Lybrand. Mr. Peralta is a licensed Certified Public Accountant in the State of Michigan. Mr. Peralta holds a bachelors degree in accounting from the University of Michigan.

Douglas M. Peterson became the Company’s Vice President, Chief Technical Officer in March 2001, and served as the Company’s Vice President of Product Development from November 1997 to March 2001. Before joining the Company, Mr. Peterson was co-founder and president of StatDesign, Inc. from 1992 through 1997, at which time StatDesign, Inc. was acquired by the Company. Mr. Peterson holds B.S. and M.S. degrees in mechanical engineering from Brigham Young University.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the “SEC”). Executive officers, directors and greater than ten-percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file.

Based solely on review of the copies of such reports furnished to the Company during or with respect to fiscal 2001, or written representations that no Forms 5 were required, the Company believes that during the fiscal year ended December 31, 2001 all applicable Section 16(a) filing requirements were complied with by each of its executive officers, directors and greater than ten-percent beneficial owners.

Item 11. Executive Compensation

Summary Compensation Table

The following table sets forth information for each of the fiscal years ended December 31, 2001, 2000 and 1999 concerning compensation of (i) all individuals serving as the Company’s Chief Executive Officer during the fiscal year ended December 31, 2001, and (ii) all other executive officers of the Company whose total annual salary and bonus exceeded $100,000 in fiscal 2001:

SUMMARY COMPENSATION TABLE


								Long Term
								Compensation
								Awards

				Annual Compensation				Securities		All Other
Name and								Underlying		Compensation
Principal Position		Year		Salary($)		Bonus($)		Options(#)		($) (1)

Michael E. Korybalski			2001		225,000		97,650		—		6,144
	Chief Executive Officer		2000		195,000		99,000		—		9,520
			1999		195,000		2,258		—		3,028
Robert R. Ryan			2001		220,000		93,000		25,000		4,560
	President and Chief		2000		190,000		93,500		22,500		5,433
	Operating Officer		1999		190,000		2,133		—		4,480
Michael Hoffmann			2001		180,800		83,700		12,500		—
	Senior Vice President -		2000		160,000		82,500		10,000		—
	Worldwide Marketing,		1999		149,000		1,882		—		—
	Sales & Service
David Peralta			2001		130,000		46,500		11,000		4,396
	Vice President, Treasurer		2000		119,000		44,000		6,000		3,394
	and Chief Financial Officer		1999		110,000		1,004		—		1,966
Douglas M. Peterson			2001		157,300		41,850		6,000		4,404
	Vice President and		2000		143,000		49,500		6,000		4,053
	Chief Technical Officer		1999		135,000		1,129		—		3,618

(1)

The amounts shown for fiscal 2001 include (i) $4,080 each for Messrs. Korybalski, Ryan, Peralta and Peterson, representing the Company’s contribution to the executive officer in 2001 under the Company’s 401(k) Plan, and (ii) $2,064, $480, $316 and $324 for Messrs. Korybalski, Ryan, Peralta and Peterson, respectively, representing life insurance premiums paid by the Company in 2001 for life insurance policies.

Option Grants Table

The following table sets forth information concerning individual grants of stock options made during the fiscal year ended December 31, 2001 to each of the executive officers of the Company named in the Summary Compensation Table above:

OPTION GRANTS IN LAST FISCAL YEAR


Individual Grants

											Potential
					% of						Realizable Value at
					Total						Assumed Annual
	Number of				Options						Rates of Stock Price
	Securities				Granted to						Appreciation
	Underlying				Employees		Exercise				for Option Term
	Options				in Fiscal		Price		Expiration
Name	Granted (#)				Year		($/Sh)		Date		5% ($)		10% ($)

Michael E. Korybalski		—				—		—		—		—		—
Robert R. Ryan		12,500	(1	)		6.1		5.75		1/1/11		45,202		114,550
		12,500	(1	)		6.1		10.90		7/26/11		85,687		217,147
Michael Hoffmann		5,000	(2	)		2.5		5.75		1/1/11		18,081		45,820
		7,500	(2	)		3.7		10.90		7/26/11		51,412		130,288
David Peralta		2,000	(3	)		1.0		5.75		1/1/11		7,232		18,328
		5,000	(3	)		2.5		8.55		4/23/11		26,885		68,132
		4,000	(3	)		2.0		10.90		7/26/11		27,420		69,487
Douglas M. Peterson		2,000	(4	)		1.0		5.75		1/1/11		7,232		18,328
		4,000	(4	)		2.0		10.90		7/26/11		27,420		69,487

(1)		12,500 options were granted to Mr. Ryan on January 1, 2001 and an additional 12,500 options were granted to him on July 26, 2001. All 25,000 options become exercisable over a period of four years, at a rate of 25% on each anniversary date after the date of grant. In the event Mr. Ryan’s employment with the Company is terminated for any reason other than death or disability, the Compensation Committee may, in its discretion, permit the exercise of his unexercised options for a period not to exceed three months after such termination.

(2)		5,000 options were granted to Dr. Hoffmann on January 1, 2001 and an additional 7,500 options were granted to him on July 26, 2001. All 12,500 options become exercisable over a period of four years, at a rate of 25% on each anniversary date after the date of grant. In the event Dr. Hoffmann’s employment with the Company is terminated for any reason other than death or disability, the Compensation Committee may, in its discretion, permit the exercise of his unexercised options for a period not to exceed three months after such termination.

(3)		2,000 options were granted to Mr. Peralta on January 1, 2001, 5,000 options were granted to him on April 23, 2001, and an additional 4,000 options were granted to him on July 26, 2001. All 11,000 options become exercisable over a period of four years, at a rate of 25% on each anniversary date after the date of grant. In the event Mr. Peralta’s employment with the Company is terminated for any reason other than death or disability, the Compensation Committee may, in its discretion, permit the exercise of his unexercised options for a period not to exceed three months after such termination.

(4)		2,000 options were granted to Mr. Peterson on January 1, 2001 and an additional 4,000 options were granted to him on July 26, 2001. All 6,000 options become exercisable over a period of four years, at a rate of 25% on each anniversary date after the date of grant. In the event Mr. Peterson’s employment with the Company is terminated for any reason other than death or disability, the Compensation Committee may, in its discretion, permit the exercise of his unexercised options for a period not to exceed three months after such termination.

Aggregated Option Exercises and Fiscal Year-End Option Value Table

The following table sets forth information concerning each exercise of stock options during the fiscal year ended December 31, 2001 by each of the executive officers named in the Summary Compensation Table above and the value of unexercised options held by such persons as of December 31, 2001:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES

Number of

Securities

Value of

Underlying

Unexercised

In-the-Money

Options at

FY-End (#)

FY-End ($)

Shares

Acquired on

Value

Exercisable/

Name

Exercise (#)

Realized ($)

Unexercisable

Unexercisable (1)

Michael E. Korybalski

0/0

--/--

Robert R. Ryan

10,385

25,617

63,990/48,125

111,257/129,156

Michael Hoffmann

52,500/20,000

165,875/53,125

David Peralta

2,115

5,218

16,885/18,000

26,512/36,075

Douglas M. Peterson

16,500/10,500

53,025/27,775

(1)

Calculated on the basis of the fair market value of the underlying securities at December 31, 2001 of $9.85 per share, minus the aggregate exercise price.

Compensation of Directors

Each non-employee member of the Company’s Board of Directors is paid $1,000 per month and reimbursed for out-of-pocket expenses incurred in attending Board meetings. Each non-employee director is also eligible to receive annual stock option awards for 5,000 shares of the Company’s Common Stock under the Company’s Non-Employee Director Stock Option Plan (the “Director Stock Option Plan”).

The Company’s Board of Directors adopted the Director Stock Option Plan in March 1996. The Director Stock Option Plan provides for the grant of “nonqualified” options to purchase shares of Common Stock. In May 2001, all four non-employee directors on the Company’s Board of Directors were each granted an option to purchase 5,000 shares of Common Stock of the Company at an exercise price of $9.70 per share. These options become fully exercisable in May 2002, one year from the date of grant, and expire in May 2006. Immediately following each annual meeting of shareholders of the Company, each non-employee director who has served as a director for at least six months will automatically be granted an option to purchase 5,000 shares of Common Stock of the Company. Upon appointment to the Board of Directors, each newly-appointed non-employee director will receive an option to purchase 5,000 shares of Common Stock of the Company. A total of 200,000 shares of Common Stock are currently reserved for issuance under the Director Stock Option Plan.

Employment Contracts and Termination of Employment and Change-in-Control Arrangements

Michael E. Korybalski entered into an employment agreement with the Company dated as of April 1, 1994, and amended and restated as of February 13, 2002 and March 15, 2002. The agreement provides that Mr. Korybalski will serve as the Company’s Chief Executive Officer until March 31, 2005, at which point the employment agreement can be extended at the option of the Company for an additional three-year term. Mr. Korybalski’s base salary under the agreement for 2002 is $250,950. Mr. Korybalski’s employment may be terminated by the Company with or without cause. Mr. Korybalski’s base salary is determined by the Board of Directors on an annual basis. In the event the Board chooses to change his duties or directs him to relocate and he resigns as a result, or if he is terminated without cause, Mr. Korybalski would then be entitled to his base salary, bonus and benefits for a period equal to the longer of the remaining

term of the agreement or one year from the date of his resignation or termination. In the event he is terminated with cause, then he would be entitled to receive only such payments and/or benefits as would be provided to other employees of the Company in accordance with the Company’s employee policies and procedures. In the event of a change of control, the agreement is automatically extended through a date three years from the effective date of such change in control. In the event Mr. Korybalski resigns or is terminated in connection with a change in control, then the Company will pay severance benefits under the same formula as in the event of termination without cause. During the term of the agreement, and for a period of up to five years thereafter, Mr. Korybalski will be subject to noncompetition and nonsolicitation restrictions.

The Company’s President and Chief Operating Officer, Robert R. Ryan, entered into an employment agreement with the Company dated as of April 1, 1994, as amended and restated February 13, 2002, pursuant to which he will serve in such capacities until March 31, 2004, at which point the employment agreement can be extended at the option of the Company for an additional two-year term. Mr. Ryan’s base salary under the agreement for 2002 is $247,975. Mr. Ryan’s base salary is determined by the Board of Directors on an annual basis. Mr. Ryan’s employment may be terminated by the Company with or without cause. In the event the Board chooses to change his duties or directs him to relocate and he resigns as a result, or if he is terminated without cause, Mr. Ryan would then be entitled to his base salary, bonus and benefits for a period equal to the longer of the remaining term of the agreement or one year from the date of his resignation or termination. In the event he is terminated with cause, then he would be entitled to receive only such payments and/or benefits as would be provided to other employees of the Company in accordance with the Company’s employee policies and procedures. In the event of a change of control, the agreement is automatically extended through a date two years from the effective date of such change in control. In the event Mr. Ryan resigns or is terminated in connection with a change in control, then the Company will pay severance benefits under the same formula as in the event of termination without cause. During the term of the agreement, and for a period of two years thereafter, Mr. Ryan will be subject to noncompetition and nonsolicitation restrictions.

The Company’s Senior Vice President — Worldwide Marketing, Sales and Service, Michael Hoffmann, entered into an employment agreement with the Company dated as of February 13, 2002, pursuant to which he will serve in such capacities until March 31, 2003, at which point the employment agreement can be extended at the option of the Company for an additional one-year term. Dr. Hoffmann’s base salary under the agreement for 2002 is $202,200. Dr. Hoffmann’s base salary is determined by the Board of Directors on an annual basis. Dr. Hoffmann’s employment may be terminated by the Company with or without cause. In the event the Board directs him to relocate and he resigns as a result, or if he is terminated without cause, Dr. Hoffmann would then be entitled to his base salary, bonus and benefits for a period equal to twelve months. In the event he is terminated with cause, then he would be entitled to receive only such payments and/or benefits as would be provided to other employees of the Company in accordance with the Company’s employee policies and procedures. In the event of a change of control, the agreement is automatically extended through a date one year from the effective date of such change in control. In the event Dr. Hoffmann is terminated in connection with a change in control, then the Company will pay severance benefits under the same formula as in the event of termination without cause. During the term of the agreement, and for a period of two years thereafter, Dr. Hoffmann will be subject to noncompetition and nonsolicitation restrictions.

The Company’s Vice President, Treasurer and Chief Financial Officer, David Peralta, entered into an employment agreement with the Company dated as of March 1, 1997, as amended and restated February 13, 2002, pursuant to which he will serve in such capacities until March 31, 2003, at which point the employment agreement can be extended at the option of the Company for an additional one-year term. Mr. Peralta’s base salary under the agreement for 2002 is $135,500. Mr. Peralta’s base salary is determined by the Board of Directors on an annual basis. Mr. Peralta’s employment may be terminated by the Company with or without cause. In the event the Board directs him to relocate and he resigns as a result, or if he is terminated without cause, Mr. Peralta would then be entitled to his base salary, bonus and benefits for a period equal to twelve months. In the event he is terminated with cause, then he would be entitled to receive only such payments and/or benefits as would be provided to other employees of the Company in accordance with the Company’s employee policies and procedures. In the event of a change of control, the agreement is automatically extended through a date one year from the effective date of such change in control. In the event Mr. Peralta is terminated in connection with a change in control, then the Company will pay severance benefits under the same formula as in the event of termination without cause. During the term of the agreement, and for a period of two years thereafter, Mr. Peralta will be subject to noncompetition and nonsolicitation restrictions.

The Company’s Vice President and Chief Technical Officer, Douglas M. Peterson, entered into an employment agreement with the Company dated as of October 31, 1997, as amended and restated February 13, 2002, pursuant to which he will serve in such capacities until March 31, 2003, at which point the employment agreement can be extended at the option of the Company for an additional one-year term. Mr. Peterson’s base salary under the agreement for 2002 is $164,980. Mr. Peterson’s base salary is determined by the Board of Directors on an annual basis. Mr. Peterson’s employment may be terminated by the Company with or without cause. In the event the Board directs him to relocate and he resigns as a result, or if he is terminated without cause, Mr. Peterson would then be entitled to his base salary, bonus and benefits for a period equal to twelve months. In the event he is terminated with cause, then he would be entitled to receive only such payments and/or benefits as would be provided to other employees of the Company in accordance with the Company’s employee policies and procedures. In the event of a change of control, the agreement is automatically extended through a date one year from the effective date of such change in control. In the event Mr. Peterson is terminated in connection with a change in control, then the Company will pay severance benefits under the same formula as in the event of termination without cause. During the term of the agreement, and for a period of two years thereafter, Mr. Peterson will be subject to noncompetition and nonsolicitation restrictions.

Compensation Committee Interlocks and Insider Participation

During the fiscal year ended December 31, 2001, Mr. Amster and Dr. Gloudeman served as the members of the Company’s Compensation Committee. None of the members of the Company’s Compensation Committee was, during the fiscal year ended December 31, 2001, an officer or employee of the Company.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Principal Holders of the Company’s Voting Securities

As of March 11, 2002, the following four persons were the only persons known by the Company to beneficially own more than 5% of the Company’s Common Shares:


	Amount of		Percentage of
	Common Shares		Common Shares
Name	Beneficially Owned		Owned*

Michael E. Korybalski		883,879		14.3	%
AWM Investment Company, Inc.		500,400		8.1	%
Wellington Management Company LLP		393,500		6.3	%
John C. Angell		375,040		6.0	%

Based on 6,202,237 Common Shares outstanding as of March 11, 2002.

Security Ownership of Management

The following information is furnished as of March 28, 2002 with respect to security ownership of directors and executive officers of the Company:


						Amount and			Percentage
						Nature of			of
						Common Shares			Common		Term
	Director				Position and Offices	Beneficially			Shares		to
Name	Since		Age		With the Company	Owned (1)			Owned (2)		Expire

DIRECTORS CONTINUING IN OFFICE
Herbert S. Amster		1990		67	Director		94,930	(3)		1.5		2002
David E. Cole		1995		64	Director		40,500	(4)		*		2004
Joseph F. Gloudeman		1993		66	Director		63,430	(5)		1.0		2002
Michael E. Korybalski		1977		55	Chief Executive Officer,		883,879			14.2		2003
					Chairman of the Board
					and Director
Mitchell I. Quain		1996		50	Director		83,592	(6)		1.3		2003
Robert R. Ryan		1997		44	President, Chief Operating		237,203	(7)		3.8		2003
					Officer and Director
OTHER CURRENT EXECUTIVE OFFICERS
Michael Hoffmann		—		45	Senior Vice President –		78,220	(8)		1.2
					Worldwide Marketing,
					Sales & Service
David Peralta		—		34	Vice President, Treasurer and		17,801	(9)		*
					Chief Financial Officer
Douglas M. Peterson		—		36	Vice President and		195,196	(10)		3.1
					Chief Technical Officer
All directors and executive officers as a group (9 persons)							1,694,751	(11)		26.4

Less than 1%

(1)		All directors, nominees and executive officers named in the preceding table have sole investment and voting power with respect to shares of Common Stock beneficially owned by them.
(2)		Based on 6,206,862 shares outstanding as of March 28, 2002.
(3)		Includes 65,930 shares held by a trust of which Mr. Amster holds voting power as the trustee, 4,000 shares held by a trust of which Mr. Amster’s wife holds voting power as the trustee and 25,000 shares subject to options exercisable within 60 days of the Record Date.
(4)		Includes 25,000 shares subject to options exercisable within 60 days of the Record Date.
(5)		Includes 38,430 shares held by a trust of which Dr. Gloudeman holds voting power as the trustee and 25,000 shares subject to options exercisable within 60 days of the Record Date.
(6)		Includes 58,592 shares held by trusts of which Mr. Quain holds voting power as the trustee and 25,000 shares subject to options exercisable within 60 days of the Record Date.
(7)		Includes 6,000 shares held by Mr. Ryan’s wife as custodian for their children and 36,250 shares subject to options exercisable within 60 days of the Record Date.
(8)		Includes 55,000 shares subject to options exercisable within 60 days of the Record Date.
(9)		Includes 14,250 shares subject to options exercisable within 60 days of the Record Date.
(10)		Includes 18,000 shares subject to options exercisable within 60 days of the Record Date.
(11)		Includes 249,115 shares which all executive officers and directors as a group have the right to acquire within 60 days of the Record Date.

Changes in Control

MSC Acquisition II Corp., a wholly owned subsidiary of MSC.Software Corporation, has commenced a tender offer under which it proposes to purchase all outstanding shares of common stock, no par value, of Mechanical Dynamics, Inc., at a price of $18.85 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated March 22, 2002. A merger of the companies would follow subsequent to the completion of the tender offer. The Tender Offer Statement on Schedule TO by MSC Acquisition II Corp., dated March 22, 2002, is incorporated in this Item 12 by reference. As part of the transaction, Herbert S. Amster, David E. Cole, Joeseph F. Gloudeman, Michael E. Korybalski, Mitchell I. Quain, Robert R. Ryan, David Peralta, and Douglas M. Peterson have agreed to tender all their shares in the offer and to vote all their shares in favor of the merger.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

Item 14(a)1. Financial Statements

Report of Independent Public Accountants

Consolidated Balance Sheets as of December 31, 2001 and 2000

Consolidated Statements of Income for the Years Ended December 31, 2001, 2000 and 1999

Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the Years Ended December 31, 2001, 2000 and 1999

Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999

Notes to Consolidated Financial Statements

Item 14(a)2. Financial Statement Schedules

None.

Item 14(a) 3. Exhibits


Number		Exhibit

(2.1)		Joint Venture Agreement between Mechanical Dynamics, Inc. and Information Services International-Dentsu, Ltd., incorporated herein by reference to Exhibit 2.1 to the Company’s previously filed Form 10-Q for the quarter ended March 31, 1997

(2.2)		Share Transfer Agreement dated November 17, 2000 by and among Mechanical Dynamics, Inc., Nissan Motor Co., Ltd., and Structural Dynamics Research Corporation, incorporated herein by reference to Exhibit 2.2 to the Company’s previously filed Form 8-K on December 28, 2000 and Form 8-K/A on March 5, 2001

(2.3)		Tender Offer Statement on Schedule TO by MSC Acquisition II Corp., a wholly owned subsidiary of MSC.Software Corporation, dated March 22, 2002, incorporated herein by reference

(3.1)		Restated Articles of Incorporation, incorporated herein by reference to Exhibit 3.2 to the Company’s previously filed Registration Statement on Form S-1, Registration No. 333-2900

(3.2)		Restated Bylaws, incorporated herein by reference to Exhibit 3.4 to the Company’s previously filed Registration Statement on Form S-1, Registration No. 333-2900

(4.2)		Line of Credit Demand Note between the Company and KeyBank National Association dated July 6, 2001, incorporated herein by reference to Exhibit 4.2 to the Company’s previously filed Form 10-Q for the quarter ended September 30, 2001

(10.1)		Amended and Restated Employment Agreement between the Company and Michael E. Korybalski, incorporated herein by reference to Exhibit 10.1 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(10.2)		Amended and Restated Employment Agreement between the Company and Robert R. Ryan, incorporated herein by reference to Exhibit 10.2 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(10.3)		Amended and Restated Employment Agreement between the Company and David Peralta, incorporated herein by reference to Exhibit 10.3 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(10.4)		Amended and Restated Employment Agreement between the Company and Douglas M. Peterson, incorporated herein by reference to Exhibit 10.4 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(10.5)		Employment Agreement between the Company and Michael Hoffmann

(10.6)		Amendment No. 1 to Amended and Restated Employment Agreement between the Company and Michael E. Korybalski

(10.18)		Lease Agreement between the Company and First Martin Corporation dated August 5, 1999, incorporated herein by reference to Exhibit 10.18 to the Company’s previously filed Form 10-Q for the quarter ended September 30, 1999

(11)		Statement Re Computation Of Per Share Earnings Per Share, incorporated herein by reference to Exhibit 11 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(21)		Subsidiaries Of The Registrant, incorporated herein by reference to Exhibit 21 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(23.1)		Consent Of Independent Public Accountants, incorporated herein by reference to Exhibit 23.1 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

Item 14(b). Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Dated: April 4, 2002		MECHANICAL DYNAMICS, INC.
		(Registrant)

	By:	/s/ Michael E. Korybalski

		Michael E. Korybalski
		Chairman of the Board

Exhibit Index


Number		Exhibit

(2.1)		Joint Venture Agreement between Mechanical Dynamics, Inc. and Information Services International-Dentsu, Ltd., incorporated herein by reference to Exhibit 2.1 to the Company’s previously filed Form 10-Q for the quarter ended March 31, 1997

(2.2)		Share Transfer Agreement dated November 17, 2000 by and among Mechanical Dynamics, Inc., Nissan Motor Co., Ltd., and Structural Dynamics Research Corporation, incorporated herein by reference to Exhibit 2.2 to the Company’s previously filed Form 8-K on December 28, 2000 and Form 8-K/A on March 5, 2001

(2.3)		Tender Offer Statement on Schedule TO by MSC Acquisition II Corp., a wholly owned subsidiary of MSC.Software Corporation, dated March 22, 2002, incorporated herein by reference

(3.1)		Restated Articles of Incorporation, incorporated herein by reference to Exhibit 3.2 to the Company’s previously filed Registration Statement on Form S-1, Registration No. 333-2900

(3.2)		Restated Bylaws, incorporated herein by reference to Exhibit 3.4 to the Company’s previously filed Registration Statement on Form S-1, Registration No. 333-2900

(4.2)		Line of Credit Demand Note between the Company and KeyBank National Association dated July 6, 2001, incorporated herein by reference to Exhibit 4.2 to the Company’s previously filed Form 10-Q for the quarter ended September 30, 2001

(10.1)		Amended and Restated Employment Agreement between the Company and Michael E. Korybalski, incorporated herein by reference to Exhibit 10.1 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(10.2)		Amended and Restated Employment Agreement between the Company and Robert R. Ryan, incorporated herein by reference to Exhibit 10.2 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(10.3)		Amended and Restated Employment Agreement between the Company and David Peralta, incorporated herein by reference to Exhibit 10.3 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(10.4)		Amended and Restated Employment Agreement between the Company and Douglas M. Peterson, incorporated herein by reference to Exhibit 10.4 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(10.5)		Employment Agreement between the Company and Michael Hoffmann

(10.6)		Amendment No. 1 to Amended and Restated Employment Agreement between the Company and Michael E. Korybalski

(10.18)		Lease Agreement between the Company and First Martin Corporation dated August 5, 1999, incorporated herein by reference to Exhibit 10.18 to the Company’s previously filed Form 10-Q for the quarter ended September 30, 1999

(11)		Statement Re Computation Of Per Share Earnings Per Share, incorporated herein by reference to Exhibit 11 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(21)		Subsidiaries Of The Registrant, incorporated herein by reference to Exhibit 21 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

(23.1)		Consent Of Independent Public Accountants, incorporated herein by reference to Exhibit 23.1 to the Company’s previously filed Form 10-K for the year ended December 31, 2001

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MECHANICAL DYNAMICS INC \MI\ 10-K/A