Document:

Independent Auditor's Report

Board of Directors and Stockholders
REpipeline.com, Inc.
Dallas, Texas

We have  audited  the  accompanying  balance  sheet of  REpipeline.com,  Inc. (a
development  stage company) as of June 30, 2000,  and the related  statements of
operations,  stockholders' equity, and cash flows for the period August 16, 1999
(inception)   through  June  30,  2000.  These  financial   statements  are  the
responsibility of the company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform our audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting  principles  used and the overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of REpipeline.com,  Inc. at June
30,  2000 and the  results of its  operations  and its cash flows for the period
August 16, 1999  (inception)  through June 30, 2000 in conformity with generally
accepted accounting principles.

Turner Stone & Associates
/s/
Certified Public Accountants
August 23, 2000

<PAGE>

                              REpipeline.com, Inc.
                         ( A DEVELOPMENT STAGE COMPANY )
                                  BALANCE SHEET
                                  JUNE 30, 2000

                                     Assets

Current assets:
          Cash                                                            23,659
          Advances to former employees                                    36,661
                 Total current assets                                     60,320

Property and equipment, at cost, less
     accumulated depreciation of $ 1,998                                   7,992

Other assets:
          Capitalized web site development costs,
               less accumulated amortization of $ 0         100,381
          Rental security deposit                            15,696      116,077

                                                                         184,389
                      Liabilities and Stockholders' Equity

Current liabilities:
          Accounts payable, trade                                         59,074
          Withholding taxes payable                                       19,238
                  Total current liabilities                               78,312

Commitments and contingencies                                                  0

Stockholders' equity:
          Common stock, $ .0001, 10,000,000 shares
               authorized, 5,561,834 shares issued and
               outstanding                                      556
          Preferred stock, $ .0001 par value, 2,000,000
               shares authorized, no shares issued and
               outstanding, no preferences determined             0
          Paid in capital in excess of par                  715,900
          Deficit accumulated during development stage     (610,379)
          Treasury stock, 3,909,267 common stock
          shares at $ 0 cost                                      0      106,077
                                                                         184,389

    The accompanying notes are an integral part of the financial statements.

<PAGE>

                              REpipeline.com, Inc.
                         ( A DEVELOPMENT STAGE COMPANY )
                             STATEMENT OF OPERATIONS
           PERIOD AUGUST 16, 1999 ( INCEPTION ) THROUGH JUNE 30, 2000

Revenues                                                                  0

Costs and expenses:
          Web site development costs             164,201
          Marketing and promotion                 26,286
         Compensation and benefits                67,922
         General and administrative              349,972
         Depreciation and amortization             1,998            610,379

Loss from operations                                               (610,379)

Interest expense                                                          0

Loss before income taxes                                           (610,379)

Provision for income tax benefit

Net loss                                                           (610,379)

The accompanying notes are an integral part of the financial statements.

<PAGE>
<TABLE>
<CAPTION>

                              REpipeline.com, Inc.
                         ( A DEVELOPMENT STAGE COMPANY )
                        STATEMENT OF STOCKHOLDERS' EQUITY
           PERIOD AUGUST 16, 1999 ( INCEPTION ) THROUGH JUNE 30, 2000

                                        Common Stock         Additional
                                        ------------           Paid in    Accumulated     Treasury
                                 No. of Shs.       $         Capital         Deficit       Stock         Total
                                 -----------  -----------   -----------   -----------   -----------   -----------
<S>                              <C>          <C>           <C>           <C>           <C>           <C>
Balance at August 16, 1999                0             0             0             0             0             0

Common stock issued in
   exchange for organizational
   services from founder          3,930,267           393                                                     393

Common stock issued in
   exchange for cash                675,169            68       642,101                                   642,169

Common stock issued in
   exchange for services            956,398            95        73,799                                    73,894

Common stock shares expunged
   from founder and held in
   treasury                      (3,909,267)                                                      0             0

Net loss                                                                     (610,379)                   (610,379)

Balance at June 30, 2000          5,561,834           556       715,900      (610,379)            0       106,077

</TABLE>

    The accompanying notes are an integral part of the financial statements.

<PAGE>

                              REpipeline.com, Inc.
                         ( A DEVELOPMENT STAGE COMPANY )
                             STATEMENT OF CASH FLOWS
           PERIOD AUGUST 16, 1999 ( INCEPTION ) THROUGH JUNE 30, 2000

Cash flows from operating activities:
          Cash received from customers
          Cash paid to employees                             (67,922)
          Cash paid to suppliers                            (387,860)
          Interest paid
          Income taxes paid
Cash used in operating activities                           (455,782)

Cash flows from investing activities:
          Purchase of property and equipment                  (9,990)
          Web development expenditures                      (100,381)
          Rental deposit advanced                            (15,696)
          Advances to former employees                       (36,661)

Cash used in investing activities                           (162,728)

Cash flows from financing activities:
          Proceeds from issuance of common stock             642,169
Cash provided by financing activities                        642,169

Net increase ( decrease ) in cash                             23,659

Cash at beginning of the year                                      0
Cash at end of year                                           23,659

    The accompanying notes are an integral part of the financial statements.

<PAGE>

                              REpipeline.com, Inc.
                         ( A DEVELOPMENT STAGE COMPANY )
                             STATEMENT OF CASH FLOWS
           PERIOD AUGUST 16, 1999 ( INCEPTION ) THROUGH JUNE 30, 2000

                           Reconciliation of Net Loss
                           --------------------------
                      to Net Cash Flows Used in Operations
                      ------------------------------------

Net loss                                                             (610,379)

Adjustments to reconcile net loss to
  net cash flows used in operations:

     Depreciation and amortization                        1,998
     Common stock issued for services                    74,287
     Increase (decrease) in accounts payable             59,074
     Increase (decrease) in withholding taxes payable    19,238       154,597

Net cash used in operating activities                                (455,782)

Supplemental Disclosure of Non Cash
Investing and Financing Activities

Issuance of common stock in exchange for services                      74,287

    The accompanying notes are an integral part of the financial statements.

<PAGE>

                              REpipeline.com, INC.
                         ( A DEVELOPMENT STAGE COMPANY )
                          NOTES TO FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization and business
         -------------------------

The Company was  incorporated in the state of Texas on June 8,2000.  The Company
is an Applications  Service  Provider (ASP) and Business  Service Provider (BSP)
for the commercial real estate industry. On July 10, 2000, the Company agreed to
purchase  the  assets and assume the  liabilities  and  shareholder's  equity of
RealEstate4Sale.com.  RealEstate4Sale.com, ("RE4S") was incorporated in Colorado
on August 17,  1999,  and its  purpose was to provide a  commercial  real estate
listings  on  the  Internet.  However,  the  concept  was  too  narrow  for  the
marketplace,  which requires a variety of services to the commercial real estate
market  over the  Internet,  which are best  addressed  by  REpipeline.com.  The
company, currently in the development stage, anticipates its new website will be
completed and ready for use in November 2000.

         Management estimates
         --------------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities  and  disclosures  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Significant  estimates  include the  capitalization of costs incurred to develop
the  Company's web site and the  amortization  of these costs over the estimated
useful life of the web site ( Note 2 ).

         Cash flows
         ----------

For  purposes of the  statement  of cash flows,  cash  includes  demand and time
deposits with  maturities of less than three months.  None of the Company's cash
is restricted.

         Property and equipment
         ----------------------

Property  and  equipment  are  stated at cost  less  accumulated  depletion  and
depreciation.  Depreciation  of  property  is  equipment  is being  provided  by
straight line methods over estimated useful lives of five years.

         Web site development costs
         --------------------------

The  Company  accounts  for its  costs  of  developing  its web  site ( Note 2 )
pursuant to EITF Abstract No. 00-02.  Pursuant to this pronouncement,  all costs
incurred for planning  activities  have been charged to expense.  Costs incurred
for development of the web site and its infrastructure are being capitalized and
will be amortized using the straight line method over its estimated  useful live
of three  years,  beginning  when the web site is  available  for use,  which is
anticipated to be in November 2000.  Costs incurred to operate the web site will
be charged to expense.

<PAGE>

         Advertising costs
         -----------------

The Company's  advertising  costs, which consist primarily of printed materials,
are charged to expense when incurred. For the period August 16, 1999 ( inception
) through June 30, 2000, advertising expenses totaled $19,837.

         Accounting for stock based compensation
         ---------------------------------------

SFAS No. 123, 'Accounting for Stock-Based Compensation',  encourages entities to
recognize  compensation costs for stock-based employee  compensation plans using
the fair value  method of  accounting,  as defined  therein,  but allows for the
continued  use of the  intrinsic  value method of  accounting  prescribed by APB
Opinion No. 25,  'Accounting  for Stock  Issued to  Employees'.  The Company has
adopted the intrinsic  value method to account for its stock options and as such
is not required to recognize  compensation expense in the accompanying financial
statements  because the market value of the Company's common stock was less than
the exercise price on the dates the options were granted.

2.  WEB SITE DEVELOPMENT

During the period August 16, 1999 ( inception ) through June 30, 2000,  the RE4S
purchased a web site domain name for $ 90,000. This web site allowed the RE4S to
provide  commercial  listings  of real  estate  properties  over  the  Internet.
However,  the focus of these services was too narrow and was not accepted by the
commercial real estate market, therefore the Company subsequently abandoned this
web site and  returned  it to the seller,  who  forgave  the  remaining $ 64,000
balance owed on the purchase  price.  The actual payments made for this web site
totaling $26,000, along with the operating costs, were charged to expense.

The  RE4S  website  technology  was  discontinued  and  REpipeline's  technology
platform was launched June 1, 2000.

In connection  with the  development of  REpipeline's  website,  the Company has
capitalized  $ 100,381 of  development  costs,  which  consist  primarily of the
internal  labor costs of  employees  directly  associated  with the  development
activity and external direct costs of materials and services consumed during the
development  activity.  These  costs  will be  amortized  over  the  three  year
estimated  useful  life of the web  site  beginning  at the time the web site is
available for use, currently anticipated to be in November 2000.

<PAGE>

3.  LEGAL PROCEEDINGS/FORMER STOCKHOLDER

Many of the employees of the Company had previously  been employees of RE4S. Tom
Bailey, who was hired as President and CEO of RE4S on January 27, 2000, resigned
his  position  as of May 1, 2000,  citing a breach of  Contract  and  failure to
disclose the criminal background of Mr. Douglas Fonteno,  the founder and acting
officer  of  RE4S.  Tom  Bailey  incorporated  REpipeline.com,   Inc.,  a  Texas
corporation subsequent to leaving as President of RE4S.

In April 2000, Mr. Fonteno was  incarcerated  for parole  violation from a prior
conviction of securities  fraud. On April 28, 2000, the board of directors voted
to expunge all shares of RE4S owned by Mr.  Fonteno,  his family  members and/or
affiliated companies,  which were issued for inadequate consideration and proper
approval  by the Board of  Directors.  These  shares,  totaling  3,909,267,  are
currently held in treasury by a wholly owned nominee  corporation to be reissued
in the future to  outsiders  for  corporate  financing  of the  Company  and /or
acquisition.

Prior to his  displacement  from RE4S,  Mr.  Fonteno made  numerous non interest
bearing  advances to himself and several  entities  controlled by him totaling $
183,906.  Although these advances have been written off as  uncollectable in the
accompanying financial statements,  the Company is in the process of obtaining a
Writ of  Garnishment  against  Mr.  Fonteno in the amount of $ 180,858  and will
attempt to  collect  this  amount.  Any amount  received  in the future  will be
recorded as income.

4.  COMMITMENTS AND CONTINGENCIES

         Legal proceedings
         -----------------

The  Company is  subject to legal  proceedings  and  claims  which  arise in the
ordinary  course  of its  business.  As of  this  date,  except  for  its  legal
proceedings  against  its  founder ( Note 3 ), the  Company  is not a party to a
lawsuit or other legal claims or contingencies.  Management does not believe the
outcome of its  lawsuit  with its  founder  will have an  adverse  effect on the
Company's financial position, operating results or cash flows.

         Employment agreements
         ---------------------

On May 1, 2000,  the Company  entered into an employment  agreement  with George
Thomas Bailey,  its President/CEO.  The agreement,  which expires June 30, 2003,
provides for annual  compensation  of $150,000  increasing to $225,000 after the
Company  raises $ 2 million  in  equity  funding.  In  addition,  the  agreement
provides a $200,000  signing  bonus,  payable  after the above  funding has been
raised.  The company has the option to pay half of the amount  payable in common
stock  shares  of the  company  valued  at the bid  price of the stock as of the
effective  date of the  agreement.  In the case of  termination,  the  agreement
provides  for a 12  month  salary  severance  package,  reduced  by  50%  if the
termination is for cause. The agreement  provides for an equity bonus package if
the Company  completes its proposed  merger with a public company ( Note 7 ) and
if the  Company  achieves  various  goals  as these  goals  are  defined  in the
agreement.  In the case of the Photonics  merger, an option to purchase at $0.10
per share approximately 11,000,000 shares would be issued to Mr. Bailey.

<PAGE>

In addition,  this  employment  agreement  provides  qualified stock options for
500,000 of the Company's  common stock at an exercise  price of $ 0.10 per share
(post  merger).  These  options vest over the three year term of the  employment
agreement  and  automatically  expire three years from the date they vest.  Upon
termination,  all vested options must be exercised within 45 days or they expire
and all  non-vested  options will be  cancelled.  Subject to the approval of the
Photonic's shareholders.

         Leases
         ------

The Company is obligated under a non-cancelable operating sublease agreement for
its office facilities, effective May 1, 2000 and expiring December 31, 2001. The
agreement  provides  for a monthly  rental  payment of $ 5,232 and a three month
security deposit. There is no option for renewal. Prior to May 1, 2000, the RE4S
leased office space from its founder,  a corporation  of Mr.  Fonteno ( Note 3 )
under a month to month agreement at $ 3,000 per month. Rent under this agreement
totaled $ 15,000.  At June 30, 2000,  future  minimum rental  payments  required
under the terms of the above sublease agreement is as follows.

                     Year Ended June 30,                  Amount
                                --------
                             2001                          62,784
                             2001                          31,392
                             2003                               0
                                                         --------
                                                           94,176
                                                         ========

         Common stock to be issued
         -------------------------

The  Company  has agreed  with  three of its  vendors to satisfy $ 36,250 of its
accounts  payable  obligations  through the  issuance  of 145,750  shares of its
common  stock.  No specific  time has been  established  for these  shares to be
issued.

5.  INCOME TAXES

The  Company  uses the  accrual  method of  accounting  for  federal  income tax
reporting purposes. At June 30, 2000, the Company has a net operating loss carry
forward for tax  reporting  purposes of  approximately  $ 580,000  which expires
through the year 2010.

Deferred  income  taxes are  recognized  for the net tax  effects  of  temporary
differences between the carrying amounts of assets and liabilities for financial
reporting  purposes and the tax bases of those assets and liabilities  that will
result in  taxable or  deductible  amounts in future  years.  At June 30,  2000,
pursuant to Statement of Financial Accounting Standards No. 109, the Company has
recognized  deferred tax assets and liabilities,  the significant  components of
which are summarized below.

                Deferred tax assets:

                     Net operating loss carry forward         197,200

                Deferred tax liability:

                     Depreciation and amortization               (800)
                                                           ----------

                Gross deferred tax asset                      196,400

                Valuation allowance                          (196,400)
                                                           ----------

                Net deferred tax asset                              0
                                                           ==========

<PAGE>

A reconciliation  of income tax expense at the statutory  federal rate of 34% to
income tax expense at the Company's effective tax rate for the period August 16,
1999 ( inception ) through June 30, 2000 is as follows:

                Tax expense ( benefit ) computed at statutory rate     (196,400)
                Valuation allowance increase                            196,400
                                                                    -----------

                Income tax expense ( benefit )                                0
                                                                    ===========

6.  FINANCIAL INSTRUMENTS

The Company's financial instruments, none of which are held for trading purposes
and which potentially  subject the Company to credit risks,  consist of its cash
and advances to its former employees.

         Cash
         ----

The Company  maintains  its cash in bank deposit and other  accounts  which,  at
times, may exceed federally insured limits.  The Company has not experienced any
losses in such  accounts  and does not believe it is subject to any credit risks
involving its cash.

         Advances to former employees
         ----------------------------

The Company's advances to its former employees are non interest bearing,  due on
demand and are secured by 28,186 shares of the Company's  common stock issued to
the  former  employees  but  held  by  the  Company.  Management  believes  this
collateral will be sufficient to induce repayment of the advances and that it is
not exposed to any  significant  credit risks  affecting these advances and that
these advances are fairly stated at estimated net realizable amounts.

7.  PROPOSED MERGER WITH PUBLIC COMPANY

On June 30, 2000, the Company entered into an agreement with an inactive, public
California  corporation  whereby the  stockholders of the Company would exchange
their common stock shares for 85% of the outstanding  common stock shares of the
public company.  The public company would survive the merger and the transaction
would be accounted for as a reverse merger similar to a pooling of interests.

A condensed  pro forma  balance  sheet of the combined  companies,  assuming the
merger was effected June 30, 2000, is a follows.

              Assets
              Current assets                                         135,320
              Other assets                                           124,069
                                                                ------------
                                                                     259,389

                                  Liabilities & Equity
                                  --------------------
              Current liabilities                                  4,025,049
              Other liabilities                                            0
              Stockholders' equity                                (3,765,660)
                                                                ------------
                                                                     259,389

<PAGE>

8.  STOCK OPTIONS

At May 1, 2000, pursuant to an employment  agreement ( Note 4 ), the Company had
granted 27,778 options to purchase the Company's common stock at an excise price
of $ 1.00.  The following pro forma  information is required by SFAS No. 123 and
is  based on the  fair  value  of the  options  estimated  by  management  to be
approximately $ .09 per share.  Management's estimate of fair value is primarily
based on the book value of the Company since no other  recoverable form of value
measurement is available.

              Pro forma net loss                                    (662,687)<PAGE>

                              EMPLOYMENT AGREEMENT

         THIS  AGREEMENT  made  as  of  the  nineteenth  day  of  April,   2001,
(hereinafter  called the  "Commencement  Date"),  by and between  DATA  RESEARCH
ASSOCIATES, INC., a Missouri corporation (hereinafter called the "Employer") and
Katharine W. Kilper,  an  individual  presently  residing at 9164 General  Grant
Lane, St. Louis, Missouri 63123 (hereinafter called the "Employee").

         WHEREAS,  Employee  is  presently  the  Vice  President  and  has  made
significant  contributions to Employer during the term of Employee's employment;
and

         WHEREAS,  Employer  wishes  to  assure  itself  both  of the  continued
availability  of the services of Employee in the event of a "Change of Control,"
(as  defined  in  Schedule  I) and to  assure  itself  of  the  availability  of
Employee's services in the absence of a Change of Control; and

         WHEREAS,  Employee wishes to continue to be employed  subsequent to any
Change of Control and is  agreeable  to the terms of  continued  employment  set
forth herein; and

         WHEREAS,  the parties  believe  that it is to their  mutual  benefit to
enter into this Agreement.

         NOW,  THEREFORE,  in consideration of the mutual covenants and promises
hereinafter set forth, the parties hereto mutually agree as follows:

         FIRST: EMPLOYMENT OF THE EMPLOYEE.  Employer,  subject to the terms and
provisions and for the term  hereinafter set forth,  hereby employs  Employee to
perform  the  duties  of the Vice  President.  Employer  hereby  represents  and
warrants to Employee that the Board of Directors of Employer (hereinafter called
the  "Board"),  at a meeting  duly held or by  unanimous  written  consent,  has
authorized and approved this  Agreement.  Employee  hereby agrees to perform the
duties described herein faithfully and to the best of Employee's ability.

         SECOND:  DUTIES.  Employee,  as the Vice  President of Employer,  shall
perform  those duties and  responsibilities  required by law and as set forth in
the  Articles of  Incorporation  and Bylaws of Employer  and as may from time to
time be assigned to Employee by the Board in its reasonable  discretion,  and in
such capacity agrees that during the term of employment hereunder, Employee will
devote  substantially  all of  Employee's  working  time  and  attention  to the
business and affairs of Employer.  Notwithstanding the foregoing, Employer shall
not,  without the prior  written  consent of  Employee,  directly or  indirectly
require  Employee  to be based at any  office  or  location  outside  of,  or to
relocate or move from, the St. Louis metropolitan area.

         THIRD: SALARY AND BENEFITS.

          (a) Employer will pay Employee for Employee's services during the term
     of employment  hereunder an annual base rate of  compensation  (hereinafter
     called the "Base  Compensation") of one hundred and fifty six thousand five
     hundred dollars  ($156,500),  which Base  Compensation  shall be payable at
     such intervals as the Employer pays its other senior  executive  employees,
     but in any event,  not less  frequently  than  monthly.  Each  fiscal  year
     (commencing with fiscal year 2001), the Compensation Committee of the Board
     (the  "Compensation  Committee") will set Employee's Base  Compensation for
     that fiscal year,  taking into  account the  performance  of Employee,  the
     total  compensation paid to senior executive  officers of similar companies
     of  comparable  size to that of  Employer  and such  other  factors  deemed
     relevant by the Board, but in no event shall such Base Compensation for any
     annual period be less than the Base  Compensation  set for the  immediately
     preceding annual period.

          (b) Employer may also pay Employee a bonus for each fiscal year during
     the term hereof,  which will be  determined  at the sole  discretion of the
     Board.

          (c) Employer agrees to reimburse Employee for all reasonable  business
     expenses  incurred by  Employee in the  performance  of  Employee's  duties
     hereunder for Employer, which expenses shall be substantiated in accordance
     with the procedures of Employer.

          (d) Employer  shall  provide  Employee,  at Employer's  expense,  with
     health,  accident,  long-term  disability,  major  medical  and such  other
     insurance  coverages as are  generally  available  to the senior  executive
     officers of Employer.

          (e) During each fiscal year of Employer, Employee shall be entitled to
     (5) weeks of paid vacation.

          (f)  Employee  shall  also be  entitled  to  participate  in all other
     insurance and retirement plans, retirement benefits, death benefits, salary
     continuation  benefits,  stock option  plans and other fringe  benefits and
     other  plans  generally  available  for the senior  executive  officers  of
     Employer,  but in no event  shall  such  fringe  benefits  be less than the
     benefits provided to Employee for the immediately  preceding annual period.

          (g)  Employer  shall,  at  Employer's  expense,   furnish  such  other
     executive  prerequisites  at least equal in value to those furnished to the
     senior executive officers of Employer.

         FOURTH: TERM OF EMPLOYMENT.  The initial term of Employee's  employment
under this  Agreement  (hereinafter  called the  "Initial  Term") shall be for a
period commencing on the Commencement Date and continuing until a date two years
from  commencement  date,  unless  sooner  terminated as  hereinafter  provided.
Following the Initial  Term,  this  Agreement  shall  automatically  continue in
effect  for an  additional  term of one  (_1__)  year  (hereinafter  called  the
"Additional Term") unless either party, by written notice delivered to the other
not less than ninety  (90) days prior to the  termination  of the Initial  Term,
indicates  the  intention  not  to  enter  into  the  Additional  Term.  At  the
termination of the Initial Term or the Additional  Term, as the case may be, the
obligation of Employer to pay further compensation or expenses to Employee shall
cease, provided,  however, that any obligations hereunder of either party to the
other party at the time of such termination shall not be affected thereby.

         FIFTH:  TERMINATION.  Employer  shall have the right to terminate  this
Agreement  if any of the  following  events  shall  occur  during the Initial or
Additional Term hereof:

          (a)  Employee's  willful  failure  or refusal  to render  services  as
     required  hereunder  after  written  notice from  Employer and a reasonable
     opportunity   on  the  part  of  Employee  to  correct  any  deficiency  in
     performance  specified  in  such  written  notice  from  Employer,  to  the
     satisfaction  of the Board or as otherwise  required by applicable  law; or

          (b) Acts of fraud,  dishonesty or breach of fiduciary  duty  involving
     personal  profit (in each  instance as  determined by the Board in its sole
     discretion) or the conviction of a felony  committed in connection with the
     business of Employer  shall be grounds for  termination  of this  Agreement
     upon  at  least  two  (2)  days'  prior  written  notice  but  without  the
     opportunity  to cure; or

          (c) The  permanent  disability  of Employee,  which,  for the purposes
     hereof,  shall be deemed to have occurred upon the commencement of benefits
     under  any  policy  maintained  by  the  Company  providing  for  long-term
     disability coverage; or

          (d) The death of Employee.  Except as expressly set forth herein,  the
     obligation of Employer to pay further  compensation or expenses of Employee
     shall cease as of the day on which  termination  under this  Article  FIFTH
     shall occur.

         SIXTH:  CHANGE  OF  CONTROL.  Employer  and  Employee  agree  that  the
following provisions shall immediately and automatically become operational upon
the occurrence of a Change of Control (as defined in Schedule I hereof), without
further action on the part of either Employer or Employee:

          (a) In  the  event  of  the  involuntary  termination  or  significant
     reduction in the  position,  duties or  responsibilities  of Employee,  for
     reasons  other than those  defined in  paragraphs  (a), (b), (c) and (d) of
     Article FIFTH hereof (herein  collectively  referred to as a "Termination")
     Employee shall be entitled to an amount,  payable within sixty (60) days of
     the occurrence of the Termination,  equal to a percentage of the greater of
     the Base Compensation in effect as of the date of such Change of Control or
     such Termination as follows: (i)one hundred and fifty percent (150%) if the
     Termination  occurs  within the first year  following  a Change of Control;
     (ii) seventy-five percent (75%) if the Termination occurs within the second
     year following a Change of Control.

          (b) All  options to  purchase  shares of the common  stock of Employer
     held by Employee  pursuant to a stock  option plan of Employer  (the "Stock
     Options") shall be fully vested and exercisable.

          (c) At the sole  discretion  of the Board,  Employee  may be awarded a
     bonus (the "Special Executive Bonus") on a "grossed up" basis (to take into
     account the taxability for federal income purposes of the Special Executive
     Bonus to the Employee) equal to the amount of federal income tax payable by
     the Employee arising from the vesting of Employee's  interests in the Stock
     Options,  assuming the maximum  statutory  rate of federal  income tax then
     applicable to an individual taxpayer.

         SEVENTH:  INDEMNIFICATION.  Employer shall  indemnify,  defend and hold
harmless  Employee for any and all acts or decisions  made by Employee,  in good
faith,  in connection with the performance by Employee of services for Employer,
which  indemnification shall be to the fullest extent permitted by law. Employer
shall use its best  efforts  to insure  its  obligations  under  this  paragraph
SEVENTH  which  insurance   coverage  shall   expressly   include  all  expenses
(including,  without  limitation,  attorneys'  fees)  actually  and  necessarily
incurred by or on behalf of the Employee in  connection  with the defense of any
suit or proceeding  (including appeals therefrom),  which coverage shall, to the
fullest extent permitted by law, include the cost of out-of-court settlements.

         EIGHTH:  GOVERNING LAW. This Agreement is executed and delivered in the
State of Missouri and shall be construed  and enforced in accordance  with,  and
shall be governed by, the laws of such State.

         NINTH: NOTICE. All notices, requests, consents and other communications
required  or  permitted  under this  Agreement  shall be in writing and shall be
deemed  sufficient if delivered by certified or registered mail,  return receipt
requested,  postage  paid,  in the case of  Employee  to  Employee's  last known
address on file with  Employer,  and, in the case of Employer,  to its principal
office. Such notice shall be effective upon deposit in the United States mail or
actual delivery, as the case may be.

         TENTH:  SUMS DUE TO  EMPLOYEE.  If any amount  payable to  Employee  or
vesting  of Stock  Options  pursuant  to  Article  SIXTH,  or  portion  thereof,
constitutes  a  "parachute  payment"  within the meaning of Section  280G of the
Internal  Revenue  Code of 1986,  as amended (the  "Code")  (determined  without
regard to this Article TENTH), then such payment shall be reduced and such Stock
Options shall not vest pursuant to Article  SIXTH,  as determined by Employer in
its sole discretion, to the extent, and only to the extent, necessary to prevent
any such  payment  or  vesting  of  Stock  Options,  or  portion  thereof,  from
constituting a "parachute payment";  provided,  however, that any such reduction
in payments  otherwise  payable pursuant to Article SIXTH or nonvesting of Stock
Options that would  otherwise  vest pursuant to Article SIXTH shall occur if and
only if,  after taking into  account the twenty  percent  (20%) tax set forth in
Section 4999 of the Code, such reduction  and/or  nonvesting  causes Employee to
realize  a  greater  after-tax  benefit  than  Employee  would  realize  if such
reduction  and/or  nonvesting  pursuant to this Article  TENTH had not occurred.
Employee  shall be  entitled  to  "rollover"  any sums  payable  hereunder  into
individual  retirement  accounts  or  similar  entities  to the  fullest  extent
provided by law.

         ELEVENTH:  SEVERABILITY AND  INTERPRETATION.  Whenever  possible,  each
provision of this Agreement and any portion thereof shall be interpreted in such
a  manner  as  to be  effective  and  valid  under  applicable  law,  rules  and
regulations.  If any covenant or other  provision of this  Agreement (or portion
thereof) is invalid,  illegal, or incapable of being enforced,  by reason of any
rule of law rule, regulation,  administrative order, judicial decision or public
policy,   all  other   conditions  and  provisions  of  this  Agreement   shall,
nevertheless,  remain in full force and effect,  and no  covenant  or  provision
shall be deemed  dependent  upon any other  covenant or  provision  (or portion)
unless so expressed herein. The parties hereto desire and consent that the court
or other body making such determination  shall, to the extent necessary to avoid
any  unenforceability,  so  reform  such  covenant,  term,  condition  or  other
provision or portion of this Agreement to the minimum extent  necessary so as to
render the same enforceable in accordance with the intent herein expressed.

         TWELFTH:  ENTIRE  AGREEMENT.  This  Agreement  constitutes  the  entire
agreement between the parties relative to the employment by Employer of Employee
and any and all prior representations,  agreements,  correspondence or memoranda
with respect thereto are superseded hereby.  Notwithstanding  the foregoing this
agreement  does not  affect  the  obligation  of  employee  under  that  certain
Non-Solicitation  and  Non-Competition  Agreement  dated  the  twenty-second  of
October,  1999. No promises,  covenants or  representations  of any character or
nature other than those expressly  stated herein have been made to induce either
party to enter into this Agreement. This Agreement shall not be modified, waived
or  discharged  except in a writing  duly signed by each of the parties or their
permitted assignees, and shall be binding upon, and inure to the benefit of, the
successors of the parties hereto.

         THIRTEENTH:  ASSIGNABILITY.  The  services to be  performed by Employee
hereunder are personal in nature and therefore  Employee shall not assign all or
any portion of  Employee's  right,  or delegate all or any portion of Employee's
obligations,  under this Agreement, and any attempted or purported assignment or
delegation  not  expressly  permitted  by Employer in writing  shall be null and
void, ab initio.

         FOURTEENTH:   SUCCESSORS.   Subject  to  the  provisions  of  paragraph
THIRTEENTH  hereof,  this Agreement shall be binding upon and shall inure to the
benefit  of  Employer  and  Employee  and  their  respective  heirs,  executors,
administrators, legal administrators, successors and assigns.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the date first above written.

                                  DATA RESEARCH ASSOCIATES, INC.

                                  EMPLOYER

                                   By: /s/ Michael J. Mellinger
                                      ------------------------------------
                                      Michael J. Mellinger, President and CEO

                                   EMPLOYEE

                                   /s/ Katharine W. Kilper
                                   ---------------------------------------
                                   Katharine W. Kilper

<PAGE>

                                   SCHEDULE I

                         Definition of Change of Control

         A Change of Control shall be deemed to have occurred upon the happening
of any of the following events:

         (a) the  acquisition  by any person of more than 50% of the  Employer's
outstanding  common stock or any other class of stock representing more than 50%
of the aggregate voting power of all classes of stock as a whole; or

         (b)  a  merger  or   consolidation  of  the  Employer  with  any  other
corporation  pursuant to which the resulting aggregate ownership of Employer (or
the parent or surviving corporation resulting from such merger or consolidation)
held by or  attributable  to those  persons  who were  stockholders  of Employer
immediately  prior  to such  merger  or  consolidation  is less  than 50% of the
aggregate  common  stock of  Employer  (or the parent or  surviving  corporation
resulting  from such merger or  consolidation)  outstanding  as a result of such
merger or  consolidation;  the term  "merger"  shall  include  a  reorganization
effected  by means  of a sale of  Employer's  assets  or any  other  substantial
portion of the assets of the Employer; or

         (c)  election  to  the  Board  of  Directors  of  the  Employer  at any
stockholders meeting of any nominee other than a nominee on whose behalf proxies
were  solicited by or on behalf of the incumbent  management or directors of the
Employer; or

         (d)  removal  by the  stockholders  of  all  or  any  of the  incumbent
directors of the Employer other than a removal for cause.

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