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Registration Rights Agreement - Research Engineers Inc. and The Shaar Fund Ltd.

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                          REGISTRATION RIGHTS AGREEMENT



            This Registration  Rights Agreement,  dated as of September 14, 1999
(this "Agreement"),  between Research Engineers,  Inc., a Delaware  corporation,
with principal  executive  offices  located at 22700 Savi Ranch  Parkway,  Yorba
Linda,  CA  92887  (the  "Company"),  and The  Shaar  Fund  Ltd.  (the  "Initial
Investor").


            Whereas,  upon  the  terms  and  subject  to the  conditions  of the
Securities  Purchase  Agreement  dated as of  September  14,  1999,  between the
Initial  Investor and the Company (the  "Securities  Purchase  Agreement"),  the
Company has agreed to issue and sell to the Initial  Investor (i) 300,000 shares
of Series B 5%  Convertible  Preferred  Stock,  par value $ 0.01 per share  (the
"Preferred  Shares")  which,  upon the terms of and subject to the conditions of
the Company's  Certificate of  Designation of Series B 5% Convertible  Preferred
Stock (the  "Certificate of  Designation"),  are convertible  into shares of the
Company's  common stock, par value $0.01 per share (the "Common Stock") and (ii)
Common Stock Purchase  Warrants (the  "Warrants")  to purchase  shares of Common
Stock; and


            Whereas,  to induce the Initial  Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common  Stock  issued or issuable in lieu of cash  dividend  payments on the
Preferred  Shares,  upon conversion of the Preferred  Shares and exercise of the
Warrants certain registration rights under the Securities Act;


            Now,  Therefore,  in  consideration  of the  premises and the mutual
covenants  contained herein, the parties hereto,  intending to be legally bound,
hereby agree as follows:

            1.    Definitions

            (a) As used in this  Agreement,  the following  terms shall have the
meanings:

                  (i)  "Affiliate,"  of any  specified  Person  means  any other
      Person who directly, or indirectly through one or more intermediaries,  is
      in control of, is controlled  by, or is under common  control  with,  such
      specified  Person.  For purposes of this  definition,  control of a Person
      means the power, directly or indirectly,  to direct or cause the direction
      of the  management  and  policies  of such  Person  whether  by  contract,
      securities,  ownership  or  otherwise;  and the  terms  "controlling"  and
      "controlled" have the respective meanings correlative to the foregoing.

                  (ii)  "Closing  Date" means the date and time of the  issuance
      and sale of the Preferred Shares.


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                  (iii)   "Commission"   means  the   Securities   and  Exchange
      Commission.

                  (iv) "Current Market Price" means on any date of determination
      the closing  bid price of a share of Common  Stock on such day as reported
      on the Nasdaq National Market  ("Nasdaq");  provided,  if such security is
      not listed or  admitted  to  trading on the  Nasdaq,  as  reported  on the
      principal  national  security  exchange or quotation  system on which such
      security is quoted or listed or admitted to trading,  or, if not quoted or
      listed or  admitted  to trading on any  national  securities  exchange  or
      quotation  system,   the  closing  bid  price  of  such  security  on  the
      over-the-counter  market on the day in question  as reported by  Bloomberg
      LP, or a similar generally accepted reporting service, as the case may be.

                  (v) "Exchange Act" means the Securities  Exchange Act of 1934,
      as amended, and the rules and regulations of the Commission thereunder, or
      any similar successor statute.

                  (vi) "Investors" means the Initial Investor and any transferee
      or assignee of Registrable Securities who agrees to become bound by all of
      the terms and  provisions of this  Agreement in accordance  with Section 8
      hereof.

                  (vii) "Person" means any individual, partnership, corporation,
      limited  liability  company,  joint  stock  company,  association,  trust,
      unincorporated  organization,  or a  government  or  agency  or  political
      subdivision thereof.

                  (viii) "Prospectus" means the prospectus  (including,  without
      limitation,  any  preliminary  prospectus and any final  prospectus  filed
      pursuant to Rule 424(b) under the Securities Act, including any prospectus
      that discloses  information  previously omitted from a prospectus filed as
      part of an effective registration statement in reliance on Rule 430A under
      the Securities Act) included in the Registration  Statement, as amended or
      supplemented by any prospectus supplement with respect to the terms of the
      offering  of any  portion  of the  Registrable  Securities  covered by the
      Registration Statement and by all other amendments and supplements to such
      prospectus,  including  all  material  incorporated  by  reference in such
      prospectus  and all documents  filed after the date of such  prospectus by
      the Company under the Exchange Act and incorporated by reference therein.

                  (ix)  "Public  Offering"  means an offer  registered  with the
      Commission and the appropriate state securities commissions by the Company
      of its Common Stock and made pursuant to the Securities Act.

                  (x) "Registrable  Securities" means the Common Stock issued or
      issuable (i) in lieu of cash dividend  payments on the  Preferred  Shares,
      (ii) upon conversion of the Preferred Shares or (iii) upon exercise of the
      Warrants;  provided,  however, a share of Common Stock shall cease to be a
      Registrable Security for purposes of this Agreement when it no longer is a
      Restricted Security.


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<PAGE>
                  (xi) "Registration  Statement" means a registration  statement
      of the  Company  filed on an  appropriate  form under the  Securities  Act
      providing for the registration of, and the sale on a continuous or delayed
      basis by the holders  of, all of the  Registrable  Securities  pursuant to
      Rule 415 under the  Securities  Act,  including the  Prospectus  contained
      therein and forming a part thereof,  any  amendments to such  registration
      statement and supplements to such  Prospectus,  and all exhibits and other
      material  incorporated  by reference in such  registration  statement  and
      Prospectus.

                  (xii)  "Restricted  Security"  means any share of Common Stock
      issued or issuable  in lieu of cash  dividend  payments  on the  Preferred
      Shares,  upon  conversion  of the  Preferred  Shares  or  exercise  of the
      Warrants except any such share that (i) has been registered pursuant to an
      effective  registration  statement  under the Securities Act and sold in a
      manner  contemplated  by the  prospectus  included  in  such  registration
      statement,  (ii) has  been  transferred  in  compliance  with  the  resale
      provisions  of Rule  144  under  the  Securities  Act  (or  any  successor
      provision  thereto) or is  transferable  pursuant to paragraph (k) of Rule
      144 under the  Securities  Act (or any successor  provision  thereto),  or
      (iii)  otherwise has been  transferred and a new share of Common Stock not
      subject  to  transfer  restrictions  under  the  Securities  Act has  been
      delivered by or on behalf of the Company.

                  (xiii)  "Securities  Act" means the Securities Act of 1933, as
      amended,  and the rules and regulations of the Commission  thereunder,  or
      any similar successor statute.

            (b) All  capitalized  terms  used and not  defined  herein  have the
respective meaning assigned to them in the Securities Purchase Agreement.

            2.    Registration

            (a) Filing and Effectiveness of Registration Statement.  The Company
shall  prepare  and file with the  Commission  not later  than 30 days after the
Closing  Date, a  Registration  Statement  relating to the offer and sale of the
Registrable Securities and shall use its best efforts to cause the Commission to
declare  such  Registration  Statement  effective  under the  Securities  Act as
promptly  as  practicable  but not later than 150 days after the  Closing  Date,
assuming  for  purposes  hereof a  Conversion  Price  under the  Certificate  of
Designation  of  $4.00  per  share.  At  such  time  after  the  filing  of  the
Registration   Statement  pursuant  to  this  Section  2(a)  as  the  Commission
indicates,  either  orally or in writing,  that it has no further  comments with
respect  to such  Registration  Statement  or that it is  willing  to  entertain
appropriate  requests for  acceleration of  effectiveness  of such  Registration
Statement,  the Company shall promptly,  and in no event later than two business
days after  receipt of such  indication  from the  Commission,  request that the
effectiveness of such  Registration  Statement be accelerated to within 48 hours
of the Commission's  receipt of such request.  The Company shall not include any
other securities in the Registration Statement relating to the offer and sale of
the  Registrable  Securities  other  than (i)  Common  Stock in an amount not to
exceed  171,000  shares  registered  by the  Company  pursuant  to that  certain
Registration Agreement,  dated September 14, 1999 by and between the Company and
Bharat  Manglani and (ii) that number of shares of Common  Stock  required to be
registered by the Company pursuant to that certain Registration Agreement, dated
September  14, 1999 by and between the Company and The Triton  Private  Equities
Fund,  L.P. The Company shall notify the  Investors by written  notice that such
Registration  Statement has been declared  effective by the Commission within 24
hours of such declaration by the Commission.


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<PAGE>
            (b) Registration Default. If the Registration Statement covering the
Registrable  Securities or the Additional  Registrable Securities (as defined in
Section  2(d)  hereof)  required to be filed by the Company  pursuant to Section
2(a) or 2(d)  hereof,  as the case may be, is not (i) filed with the  Commission
within  30  days  after  the  Closing  Date or (ii)  declared  effective  by the
Commission  within 150 days after the  Closing  Date  (either of which,  without
duplication, an "Initial Date"), then the Company shall make the payments to the
Initial Investor as provided in the next sentence as liquidated  damages and not
as a penalty. The amount to be paid by the Company to the Initial Investor shall
be determined as of each  Computation  Date (as defined below),  and such amount
shall be equal to 2% (the  "Liquidated  Damage Rate") of the Purchase  Price (as
defined in the Securities Purchase Agreement) from the Initial Date to the first
Computation Date and for each  Computation Date thereafter,  calculated on a pro
rata basis to the date on which the Registration Statement is filed with (in the
event of an Initial Date pursuant to clause (i) above) or declared  effective by
(in the event of an Initial Date  pursuant to clause (ii) above) the  Commission
(the "Periodic Amount") provided, however, that in no event shall the liquidated
damages be less than  $25,000.  The full  Periodic  Amount  shall be paid by the
Company to the Initial Investor by wire transfer of immediately  available funds
within three days after each Computation Date.

            As used in this  Section  2(b),  "Computation  Date"  means the date
which is 30 days  after the  Initial  Date and,  if the  Registration  Statement
required to be filed by the Company pursuant to Section 2(a) has not theretofore
been declared effective by the Commission,  each date which is 30 days after the
previous  Computation  Date until such  Registration  Statement  is so  declared
effective.

            Notwithstanding  the above, if the Registration  Statement  covering
the Registrable  Securities or the Additional Registrable Securities required to
be filed by the Company pursuant to Section 2(a) or 2(d) hereof, as the case may
be, is not filed with the Commission by the 30th day after the Closing Date, the
Company shall be in default of this Registration Rights Agreement.

            (c) Eligibility for Use of Form S-3. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and  information  required to be
filed  by it with the  Commission  in a timely  manner  and take all such  other
action so as to maintain such eligibility for the use of such form.

            (d) In the event the  Current  Market  Price  declines  to $5.00 per
share,  the Company shall, to the extent required by the Securities Act (because
the  additional  shares were not  covered by the  Registration  Statement  filed
pursuant to Section  2(a)),  as reasonably  determined by the Initial  Investor,
file  an  additional   Registration  Statement  with  the  Commission  for  such
additional number of Registrable Securities as would be issuable upon conversion
of  the  Preferred   Shares  and  exercise  of  the  Warrants  (the  "Additional
Registrable Securities") in addition to those previously registered,  assuming a
Conversion  Price of $1.50 per share.  The Company shall, to the extent required
by the Securities Act, as reasonably determined by the Initial Investor, prepare
and file  with the  Commission  not  later  than  the  30th  day  thereafter,  a
Registration  Statement  relating  to the  offer  and  sale of  such  Additional
Registrable Securities and shall use its best efforts to cause the Commission to
declare  such  Registration  Statement  effective  under the  Securities  Act as
promptly as practicable but not later than 60 days thereafter. The Company shall
not include any other securities in the Registration  Statement  relating to the
offer and sale of such Additional Registrable Securities.


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<PAGE>
            (e) (i) If the Company  proposes to  register  any of its  warrants,
      Common Stock or any other shares of common stock of the Company  under the
      Securities  Act (other than a  registration  (A) on Form S-8 or S-4 or any
      successor  or similar  forms,  (B)  relating to Common  Stock or any other
      shares of common stock of the Company  issuable  upon exercise of employee
      share options or in connection  with any employee  benefit or similar plan
      of the Company or (C) in connection with a direct or indirect  acquisition
      by the Company of another Person or any transaction  with respect to which
      Rule 145 (or any successor  provision)  under the Securities Act applies),
      whether or not for sale for its own account,  it will each such time, give
      prompt  written  notice at least 20 days prior to the  anticipated  filing
      date of the registration  statement  relating to such  registration to the
      Initial  Investor,  which notice  shall set forth such Initial  Investor's
      rights under this  Section  2(e) and shall offer the Initial  Investor the
      opportunity  to  include in such  registration  statement  such  number of
      Registrable  Securities  as the Initial  Investor  may  request.  Upon the
      written  request  of an  Initial  Investor  made  within 10 days after the
      receipt of notice from the Company (which request shall specify the number
      of  Registrable  Securities  intended to be  disposed  of by such  Initial
      Investor),   the  Company   will  use  its  best  efforts  to  effect  the
      registration  under the Securities Act of all Registrable  Securities that
      the Company has been so requested to register by the Initial Investor,  to
      the  extent  requisite  to  permit  the  disposition  of  the  Registrable
      Securities so to be registered;  provided,  however,  that if, at any time
      after giving written  notice of its intention to register any  Registrable
      Securities  pursuant to this Section 2 and prior to the effective  date of
      the registration statement filed in connection with such registration, the
      Company shall  determine  for any reason not to register such  Registrable
      Securities,  the Company shall give written notice to the Initial Investor
      and,  thereupon,  shall be relieved  of its  obligation  to  register  any
      Registrable Securities in connection with such registration. The Company's
      obligations  under this Section 2(e) shall  terminate on the date that the
      registration  statement  to be filed in  accordance  with  Section 2(a) is
      declared effective by the Commission.

                  (ii) If a registration  pursuant to this Section 2(e) involves
      a Public Offering and the managing underwriter thereof advises the Company
      that, in its view, the number of shares of Common Stock, Warrants or other
      shares  of Common  Stock  that the  Company  and the  Investors  intend to
      include  in such  registration  exceeds  the  largest  number of shares of
      Common  Stock or Warrants  (including  any other shares of Common Stock or
      Warrants of the Company) that can be sold without having an adverse effect
      on such Public Offering (the "Maximum  Offering  Size"),  the Company will
      include in such  registration,  only that number of shares of Common Stock
      or Warrants, as applicable,  such that the number of shares of Registrable
      Securities  registered does not exceed the Maximum Offering Size, with the
      difference  between the number of shares in the Maximum  Offering Size and
      the number of shares to be issued by the  Company to be  allocated  (after
      including  all shares to be issued and sold by the  Company  and all other



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<PAGE>
      selling shareholders  ("Third-Party  Sellers")),  first, among the Company
      and the Investors  pro rata on the basis of the relative  number of shares
      of Common Stock or Warrants  offered for sale under such  registration  by
      each of the Company and the  Investors,  and  second,  to any  Third-Party
      Sellers pro rata on the basis of the  relative  number of shares of Common
      Stock or Warrant  offered for sale under such  registration by Third-Party
      Sellers.  If as a  result  of the  proration  provisions  of this  Section
      2(e)(ii),  any  Investor is not  entitled to include all such  Registrable
      Securities  in such  registration,  such  Initial  Investor  may  elect to
      withdraw  its  request  to  include  any  Registrable  Securities  in such
      registration. With respect to registrations pursuant to this Section 2(e),
      the  number  of   securities   required  to  satisfy   any   underwriters'
      over-allotment  option  shall be  allocated  on the basis set forth in the
      first sentence of this Section 2(e)(ii).

            3.    Obligations of the Company

            In connection with the  registration of the Registrable  Securities,
the Company shall:

            (a)  Promptly  (i)  prepare  and  file  with  the  Commission   such
amendments (including  post-effective  amendments) to the Registration Statement
and  supplements to the Prospectus as may be necessary to keep the  Registration
Statement  continuously  effective and in compliance  with the provisions of the
Securities  Act applicable  thereto so as to permit the Prospectus  forming part
thereof to be current and useable by  Investors  for resales of the  Registrable
Securities  for a period  of two years  from the date on which the  Registration
Statement is first declared  effective by the Commission (the "Effective  Time")
or such shorter period that will terminate when all the  Registrable  Securities
covered  by the  Registration  Statement  have been  sold  pursuant  thereto  in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the  Securities  Act or  otherwise  transferred  in a
manner that  results in the delivery of new  securities  not subject to transfer
restrictions under the Securities Act (the "Registration  Period") and (ii) take
all  lawful  action  such that each of (A) the  Registration  Statement  and any
amendment  thereto  does  not,  when it  becomes  effective,  contain  an untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein or necessary to make the statements  therein,  not misleading and
(B) the Prospectus forming part of the Registration Statement, and any amendment
or  supplement  thereto,  does not at any time  during the  Registration  Period
include an untrue  statement of a material fact or omit to state a material fact
required to be stated  therein or necessary to make the statements  therein,  in
light  of  the  circumstances  under  which  they  were  made,  not  misleading.
Notwithstanding the foregoing  provisions of this Section 3(a), the Company may,
during the Registration  Period,  suspend the use of the Prospectus for a period
not to exceed 60 days (whether or not consecutive) in any 12-month period if the
Board of Directors of the Company determines in good faith that because of valid
business  reasons,  including  pending  mergers  or other  business  combination
transactions, the planned acquisition or divestiture of assets, pending material
corporate  developments  and similar events,  it is in the best interests of the
Company to suspend such use, and prior to or  contemporaneously  with suspending
such  use the  Company  provides  the  Investors  with  written  notice  of such
suspension, which notice need not specify the nature of the event giving rise to
such  suspension.  At the end of any such suspension  period,  the Company shall
provide the Investors with written notice of the termination of such suspension;


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<PAGE>
            (b) During the  Registration  Period,  comply with the provisions of
the  Securities  Act with respect to the  Registrable  Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities  have been  disposed of in  accordance  with the intended  methods of
disposition by the Investors as set forth in the Prospectus  forming part of the
Registration Statement;

            (c) (i) Prior to the filing with the Commission of any  Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus  (including any  supplements  thereto),  provide (A) draft copies
thereof to the Investors and reflect in such  documents all such comments as the
Investors (and their counsel)  reasonably may propose and (B) to the Investors a
copy of the  accountant's  consent  letter to be included in the filing and (ii)
furnish to each  Investor  whose  Registrable  Securities  are  included  in the
Registration  Statement  and its legal counsel  identified  to the Company,  (A)
promptly  after the same is prepared  and publicly  distributed,  filed with the
Commission,  or received by the Company, one copy of the Registration Statement,
each Prospectus,  and each amendment or supplement thereto,  and (B) such number
of copies of the Prospectus and all amendments and supplements  thereto and such
other documents,  as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;

            (d) (i) Register or qualify the  Registrable  Securities  covered by
the  Registration  Statement  under such  securities  or "blue sky" laws of such
jurisdictions  as  the  Investors  who  hold  a   majority-in-interest   of  the
Registrable  Securities being offered reasonably request,  (ii) prepare and file
in such jurisdictions such amendments (including post-effective  amendments) and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof at all times during the Registration Period,
(iii) take all such other lawful  actions as may be  necessary to maintain  such
registrations and  qualifications in effect at all times during the Registration
Period,  and (iv) take all such other  lawful  actions  reasonably  necessary or
advisable to qualify the Registrable  Securities for sale in such jurisdictions;
provided,  however,  that  the  Company  shall  not be  required  in  connection
therewith  or as a  condition  thereto  to (A)  qualify  to do  business  in any
jurisdiction  where it would not  otherwise  be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;

            (e) As promptly as  practicable  after becoming aware of such event,
notify each Investor of the  occurrence  of any event,  as a result of which the
Prospectus included in the Registration  Statement,  as then in effect, includes
an  untrue  statement  of a  material  fact or omits to  state a  material  fact
required to be stated  therein or necessary to make the statements  therein,  in
light of the  circumstances  under  which they were made,  not  misleading,  and
promptly  prepare an amendment to the  Registration  Statement and supplement to
the  Prospectus  to correct such untrue  statement  or  omission,  and deliver a
number of copies of such  supplement  and  amendment  to each  Investor  as such
Investor may reasonably request;

            (f) As promptly as  practicable  after becoming aware of such event,
notify each  Investor who holds  Registrable  Securities  being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration  Statement at the earliest possible time and take all lawful action
to effect  the  withdrawal,  recession  or  removal  of such stop order or other
suspension;


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<PAGE>
            (g) Cause all the Registrable Securities covered by the Registration
Statement  to be listed  on the  principal  national  securities  exchange,  and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;

            (h) Maintain a transfer agent and  registrar,  which may be a single
entity, for the Registrable  Securities not later than the effective date of the
Registration Statement;

            (i) Cooperate  with the Investors  who hold  Registrable  Securities
being offered to facilitate the timely  preparation and delivery of certificates
for the  Registrable  Securities  to be  offered  pursuant  to the  registration
statement and enable such  certificates for the Registrable  Securities to be in
such denominations or amounts,  as the case may be, as the Investors  reasonably
may request and  registered  in such names as the  Investor  may  request;  and,
within  three  business  days  after a  registration  statement  which  includes
Registrable  Securities  is declared  effective by the  Commission,  deliver and
cause legal counsel selected by the Company to deliver to the transfer agent for
the  Registrable  Securities  (with copies to the  Investors  whose  Registrable
Securities  are  included  in  such   registration   statement)  an  appropriate
instruction and, to the extent necessary, an opinion of such counsel;

            (j) Take all such  other  lawful  actions  reasonably  necessary  to
expedite and  facilitate the  disposition by the Investors of their  Registrable
Securities  in accordance  with the intended  methods  therefor  provided in the
Prospectus which are customary under the circumstances;

            (k) Make  generally  available  to its  security  holders as soon as
practicable,  but in any event not later  than  three (3)  months  after (i) the
effective  date (as  defined in Rule  158(c)  under the  Securities  Act) of the
Registration  Statement,  and (ii)  the  effective  date of each  post-effective
amendment  to the  Registration  Statement,  as the  case  may be,  an  earnings
statement of the Company and its  subsidiaries  complying  with Section 11(a) of
the  Securities Act and the rules and  regulations of the Commission  thereunder
(including, at the option of the Company, Rule 158);

            (1) In the event of an underwritten  offering,  promptly  include or
incorporate  in a  Prospectus  supplement  or  post-effective  amendment  to the
Registration  Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus  supplement or post-effective  amendment
as soon as  practicable  after it is  notified  of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;

            (m) (i) Make reasonably  available for inspection by Investors,  any
underwriter  participating  in any  disposition  pursuant  to  the  Registration
Statement,  and  any  attorney,  accountant  or  other  agent  retained  by such
Investors or any such  underwriter  all relevant  financial  and other  records,
pertinent   corporate   documents   and   properties  of  the  Company  and  its
subsidiaries,  and (ii) cause the Company's officers, directors and employees to



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<PAGE>
supply  all  information  reasonably  requested  by such  Investors  or any such
underwriter,  attorney,  accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided,  however,  that  all  records,  information  and  documents  that  are
designated  in  writing  by  the  Company,   in  good  faith,  as  confidential,
proprietary  or  containing  any material  nonpublic  information  shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate  confidentiality  agreement in the case of any
such  holder or agent),  unless  such  disclosure  is made  pursuant to judicial
process in a court  proceeding  (after first  giving the Company an  opportunity
promptly  to seek a  protective  order  or  otherwise  limit  the  scope  of the
information  sought to be  disclosed)  or is required  by law, or such  records,
information or documents  become  available to the public generally or through a
third party not in violation of an accompanying  obligation of  confidentiality;
and  provided,  further,  that,  if the  foregoing  inspection  and  information
gathering would otherwise  disrupt the Company's  conduct of its business,  such
inspection and information  gathering shall, to the maximum extent possible,  be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel  designed  by and on behalf of the  majority  in interest of
Investors and other parties;

            (n)  In  connection  with  any  underwritten  offering,   make  such
representations   and  warranties  to  the  Investors   participating   in  such
underwritten  offering and to the managers,  in form, substance and scope as are
customarily  made by the  Company  to  underwriters  in  secondary  underwritten
offerings;

            (o) In connection with any underwritten offering, obtain opinions of
counsel  to the  Company  (which  counsel  and  opinions  (in  form,  scope  and
substance)  shall be reasonably  satisfactory to the managers)  addressed to the
underwriters,  covering  such  matters as are  customarily  covered in  opinions
requested in secondary  underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the  Effective  Time of the  Registration  Statement or
most recent  post-effective  amendment thereto,  as the case may be, the absence
from the  Registration  Statement  and the  Prospectus,  including any documents
incorporated by reference therein,  of an untrue statement of a material fact or
the omission of a material  fact  required to be stated  therein or necessary to
make the  statements  therein  (in the case of the  Prospectus,  in light of the
circumstances  under which they were made) not misleading,  subject to customary
limitations);

            (p) In  connection  with any  underwritten  offering,  obtain  "cold
comfort" letters and updates thereof from the independent  public accountants of
the Company (and, if necessary,  from the independent  public accountants of any
subsidiary  of the Company or of any business  acquired by the Company,  in each
case for which  financial  statements and financial data are, or are required to
be,  included in the  Registration  Statement),  addressed  to each  underwriter
participating  in such  underwritten  offering (if such underwriter has provided
such letter,  representations  or documentation,  if any, required for such cold
comfort  letter to be so addressed),  in customary form and covering  matters of
the type  customarily  covered  in "cold  comfort"  letters in  connection  with
secondary underwritten offerings;

            (q) In  connection  with any  underwritten  offering,  deliver  such
documents and  certificates  as may be reasonably  required by the managers,  if
any; and


                                       9
<PAGE>
            (r) In  the  event  that  any  broker-dealer  registered  under  the
Exchange Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules
and  regulations of the National  Association of Securities  Dealers,  Inc. (the
"NASD  Rules") (or any  successor  provision  thereto))  of the Company or has a
"conflict of interest" (as defined in Rule  2720(b)(7) of the NASD Rules (or any
successor   provision   thereto))  and  such  broker-dealer   shall  underwrite,
participate as a member of an underwriting  syndicate or selling group or assist
in the  distribution of any Registrable  Securities  covered by the Registration
Statement,  whether  as a  holder  of  such  Registrable  Securities  or  as  an
underwriter,  a  placement  or sales  agent or a broker  or  dealer  in  respect
thereof, or otherwise,  the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including,  without limitation,  by (A)
engaging a "qualified  independent  underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor  provision  thereto)) to  participate in the
preparation  of  the  Registration   Statement   relating  to  such  Registrable
Securities,  to exercise usual standards of due diligence in respect thereof and
to recommend  the public  offering  price of such  Registrable  Securities,  (B)
indemnifying  such  qualified  independent  underwriter  to  the  extent  of the
indemnification of underwriters  provided in Section 5 hereof, and (C) providing
such  information  to such  broker-dealer  as may be  required in order for such
broker-dealer to comply with the requirements of the NASD Rules.

            4.    Obligations of the Investors

            In connection with the  registration of the Registrable  Securities,
the Investors shall have the following obligations:

            (a) It shall be a  condition  precedent  to the  obligations  of the
Company to complete the registration  pursuant to this Agreement with respect to
the  Registrable  Securities of a particular  Investor that such Investor  shall
furnish to the  Company  such  information  regarding  itself,  the  Registrable
Securities  held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such  Registrable  Securities  and shall execute such documents in connection
with such  registration  as the Company may reasonably  request.  As least seven
days prior to the first anticipated  filing date of the Registration  Statement,
the Company shall notify each Investor of the information  the Company  requires
from each such Investor (the "Requested Information") if such Investor elects to
have any of its Registrable  Securities included in the Registration  Statement.
If at least two business days prior to the  anticipated  filing date the Company
has not received the Requested  Information from an Investor (a  "Non-Responsive
Investor"),  then  the  Company  may  file the  Registration  Statement  without
including  Registrable  Securities of such  Non-Responsive  Investor and have no
further obligations to the Non-Responsive Investor;

            (b) Each Investor by its  acceptance of the  Registrable  Securities
agrees to cooperate  with the Company in  connection  with the  preparation  and
filing  of the  Registration  Statement  hereunder,  unless  such  Investor  has
notified  the  Company  in  writing  of  its  election  to  exclude  all  of its
Registrable Securities from the Registration Statement; and

            (c) Each Investor  agrees that,  upon receipt of any notice from the
Company of the  occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the  Registration  Statement  covering such  Registrable  Securities
until  such  Investor's  receipt of the  copies of the  supplemented  or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a  certificate  of  destruction)  all copies in such
Investor's  possession,  of the Prospectus covering such Registrable  Securities
current at the time of receipt of such notice.


                                       10
<PAGE>
            5.    Expenses of Registration

            All expenses,  other than  underwriting  discounts and  commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 3, but including,  without limitation,  all registration,  listing,  and
qualifications fees, printing and engraving fees,  accounting fees, and the fees
and  disbursements  of counsel for the Company,  and the reasonable  fees of one
firm of counsel to the  holders of a majority  in  interest  of the  Registrable
Securities shall be borne by the Company.

            6.    Indemnification and Contribution

            (a) The Company shall  indemnify and hold harmless each Investor and
each  underwriter,  if any,  which  facilitates  the  disposition of Registrable
Securities,  and each of their respective officers and directors and each person
who controls  such Investor or  underwriter  within the meaning of Section 15 of
the  Securities  Act or Section 20 of the  Exchange  Act (each such person being
sometimes  hereinafter referred to as an "Indemnified  Person") from and against
any losses,  claims,  damages or  liabilities,  joint or several,  to which such
Indemnified  Person may become  subject under the  Securities  Act or otherwise,
insofar as such losses,  claims,  damages or liabilities  (or actions in respect
thereof)  arise out of or are based upon an untrue  statement or alleged  untrue
statement  of a material  fact  contained  in any  Registration  Statement or an
omission or alleged  omission to state  therein a material  fact  required to be
stated therein or necessary to make the statements therein,  not misleading,  or
arise out of or are based upon an untrue  statement or alleged untrue  statement
of a  material  fact  contained  in any  Prospectus  or an  omission  or alleged
omission  to state  therein a material  fact  required  to be stated  therein or
necessary  to make the  statements  therein,  in the light of the  circumstances
under which they were made,  not  misleading;  and the Company  hereby agrees to
reimburse such  Indemnified  Person for all reasonable  legal and other expenses
incurred by them in connection with  investigating  or defending any such action
or claim as and when such expenses are  incurred;  provided,  however,  that the
Company shall not be liable to any such  Indemnified  Person in any such case to
the extent that any such loss,  claim,  damage or liability  arises out of or is
based upon (i) an untrue  statement or alleged  untrue  statement made in, or an
omission or alleged omission from, such Registration  Statement or Prospectus in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the  occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective  Prospectus after the Company
has provided to such  Indemnified  Person an updated  Prospectus  correcting the
untrue  statement or alleged  untrue  statement or omission or alleged  omission
giving rise to such loss, claim, damage or liability.

            (b) Indemnification by the Investors and Underwriters. Each Investor
agrees,  as a consequence of the inclusion of any of its Registrable  Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition  of  Registrable   Securities  shall  agree,  as  a  consequence  of
facilitating  such  disposition  of  Registrable  Securities,  severally and not
jointly,  to  (i)  indemnify  and  hold  harmless  the  Company,  its  directors
(including any person who, with his or her consent, is named in the Registration
Statement  as a director  nominee of the  Company),  its  officers  who sign any
Registration  Statement and each person, if any, who controls the Company within
the  meaning  of either  Section 15 of the  Securities  Act or Section 20 of the



                                       11
<PAGE>
Exchange Act,  against any losses,  claims,  damages or liabilities to which the
Company or such other persons may become  subject,  under the  Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon an untrue  statement or alleged
untrue statement of a material fact contained in such Registration  Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the  statements  therein  (in light of the  circumstances  under which they were
made,  in the  case of the  Prospectus),  not  misleading,  in each  case to the
extent,  but only to the extent,  that such untrue  statement or alleged  untrue
statement  or omission  or alleged  omission  was made in  reliance  upon and in
conformity with written  information  furnished to the Company by such holder or
underwriter  expressly for use therein;  provided,  however, that no Investor or
underwriter  shall be liable under this Section 6(b) for any amount in excess of
the net proceeds paid to such Investor or  underwriter in respect of shares sold
by it, and (ii) reimburse the Company for any legal or other  expenses  incurred
by the Company in connection with  investigating or defending any such action or
claim as such expenses are incurred.

            (c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification  pursuant to this Section 6 (an "Indemnified  Party") of written
notice of any  investigation,  claim,  proceeding  or other action in respect of
which  indemnification is being sought (each, a "Claim"),  the Indemnified Party
promptly  shall notify the party against whom  indemnification  pursuant to this
Section  6 is  being  sought  (the  "Indemnifying  Party")  of the  commencement
thereof;  but the omission to so notify the Indemnifying Party shall not relieve
it from any  liability  that it  otherwise  may have to the  Indemnified  Party,
except to the extent that the  Indemnifying  Party is materially  prejudiced and
forfeits  substantive  rights  and  defenses  by  reason  of  such  failure.  In
connection  with any  Claim as to which  both  the  Indemnifying  Party  and the
Indemnified  Party are  parties,  the  Indemnifying  Party  shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying  Party, the Indemnified  Party shall have the right to
employ  separate  legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees,  out-of-pocket  costs
and expenses of such  separate  legal counsel to the  Indemnified  Party if (and
only if): (x) the  Indemnifying  Party shall have agreed to pay such fees, costs
and  expenses,  (y) the  Indemnified  Party  and the  Indemnifying  Party  shall
reasonably have concluded that  representation  of the Indemnified  Party by the
Indemnifying  Party by the same legal  counsel would not be  appropriate  due to
actual or, as reasonably  determined by legal counsel to the Indemnified  Party,
potentially  differing  interests  between  such  parties in the  conduct of the
defense  of such  Claim,  or if there  may be legal  defenses  available  to the
Indemnified  Party that are in addition to or disparate from those  available to
the  Indemnifying  Party,  or (z) the  Indemnifying  Party  shall have failed to
employ legal counsel  reasonably  satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances  other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne  exclusively by the  Indemnified  Party.  Except as
provided above, the  Indemnifying  Party shall not, in connection with any Claim
in the same  jurisdiction,  be liable for the fees and expenses of more than one
firm of counsel for the  Indemnified  Party  (together  with  appropriate  local
counsel).  The Indemnified Party shall not, without the prior written consent of
the  Indemnifying  Party (which  consent  shall not  unreasonably  be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not  include  an  unconditional  release  of the  Indemnifying  Party  from  all
liabilities with respect to such Claim or judgment.


                                       12
<PAGE>
            (d)  Contribution.  If the  indemnification  provided  for  in  this
Section 6 is  unavailable  to or  insufficient  to hold harmless an  Indemnified
Person  under  subsection  (a) or (b) above in  respect of any  losses,  claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each  Indemnifying  Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect  thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses,  claims, damages
or liabilities  (or actions in respect  thereof),  as well as any other relevant
equitable  considerations.  The relative  fault of such  Indemnifying  Party and
Indemnified  Party shall be  determined  by reference  to,  among other  things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged  omission to state a material  fact relates to  information  supplied by
such Indemnifying  Party or by such Indemnified Party, and the parties' relative
intent,  knowledge,  access to information and opportunity to correct or prevent
such  statement or omission.  The parties hereto agree that it would not be just
and equitable if  contribution  pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any  underwriters  were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable  considerations  referred to in this Section 6(d).
The amount  paid or payable by an  Indemnified  Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be  deemed  to  include  any legal or other  fees or  expenses  reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such  action or  claim.  No person  guilty of  fraudulent  misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution   from  any  person   who  was  not   guilty  of  such   fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(d) to contribute  shall be several in proportion to the  percentage of
Registrable  Securities registered or underwritten,  as the case may be, by them
and not joint.

            (e)  Notwithstanding  any other  provision  of this Section 6, in no
event shall any (i)  Investor be required to  undertake  liability to any person
under  this  Section 6 for any  amounts  in excess of the  dollar  amount of the
proceeds  to be  received  by such  Investor  from the  sale of such  Investor's
Registrable  Securities  (after  deducting any fees,  discounts and  commissions
applicable  thereto)  pursuant to any  Registration  Statement  under which such
Registrable  Securities  are to be registered  under the Securities Act and (ii)
underwriter be required to undertake  liability to any Person  hereunder for any
amounts in excess of the aggregate  discount,  commission or other  compensation
payable  to  such  underwriter  with  respect  to  the  Registrable   Securities
underwritten by it and distributed pursuant to the Registration Statement.

            (f) The  obligations of the Company under this Section 6 shall be in
addition  to  any  liability  which  the  Company  may  otherwise  have  to  any
Indemnified  Person and the  obligations  of any  Indemnified  Person under this
Section 6 shall be in addition to any liability  which such  Indemnified  Person
may otherwise have to the Company.  The remedies  provided in this Section 6 are
not exclusive and shall not limit any rights or remedies  which may otherwise be
available to an indemnified party at law or in equity.


                                       13
<PAGE>
            7.    Rule 144

            With a view to making  available  to the  Investors  the benefits of
Rule 144 under the Securities Act or any other similar rule or regulation of the
Commission  that may at any time permit the Investors to sell  securities of the
Company to the public without  registration  ("Rule 144"), the Company agrees to
use its best efforts to:

            (a)   comply with the provisions of paragraph (c) (1) of Rule
144; and

            (b) file with the  Commission  in a timely  manner all  reports  and
other  documents  required to be filed by the Company  pursuant to Section 13 or
15(d) under the  Exchange  Act;  and, if at any time it is not  required to file
such reports but in the past had been required to or did file such  reports,  it
will,  upon the request of any Investor,  make  available  other  information as
required  by,  and so long as  necessary  to permit  sales of,  its  Registrable
Securities pursuant to Rule 144.

            8.    Assignment

            The  rights  to have the  Company  register  Registrable  Securities
pursuant to this Agreement shall be  automatically  assigned by the Investors to
any permitted transferee of all or any portion of such securities (or all or any
portion of any Preferred  Shares or Warrant of the Company which is  convertible
into such securities) of Registrable Securities only if: (a) the Investor agrees
in writing with the transferee or assignee to assign such rights,  and a copy of
such agreement is furnished to the Company  within a reasonable  time after such
assignment,  (b) the Company is, within a reasonable time after such transfer or
assignment,  furnished  with written  notice of (i) the name and address of such
transferee  or  assignee  and (ii) the  securities  with  respect  to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or  assignment,  the  securities so transferred or assigned to the
transferee or assignee constitute  Restricted  Securities,  and (d) at or before
the time the Company  received the written notice  contemplated by clause (b) of
this sentence the  transferee or assignee  agrees in writing with the Company to
be bound by all of the provisions contained herein.

            9.    Amendment and Waiver

            Any provision of this  Agreement  may be amended and the  observance
thereof may be waived (either  generally or in a particular  instance and either
retroactively  or  prospectively),  only with the written consent of the Company
and Investors who hold a majority-in-interest of the Registrable Securities. Any
amendment or waiver  effected in accordance with this Section 9 shall be binding
upon each Investor and the Company.

            10.   Miscellaneous

            (a) A person or entity shall be deemed to be a holder of Registrable
Securities  whenever  such  person or entity  owns of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or more  persons  or  entities  with  respect  to the  same
Registrable  Securities,  the Company shall act upon the basis of  instructions,
notice  or  election  received  from the  registered  owner of such  Registrable
Securities.


                                       14
<PAGE>
            (b) If, after the date hereof and prior to the Commission  declaring
the Registration  Statement to be filed pursuant to Section 2(a) effective under
the  Securities  Act, the Company grants to any Person any  registration  rights
with respect to any Company  securities  which are more  favorable to such other
Person than those provided in this Agreement,  then the Company  forthwith shall
grant  (by means of an  amendment  to this  Agreement  or  otherwise)  identical
registration rights to all Investors hereunder.

            (c) Except as may be otherwise  provided herein, any notice or other
communication  or delivery  required or permitted  hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally  recognized overnight courier service, and shall be deemed given
when so delivered  personally or by overnight  courier  service,  or, if mailed,
three days after the date of deposit in the United States mails, as follows:

<TABLE>
                  <S>   <C>
                  (i)   if to the Company, to:

                        Research Engineers, Inc.
                        22700 Savi Ranch Parkway
                        Yorba Linda, CA 92887
                        Attention: Chief Financial Officer
                        (714) 974-2500
                        (714) 921-0683 (Fax)

                        with a copy to:

                        Rutan & Tucker, LLP
                        611 Anton Blvd., 14th Floor
                        Costa Mesa, CA  92626
                        Attention:  Gregg Amber, Esq.
                        (714) 641-3425
                        (714) 546-9035 (Fax)

                   (ii) if to the Initial Investor, to:

                        The Shaar Fund Ltd.,
                         c/o Levinson Capital Management
                        2 World Trade Center, Suite 1820
                        New York, NY  10048
                           Attention: Samuel Levinson
                        (212) 432-7711
                        (212) 432-7771 (Fax)

                        with a copy to:

                        Cadwalader, Wickersham & Taft
                        100 Maiden Lane
                        New York, NY 10038
                        Attention:  Dennis J. Block, Esq.
                        (212) 504-5555
                        (212) 504-5557 (Fax)
</TABLE>

                                       15
<PAGE>
                  (iii)  if to any  other  Investor,  at  such  address  as such
      Investor shall have provided in writing to the Company.

The  Company,  the Initial  Investor or any  Investor  may change the  foregoing
address by notice given pursuant to this Section 10(c).

            (d) Failure of any party to exercise  any right or remedy under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            (e)  This  Agreement   shall  be  governed  by  and  interpreted  in
accordance with the laws of the State of New York. Each of the parties  consents
to the jurisdiction of the federal courts whose districts  encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives,  to the maximum extent permitted by law, any objection  including
any  objection  based on  forum  non  conveniens,  to the  bringing  of any such
proceeding in such jurisdictions.

            (f) The remedies  provided in this  Agreement are cumulative and not
exclusive of any remedies provided by law. If any term,  provision,  covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants  and  restrictions  set forth  herein  shall  remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an  alternative  means to
achieve the same or substantially  the same result as that  contemplated by such
term, provision,  covenant or restriction.  It is hereby stipulated and declared
to be the  intention of the parties that they would have  executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

            (g) The Company shall not enter into any  agreement  with respect to
its securities  that is  inconsistent  with the rights granted to the holders of
Registrable  Securities  in this  Agreement  or  otherwise  conflicts  with  the
provisions  hereof.  The  Company  is not  currently  a party  to any  agreement
granting any  registration  rights with respect to any of its  securities to any
person which  conflicts with the Company's  obligations  hereunder or (except as
set  forth in  Section  2(a))  gives any other  party the right to  include  any
securities in any Registration  Statement filed pursuant hereto, except for such
rights and  conflicts  as have been  irrevocably  waived.  Without  limiting the
generality  of the  foregoing,  without the written  consent of the holders of a
majority in interest of the Registrable Securities,  the Company shall not grant
to any person the right to request it to register  any of its  securities  under
the  Securities  Act unless the rights so granted  are subject in all respect to
the prior rights of the holders of Registrable  Securities set forth herein, and
are not  otherwise  in  conflict or  inconsistent  with the  provisions  of this
Agreement. The restrictions on the Company's rights to grant registration rights
under this paragraph shall terminate on the date the  Registration  Statement to
be filed pursuant to Section 2(a) is declared effective by the Commission.


                                       16
<PAGE>
            (h) This Agreement,  the Securities Purchase  Agreement,  the Escrow
Instructions,  dated as of a date even  herewith  (the  "Escrow  Instructions"),
between the Company, the Initial Investor and Cadwalader, Wickersham & Taft, the
Preferred  Shares and the Warrants  constitute  the entire  agreement  among the
parties  hereto  with  respect  to  the  subject  matter  hereof.  There  are no
restrictions,  promises, warranties or undertakings,  other than those set forth
or referred to herein. This Agreement,  the Securities  Purchase Agreement,  the
Escrow  Instructions,  the Certificate of Designation and the Warrants supersede
all prior agreements and  undertakings  among the parties hereto with respect to
the subject matter hereof.

            (i) Subject to the requirements of Section 8 hereof,  this Agreement
shall inure to the benefit of and be binding upon the  successors and assigns of
each of the parties hereto.

            (j) All pronouns and any variations  thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

            (k) The headings in this Agreement are for  convenience of reference
only and shall not limit or otherwise affect the meaning thereof.

            (1) The  Company  acknowledges  that any  failure by the  Company to
perform its obligations  under Section 3, or any delay in such performance could
result in direct  damages to the  Investors  and the  Company  agrees  that,  in
addition  to any  other  liability  the  Company  may have by reason of any such
failure or delay,  the Company shall be liable for all direct  damages caused by
such failure or delay.

            (m) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall  constitute  one and
the same agreement.  A facsimile  transmission of this signed Agreement shall be
legal and binding on all parties hereto.



                                       17
<PAGE>
            In Witness  Whereof,  the parties  have caused this  Agreement to be
duly executed and delivered as of the date first above written.


                                       Research Engineers, Inc.


                                       By:
                                      Name:  Jyoti Chatterjee
                                     Title:  President


                                       The Shaar Fund Ltd.


                                       By:
                                           Name:  Samuel Levinson
                                           Title:  Managing Director




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