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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): SEPTEMBER 29, 1997
DATAWORKS CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation)
0-26814 33-0209937
(Commission File No.) (IRS Employer Identification No.)
5910 PACIFIC CENTER BLVD., SUITE 300
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (619) 546-9600
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
THIS CURRENT REPORT ON FORM 8-K CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES, INCLUDING RISKS THAT THE INTEGRATION OF THE
OPERATIONS, TECHNOLOGIES, PRODUCTS AND EMPLOYEES OF DATAWORKS CORPORATION, A
CALIFORNIA CORPORATION ("DATAWORKS" OR THE "REGISTRANT"), AND INTERACTIVE GROUP,
INC., A DELAWARE CORPORATION ("INTERACTIVE"), MIGHT NOT OCCUR AS ANTICIPATED;
THAT THE SYNERGIES EXPECTED TO RESULT FROM THE MERGER DESCRIBED BELOW MIGHT NOT
OCCUR AS ANTICIPATED; AND THAT MANAGEMENT'S ATTENTION MIGHT BE DIVERTED FROM
DAY-TO-DAY BUSINESS ACTIVITIES. ACTUAL RESULTS AND DEVELOPMENTS MAY DIFFER
MATERIALLY FROM THOSE DESCRIBED IN THIS CURRENT REPORT. FOR MORE INFORMATION
ABOUT DATAWORKS AND RISKS RELATING TO INVESTING IN DATAWORKS, REFER TO
DATAWORKS' MOST RECENT REPORTS ON FORM 10-K AND FORM 10-Q, AND THE RECENT
REGISTRATION STATEMENT ON FORM S-4 RELATED TO THE MERGER DESCRIBED BELOW, AS
FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.
On September 29, 1997, DataWorks Acquisition Sub, Inc. ("DataWorks Sub"),
which was a Delaware corporation and a wholly owned subsidiary of DataWorks, was
merged with and into Interactive, pursuant to an Agreement and Plan of Merger
and Reorganization, dated July 31, 1997, among DataWorks, DataWorks Sub and
Interactive (the "Merger Agreement").
The merger of DataWorks Sub with and into Interactive (the "Merger") became
effective at the time of the filing of a Certificate of Merger with the Delaware
Secretary of State on September 29, 1997 (the "Effective Time"). At the
Effective Time: (i) DataWorks Sub ceased to exist; (ii) Interactive, as the
surviving corporation in the Merger, became a wholly owned subsidiary of
DataWorks; and (iii) subject to the provisions of the Merger Agreement relating
to the payment of cash in lieu of fractional shares, each share of Interactive
Common Stock, $.001 par value ("Interactive Common Stock"), outstanding
immediately prior to the Effective Time (except for any such shares held by
Interactive as treasury stock and any such shares held by DataWorks or any
subsidiary of DataWorks or Interactive, which shares, if any, were canceled) was
converted into the right to receive 0.8054 of a share (the "Exchange Ratio") of
Common Stock, no par value, of DataWorks ("DataWorks Common Stock").
2.
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In addition, pursuant to the Merger Agreement, at the Effective Time, all
outstanding options and the outstanding warrant to acquire Interactive Common
Stock were converted into and became equivalent options and an equivalent
warrant for DataWorks Common Stock. By virtue of the assumption by DataWorks of
such Interactive stock options and the warrant, from and after the Effective
Time: (i) each Interactive stock option and warrant assumed by DataWorks may be
exercised solely for DataWorks Common Stock; (ii) the number of shares of
DataWorks Common Stock subject to each such Interactive stock option and warrant
is equal to the number of shares of Interactive Common Stock subject to such
Interactive stock option or warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole share; and
(iii) the per share exercise price under each such Interactive stock option and
warrant was adjusted by dividing the per share purchase price under such
Interactive stock option or warrant by the Exchange Ratio and rounding up to the
nearest cent.
The former holders of Interactive are receiving approximately 3,700,000
shares of DataWorks Common Stock pursuant to the Merger, which represents
approximately 26.8% of the shares of DataWorks Common Stock outstanding
immediately after consummation of the Merger. Cash payments will be made for
fractional shares resulting from the conversion. DataWorks will use its current
cash resources to fund the payments for fractional shares. In addition,
approximately 526,000 shares of DataWorks Common Stock may be issued in
connection with the exercise of the Interactive stock options and the
Interactive warrant assumed by DataWorks.
Robert C. Vernon, the former Chairman of the Board and Chief Executive
Officer of Interactive, a former stockholder of Interactive and the President,
International Operations of DataWorks as of the Effective Time, will receive
848,426 shares of DataWorks Common Stock and $1.30 in lieu of fractional shares
in exchange for his Interactive Common Stock in the Merger; and Mark Hellinger,
the former President and Chief Operating Officer--North American Operations and
a former director of Interactive, a former stockholder of Interactive and the
President, Mid-Tier Division of DataWorks as of the Effective Time, will receive
269,626 shares of DataWorks Common Stock and $17.95 in lieu of fractional shares
in exchange for his Interactive Common Stock in the Merger.
Upon consummation of the Merger, DataWorks anticipates incurring a pre-tax
charge of approximately $14.0 million to reflect direct transaction costs. This
amount is a preliminary estimate, and there can be no assurance that DataWorks
will not incur additional charges to reflect costs associated with the Merger.
The Merger is intended to qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and
is to
3.
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be accounted for by DataWorks as a pooling of interests for financial reporting
purposes.
Interactive develops, markets, implements and supports integrated business
information systems that enable discrete manufacturers to manage their
enterprise-wide information requirements. A copy of the press release announcing
the consummation of the Merger is attached hereto as Exhibit 99.1.
4.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
(i) Financial Statements of Interactive at December 31, 1996 and
1995, and for each of the years in the three-year period ended
December 31, 1996, with an audit report by Ernst & Young LLP, are
incorporated by reference to pages F-2 through F-17 of
Registrant's Registration Statement on Form S-4 (No. 333-33451),
as amended (the "Registration Statement").
(ii) Unaudited interim financial statements of Interactive at June 30,
1997 and for the six-month periods ended June 30, 1997 and 1996
are incorporated by reference to pages F-18 through F-22 of the
Registration Statement.
(B) PRO FORMA FINANCIAL INFORMATION.
The pro forma financial information at June 30, 1997, for each of the
years in the three-year period ended December 31, 1996 and for the
six-month periods ended June 30, 1997 and 1996 is incorporated by
reference to the Unaudited Pro Forma Combined Condensed Financial
Information at pages 63 through 66 of the Registration Statement.
(C) EXHIBITS.
2.1 Agreement and Plan of Merger and Reorganization dated July 31,
1997 among the Registrant, DataWorks Acquisition Sub, Inc. and
Interactive Group, Inc.*
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Romito, Tomasetti & Associates, P.C., Independent
Auditors.
99.1 Press release, dated September 29, 1997.
* Incorporated by reference to Interactive Group, Inc.'s Current Report on
Form 8-K dated August 11, 1997.
5.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATAWORKS CORPORATION
Dated: October 9, 1997 By: /s/ NORMAN R. FARQUHAR
--------------------------------
Norman R. Farquhar
Executive Vice President, Chief
Financial Officer and Director
6.
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INDEX TO EXHIBITS
2.1 Agreement and Plan of Merger and Reorganization dated July 31,
1997 among the Registrant, DataWorks Acquisition Sub, Inc. and
Interactive Group, Inc.*
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Romito, Tomasetti & Associates, P.C., Independent
Auditors.
99.1 Press release, dated September 29, 1997.
* Incorporated by reference to Interactive Group, Inc.'s Current Report on
Form 8-K dated August 11, 1997.
7.
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EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Current Report on Form 8-K
of DataWorks Corporation of our report dated February 19, 1997, with respect to
the consolidated financial statements of Interactive Group, Inc., included in
the Registration Statement (Form S-4 No. 333-33451) of DataWorks Corporation
filed with the Securities and Exchange Commission.
San Diego, California
October 7, 1997
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EXHIBIT 23.2
CONSENT OF ROMITO, TOMASETTI & ASSOCIATES, P.C.,
INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Current Report on Form 8-K
dated September 29, 1997 of DataWorks Corporation of our report dated March 17,
1995, with respect to the combined financial statements of Intrepid Software,
Inc., included in the financial statements of Interactive Group, Inc. for the
fiscal year ended December 31, 1996.
ROMITO, TOMASETTI & ASSOCIATES, P.C.
Burlington, Massachusetts
October 3, 1997
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EXHIBIT 99.1
DATAWORKS AND INTERACTIVE GROUP CLOSE ACQUISITION
DATAWORKS STRENGTHENS ITS POSITION AS A LEADER IN
MID-RANGE ERP SOFTWARE SOLUTIONS
San Diego, CA, September 29, 1997 - DataWorks Corporation (Nasdaq: DWRX) and
Interactive Group (Nasdaq: INTE) announced today that DataWorks has completed
its acquisition of Interactive Group in a stock-for-stock exchange. This
acquisition strengthens the DataWorks' leadership position in the mid-range ERP
market with a synergistic combination of complementary products and
technologies. The acquisition also significantly increases DataWorks' revenue
base.
The transaction is being accounted for as a pooling of interests for financial
reporting purposes. According to DataWorks Executive Vice President and CFO,
Norman R. Farquhar, the acquisition should be accretive to earnings per share in
the fourth quarter of 1997 as well as in fiscal 1998. Under the terms of the
agreement, shareholders of Interactive Group will receive 0.8054 of a share of
DataWorks for each share of Interactive Group. DataWorks has assumed all of
Interactive Group's outstanding options and warrants based on the same exchange
ratio.
Stuart W. Clifton, DataWorks' President and CEO, commented, "We see this
acquisition offering major advantages in three key areas - significantly
enhanced international operations, more comprehensive mid-tier product offerings
and substantial critical mass makes DataWorks one of the largest mid-range ERP
providers in the world. We are particularly pleased about the product and
technology synergy this acquisition brings to DataWorks. In the next few weeks
we expect to launch Avante, one of the most comprehensive mid-tier ERP offerings
available. This Microsoft-centric product, which incorporates the applications
found in DataWorks' DataFlo and ManFact products as well as Interactive's
INFOFLO system, will offer our mid-range customers a larger selection of
application suites to match their varying business processes. In addition to
allowing us to consolidate resources and costs, we believe Avante will excel in
its ability to meet the requirements of mid-size manufacturers -- companies with
annual revenues up to $1 billion -- providing us with significant growth
opportunities.
"Of course, one of the primary advantages of this acquisition is the significant
international presence it provides DataWorks. With Interactive's established
international channels, we now have over 150 employees and 7 DataWorks offices
in Europe as well as a substantial distributor in Germany - a position it would
have taken DataWorks at least three years to achieve prior to the acquisition."
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According to Interactive's Chairman and CEO, Robert C. Vernon, "Customers and
prospects have had a positive response to the announcement of our agreement and
the expanded product scope we'll be capable of offering to them. DataWorks and
Interactive employees also welcome the opportunity for increased worldwide
capabilities. We can now offer our customers greater financial strength,
expanded development resources and an extended systems migration path." Vernon,
who played a key role in establishing lnteractive's international operations,
will become DataWorks' President of International Operations and will join the
company's Board of Directors.
DataWorks is a supplier of software solutions for mid-range discrete product
manufacturers. The company's products feature advanced ERP system functionality
combined with open system technologies, including client-server architecture,
relational database and easy-to-use Windows-based graphical user interfaces.
DataWorks now has 25 offices throughout the United States, Canada, United
Kingdom and Europe, with over 4,000 customer sites worldwide. DataWorks is one
of the first manufacturing software companies to have customers completely
installed and operational on the Windows NT operating system.
Worldwide headquarters is located in San Diego, CA.
This news release may contain forward-looking statements that involve risks and
uncertainties, including the risks associated with the integration of the two
companies, establishing new, or improving existing, relationships or alliances
with the company, timely new product releases, competition from other suppliers
of ERP software and risks associated with international operations. Certain of
these factors, as well as additional risks and uncertainties, are detailed from
time to time in DataWorks' periodic filings with the Securities and Exchange
Commission.
For more information, contact: Chris Jensen, DataWorks, 21 Technology Drive,
Irvine, CA 92618, (714) 788-4013, email: [email protected].
