<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) MAY 24, 1996
------------
FRACTAL DESIGN CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
CALIFORNIA 77-0276903
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
335 SPRECKELS DRIVE, APTOS, CALIFORNIA 95003
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 688-5300
-------------------------
N/A
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
-1-
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the Agreement and Plan of Reorganization (the "Reorganization
Agreement") by and among Fractal Design Corporation ("Fractal"), Fractal
Acquisition Corporation ("Merger Sub"), a wholly-owned subsidiary of Fractal,
and Ray Dream, Inc., a California corporation ("Ray Dream") dated as of
February 17, 1996 and the related Agreement of Merger (the "Merger Agreement"),
filed with the California Secretary of State on May 24, 1996, Merger Sub was
merged with and into Ray Dream (the "Merger"). As a result of the Merger, Ray
Dream has become a wholly-owned subsidiary of Fractal.
At the time the Merger became effective on May 24, 1996 (the "Effective
Date"), each share of Common Stock of Ray Dream outstanding immediately prior to
the Effective Date was converted into and exchanged for 0.565249 shares of
Common Stock of Fractal. The aggregate number of shares of Common Stock of
Fractal issued in accordance with the terms of the Reorganization Agreement and
the Merger Agreement upon such conversion and exchange was 3,165,660 shares.
Under the terms of the Reorganization Agreement, a total of 316,556 shares
of Common Stock of Fractal issued as described in the preceding paragraph will
be held in escrow for the purpose of indemnifying Fractal against certain
liabilities of Ray Dream. Such escrow will expire on September 30, 1996.
In addition, pursuant to the Reorganization Agreement, Fractal has reserved
an aggregate of 219,459 shares of its Common Stock for issuance upon exercise of
previously outstanding options to purchase Ray Dream Common Stock, which options
vest and become exercisable in accordance with the terms of the respective,
original Ray Dream stock option agreements.
The amount of consideration paid in connection with the Merger was
determined in arms-length negotiations between officers of Fractal and Ray
Dream. The terms of the transaction were approved by the Boards of Directors
and the shareholders of Fractal, Merger Sub and Ray Dream.
Further information with respect to the Merger is set forth in Fractal's
Registration Statement on Form S-4 under the caption "The Merger," declared
effective by the Commission on April 26, 1996.
-2-
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Incorporated by reference from Registrant's Registration Statement
filed on Form S-4 (Registration No. 333-2110), declared effective by the
Commission on April 26, 1996.
(b) PRO FORMA FINANCIAL INFORMATION.
It is currently impracticable for the Registrant to provide the pro
forma combined financial statements of Fractal and Ray Dream required
pursuant to Article 11 of Regulation S-X. In accordance with Items 7(a)(4)
and 7(b)(2) of the Instructions to Form 8-K, the Registrant will file such
financial statements as soon as they are available, and in no event later
than August 7, 1996.
(c) EXHIBITS.
2.1* Agreement and Plan of Reorganization dated January 28, 1994 among
Registrant, Fractal Acquisition Corporation and Ray Dream, Inc.
2.2 Agreement of Merger dated as of May 24, 1996 among Registrant,
Fractal Acquisition Corporation and Ray Dream, Inc. as filed with
the California Secretary of State on May 24, 1996.
23.1 Consent of KPMG Peat Marwick LLP, independent auditors of Ray
Dream.
* Incorporated by reference from Registrant's Registration
Statement filed on Form S-4 (Registration No. 333-2110), declared
effective by the Commission on April 26, 1996.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Fractal Design Corporation
(Registrant)
Dated: June 6, 1996 By: /s/ LESLIE WRIGHT
------------------------------------------
Leslie Wright
Chief Operating Officer, Chief
Financial Officer and Assistant Secretary
-4-
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Exhibit
-------- --------
2.1* Agreement and Plan of Reorganization dated February 17, 1996
Registrant, Fractal Acquisition Corporation, and Ray Dream, Inc.
2.2 Agreement of Merger dated as of May 24, 1996 among Registrant,
Fractal Acquisition Corporation and Ray Dream, Inc. as filed with
the California Secretary of State on May 24, 1996
23.1 Consent of KPMG Peat Marwick LLP, independent auditors of Ray
Dream.
* Incorporated by reference from Registrant's Registration Statement filed
on Form S-4 (Registration No. 333-2110), declared effective by the Commission
on April 26, 1996.
-5-
<PAGE>
AGREEMENT OF MERGER
OF
FRACTAL DESIGN CORPORATION
FRACTAL ACQUISITION CORPORATION
AND
RAY DREAM, INC.
This Agreement of Merger, is made and entered into on May 24, 1996 ("Merger
Agreement"), by and among Fractal Acquisition Corporation ("Merger Sub"), a
California corporation and a wholly owned subsidiary of Fractal Design
Corporation, a California corporation ("Acquiror"), Acquiror and Ray Dream,
Inc., a California corporation ("Target" or the "Surviving Corporation").
RECITALS
A. Acquiror, Merger Sub and Target have entered into an Agreement and
Plan of Reorganization dated as of February 17, 1996 (the "Agreement and Plan of
Reorganization") providing for certain representations, warranties, covenants
and agreements in connection with the transactions contemplated hereby.
B. The Boards of Directors of Target, Acquiror and Merger Sub deem it
advisable and in their mutual best interests and in the best interests of the
shareholders of Target and Merger Sub, respectively, that Target be acquired by
Acquiror through a merger ("Merger") of Merger Sub with and into Target,
pursuant to the California Corporations Code (the "California Law").
C. The Boards of Directors of Acquiror, Merger Sub and Target and the
shareholders of Acquiror or Merger Sub and Target have approved the Merger.
AGREEMENTS
The parties hereto hereby agree as follows:
1. Merger Sub shall be merged with and into Target, and Target shall be
the surviving corporation.
2. The Merger shall become effective at such time (the "Effective Time"
of the Merger) as this Merger Agreement and the officers' certificates of Merger
Sub and Target are filed with the Secretary of State of the State of California
pursuant to Section 1103 of the California Law.
<PAGE>
3. At the Effective Time, each share of Common Stock of Target ("Target
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled pursuant to Section 8 and shares, if any, held
by persons who have not voted such shares for approval of the Merger and with
respect to which such persons are entitled to exercise dissenters' rights in
accordance with Chapter 13 of California Law ("Dissenting Shares"))
(collectively, the "Exchangeable Shares") shall be converted and exchanged for
such number of shares of Common Stock of Acquiror ("Acquiror Common Stock") as
is determined by a ratio (the "Exchange Ratio"), the numerator of which is
3,250,000 and the denominator of which is equal to the sum of (i) the number of
shares of Target Common Stock outstanding plus (ii) the number of shares of
Target Common Stock exercisable as of the Effective Time pursuant to the terms
of all outstanding stock options of Target.
4. Any Dissenting Shares shall not be converted into Acquiror Common
Stock but shall be converted into the right to receive such consideration as may
be determined to be due with respect to such Dissenting Shares pursuant to the
law of the State of California. If after the Effective Time of the Merger any
Dissenting Shares shall lose their status as Dissenting Shares, then as of the
occurrence of the event which causes the loss of such status, such shares shall
be converted into Acquiror Common Stock in accordance with Section 3, and
Acquiror shall, upon surrender by such shareholder of certificate or
certificates representing shares of Target Common Stock, issue and deliver the
number of shares of Acquiror Common Stock to which such shareholder would
otherwise be entitled hereunder (which shares shall be deemed to be
"Exchangeable Shares" for the purpose of this Agreement).
5. Notwithstanding any other term or provision hereof, no fractional
shares of Acquiror Common Stock shall be issued, but in lieu thereof each holder
of Target Common Stock who would otherwise, but for rounding as provided herein,
be entitled to receive a fraction of a share of Acquiror Common Stock shall
receive from Acquiror an amount of cash equal to the product of (i) such
fraction multiplied by the closing price of a share of Acquiror Common Stock on
the date of the Effective Time of the Merger, as reported on the Nasdaq National
Market. All certificates representing shares of Target Common Stock held by a
single holder shall be aggregated prior to determining the number of fractional
shares so that no Target shareholder shall receive cash in an amount greater
than the value of one full share of Acquiror Common Stock.
6. The conversion of Target Common Stock into Acquiror Common Stock as
provided by this Merger Agreement shall occur automatically at the Effective
Time of the Merger without action by the holders thereof. Each holder of Target
Common Stock shall thereupon be entitled to receive his, her or its shares of
Acquiror Common Stock in accordance with Section 3. Such shareholder shall
receive certificates that represent the applicable number of shares of Acquiror
Common Stock in accordance with the following procedures:
-2-
<PAGE>
(a) As soon as practicable after the Effective Time of the Merger,
Acquiror shall make available for exchange in accordance with Section 3, through
such reasonable procedures as Acquiror may adopt, the Acquiror Common Stock
issuable pursuant to Section 3 in exchange for outstanding shares of Target
Common Stock.
(b) Promptly after the Effective Time of the Merger, the Exchange
Agent (as defined in Section 1.7 of the Agreement and Plan of Reorganization)
shall mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time of the Merger represented outstanding
shares of Target Common Stock (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
shall pass, only upon delivery of the certificates to the Exchange Agent and
shall be in such form and have such other provisions as Acquiror may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
certificates in exchange for Acquiror Common Stock. Upon surrender of a
certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Acquiror, together with such letter of
transmittal, duly executed, the holder of such certificate shall be entitled to
receive in exchange therefor the number of shares of Acquiror Common Stock to
which the holder of Target Common Stock is entitled pursuant to Section 3 hereof
and is represented by the certificate so surrendered, along with a check
representing the value of any fractional shares as defined pursuant to Section 5
hereof, less such number of shares to be deposited in an escrow fund on such
holder's behalf pursuant to Article VIII of the Agreement and Plan of
Reorganization. The certificate so surrendered shall forthwith be canceled. As
soon as practicable after the Effective Time of the Merger, and subject to and
in accordance with the provisions of Article VIII of the Agreement and Plan of
Reorganization, Acquiror shall cause to be distributed to the Escrow Agent (as
defined in Article VIII of the Agreement and Plan of Reorganization) a
certificate or certificates representing ten percent (10%) of the product of
(i) the Exchange Ratio multiplied by (ii) the number of Exchangeable Shares less
the number of Exchangeable Shares that are Dissenting Shares (the "Escrow
Shares") of Acquiror Common Stock which shall be registered in the name of the
holders of Certificates canceled pursuant to this Section 6(b), but held by the
Escrow Agent in escrow. Such shares shall be beneficially owned by such holders
and shall be held in escrow and shall be available to compensate Acquiror for
certain damages as provided in Article VIII of the Agreement and Plan of
Reorganization. To the extent not used for such purposes, such shares shall be
released, all as provided in Article VIII of the Agreement and Plan of
Reorganization. In the event of a transfer of ownership of Target Common Stock
which is not registered in the transfer records of Target, Acquiror Common Stock
may be delivered to a transferee if the certificate representing such Target
Common Stock is presented to Acquiror and accompanied by all documents required
to evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 6, each certificate shall be deemed at any time after the Effective Time
of Merger to represent the right to receive upon such surrender such shares of
the Acquiror Common Stock as provided by Section 3 and the provisions of
applicable law.
-3-
<PAGE>
(c) No dividends on the Target Common Stock shall be paid to the
holder of any unsurrendered certificate until the holder of record of such
certificate shall surrender such certificate. Subject to the effect, if any, of
applicable escheat and other laws, following surrender of any certificate, there
shall be delivered to the person entitled thereto, without interest, the amount
of dividends theretofore paid with respect to the Target Common Stock so
withheld as of any date subsequent to the Effective Time of the Merger and prior
to such date of delivery.
(d) The Acquiror Common Stock delivered upon the surrender for
exchange of Target Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such Target Common Stock. There shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the Target Common
Stock that were outstanding immediately prior to the Effective Time of the
Merger. If, after the Effective Time of the Merger, certificates are presented
to Acquiror for any reason, they shall be canceled and exchanged as provided in
this Section 6.
7. At the Effective Time of the Merger, the separate existence of Merger
Sub shall cease, and Target shall succeed, without other transfer, to all of the
rights and properties of Merger Sub and shall be subject to all the debts and
liabilities thereof in the same manner as if Target had itself incurred them.
All rights of creditors and all liens upon the property of each corporation
shall be preserved unimpaired, provided that such liens upon property of Merger
Sub shall be limited to the property affected thereby immediately prior to the
Effective Time of the Merger.
8. At the Effective Time of the Merger, each share of the Common Stock of
Merger Sub that is outstanding immediately prior to the Effective Time of the
Merger shall be converted into one share of Common Stock of the Surviving
Corporation and each share of capital stock of Target, including the Common
Stock of the Surviving Corporation, owned by Acquiror or any direct or indirect
wholly owned subsidiary of Acquiror or of Target immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
9. This Merger Agreement is intended as a plan of reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended,
(the "Code") and to qualify as a reorganization under the provisions of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code.
10. The Amended and Restated Articles of Incorporation as set forth on
SCHEDULE 1 to this Agreement of Merger shall be the Amended and Restated
Articles of Incorporation of Target as the Surviving Corporation after the
Merger unless thereafter amended.
11. (a) Notwithstanding the approval of this Merger Agreement by the
shareholders of Target and Merger Sub, this Merger Agreement may be terminated
at any time prior to the Effective Time of the Merger by mutual agreement of the
Boards of Directors of Acquiror, Target and Merger Sub.
(b) Notwithstanding the approval of this Merger Agreement by the
shareholders of Target and Merger Sub, this Merger Agreement shall terminate
forthwith in the event that the Agreement and Plan of Reorganization shall be
terminated as therein provided.
-4-
<PAGE>
(c) In the event of the termination of this Merger Agreement as
provided above, this Merger Agreement shall forthwith become void and there
shall be no liability on the part of Target, Acquiror or Merger Sub or their
respective officers or directors, except as otherwise provided in the Agreement
and Plan of Reorganization.
(d) This Merger Agreement may be amended by the parties hereto any
time before or after approval hereof by the shareholders of Target and Merger
Sub, but, after such approval, no amendments shall be made which by law require
the further approval of such shareholders without obtaining such approval. This
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Merger Agreement as of
the date first written above.
FRACTAL ACQUISITION CORPORATION
By: /s/ MARK ZIMMER
-----------------------------------------
Mark Zimmer,
President and Chief Executive Officer
By: /s/ CRAIG W. JOHNSON
-----------------------------------------
Craig W. Johnson, Secretary
FRACTAL DESIGN CORPORATION
By: /s/ MARK ZIMMER
-----------------------------------------
Mark Zimmer,
President and Chief Executive Officer
By: /s/ CRAIG W. JOHNSON
-----------------------------------------
Craig W. Johnson, Secretary
RAY DREAM, INC.
By: /s/ JOSEPH CONSUL
-----------------------------------------
Joseph Consul,
Vice President Finance and
Administration
By: /s/ JOHN STOCKHOLM
-----------------------------------------
John Stockholm, Secretary
-6-
<PAGE>
SCHEDULE 1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
RAY DREAM, INC.
ONE: The name of the corporation is RAY DREAM, Inc.
TWO: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
THREE: The Corporation is authorized to issue One Thousand shares of
Common Stock of one class.
FOUR: Section 1. The liability of the directors of this Corporation
for monetary damages shall be eliminated to the fullest extent permissible under
California law.
Section 2. The Corporation is authorized to indemnify the
directors and officers of the Corporation to the fullest extent permissible
under California law (as defined in Section 317(g) of the California
Corporations Code or elsewhere).
Section 3. Any repeal or modification of the foregoing
provisions of this Article Four by the shareholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Fractal Design Corporation:
We consent to the incorporation by reference in the registration statement on
Form 8-K of Fractal Design Corporation of our report dated February 13, 1996,
except as to Note 13, which was as of February 17, 1996, with respect to the
consolidated balance sheets of Ray Dream, Inc. and subsidiary as of December 31,
1995,and 1994, and the related consolidated statements of operations,
shareholders' euity, and chash flows for each of the years in the Three-year
period ended December 31, 1995 which report appears in the Form S-4 of
Fractal Design Corporation which was declared effective by the Securities
and Exchange Commission on April 26, 1996.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
San Jose, California
June 6, 1996
