-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ALxRW32p5hd/HEl5UiJCh1tMokLhfi/yKgsq8WwkamBnZDyEkD0g8azXTHaj0+d6 13cWhSYX9LVQGopgMrc29g== 0001019687-00-000044.txt : 20000202 0001019687-00-000044.hdr.sgml : 20000202 ACCESSION NUMBER: 0001019687-00-000044 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20000119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESEARCH ENGINEERS INC CENTRAL INDEX KEY: 0001015920 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 222356861 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-94921 FILM NUMBER: 509351 BUSINESS ADDRESS: STREET 1: 22700 SAVI RANCH PARKWAY CITY: YORBA LINDA STATE: CA ZIP: 92887 BUSINESS PHONE: 7149742500 MAIL ADDRESS: STREET 1: 22700 SAVI RANCH PKWY CITY: YORBA LINDA STATE: CA ZIP: 92887 S-3 1 RESEARCH ENGINEERS, INC. As filed with the Securities and Exchange Commission on January 19, 2000 Registration No. 333-_______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ 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) ------------------ 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) ------------------ 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. [ ] ------------------ CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Common Stock, $.01 par value 215,000 $55.00 $11,825,000 $3,121.80 - -------------------------------------------------------------------------------- (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. ================================================================================ 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
TABLE OF CONTENTS 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
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. 2 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. 3 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: 4 - 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. 5 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. 6 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. 7 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. 8 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. 9 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. 10 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. 11 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 - 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 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:
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 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 -- -- - ---------------
* 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 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 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 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 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 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 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 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 EX-4.2 2 COMMON STOCK PURCHASE WARRANT - BRIDGEWATER 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- (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- (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- 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- 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- 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- EX-4.3 3 COMMON STOCK PURCHASE WARRANT - PACIFIC SUMMIT 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- 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- (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- 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- 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- 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- EX-4.4 4 COMMON STOCK PURCHASE WARRANT - GANESH ASSET 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- 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- (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- 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- 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- 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- EX-5.1 5 CONSENT OF RUTAN & TUCKER, LLP 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 EX-23.1 6 CONSENT OF KPMG 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 EX-23.2 7 CONSENT OF INDEPENDENT AUDITORS 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 EX-23.3 8 CONSENT OF INDEPENDENT AUDITORS 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 -----END PRIVACY-ENHANCED MESSAGE-----