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As filed with the Securities and Exchange Commission on January 19, 2000
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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RESEARCH ENGINEERS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 22-2356861
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
22700 Savi Ranch Parkway
Yorba Linda, California 92887
(714) 974-2500
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
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Jyoti Chatterjee, President Copy to:
Research Engineers, Inc. Larry A. Cerutti, Esq.
22700 Savi Ranch Parkway Rutan & Tucker LLP
Yorba Linda, California 92887 611 Anton Boulevard, Suite 1400
(714) 833-3838 Costa Mesa, California 92626
(714) 641-5100
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
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Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this registration statement.
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. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
To Be To Be Offering Price Aggregate Registration
Registered Registered(1) Per Share (2) Offering Price (2) Fee
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Common Stock,
$.01 par value 215,000 $55.00 $11,825,000 $3,121.80
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(1) In the event of a stock split, stock dividend, anti-dilution adjustment or
similar transaction involving common stock of the registrant, in order to
prevent dilution, the number of shares registered shall be automatically
increased to cover the additional shares in accordance with Rule 416(a)
under the Securities Act.
(2) Estimated solely for purposes of determining the registration fee.
Calculated pursuant to Rule 457(c), on the basis of the market price per
share on January 13, 2000.
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, as amended, 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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SUBJECT TO COMPLETION, DATED JANUARY 19, 2000
PROSPECTUS
RESEARCH ENGINEERS, INC.
215,000 Shares
Common Stock
This prospectus relates to 215,000 shares of our common stock, $.01 par value
per share, which are being offered by the selling stockholders, including shares
of common stock underlying warrants which we previously issued to certain
selling stockholders.
The shares offered hereby were acquired by the selling stockholders in
private transactions and are "restricted securities" under the Securities Act of
1933. This prospectus has been prepared for the purpose of registering the
shares under the Securities Act of 1933 to allow for future sales by the selling
stockholders to the public without restriction. To our knowledge, the selling
stockholders have made no arrangement with any brokerage firm for the sale of
the shares. The selling stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933. Any commissions received by a broker
or dealer in connection with resales of the shares may be deemed to be
underwriting commissions or discounts under the Securities Act of 1933. We
agreed to indemnify the selling stockholders against certain liabilities,
including certain liabilities under the Securities Act of 1933. See "Plan of
Distribution."
The price of the common stock being offered by the selling stockholders may
vary, depending on market conditions. We will not receive any of the proceeds
from the sale of the shares by the selling stockholders.
There is an existing market for these shares. Our common stock is traded on
the Nasdaq National Market System under the symbol "RENG." The last reported
sales price on January 14, 2000 was $58.00 per share.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities, and we are not soliciting offers to buy these securities, in
any state where the offer or sale is not permitted.
----------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2000
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
The Company....................................................... 3
Risk Factors...................................................... 4
Special Note Regarding Forward-Looking Statements................. 11
Plan of Distribution.............................................. 12
Selling Stockholders.............................................. 14
Use of Proceeds................................................... 15
Experts........................................................... 15
Legal Matters..................................................... 15
Where You Can Find More Information............................... 15
Incorporation of Certain Documents by Reference................... 15
</TABLE>
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in this
prospectus, in connection with the offering contemplated hereby, and, if given
or made, such information or representations must not be relied upon as having
been authorized by us or the selling stockholders. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
in any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in our affairs since the date hereof or that the
information contained or incorporated by reference herein is correct as of any
time subsequent to its date.
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THE COMPANY
Research Engineers, Inc. was incorporated in 1981 and is headquartered in
Yorba Linda, California. We are a leading provider of technically advanced
engineering software solutions. Our software products provide fully integrated
easy-to-use design automation and analysis solutions for use by engineering
analysis and design professionals worldwide. Our comprehensive line of
structural, mechanical, civil and process/piping engineering software products
is designed to fully integrate the functions of model generation, analysis,
design drafting and data presentation. All of our products utilize a proprietary
Windows-based graphics engine, allowing the software to be used with or without
third-party CAD software. Our products assist engineers in performing a myriad
of mission-critical engineering tasks, including the analysis and design of
industrial, commercial, transportation and utility structures, pipelines,
machinery, automotive and aerospace products, and survey, contour and digital
terrain modeling. Suggested list prices for most of our products range from
approximately $995 to $7,000.
Through the acquisitions of R-Cube Technologies in February 1999 and NetGuru
Systems in September 1999, we have expanded into the $90 billion information
technology services industry, providing expertise in data-mining and embedded
technologies to Internet/Intranet design and communications. In addition, in
April 1999, we announced that we had launched the first of several e-commerce
special interest portals targeting the 90 million expatriate professionals of
the Asia Pacific region now living throughout Europe and North America.
We currently license our software products to more than 19,000 customers
accounting for over 47,000 software installations and 140,000 concurrent users
worldwide. A selected list of our customers include: Bechtel Corporation, Boston
Edison, British Telecom, California Department of Resources, California
Institute of Technology, Jet Propulsion Laboratories, Exxon Corporation, Fluor
Daniel, Inc., General Dynamics, NASA, Rocketdyne, Siemens AG and Toyo
Engineering. Our products are sold and supported domestically and
internationally through our network of branch offices, subsidiaries and
representatives in the United States, United Kingdom, Germany, Japan, France,
Scandinavia, Australia, China, Singapore, India, Indonesia, Korea, Thailand,
Malaysia, South Africa, Mexico, Russia, the Middle East and Latin America. Our
structural and civil engineering products provide eight international language
options and local design codes required by our worldwide markets.
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RISK FACTORS
In addition to the other information in this prospectus, the following risk
factors should be considered carefully in evaluating us and our business before
purchasing the common stock offered by this prospectus. An investment in the
common stock offered hereby is speculative in nature and involves a high degree
of risk.
RISKS RELATED TO OUR BUSINESS
OUR SUCCESS DEPENDS ON OUR RETENTION OF OUR CURRENT KEY MANAGEMENT AND
TECHNICAL PERSONNEL.
Our future success depends to a large extent upon the continued services of
key managerial and qualified technical and marketing employees and on our
ability to attract, assimilate or retain other highly qualified employees.
Competition for such personnel is intense, and there can be no assurance that we
will be able to attract, assimilate or retain such personnel. The loss of the
services of any of our key employees or our inability to recruit quality
personnel could have a material adverse effect on our business. We do not
currently maintain life insurance on the lives of any of our key employees.
IF WE ARE UNABLE TO EFFECTIVELY MANAGE OUR EXPANDED OPERATIONS OUR BUSINESS
COULD BE ADVERSELY AFFECTED.
We expect to experience rapid growth over the next several years. This could
place a significant strain on our management and other resources. Our ability to
manage our growth will require us to continue to improve our operational,
financial and management information systems, and to motivate and effectively
manage our employees. Among other things, we will need to hire and integrate new
managers and install and operate new or enhanced accounting and financial
management systems. If we are unable to manage growth effectively, the quality
of our products and services, our ability to identify, hire and retain key
personnel and our business and results of operations could be adversely
affected.
THE MARKETS IN WHICH WE COMPETE ARE HIGHLY COMPETITIVE AND WE EXPECT THEM TO
BECOME MORE COMPETITIVE IN THE FUTURE, WHICH COULD RESULT IN SIGNIFICANT PRICE
COMPETITION, REDUCED REVENUES, LOWER PROFIT MARGINS OR LOSS OF MARKET SHARE.
The CAD, computer aided engineering software and information technology
industries are highly competitive. These industries may experience pricing and
margin pressure which as a result, could adversely affect our operating results
and financial position. A number of companies offer products and services that
target the same markets as we target. Some of our competitors and potential
competitors have larger technical staffs, more established and larger marketing
and sales organizations and significantly greater financial resources than ours.
Our competitors may develop products that are superior to ours or that achieve
greater market acceptance. Our future success will depend significantly upon our
ability to increase our share of our target markets and to sell additional
products, product enhancements and services to our existing customers. We may
not be able to compete successfully, and competition may result in decreases in:
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- the prices we receive for our products and services
- our revenues
- our profit margins
- our market share
Any such decreases would adversely affect our business and results of
operations.
THE MAJORITY OF OUR REVENUES ARE CURRENTLY DERIVED FROM THE ENGINEERING
DESIGN INDUSTRY SO A DECLINE IN THIS INDUSTRY OR RELATED INDUSTRIES MAY
ADVERSELY AFFECT OUR BUSINESS.
Although we are in the process of diversifying our business through
acquisitions and through expansion into information technology and other lines
of business, during the fiscal year ended March 31, 1999 and the six months
ended September 30, 1999, approximately 96% and 59%, respectively, of our
revenues were derived from sales of engineering software products to the
construction and plant design industries. Companies in these industries will
continue to account for significant amounts of our revenue for the foreseeable
future, and we depend on continued demand for our products from those
industries. While those industries are cyclical, downturns in those industries
are difficult to predict and it could be difficult for us to react quickly if
and when downturns occur. Any such downturns could adversely affect our business
and results of operations.
IF WE ARE UNABLE TO SUCCESSFULLY IMPLEMENT OUR ACQUISITION STRATEGY, OUR
EXPECTATIONS OF OUR GROWTH OR OPERATING RESULTS MAY NOT BE MET.
To expand our markets, our business strategy includes growth through
acquisitions. For instance, through the acquisitions of R-Cube in February 1999
and NetGuru in September 1999, we have expanded into the $90 billion IT services
industry. Identifying and pursuing strategic acquisition opportunities and
integrating acquired products and businesses requires a significant amount of
management time and skill. There can be no assurance that we will be able to
identify suitable acquisition candidates, consummate any acquisition on
acceptable terms or successfully integrate any acquired business into our
operations. There also can be no assurance that any future acquisition will not
have an adverse effect upon our operating results, particularly in the fiscal
quarters immediately following consummation of the acquisition while the
acquired business is being integrated into our operations.
WE HAVE RECENTLY EXPANDED INTO NEW LINES OF BUSINESS, AND THOSE LINES OF
BUSINESS MAY BE DIFFICULT TO INTEGRATE WITH OUR CORE BUSINESS.
We have been in the engineering software business since 1981. We have only
recently entered the information technology, Internet special interest portal
and digital animation fields. Our expansion into these lines of business may be
particularly difficult for us to manage, acquisitions in these fields may be
more difficult for us to integrate, at least initially, because they involve
different disciplines and require different expertise than our core business. If
we are not able to attain the level of expertise and reputation in these fields
that we feel we have attained in the engineering software field, our business
and results of operations could be adversely affected.
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OUR INTELLECTUAL PROPERTY PROTECTIONS MAY NOT BE ADEQUATE AND COULD ADVERSELY
AFFECT OUR BUSINESS.
We rely primarily on a combination of contract, copyright, trademark and
trade secret laws, license and confidentiality agreements and software security
measures to protect our proprietary technology. We distribute our products under
"shrink-wrap" software license agreements, which grant end-users licenses to
(rather than ownership of) our products and which contain various provisions
intended to protect our ownership and confidentiality of the underlying
technology. In addition, our software is distributed with a third party
"hardware lock." We also require all of our employees and other parties with
access to our confidential information to execute agreements prohibiting the
unauthorized use or disclosure of our technology. In addition, we periodically
review our proprietary technology for patentability, although we do not have any
current patents. Despite these precautions, we believe that existing laws
provide limited protection for our technology and that it may be possible for a
third party to misappropriate our technology or to independently develop similar
technology. In addition, effective copyright and trade secret protection may not
be available in every jurisdiction where we distribute our products,
particularly in foreign countries where the laws generally offer no protection
or less protection than those of the United States. Due to our significant
reliance upon international sales of our products, this lack of copyright and
trade secret protection could adversely affect our business and results of
operations if a third party were successful in copying our products and
marketing products similar to ours. Moreover, "shrink-wrap" licenses, which are
not signed by the end-user, may be unenforceable in certain jurisdictions.
We believe that, due to the rapid pace of technological innovation and change
within the engineering industry, legal protections afforded our technology are
less significant in affecting our business and results of operations than
factors such as our reputation, our products, the knowledge, ability and
experience of our personnel, the frequency of product enhancements and the
timeliness and quality of our customer service and support.
IN ORDER TO COMPETE SUCCESSFULLY, WE MUST KEEP PACE WITH THE RAPID CHANGES TO
WHICH OUR INDUSTRIES ARE SUBJECT.
The engineering software and information technology industries are
characterized by rapid technological advances, changes in customer requirements
and frequent new product and services introductions and enhancements. Our future
success will depend upon our ability to enhance our current products and
services and to develop and introduce new products and services that keep pace
with technological developments, respond to evolving customer requirements and
achieve market acceptance. In particular, we believe we must continue to respond
quickly to users' needs for broad functionality and to advances in hardware and
operating systems. Any failure on our part to anticipate or respond adequately
to technological developments and customer requirements, or any significant
delays in product development or introduction, could result in a loss of
competitiveness or revenues. New products or product enhancements which we
develop might not achieve market acceptance.
OUR FAILURE AND THE FAILURE OF THIRD PARTIES TO BE YEAR 2000 COMPLIANT COULD
NEGATIVELY IMPACT OUR BUSINESS.
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in major system failure or
miscalculations. We have performed a review of our internal systems to identify
and resolve the effect of Year 2000 software issues on the integrity and
reliability of our financial and operational systems. Based on this review, our
management believes that our internal systems are substantially compliant with
Year 2000 issues. In addition, we are also communicating with our principal
service providers to ensure Year 2000 issues will not have an adverse impact on
us. If we, and third parties upon which we rely, are unable to address this
issue in a timely manner, it could result in a material financial risk to us. In
order to assure that this does not occur, we plan to devote all resources
required to resolve any significant Year 2000 issues in a timely manner. To
date, we have not experienced any adverse effects of the Year 2000 issues.
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RISKS RELATED TO OUR INTERNATIONAL OPERATIONS
A SUBSTANTIAL PORTION OF OUR SALES ARE MADE IN FOREIGN MARKETS AND, AS A
RESULT, WE ARE SUBJECT TO A NUMBER OF RISKS ASSOCIATED WITH INTERNATIONAL
BUSINESS ACTIVITIES.
Sales of our products and services to customers located outside the United
States accounted for approximately 55% of our net revenue for the fiscal year
ended March 31, 1999. We anticipate that international sales will continue to
account for a significant portion of our total software sales. As a result, our
financial results could be impacted by weakened general economic conditions,
such as the recent condition in the Asian markets, differing technological
advances or preferences, volatile foreign exchange rates and government trade
restrictions in any country in which we do business.
We have increasingly relied on distributors and representatives to market our
products, particularly in the Asia-Pacific market. Our revenue in any particular
quarter may be negatively impacted by a lower than anticipated performance of
any significant distributor or representative. We do not offer a right of return
to distributors or representatives. We do, however, provide extended payment
terms of up to 90 days and commissions to these distributors and
representatives. Commissions range from 20% to 70% of gross sales. These
commissions are recorded at the time of sale and are reflected in selling
expenses in our consolidated statements of operations. Sales in other regions
such as North America and Europe are generally made without commissions. We
continue to assess the costs and benefits of continuing to offer these
commissions and to evaluate means whereby the amounts can be reduced. Means by
which commissions may be reduced include, but are not limited to, opening
additional foreign sales offices, establishing new foreign subsidiaries and
renegotiating current commission amounts with foreign distributors and
representatives. We may, however, find it necessary in the future to continue to
provide commissions at current levels or possibly increase them in order to
expand international sales, which could negatively impact our operating income.
There are a number of risks inherent in our international business
activities, including:
- unexpected changes in regulatory requirements
- tariffs, duties and other trade barriers and restrictions
- longer account receivable payment cycles
- potentially adverse tax consequences
- the burdens of compliance with foreign laws
- lack of international market data
- difficulties in managing the staffing of international operations
- establishing or maintaining international distribution channels
- increased collection risks
- uncertain political, regulatory and economic developments
Any of these risks could adversely affect our business and results of
operations.
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IF WE ARE UNABLE TO MEET THE REGULATORY STANDARDS OF FOREIGN GOVERNMENTS ON A
TIMELY BASIS, OUR FOREIGN OPERATIONS AND SALES COULD BE DELAYED AND REVENUES
NEGATIVELY IMPACTED.
While we believe our current products and services are designed to meet the
regulatory standards of foreign markets, our inability to maintain or to obtain
foreign regulatory approvals on a timely basis in the future could adversely
affect our business.
BECAUSE THE FINANCIAL STATEMENTS OF OUR FOREIGN SUBSIDIARIES ARE PREPARED
USING THE RELEVANT FOREIGN CURRENCY WHICH MUST BE CONVERTED INTO U.S. DOLLARS
FOR INCLUSION IN OUR CONSOLIDATED FINANCIAL STATEMENTS, EXCHANGE RATE
FLUCTUATIONS MAY ADVERSELY IMPACT OUR REPORTED RESULTS OF OPERATIONS.
We have established and acquired several international subsidiaries, which
prepare their balance sheets in the relevant foreign currency. In order to be
included in our consolidated financial statements, these balance sheets are
converted, at the then current exchange rate, into U.S. dollars and the
statements of operations are converted using weighted average exchange rates for
the applicable period. Therefore, exchange rate fluctuations can have a
detrimental effect on our earnings or on our ability to compete. We do not
engage in hedging activities to protect against the risk of currency
fluctuations. Foreign currency denominated sales may result in gains and losses
on the conversion to U.S. dollars. We have historically denominated sales by our
foreign subsidiaries in the local currency. In addition, we expect that in the
future many of our European subsidiaries will denominate their revenues in the
Euro. The Euro is an untested currency and may be subject to economic risks that
are not currently contemplated and which could have a harmful effect on our
business.
RISKS RELATED TO THIS OFFERING
THE MARKET PRICE OF OUR STOCK HAS FLUCTUATED AND MAY CONTINUE TO FLUCTUATE
DUE TO CHANGES IN REVENUE AND OPERATING RESULTS AND GENERAL MARKET CONDITIONS.
Our operating results have fluctuated in the past and may fluctuate
significantly in the future. Future results could be impacted by factors such as
customer order delays, a slower growth rate in the market, increased competition
or adverse changes in general economic conditions in any of the countries in
which we do business. While no single customer has accounted for more than 10%
of our revenues, the loss of a major distributor or a reduction in orders from a
major distributor could have a significant impact on our results of operations
in any particular quarter or fiscal year.
Our quarterly results of operations may also vary significantly depending on
a number of other factors, including the timing of the introduction or
enhancement of products by us or our competitors, market acceptance of new
products, customer order deferrals in anticipation of new products, changes in
our operating expenses, personnel changes, mix of products sold, changes in
product pricing, acquisitions of additional products or businesses and general
business and economic conditions. There can be no assurance that we will be able
to grow or sustain our profitability on a quarterly or annual basis.
In addition, certain of our expenses are based, in part, on our future
revenue expectations. We continue to increase our operating expense levels to
meet the growing customer demand for our products and services. If revenue is
below expectations, our operating results could be adversely and materially
affected. Net income or loss may be disproportionately affected by an unexpected
reduction in revenue because certain expenses are generally committed in
advance.
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Our stock price may fluctuate significantly as a result of fluctuations in
our quarterly performance, and may also fluctuate due to other factors, many of
which are beyond our control, such as analysts' expectations and our performance
relative to those expectations, global economic conditions and general market
conditions. During the past year, our stock price has fluctuated from a low of
$1.87 per share during the week of December 31, 1998, to a high of $58.00 during
the week of January 10, 2000. Any of the following factors could have a
significant impact on the market price of our common stock:
- variations in our revenue
- variations in our earnings and cash flows
- announcements of technological innovations or price reductions by us,
our competitors, or providers of alternative products and processes
- the gain or loss of significant customers
- changes in analysts' earnings estimates
- general conditions in the engineering software and information
technology markets
In addition, the securities markets have recently experienced significant
price and volume fluctuations that have particularly affected technology-based
companies, and resulted in changes in the market prices of the stocks of many
companies that have not been directly related to the operating performance of
those companies. Such broad market fluctuations may adversely affect the market
price of our common stock. In the past, following periods of volatility in the
market price of a company's securities, securities class action litigation has
sometimes been instituted against the issuing company. If securities litigation
is brought against us, it could result in substantial costs and a diversion of
management's attention and resources, which could adversely affect our business
and results of operations. Any adverse determination in such litigation could
also subject us to substantial liabilities.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND ADEQUATE FINANCING MAY NOT
BE AVAILABLE.
Our future capital requirements will depend upon many factors, including the
development of new products, possible future strategic acquisitions, the
progress of our research and development efforts, the expansion of our sales and
marketing efforts and the status of competitive products. We believe that
current and future available capital resources will be adequate to fund our
operations for the foreseeable future. However, to the extent we are in need of
any additional financing after such time, there can be no assurance that any
such additional financing will be available to us on acceptable terms, or at
all. If additional funds are raised by issuing equity securities, further
dilution to the existing stockholders may result. If adequate funds are not
available, we may be required to delay, scale back or eliminate our research and
development program or to obtain funds through arrangements with partners or
others that may require us to relinquish rights to certain of our technologies
or potential products or other assets. Accordingly, the inability to obtain such
financing could adversely affect our business, financial condition and results
of operations.
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OUR STOCK HAS HISTORICALLY BEEN THINLY TRADED, AND THE ABILITY OF THE SELLING
STOCKHOLDERS TO SELL THEIR SHARES IN THE OPEN MARKET COULD DEPRESS OUR STOCK
PRICE.
During 1999, our trading volume on the Nasdaq National Market has fluctuated
significantly. For example, during most of 1999 our trading volume averaged less
than 60,000 shares per week, and during the quarter ended September 30, 1999
averaged less than 35,000 shares per week. However, from November 8, 1999
through December 17, 1999, our trading volume averaged approximately 288,000
shares per week. By virtue of this prospectus, the selling stockholders will be
able to resell publicly up to 215,000 shares of our common stock. If they were
to do so in large volumes during short periods of time, our stock price on the
Nasdaq National Market could be significantly depressed.
OUR PREFERRED STOCK MAY DELAY OR PREVENT A TAKEOVER OF OUR COMPANY POSSIBLY
PREVENTING YOU FROM OBTAINING HIGHER STOCK PRICES FOR YOUR SHARES.
Our board of directors has the authority to issue up to 5,000,000 shares of
preferred stock and to fix the rights, preferences, privileges and restrictions,
including voting rights of those shares without any further vote or action by
our stockholders. 357,143 of these shares have been designated Series A 5%
Convertible Preferred Stock, of which none are issued and outstanding, and
371,429 of these shares have been designated Series B 5% Convertible Preferred
Stock, all of which are issued and outstanding. The rights of the holders of
our 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 desired 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, thereby delaying, deferring or preventing a
change in control of the company. Furthermore, such preferred stock may have
other rights, including economic rights senior to the common stock, and, as a
result, the issuance thereof could adversely affect the market value of our
common stock. We have no present plans to issue additional shares of preferred
stock.
THE CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK AND THE ANTITAKEOVER
EFFECTS OF DELAWARE LAW COULD ADVERSELY AFFECT THE PERFORMANCE OF OUR STOCK.
Our executive officers and directors and their family members together
beneficially own approximately 61.1% of the issued and outstanding shares of our
common stock. As a result, such persons will have the ability to elect a
majority of directors and exert control over our affairs, irrespective of how
our other stockholders may vote. This concentration of ownership may have the
effect of delaying or preventing a change in control of the company. In
addition, Section 203 of the General Corporation Law of Delaware prohibits us
from engaging in certain business combinations with interested stockholders, as
defined by statute. These provisions may have the effect of delaying or
preventing a change in control of the company without action by our
stockholders, and therefore could adversely affect the price of our common
stock.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements, including among
others (i) the projected growth in the engineering software market; (ii)
anticipated trends in our financial condition and results of operations; (iii)
our business strategy for expanding our presence in the engineering software
industry; and (iv) our ability to distinguish ourselves from our current and
future competitors. These forward-looking statements are based largely on our
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from these forward-looking statements. In
addition to the other risks described in the Risk Factors discussion, important
factors to consider in evaluating such forward-looking statements include (i)
changes in external competitive market factors or in our internal budgeting
process which might impact trends in our results of operations; (ii)
unanticipated working capital or other cash requirements; (iii) changes in our
business strategy or an inability to execute our strategy due to unanticipated
changes in the engineering software or information technology industry; and (iv)
various competitive factors that may prevent us from competing successfully in
the marketplace. In light of these risks and uncertainties, many of which are
described in greater detail elsewhere in this Risk Factors discussion, there can
be no assurance that the events predicted in forward-looking statements
contained in this prospectus will in fact transpire.
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PLAN OF DISTRIBUTION
The shares being offered hereby will be offered and sold by the selling
stockholders for their own accounts. We will not receive any of the proceeds
from the sale of the shares pursuant to this prospectus. We have agreed to bear
the expenses of the registration of the shares, including legal, accounting,
printing and filing fees, and such expenses are estimated to be $15,000.
The shares offered by this prospectus may be sold from time to time by the
selling stockholders and those persons' pledgees, donees, transferees or other
successors in interest. The selling stockholders may sell the shares on the
Nasdaq National Market or otherwise, at market prices or at negotiated prices.
They may sell shares by one or a combination of the following:
- a block trade in which a broker or 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 or dealer as principal and resale by the broker or
dealer for its account pursuant to this prospectus; and
- ordinary brokerage transactions and transactions in which a broker solicits
purchasers.
In effecting sales, brokers or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from selling stockholders in amounts to be
negotiated prior to the sale. The selling stockholders and any broker-dealers
that participate in the distribution may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, and any proceeds or
commissions received by them, and any profits on the resale of shares sold by
broker-dealers, may be deemed to be underwriting discounts and commissions.
Regulation M under the Securities Exchange Act of 1934 prohibits participants
in a distribution and their affiliates from bidding for or purchasing any of the
securities that are the subject of the distribution. It also governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
If any selling stockholder notifies us that a 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, we will file a prospectus supplement, if required
pursuant to Rule 424(c) under the Securities Act of 1933, setting forth:
- the name of each of the participating broker-dealers,
- the number of shares involved,
- the price at which the shares were sold,
- the commissions paid or discounts or concessions allowed to the broker-
dealers, where applicable,
12
<PAGE>
- a statement to the effect that the broker-dealers did not conduct any
investigation to verify the information set out or incorporated by
reference in this prospectus, and
- any other facts material to the transaction.
We have agreed to indemnify the selling stockholders against liabilities,
including certain liabilities under the Securities Act of 1933 or to contribute
to payments which the selling stockholders may be required to make in respect of
these liabilities.
13
<PAGE>
SELLING STOCKHOLDERS
GENERAL
There are seven selling stockholders. The selling stockholders are
acting individually, not as a group. None of the selling stockholders
or their affiliates has held any position, office or other material
relationship, other than as a stockholder, with us, except that Cruttenden
Roth Incorporated underwrote our initial public offering of our common
stock in 1996 and Karen Hunter and William Schmidt became non-executive officer
employees of ours after our acquisition of PacSoft Incorporated. The
following table sets forth certain information as of January 6, 2000,
with respect to each selling stockholder for whom we are registering shares
of common stock for resale:
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON SHARES OF COMMON
NAME OF STOCK BENEFICIALLY STOCK BEING STOCK BENEFICIALLY
SELLING OWNED PRIOR TO OFFERED PURSUANT OWNED AFTER
STOCKHOLDER THIS OFFERING(1) TO THIS PROSPECTUS OFFERING(2)
----------- ---------------- ------------------ -----------
NUMBER PERCENT NUMBER PERCENT
<S> <C> <C> <C> <C> <C>
Cruttenden Roth Incorporated 130,000 2.1% 130,000 -- --
Bridgewater Capital Corporation 12,500 * 12,500 (3) -- --
Ganesh Asset Management 7,500 * 7,500 (3) -- --
Pacific Summit Capital 15,000 * 15,000 (3) -- --
Karen Hunter 41,666 * 41,666 -- --
William Schmidt 4,167 * 4,167 -- --
Mae Webb 4,167 * 4,167 -- --
- ---------------
</TABLE>
* Less than 1%.
(1) Based on an aggregate of 6,111,073 shares of common stock issued and
outstanding as of January 6, 2000. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Except as otherwise indicated by footnote and subject to applicable
community property laws, the persons named in the table above have sole
voting and investment power with respect to all shares of common stock
shown as beneficially owned by them. All information with respect to
beneficial ownership is based on filings made by the respective beneficial
owners with the Securities and Exchange Commission or information provided
to our company by such beneficial owners.
(2) Assumes that all of the shares are sold pursuant to this prospectus.
(3) Entire amount represents shares of common stock issuable upon exercise
of warrants.
14
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares
of common stock offered hereby.
EXPERTS
The consolidated financial statements of Research Engineers, Inc. and
subsidiaries as of March 31, 1999, and for the years ended March 31, 1999 and
1998, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The combined financial statements of NetGuru Systems, Inc. and NetGuru
Consulting, Inc. as of December 31, 1997 and 1998, and for the years then ended,
have been incorporated by reference herein and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The financial statements of R-Cube Technologies, Inc. as of September 30,
1998 and 1997, and for the years then ended, have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the legality of the securities
offered hereby will be passed upon for Research Engineers, Inc. by Rutan &
Tucker, LLP, Costa Mesa, California.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act of 1933 covering the shares of
common stock offered pursuant to this prospectus. This prospectus omits certain
information and exhibits included in the registration statement, copies of which
may be obtained upon payment of a fee prescribed by the Commission or may be
examined free of charge at the principal office of the Commission in Washington,
D.C.
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and in accordance therewith file reports and other information with
the Commission. Reports, proxy statements and other information filed by us with
the Commission may be inspected at the Commission's Public Reference Section,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: 7 World Trade Center, 13th Floor, New York,
New York 10048, and at Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. You can request copies of these documents upon
payment of a duplicating fee, by writing to the Commission. Please call the
Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. Our filings, including the registration statement, will
also be available to you on the Commission's Internet site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We have filed the documents listed below with the Commission. These documents
are incorporated herein by reference: (a) our Annual Report on Form 10-KSB for
the fiscal year ended March 31, 1999; (b) our Current Report on Form 8-K/A filed
May 13, 1999; (c) our Current Report on Form 8-K filed September 29, 1999; (d)
our Current Report on Form 8-K/A filed October 15, 1999; (e) our Current Report
on Form 8-K/A filed November 12, 1999; (f) our Proxy Statement dated October 13,
1999; (g) our Quarterly Reports on Form 10-QSB for the quarters ended June 30,
1999 and September 30, 1999; and (h) the description of our common stock
contained in the registration statement on Form 8-A filed pursuant to Section 12
of the Securities Exchange Act of 1934 on June 11, 1996 (incorporating by
reference information contained in our registration statement on Form SB-2 filed
pursuant to the Securities Act of 1933).
15
<PAGE>
All reports and documents which we subsequently file pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
of this prospectus and prior to the termination of this offering shall be deemed
to be incorporated by reference into this prospectus and to be part hereof from
the date of filing of those reports and documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated herein modifies
or supersedes that statement. Any modified or superseded statement shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus is delivered, upon the written or oral
request, a copy of any or all of the documents referred to above which have been
incorporated into this prospectus by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
any such document). Requests for such copies should be directed to Wayne Blair,
Research Engineers, Inc., 22700 Savi Ranch Parkway, Yorba Linda, California
92887; Telephone: (714) 974-2500.
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Expenses payable in connection with the distribution of the securities being
registered (estimated except for the registration fee), all of which will be
borne by the registrant, are as follows:
Registration fee......................... $ 3,122
Printing expenses........................ 500
Legal fees and expenses.................. 6,000
Accounting fees.......................... 4,000
Miscellaneous expenses................... 1,378
-------
Total......................... $15,000
Item 15. Indemnification of Directors and Officers.
The liability of the registrant's controlling persons, officers or directors
is or may be affected in such capacity by the following:
The registrant's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. The registrant's
Bylaws provide that the registrant shall indemnify its officers and directors
and may indemnify its employees and other agents to the fullest extent permitted
by Delaware law.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of that fact that he or she was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him or her in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and with respect to any criminal action, had no reasonable cause
to believe his or her conduct was unlawful.
Item 16. Exhibits.
Exhibit
Number Description of Exhibit
------- ----------------------
4.1 Representative's Warrant Agreement dated as of
July 31, 1996 between the Registrant and
Cruttenden Roth Incorporated.*
4.2 Common Stock Purchase Warrant dated as of
September 14, 1999 between the Registrant and
and Bridgewater Capital, Inc.
4.3 Common Stock Purchase Warrant dated as of
September 14, 1999 between the Registrant and
Pacific Summit Capital, Inc.
4.4 Common Stock Purchase Warrant dated as of
September 14, 1999 between the Registrant and
Ganesh Asset Management
5.1 Opinion of Rutan & Tucker, LLP
23.1 Consent of KPMG LLP
23.2 Consent of KPMG LLP
23.3 Consent of KPMG LLP
17
<PAGE>
23.4 Consent of Rutan & Tucker, LLP (contained in the
opinion included as Exhibit 5.1)
-------
* Filed as an Exhibit to Registrant's Amendment
No. 1 on Registration Statement on Form SB-2
dated June 14, 1996 (Registration No. 333-4844-LA).
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 this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective 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.
Provided however, that paragraphs (1)(i) and (1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such 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 post-effective amendment to this
registration statement 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
of 1933, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (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) 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.
(5) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions or otherwise,
18
<PAGE>
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.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Yorba Linda, State of California, on January 17,
2000.
RESEARCH ENGINEERS, INC.
By: /S/ JYOTI CHATTERJEE
---------------------------
Jyoti Chatterjee, President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jyoti Chatterjee and Wayne Blair, or either of them, his true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his
behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this registration statement on Form S-3 and to file
the same, with all exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission under the Securities Act
of 1933, granting unto said attorney-in-fact and agent full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully and to all intents and purposes as each
might or could do in person, hereby ratifying and confirming each act that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the following
capacities on the dates indicated.
Name Title Date
- ---------------------- ------------------------ ----------------
/S/ AMRIT K. DAS Chairman of the Board January 17, 2000
- -------------------- and Director
Amrit K. Das
/S/ JYOTI CHATTERJEE President (principal January 17, 2000
- -------------------- executive officer) and
Jyoti Chatterjee Director
/S/ WAYNE BLAIR Chief Financial Officer January 17, 2000
- -------------------- (principal accounting
Wayne Blair officer)
/S/ DAN W. HEIL Director January 17, 2000
- --------------------
Dan W. Heil
/S/ BRUCE E. CUMMINGS Director January 17, 2000
- --------------------
Bruce E. Cummings
/S/ SANTANU DAS Director January 17, 2000
- --------------------
Santanu Das
20
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit Page Number
- -------------- ---------------------- -----------
4.2 Common Stock Purchase Warrant dated as of
September 14, 1999 between the Registrant and
and Bridgewater Capital, Inc.
4.3 Common Stock Purchase Warrant dated as of
September 14, 1999 between the Registrant and
Pacific Summit Capital, Inc.
4.4 Common Stock Purchase Warrant dated as of
September 14, 1999 between the Registrant and
Ganesh Asset Management
5.1 Opinion of Rutan & Tucker, LLP
23.1 Consent of KPMG LLP
23.2 Consent of KPMG LLP
23.3 Consent of KPMG LLP
23.4 Consent of Rutan & Tucker, LLP
(contained in the opinion included
in Exhibit 5.1).
21
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"), OR ANY STATE
SECURITIES LAWS AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED,
OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY THE
HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE OPINION
OF ITS COUNSEL OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE
AS MAY BE SATISFACTORY TO COUNSEL FOR THE COMPANY, IN EITHER CASE, TO
THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE 1933
ACT AND APPLICABLE STATE SECURITIES LAWS.
RESEARCH ENGINEERS, INC.
Common Stock Purchase Warrant
to
Purchase 12,500 Shares
of
Common Stock
This Common Stock Purchase Warrant is issued to:
BRIDGEWATER CAPITAL CORPORATION
by RESEARCH ENGINEERS, INC., a Delaware corporation (hereinafter called the
"Company", which term shall include its successors and assigns).
FOR VALUE RECEIVED and subject to the terms and conditions hereinafter
set out, the registered holder of this Warrant as set forth on the books and
records of the Company (the "Holder") is entitled upon surrender of this Warrant
to purchase from the Company Twelve Thousand, Five Hundred (12,500) fully paid
and nonassessable shares of Common Stock, $.01 par value per share (the "Common
Stock"), at the Exercise Price (as defined below) per share.
This Warrant shall expire at the close of business on September 14,
2002.
1. (a) The right to purchase shares of Common Stock represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company at 22700 Savi Ranch Road, Yorba Linda, California 92887 (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company), and
upon payment to the Company, by cash or by certified check or bank draft, of the
Exercise Price for such shares. The Company agrees that the shares of Common
Stock so purchased shall be deemed to be issued to the Holder as the record
owner of such shares of Common Stock as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for such shares
of Common Stock as aforesaid. Certificates for the shares of Common Stock so
purchased (together with a cash adjustment in lieu of any fraction of a share)
shall be delivered to the Holder within a reasonable time, not exceeding five
-1-
<PAGE>
(5) business days, after the rights represented by this Warrant shall have been
so exercised, and, unless this Warrant has expired, a new Warrant representing
the number of shares of Common Stock, if any, with respect to which this Warrant
shall not then have been exercised, in all other respects identical with this
Warrant, shall also be issued and delivered to the Holder within such time, or,
at the request of the Holder, appropriate notation may be made on this Warrant
and the same returned to the Holder.
(b) This Warrant may be exercised to acquire, from and after
the date hereof, the aggregate number of shares of Common Stock set forth on the
first page hereof (subject to adjustments described in this Warrant); provided,
however, the right hereunder to purchase such shares of Common Stock shall
expire at the close of business on September 14, 2002.
2. This Warrant is being issued by the Company in connection with
certain capital raising activities related to the acquisition by the Company of
NetGuru Systems, Inc.
3. The Company covenants and agrees that all Common Stock upon issuance
against payment in full of the Exercise Price by the Holder pursuant to this
Warrant will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof (except to the extent
resulting from the Holder's own circumstances, actions or omissions). The
Company covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will have at all times
authorized, and reserved for the purpose of issue or transfer upon exercise of
the rights evidenced by this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant, and
will procure at its sole expense upon each such reservation of shares the
listing thereof (subject to issuance or notice of issuance) on all stock
exchanges on which the Common Stock is then listed or inter-dealer trading
systems on which the Common Stock is then traded. The Company will take all such
action as may be necessary to assure that such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common Stock may
be listed or inter-dealer trading system on which the Common Stock is then
traded. The Company will not take any action which would result in any
adjustment in the number of shares of Common Stock purchasable hereunder if the
total number of shares of Common Stock issuable pursuant to the terms of this
Warrant after such action upon full exercise of this Warrant and, together with
all shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon exercise of all options and other rights to purchase shares of
Common Stock then outstanding, would exceed the total number of shares of Common
Stock then authorized by the Company's Certificate of Incorporation, as then
amended.
4. The Initial Exercise Price is $9.42 per share of Common Stock
("Initial Exercise Price"). The Initial Exercise Price shall be adjusted as
provided for below in this Section 4 (the Initial Exercise Price, and the
Initial Exercise Price, as thereafter then adjusted, shall be referred to as the
"Exercise Price") and the Exercise Price from time to time shall be further
adjusted as provided for below in this Section 4. Upon each adjustment of the
Exercise Price, the Holder shall thereafter be entitled to receive upon exercise
of this Warrant, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock obtained by (i) multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock purchasable hereunder immediately prior to such adjustment, and (ii)
dividing the product thereof by the Exercise Price resulting from such
adjustment. The Exercise Price shall be adjusted as follows:
-2-
<PAGE>
(i) In the case of any amendment to the Company's
Certificate of Incorporation to change the designation of the
Common Stock or the rights, privileges, restrictions or
conditions in respect to the Common Stock or division of the
Common Stock, this Warrant shall be adjusted so as to provide
that upon exercise thereof, the Holder shall receive, in lieu of
each share of Common Stock theretofore issuable upon such
exercise, the kind and amount of shares, other securities, money
and property receivable upon such designation, change or
division by the Holder issuable upon such exercise had the
exercise occurred immediately prior to such designation, change
or division. This Warrant shall be deemed thereafter to provide
for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4.
The provisions of this Subsection 4(i) shall apply in the same
manner to successive reclassifications, changes, consolidations
and mergers.
(ii) If the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of
shares of Common Stock, or declare a dividend or make any other
distribution upon the Common Stock payable in shares of Common
Stock, the Exercise Price in effect immediately prior to such
subdivision or dividend or other distribution shall be
proportionately reduced, and conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number
of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination shall be proportionately
increased.
(iii) If any capital reorganization or reclassification
of the capital stock of the Company, or any consolidation or
merger of the Company with or into another corporation or other
entity, or the sale of all or substantially all of the Company's
assets to another corporation or other entity shall be effected
in such a way that holders of shares of Common Stock shall be
entitled to receive stock, securities, other evidence of equity
ownership or assets with respect to or in exchange for shares of
Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale (except as
otherwise provided below in this Section 4), lawful and adequate
provisions shall be made whereby the Holder shall thereafter
have the right to receive upon the exercise hereof upon the
basis and upon the terms and conditions specified herein, such
shares of stock, securities, other evidence of equity ownership
or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock
equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of this
Warrant under this Section 4 had such reorganization,
reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holder to the end
that the provisions hereof (including, without limitation,
provisions for adjustments of the Exercise Price and of the
number of shares of Common Stock receivable upon the exercise of
this Warrant) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities, other
evidence of equity ownership or assets thereafter deliverable
-3-
<PAGE>
upon the exercise hereof (including an immediate adjustment, by
reason of such consolidation or merger, of the Exercise Price to
the value for the Common Stock reflected by the terms of such
consolidation or merger if the value so reflected is less than
the Exercise Price in effect immediately prior to such
consolidation or merger). Subject to the terms of this Warrant,
in the event of a merger or consolidation of the Company with or
into another corporation or other entity as a result of which
the number of shares of common stock of the surviving
corporation or other entity issuable to holders of Common Stock,
is greater or lesser than the number of shares of Common Stock
outstanding immediately prior to such merger or consolidation,
then the Exercise Price in effect immediately prior to such
merger or consolidation shall be adjusted in the same manner as
though there were a subdivision or combination of the
outstanding shares of Common Stock. The Company shall not effect
any such consolidation, merger or sale, unless, prior to the
consummation thereof, the successor corporation (if other than
the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to the Holder, the
obligation to deliver to the Holder such shares of stock,
securities, other evidence of equity ownership or assets as, in
accordance with the foregoing provisions, the Holder may be
entitled to receive or otherwise acquire. If a purchase, tender
or exchange offer is made to and accepted by the holders of more
than fifty (50%) percent of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger or
sale with the person having made such offer or with any
affiliate of such person, unless prior to the consummation of
such consolidation, merger or sale the Holder of this Warrant
shall have been given a reasonable opportunity to then elect to
receive upon the exercise of this Warrant the amount of stock,
securities, other evidence of equity ownership or assets then
issuable with respect to the number of shares of Common Stock in
accordance with such offer.
(iv) In case the Company shall, at any time prior to
exercise of this Warrant, consolidate or merge with any other
corporation or other entity (where the Company is not the
surviving entity) or transfer all or substantially all of its
assets to any other corporation or other entity, then the
Company shall, as a condition precedent to such transaction,
cause effective provision to be made so that the Holder of this
Warrant upon the exercise of this Warrant after the effective
date of such transaction shall be entitled to receive the kind
and amount of shares, evidences of indebtedness and/or other
securities or property receivable on such transaction by a
holder of the number of shares of Common Stock as to which this
Warrant was exercisable immediately prior to such transaction
(without giving effect to any restriction upon such exercise);
and, in any such case, appropriate provision shall be made with
respect to the rights and interest of the Holder of this Warrant
to the end that the provisions of this Warrant shall thereafter
be applicable (as nearly as may be practicable) with respect to
any shares, evidences of indebtedness or other securities or
assets thereafter deliverable upon exercise of this Warrant.
Upon the occurrence of any event described in this Section
4(iv), the holder of this Warrant shall have the right to (i)
exercise this Warrant immediately prior to such event at an
Exercise Price equal to lesser of (1) the then Exercise Price or
(2) the price per share of Common Stock paid in such event, or
(ii) retain ownership of this Warrant, in which event,
-4-
<PAGE>
appropriate provisions shall be made so that the Warrant shall
be exercisable at the Holder's option into shares of stock,
securities or other equity ownership of the surviving or
acquiring entity.
Whenever the Exercise Price shall be adjusted pursuant to this
Section 4, the Company shall issue a certificate signed by its President or Vice
President and by its Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board of
Directors of the Company made any determination hereunder), and the Exercise
Price after giving effect to such adjustment, and shall cause copies of such
certificates to be mailed (by first-class mail, postage prepaid) to the Holder
of this Warrant. The Company shall make such certificate and mail it to the
Holder promptly after each adjustment.
No fractional shares of Common Stock shall be issued in connection
with any exercise of this Warrant, but in lieu of such fractional shares, the
Company shall make a cash payment therefor equal in amount to the product of the
applicable fraction multiplied by the Exercise Price then in effect.
5. In the event the Company grants rights (other than rights granted
pursuant to a shareholder rights or poison pill plan) to all shareholders to
purchase Common Stock, the Holder shall have the same rights as if this Warrant
had been exercised immediately prior to such grant.
6. This Warrant need not be changed because of any change in the
Exercise Price or in the number of shares of Common Stock purchased hereunder.
7. The terms defined in this paragraph, whenever used in this Warrant,
shall, unless the context otherwise requires, have the respective meanings
hereinafter specified. The term "Common Stock" shall mean and include the
Company's Common Stock, $.01 par value per share, authorized on the date of the
original issue of this Warrant and shall also include in case of any
reorganization, reclassification, consolidation, merger or sale of assets of the
character referred to in Section 4 hereof, the stock, securities or assets
provided for in such paragraph. The term "Company" shall also include any
successor corporation to RESEARCH ENGINEERS, INC. by merger, consolidation or
otherwise. The term "outstanding" when used with reference to Common Stock shall
mean at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company. The term "1933 Act" shall mean the Securities Act of
1933, as amended, or any successor Federal statute, and the rules and
regulations of the Securities and Exchange Commission, or any other Federal
agency then administering the 1933 Act, thereunder, all as the same shall be in
effect at the time.
8. This Warrant is exchangeable, upon the surrender hereby by the
Holder at the office or agency of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares of Common Stock as shall be designated by the Holder at
the time of such surrender. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant or any such new
-5-
<PAGE>
Warrants and, in the case of any such loss, theft, or destruction, upon delivery
of a bond of indemnity, reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender or cancellation of this Warrant or such
new Warrants, the Company will issue to the Holder a new Warrant of like tenor,
in lieu of this Warrant or such new Warrants, representing the right to
subscribe for and purchase the number of shares of Common Stock which may be
subscribed for and purchased hereunder.
9. The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. This Warrant shall not entitle the Holder to any
voting rights or any rights as a shareholder of the Company. The rights and
obligations of the Company, of the Holder, and of any holder of shares of Common
Stock issuable hereunder, shall survive the exercise of this Warrant.
10. This Warrant sets forth the entire agreement of the Company and the
Holder of the Common Stock issuable upon the exercise of this Warrant with
respect to the rights of the Holder and the Common Stock issuable upon the
exercise of this Warrant, notwithstanding the knowledge of such Holder of any
other agreement or the provisions of any agreement, whether or not known to the
Holder, and the Company represents that there are no agreements inconsistent
with the terms hereof or which purport in any way to bind the Holder of this
Warrant or the Common Stock.
11. The validity, interpretation and performance of this Warrant and
each of its terms and provisions shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal and dated as of September
14, 1999.
RESEARCH ENGINEERS, INC.
By: /S/ Jyoti Chatterjee
----------------------------------
Jyoti Chatterjee
President
-6-
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"), OR ANY STATE
SECURITIES LAWS AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED,
OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY THE
HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE OPINION
OF ITS COUNSEL OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE
AS MAY BE SATISFACTORY TO COUNSEL FOR THE COMPANY, IN EITHER CASE, TO
THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE 1933
ACT AND APPLICABLE STATE SECURITIES LAWS.
RESEARCH ENGINEERS, INC.
Common Stock Purchase Warrant
to
Purchase 15,000 Shares
of
Common Stock
This Common Stock Purchase Warrant is issued to:
PACIFIC SUMMIT CAPITAL
by RESEARCH ENGINEERS, INC., a Delaware corporation (hereinafter called the
"Company", which term shall include its successors and assigns).
FOR VALUE RECEIVED and subject to the terms and conditions hereinafter
set out, the registered holder of this Warrant as set forth on the books and
records of the Company (the "Holder") is entitled upon surrender of this Warrant
to purchase from the Company Fifteen Thousand (15,000) fully paid and
nonassessable shares of Common Stock, $.01 par value per share (the "Common
Stock"), at the Exercise Price (as defined below) per share.
This Warrant shall expire at the close of business on September 14,
2002.
1. (a) The right to purchase shares of Common Stock represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company at 22700 Savi Ranch Road, Yorba Linda, California 92887 (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company), and
upon payment to the Company, by cash or by certified check or bank draft, of the
Exercise Price for such shares. The Company agrees that the shares of Common
Stock so purchased shall be deemed to be issued to the Holder as the record
owner of such shares of Common Stock as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for such shares
of Common Stock as aforesaid. Certificates for the shares of Common Stock so
purchased (together with a cash adjustment in lieu of any fraction of a share)
shall be delivered to the Holder within a reasonable time, not exceeding five
(5) business days, after the rights represented by this Warrant shall have been
so exercised, and, unless this Warrant has expired, a new Warrant representing
-1-
<PAGE>
the number of shares of Common Stock, if any, with respect to which this Warrant
shall not then have been exercised, in all other respects identical with this
Warrant, shall also be issued and delivered to the Holder within such time, or,
at the request of the Holder, appropriate notation may be made on this Warrant
and the same returned to the Holder.
b) This Warrant may be exercised to acquire, from and after the date
hereof, the aggregate number of shares of Common Stock set forth on the first
page hereof (subject to adjustments described in this Warrant); provided,
however, the right hereunder to purchase such shares of Common Stock shall
expire at the close of business on September 14, 2002.
2. This Warrant is being issued by the Company in connection with
certain capital raising activities related to the acquisition by the Company of
NetGuru Systems, Inc.
3. The Company covenants and agrees that all Common Stock upon issuance
against payment in full of the Exercise Price by the Holder pursuant to this
Warrant will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof (except to the extent
resulting from the Holder's own circumstances, actions or omissions). The
Company covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will have at all times
authorized, and reserved for the purpose of issue or transfer upon exercise of
the rights evidenced by this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant, and
will procure at its sole expense upon each such reservation of shares the
listing thereof (subject to issuance or notice of issuance) on all stock
exchanges on which the Common Stock is then listed or inter-dealer trading
systems on which the Common Stock is then traded. The Company will take all such
action as may be necessary to assure that such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common Stock may
be listed or inter-dealer trading system on which the Common Stock is then
traded. The Company will not take any action which would result in any
adjustment in the number of shares of Common Stock purchasable hereunder if the
total number of shares of Common Stock issuable pursuant to the terms of this
Warrant after such action upon full exercise of this Warrant and, together with
all shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon exercise of all options and other rights to purchase shares of
Common Stock then outstanding, would exceed the total number of shares of Common
Stock then authorized by the Company's Certificate of Incorporation, as then
amended.
4. The Initial Exercise Price is $9.42 per share of Common Stock
("Initial Exercise Price"). The Initial Exercise Price shall be adjusted as
provided for below in this Section 4 (the Initial Exercise Price, and the
Initial Exercise Price, as thereafter then adjusted, shall be referred to as the
"Exercise Price") and the Exercise Price from time to time shall be further
adjusted as provided for below in this Section 4. Upon each adjustment of the
Exercise Price, the Holder shall thereafter be entitled to receive upon exercise
of this Warrant, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock obtained by (i) multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock purchasable hereunder immediately prior to such adjustment, and (ii)
dividing the product thereof by the Exercise Price resulting from such
adjustment. The Exercise Price shall be adjusted as follows:
-2-
<PAGE>
(i) In the case of any amendment to the Company's
Certificate of Incorporation to change the designation of the
Common Stock or the rights, privileges, restrictions or
conditions in respect to the Common Stock or division of the
Common Stock, this Warrant shall be adjusted so as to provide
that upon exercise thereof, the Holder shall receive, in lieu of
each share of Common Stock theretofore issuable upon such
exercise, the kind and amount of shares, other securities, money
and property receivable upon such designation, change or
division by the Holder issuable upon such exercise had the
exercise occurred immediately prior to such designation, change
or division. This Warrant shall be deemed thereafter to provide
for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4.
The provisions of this Subsection 4(i) shall apply in the same
manner to successive reclassifications, changes, consolidations
and mergers.
(ii) If the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of
shares of Common Stock, or declare a dividend or make any other
distribution upon the Common Stock payable in shares of Common
Stock, the Exercise Price in effect immediately prior to such
subdivision or dividend or other distribution shall be
proportionately reduced, and conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number
of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination shall be proportionately
increased.
(iii) If any capital reorganization or reclassification
of the capital stock of the Company, or any consolidation or
merger of the Company with or into another corporation or other
entity, or the sale of all or substantially all of the Company's
assets to another corporation or other entity shall be effected
in such a way that holders of shares of Common Stock shall be
entitled to receive stock, securities, other evidence of equity
ownership or assets with respect to or in exchange for shares of
Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale (except as
otherwise provided below in this Section 4), lawful and adequate
provisions shall be made whereby the Holder shall thereafter
have the right to receive upon the exercise hereof upon the
basis and upon the terms and conditions specified herein, such
shares of stock, securities, other evidence of equity ownership
or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock
equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of this
Warrant under this Section 4 had such reorganization,
reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holder to the end
that the provisions hereof (including, without limitation,
provisions for adjustments of the Exercise Price and of the
number of shares of Common Stock receivable upon the exercise of
this Warrant) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities, other
evidence of equity ownership or assets thereafter deliverable
upon the exercise hereof (including an immediate adjustment, by
reason of such consolidation or merger, of the Exercise Price to
the value for the Common Stock reflected by the terms of such
consolidation or merger if the value so reflected is less than
the Exercise Price in effect immediately prior to such
-3-
<PAGE>
consolidation or merger). Subject to the terms of this Warrant,
in the event of a merger or consolidation of the Company with or
into another corporation or other entity as a result of which
the number of shares of common stock of the surviving
corporation or other entity issuable to holders of Common Stock,
is greater or lesser than the number of shares of Common Stock
outstanding immediately prior to such merger or consolidation,
then the Exercise Price in effect immediately prior to such
merger or consolidation shall be adjusted in the same manner as
though there were a subdivision or combination of the
outstanding shares of Common Stock. The Company shall not effect
any such consolidation, merger or sale, unless, prior to the
consummation thereof, the successor corporation (if other than
the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to the Holder, the
obligation to deliver to the Holder such shares of stock,
securities, other evidence of equity ownership or assets as, in
accordance with the foregoing provisions, the Holder may be
entitled to receive or otherwise acquire. If a purchase, tender
or exchange offer is made to and accepted by the holders of more
than fifty (50%) percent of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger or
sale with the person having made such offer or with any
affiliate of such person, unless prior to the consummation of
such consolidation, merger or sale the Holder of this Warrant
shall have been given a reasonable opportunity to then elect to
receive upon the exercise of this Warrant the amount of stock,
securities, other evidence of equity ownership or assets then
issuable with respect to the number of shares of Common Stock in
accordance with such offer.
(iv) In case the Company shall, at any time prior to
exercise of this Warrant, consolidate or merge with any other
corporation or other entity (where the Company is not the
surviving entity) or transfer all or substantially all of its
assets to any other corporation or other entity, then the
Company shall, as a condition precedent to such transaction,
cause effective provision to be made so that the Holder of this
Warrant upon the exercise of this Warrant after the effective
date of such transaction shall be entitled to receive the kind
and amount of shares, evidences of indebtedness and/or other
securities or property receivable on such transaction by a
holder of the number of shares of Common Stock as to which this
Warrant was exercisable immediately prior to such transaction
(without giving effect to any restriction upon such exercise);
and, in any such case, appropriate provision shall be made with
respect to the rights and interest of the Holder of this Warrant
to the end that the provisions of this Warrant shall thereafter
be applicable (as nearly as may be practicable) with respect to
any shares, evidences of indebtedness or other securities or
assets thereafter deliverable upon exercise of this Warrant.
Upon the occurrence of any event described in this Section
4(iv), the holder of this Warrant shall have the right to (i)
exercise this Warrant immediately prior to such event at an
Exercise Price equal to lesser of (1) the then Exercise Price or
(2) the price per share of Common Stock paid in such event, or
(ii) retain ownership of this Warrant, in which event,
appropriate provisions shall be made so that the Warrant shall
be exercisable at the Holder's option into shares of stock,
securities or other equity ownership of the surviving or
acquiring entity.
-4-
<PAGE>
Whenever the Exercise Price shall be adjusted pursuant to this Section
4, the Company shall issue a certificate signed by its President or Vice
President and by its Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board of
Directors of the Company made any determination hereunder), and the Exercise
Price after giving effect to such adjustment, and shall cause copies of such
certificates to be mailed (by first-class mail, postage prepaid) to the Holder
of this Warrant. The Company shall make such certificate and mail it to the
Holder promptly after each adjustment.
No fractional shares of Common Stock shall be issued in connection with
any exercise of this Warrant, but in lieu of such fractional shares, the Company
shall make a cash payment therefor equal in amount to the product of the
applicable fraction multiplied by the Exercise Price then in effect.
5. In the event the Company grants rights (other than rights granted
pursuant to a shareholder rights or poison pill plan) to all shareholders to
purchase Common Stock, the Holder shall have the same rights as if this Warrant
had been exercised immediately prior to such grant.
6. This Warrant need not be changed because of any change in the
Exercise Price or in the number of shares of Common Stock purchased hereunder.
7. The terms defined in this paragraph, whenever used in this Warrant,
shall, unless the context otherwise requires, have the respective meanings
hereinafter specified. The term "Common Stock" shall mean and include the
Company's Common Stock, $.01 par value per share, authorized on the date of the
original issue of this Warrant and shall also include in case of any
reorganization, reclassification, consolidation, merger or sale of assets of the
character referred to in Section 4 hereof, the stock, securities or assets
provided for in such paragraph. The term "Company" shall also include any
successor corporation to RESEARCH ENGINEERS, INC. by merger, consolidation or
otherwise. The term "outstanding" when used with reference to Common Stock shall
mean at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company. The term "1933 Act" shall mean the Securities Act of
1933, as amended, or any successor Federal statute, and the rules and
regulations of the Securities and Exchange Commission, or any other Federal
agency then administering the 1933 Act, thereunder, all as the same shall be in
effect at the time.
8. This Warrant is exchangeable, upon the surrender hereby by the
Holder at the office or agency of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares of Common Stock as shall be designated by the Holder at
the time of such surrender. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant or any such new
Warrants and, in the case of any such loss, theft, or destruction, upon delivery
of a bond of indemnity, reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender or cancellation of this Warrant or such
new Warrants, the Company will issue to the Holder a new Warrant of like tenor,
in lieu of this Warrant or such new Warrants, representing the right to
subscribe for and purchase the number of shares of Common Stock which may be
subscribed for and purchased hereunder.
-5-
<PAGE>
9. The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. This Warrant shall not entitle the Holder to any
voting rights or any rights as a shareholder of the Company. The rights and
obligations of the Company, of the Holder, and of any holder of shares of Common
Stock issuable hereunder, shall survive the exercise of this Warrant.
10. This Warrant sets forth the entire agreement of the Company and the
Holder of the Common Stock issuable upon the exercise of this Warrant with
respect to the rights of the Holder and the Common Stock issuable upon the
exercise of this Warrant, notwithstanding the knowledge of such Holder of any
other agreement or the provisions of any agreement, whether or not known to the
Holder, and the Company represents that there are no agreements inconsistent
with the terms hereof or which purport in any way to bind the Holder of this
Warrant or the Common Stock.
11. The validity, interpretation and performance of this Warrant and
each of its terms and provisions shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal and dated as of September
14, 1999.
RESEARCH ENGINEERS, INC.
By: /S/ Jyoti Chatterjee
-----------------------------------
Jyoti Chatterjee
President
-6-
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"), OR ANY STATE
SECURITIES LAWS AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED,
OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION, BY THE
HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE OPINION
OF ITS COUNSEL OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE
AS MAY BE SATISFACTORY TO COUNSEL FOR THE COMPANY, IN EITHER CASE, TO
THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE 1933
ACT AND APPLICABLE STATE SECURITIES LAWS.
RESEARCH ENGINEERS, INC.
Common Stock Purchase Warrant
to
Purchase 7,500 Shares
of
Common Stock
This Common Stock Purchase Warrant is issued to:
GANESH ASSET MANAGEMENT
by RESEARCH ENGINEERS, INC., a Delaware corporation (hereinafter called the
"Company", which term shall include its successors and assigns).
FOR VALUE RECEIVED and subject to the terms and conditions hereinafter
set out, the registered holder of this Warrant as set forth on the books and
records of the Company (the "Holder") is entitled upon surrender of this Warrant
to purchase from the Company Seven Thousand, Five Hundred (7,500) fully paid and
nonassessable shares of Common Stock, $.01 par value per share (the "Common
Stock"), at the Exercise Price (as defined below) per share.
This Warrant shall expire at the close of business on September 14,
2002.
1. (a) The right to purchase shares of Common Stock represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company at 22700 Savi Ranch Road, Yorba Linda, California 92887 (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company), and
upon payment to the Company, by cash or by certified check or bank draft, of the
Exercise Price for such shares. The Company agrees that the shares of Common
Stock so purchased shall be deemed to be issued to the Holder as the record
owner of such shares of Common Stock as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for such shares
of Common Stock as aforesaid. Certificates for the shares of Common Stock so
purchased (together with a cash adjustment in lieu of any fraction of a share)
shall be delivered to the Holder within a
-1-
<PAGE>
reasonable time, not exceeding five (5) business days, after the rights
represented by this Warrant shall have been so exercised, and, unless this
Warrant has expired, a new Warrant representing the number of shares of Common
Stock, if any, with respect to which this Warrant shall not then have been
exercised, in all other respects identical with this Warrant, shall also be
issued and delivered to the Holder within such time, or, at the request of the
Holder, appropriate notation may be made on this Warrant and the same returned
to the Holder.
(b) This Warrant may be exercised to acquire, from and after the
date hereof, the aggregate number of shares of Common Stock set forth on the
first page hereof (subject to adjustments described in this Warrant); provided,
however, the right hereunder to purchase such shares of Common Stock shall
expire at the close of business on September 14, 2002.
2. This Warrant is being issued by the Company in connection with
certain capital raising activities related to the acquisition by the Company of
NetGuru Systems, Inc.
3. The Company covenants and agrees that all Common Stock upon issuance
against payment in full of the Exercise Price by the Holder pursuant to this
Warrant will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof (except to the extent
resulting from the Holder's own circumstances, actions or omissions). The
Company covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will have at all times
authorized, and reserved for the purpose of issue or transfer upon exercise of
the rights evidenced by this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant, and
will procure at its sole expense upon each such reservation of shares the
listing thereof (subject to issuance or notice of issuance) on all stock
exchanges on which the Common Stock is then listed or inter-dealer trading
systems on which the Common Stock is then traded. The Company will take all such
action as may be necessary to assure that such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common Stock may
be listed or inter-dealer trading system on which the Common Stock is then
traded. The Company will not take any action which would result in any
adjustment in the number of shares of Common Stock purchasable hereunder if the
total number of shares of Common Stock issuable pursuant to the terms of this
Warrant after such action upon full exercise of this Warrant and, together with
all shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon exercise of all options and other rights to purchase shares of
Common Stock then outstanding, would exceed the total number of shares of Common
Stock then authorized by the Company's Certificate of Incorporation, as then
amended.
4. The Initial Exercise Price is $9.42 per share of Common Stock
("Initial Exercise Price"). The Initial Exercise Price shall be adjusted as
provided for below in this Section 4 (the Initial Exercise Price, and the
Initial Exercise Price, as thereafter then adjusted, shall be referred to as the
"Exercise Price") and the Exercise Price from time to time shall be further
adjusted as provided for below in this Section 4. Upon each adjustment of the
Exercise Price, the Holder shall thereafter be entitled to receive upon exercise
of this Warrant, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock obtained by (i) multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares of Common
Stock purchasable hereunder immediately prior to such adjustment, and (ii)
dividing the product thereof by the Exercise Price resulting from such
adjustment. The Exercise Price shall be adjusted as follows:
-2-
<PAGE>
(i) In the case of any amendment to the Company's
Certificate of Incorporation to change the designation of the
Common Stock or the rights, privileges, restrictions or
conditions in respect to the Common Stock or division of the
Common Stock, this Warrant shall be adjusted so as to provide
that upon exercise thereof, the Holder shall receive, in lieu of
each share of Common Stock theretofore issuable upon such
exercise, the kind and amount of shares, other securities, money
and property receivable upon such designation, change or
division by the Holder issuable upon such exercise had the
exercise occurred immediately prior to such designation, change
or division. This Warrant shall be deemed thereafter to provide
for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4.
The provisions of this Subsection 4(i) shall apply in the same
manner to successive reclassifications, changes, consolidations
and mergers.
(ii) If the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of
shares of Common Stock, or declare a dividend or make any other
distribution upon the Common Stock payable in shares of Common
Stock, the Exercise Price in effect immediately prior to such
subdivision or dividend or other distribution shall be
proportionately reduced, and conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number
of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination shall be proportionately
increased.
(iii) If any capital reorganization or reclassification
of the capital stock of the Company, or any consolidation or
merger of the Company with or into another corporation or other
entity, or the sale of all or substantially all of the Company's
assets to another corporation or other entity shall be effected
in such a way that holders of shares of Common Stock shall be
entitled to receive stock, securities, other evidence of equity
ownership or assets with respect to or in exchange for shares of
Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale (except as
otherwise provided below in this Section 4), lawful and adequate
provisions shall be made whereby the Holder shall thereafter
have the right to receive upon the exercise hereof upon the
basis and upon the terms and conditions specified herein, such
shares of stock, securities, other evidence of equity ownership
or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock
equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of this
Warrant under this Section 4 had such reorganization,
reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holder to the end
that the provisions hereof (including, without limitation,
provisions for adjustments of the Exercise Price and of the
number of shares of Common Stock receivable upon the exercise of
this Warrant) shall thereafter be applicable, as nearly as may
be, in relation to any shares of stock, securities, other
evidence of equity ownership or assets thereafter deliverable
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<PAGE>
upon the exercise hereof (including an immediate adjustment, by
reason of such consolidation or merger, of the Exercise Price to
the value for the Common Stock reflected by the terms of such
consolidation or merger if the value so reflected is less than
the Exercise Price in effect immediately prior to such
consolidation or merger). Subject to the terms of this Warrant,
in the event of a merger or consolidation of the Company with or
into another corporation or other entity as a result of which
the number of shares of common stock of the surviving
corporation or other entity issuable to holders of Common Stock,
is greater or lesser than the number of shares of Common Stock
outstanding immediately prior to such merger or consolidation,
then the Exercise Price in effect immediately prior to such
merger or consolidation shall be adjusted in the same manner as
though there were a subdivision or combination of the
outstanding shares of Common Stock. The Company shall not effect
any such consolidation, merger or sale, unless, prior to the
consummation thereof, the successor corporation (if other than
the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to the Holder, the
obligation to deliver to the Holder such shares of stock,
securities, other evidence of equity ownership or assets as, in
accordance with the foregoing provisions, the Holder may be
entitled to receive or otherwise acquire. If a purchase, tender
or exchange offer is made to and accepted by the holders of more
than fifty (50%) percent of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger or
sale with the person having made such offer or with any
affiliate of such person, unless prior to the consummation of
such consolidation, merger or sale the Holder of this Warrant
shall have been given a reasonable opportunity to then elect to
receive upon the exercise of this Warrant the amount of stock,
securities, other evidence of equity ownership or assets then
issuable with respect to the number of shares of Common Stock in
accordance with such offer.
(iv) In case the Company shall, at any time prior to
exercise of this Warrant, consolidate or merge with any other
corporation or other entity (where the Company is not the
surviving entity) or transfer all or substantially all of its
assets to any other corporation or other entity, then the
Company shall, as a condition precedent to such transaction,
cause effective provision to be made so that the Holder of this
Warrant upon the exercise of this Warrant after the effective
date of such transaction shall be entitled to receive the kind
and amount of shares, evidences of indebtedness and/or other
securities or property receivable on such transaction by a
holder of the number of shares of Common Stock as to which this
Warrant was exercisable immediately prior to such transaction
(without giving effect to any restriction upon such exercise);
and, in any such case, appropriate provision shall be made with
respect to the rights and interest of the Holder of this Warrant
to the end that the provisions of this Warrant shall thereafter
be applicable (as nearly as may be practicable) with respect to
any shares, evidences of indebtedness or other securities or
assets thereafter deliverable upon exercise of this Warrant.
Upon the occurrence of any event described in this Section
4(iv), the holder of this Warrant shall have the right to (i)
exercise this Warrant immediately prior to such event at an
Exercise Price equal to lesser of (1) the then Exercise Price or
(2) the price per share of Common Stock paid in such event, or
(ii) retain ownership of this Warrant, in which event,
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<PAGE>
appropriate provisions shall be made so that the Warrant shall
be exercisable at the Holder's option into shares of stock,
securities or other equity ownership of the surviving or
acquiring entity.
Whenever the Exercise Price shall be adjusted pursuant to this
Section 4, the Company shall issue a certificate signed by its President or Vice
President and by its Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board of
Directors of the Company made any determination hereunder), and the Exercise
Price after giving effect to such adjustment, and shall cause copies of such
certificates to be mailed (by first-class mail, postage prepaid) to the Holder
of this Warrant. The Company shall make such certificate and mail it to the
Holder promptly after each adjustment.
No fractional shares of Common Stock shall be issued in connection
with any exercise of this Warrant, but in lieu of such fractional shares, the
Company shall make a cash payment therefor equal in amount to the product of the
applicable fraction multiplied by the Exercise Price then in effect.
5. In the event the Company grants rights (other than rights granted
pursuant to a shareholder rights or poison pill plan) to all shareholders to
purchase Common Stock, the Holder shall have the same rights as if this Warrant
had been exercised immediately prior to such grant.
6. This Warrant need not be changed because of any change in the
Exercise Price or in the number of shares of Common Stock purchased hereunder.
7. The terms defined in this paragraph, whenever used in this Warrant,
shall, unless the context otherwise requires, have the respective meanings
hereinafter specified. The term "Common Stock" shall mean and include the
Company's Common Stock, $.01 par value per share, authorized on the date of the
original issue of this Warrant and shall also include in case of any
reorganization, reclassification, consolidation, merger or sale of assets of the
character referred to in Section 4 hereof, the stock, securities or assets
provided for in such paragraph. The term "Company" shall also include any
successor corporation to RESEARCH ENGINEERS, INC. by merger, consolidation or
otherwise. The term "outstanding" when used with reference to Common Stock shall
mean at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company. The term "1933 Act" shall mean the Securities Act of
1933, as amended, or any successor Federal statute, and the rules and
regulations of the Securities and Exchange Commission, or any other Federal
agency then administering the 1933 Act, thereunder, all as the same shall be in
effect at the time.
8. This Warrant is exchangeable, upon the surrender hereby by the
Holder at the office or agency of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each of such new Warrants to represent the right to subscribe for and purchase
such number of shares of Common Stock as shall be designated by the Holder at
the time of such surrender. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant or any such new
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<PAGE>
Warrants and, in the case of any such loss, theft, or destruction, upon delivery
of a bond of indemnity, reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender or cancellation of this Warrant or such
new Warrants, the Company will issue to the Holder a new Warrant of like tenor,
in lieu of this Warrant or such new Warrants, representing the right to
subscribe for and purchase the number of shares of Common Stock which may be
subscribed for and purchased hereunder.
9. The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. This Warrant shall not entitle the Holder to any
voting rights or any rights as a shareholder of the Company. The rights and
obligations of the Company, of the Holder, and of any holder of shares of Common
Stock issuable hereunder, shall survive the exercise of this Warrant.
10. This Warrant sets forth the entire agreement of the Company and the
Holder of the Common Stock issuable upon the exercise of this Warrant with
respect to the rights of the Holder and the Common Stock issuable upon the
exercise of this Warrant, notwithstanding the knowledge of such Holder of any
other agreement or the provisions of any agreement, whether or not known to the
Holder, and the Company represents that there are no agreements inconsistent
with the terms hereof or which purport in any way to bind the Holder of this
Warrant or the Common Stock.
11. The validity, interpretation and performance of this Warrant and
each of its terms and provisions shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal and dated as of September
14, 1999.
RESEARCH ENGINEERS, INC.
By: /S/ Jyoti Chatterjee
----------------------------------
Jyoti Chatterjee
President
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EXHIBIT 5.1
RUTAN & TUCKER, LLP
611 Anton Boulevard, Suite 1400
Costa Mesa, California 92626
(714) 641-5100
January 19, 2000
Research Engineers, Inc.
22700 Savi Ranch Parkway
Yorba Linda, California 92887
Re: Form S-3 Registration Statement
Gentlemen:
We have acted as special counsel to Research Engineers, Inc., a
Delaware corporation (the "Company"), in connection with the registration by the
Company on Form S-3 (the "Registration Statement") under the Securities Act of
1933, as amended, of 215,000 shares of the Company's common stock, $.01 par
value (the "Shares"). The Shares are being offered for sale by certain
stockholders of the Company (the "Selling Stockholders") identified in the
Registration Statement.
On the basis of such investigations as we have deemed necessary, we
are of the opinion that the Shares to be offered for sale by the Selling
Stockholders have been duly authorized and are (or, upon exercise of warrants in
accordance with their terms, will be) fully paid and nonassessable and have been
(or, upon the execution and delivery of certificates representing Shares after
exercise of warrants in accordance with their terms, will be) validly issued.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" contained in the prospectus that forms a part of the
Registration Statement.
Very truly yours,
/S/ RUTAN & TUCKER, LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Research Engineers, Inc.:
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of Research Engineers, Inc. of our report dated May 17, 1999, relating
to the consolidated balance sheet of Research Engineers, Inc. and subsidiaries
as of March 31, 1999, and the related consolidated statements of operations,
stockholders' equity and comprehensive income (loss) and cash flows for the
years ended March 31, 1999 and 1998, which report appears in the March 31, 1999
Annual Report on Form 10-KSB of Research Engineers, Inc. and to the reference to
our firm under the heading "Experts" in the related prospectus.
/S/ KPMG LLP
Orange County, California
January 19, 2000
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Research Engineers, Inc.:
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of Research Engineers, Inc. of our report dated October 21, 1999,
relating to the combined balance sheets of NetGuru Systems, Inc. and NetGuru
Consulting, Inc. as of December 31, 1997 and 1998, and the related combined
statements of earnings, stockholder's equity and cash flows for the years then
ended, which report appears in the Form 8-K/A of Research Engineers, Inc. dated
September 14, 1999 and to the reference to our firm under the heading "Experts"
in the related prospectus.
/S/ KPMG LLP
Boston, Massachusetts
January 19, 2000
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Research Engineers, Inc.:
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of Research Engineers, Inc. of our report dated May 8, 1999, relating
to the balance sheets of R-Cube Technologies, Inc. as of September 30, 1998 and
1997, and the related statements of operations, stockholders' equity and cash
flows for the years then ended, which report appears in the Form 8-K/A of
Research Engineers, Inc. dated February 26, 1999 and to the reference to our
firm under the heading "Experts" in the related prospectus.
/S/ KPMG LLP
Orange County, California
January 19, 2000
