<PAGE>

                                                                   Exhibit 10.30


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                     SANCTUARY WOODS MULTIMEDIA CORPORATION

                            NOTE PURCHASE AGREEMENT


                               November 20, 1997

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<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                 PAGE
                                                                                 ----
<S>                                                                              <C>
1.   The Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1

     1.1  The Advance of Funds . . . . . . . . . . . . . . . . . . . . . . . . .   1
     1.2  Closing Date.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
     1.3  Delivery.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
     1.4  Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
     1.5  Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
     1.6  Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
     1.7  No Usury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
     1.8  Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . .   4
     1.9  Additional Agreements. . . . . . . . . . . . . . . . . . . . . . . . .   4

2.   Representations and Warranties of the Lenders . . . . . . . . . . . . . . .   5

     2.1  Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
     2.2  Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
     2.3  Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
     2.4  Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
     2.5  Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
     2.6  Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7
     2.7  Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . .   7

3.   Representations and Warranties of the Company . . . . . . . . . . . . . . .   7

     3.1  Corporate Organization and Authority of the Company. . . . . . . . . .   7
     3.2  Corporate Power. . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
     3.3  Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
     3.4  Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
     3.5  Validity of Shares . . . . . . . . . . . . . . . . . . . . . . . . . .   9
     3.6  Accuracy of Reports. . . . . . . . . . . . . . . . . . . . . . . . . .  10
     3.7  Governmental Consent, etc. . . . . . . . . . . . . . . . . . . . . . .  10
     3.8  Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . .  10
     3.9  Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

4.   Securities Laws Covenants of Lenders. . . . . . . . . . . . . . . . . . . .  11

5.   Conditions of Lenders' Obligations at Closing . . . . . . . . . . . . . . .  11

     5.1  Representations and Warranties . . . . . . . . . . . . . . . . . . . .  11
     5.2  Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
</TABLE>


                                      -i-

<PAGE>

                               TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
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<S>                                                                              <C>
     5.3  Blue Sky Compliance. . . . . . . . . . . . . . . . . . . . . . . . . .  12
     5.4  Proceedings Satisfactory . . . . . . . . . . . . . . . . . . . . . . .  12
     5.5  Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
     5.6  No Actions Pending . . . . . . . . . . . . . . . . . . . . . . . . . .  12

6.   Conditions of the Company's Obligations at Closing. . . . . . . . . . . . .  12

     6.1  Representations and Warranties . . . . . . . . . . . . . . . . . . . .  12
     6.2  Blue Sky Compliance. . . . . . . . . . . . . . . . . . . . . . . . . .  12
     6.3  No Order Pending . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

7.   Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

     7.1  Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
     7.2  Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . .  13
     7.3  Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
     7.4  Notices, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
     7.5  Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
     7.6  Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
     7.7  Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
     7.8  Survival of Representations and Warranties . . . . . . . . . . . . . .  14
     7.9  Amendment of Agreement . . . . . . . . . . . . . . . . . . . . . . . .  14
     7.10 Finder's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
     7.11 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
</TABLE>

SCHEDULES

Schedule A - Lenders
Schedule B - Investors (Pursuant to Section 1.9)

EXHIBITS

Exhibit A - Form of Convertible Promissory Note
Exhibit B - Form of Warrant
Exhibit C - Security Agreement
Exhibit D - Registration Rights Agreement
Exhibit E - Schedule of Exceptions


                                     -ii-

<PAGE>

                            NOTE PURCHASE AGREEMENT


     This Note Purchase Agreement (the "Agreement") is entered into as of
November 20, 1997, by and between Sanctuary Woods Multimedia Corporation, a
Delaware corporation (the "Company") and the parties listed on the Schedule of
Lenders attached hereto as SCHEDULE A ("Lenders") (as amended from time to time
pursuant to Section 1.2.

     In consideration of the mutual covenants and conditions herein contained,
the parties hereto agree as follows:

     1.   THE CREDIT

          1.1  THE ADVANCE OF FUNDS.

               (i)   Under this Agreement, the Company has authorized the
borrowing of up to $3,000,000 (the "Credit") from Lenders, subject to Section
1.9 of this Agreement.  Lenders hereby agree to make one or more loans to the
Company up to the full amount of the Credit, to be paid to the Company by check
or wire transfer on or before the Closing (as defined below) for such loan, or
by tendering outstanding promissory notes issued by the Company which have
become due and payable on or prior to the Closing for such loan (or will become
due and payable within 30 days of such Closing).

               (ii)  The Company's obligations to each Lender at the time of a
Closing shall be evidenced by a secured convertible promissory note delivered to
each Lender, in the form attached as EXHIBIT A hereto (the "Notes"), and a
warrant for one share of Common Stock of the Company per dollar of Credit loaned
to the Company from such Lender and with a strike price of $0.15 per share, in
the form attached as EXHIBIT B hereto (the "Warrants").


<PAGE>

               (iii) The Company's obligations to Lenders are secured by lien on
collateral pursuant to a Security Agreement, dated November 20, 1997, in the
form attached hereto as EXHIBIT C (the "Security Agreement").

          1.2  CLOSING DATE.  The closing of the purchase and sale of the Notes
hereunder shall be held at the offices of Wilson Sonsini Goodrich & Rosati, 650
Page Mill Road, Palo Alto, California on November 19, 1997 (the "First Closing")
or at such other time and place upon which the Company and the Lenders shall
agree (the date of the First Closing is hereinafter referred to as the "First
Closing Date").  Following the First Closing Date, and prior to January 31,
1998, subject to Section 1.9 herein the Company may borrow additional amounts
from the Lenders or from lenders in addition to those listed on SCHEDULE A (the
"Additional Lenders"), upon the same terms and conditions hereunder as loans
made on the First Closing Date, up to the full aggregate amount of the Credit at
one or more closings to be held at such other times and places upon which the
Company and the Additional Lenders making such loans at such closing shall agree
(a "Subsequent Closing").  Such Additional Lenders shall be deemed to be listed
on SCHEDULE A as parties to this Agreement and shall be deemed to be "Lenders"
for the purposes of this Agreement.  The date of a Subsequent Closing is
hereinafter referred to as a "Subsequent Closing Date."  The First Closing and
each Subsequent Closing is hereinafter referred to as a "Closing" and the First
Closing Date and each Subsequent Closing Date is hereinafter referred to as a
"Closing Date."

          1.3  DELIVERY.  At the Closing, the Company will issue to each of the
Lenders a Note, registered in such Lender's name, representing the principal
amount of the Credit loaned by such Lender, against the loan of such funds.

          1.4  INTEREST RATE.  The outstanding principal balance of the Credit
shall bear interest from the Closing Date until payment in full is made.  The
interest rate shall be fifteen percent (15%) 


                                      -2-

<PAGE>

accumulating interest per annum; provided that in no event shall such rate 
exceed the maximum rate of interest allowed by applicable law.

          1.5  TERM.  All outstanding principal and interest due under the Notes
shall be due and payable as set forth therein.

          1.6  PREPAYMENT.  The Company may prepay the principal and accrued
interest under the Notes according to the terms of Section 2 of the Notes.

          1.7  NO USURY.  This Agreement, the Notes, the Security Agreement, the
Registration Rights Agreement, which is attached hereto as EXHIBIT D (the
"Registration Rights Agreement"), the Warrants, and other agreements referred to
herein (collectively the "Transaction Agreements"), and any other agreements
which may subsequently be entered into between the Company and the Lenders,  are
hereby expressly limited so that in no event whatsoever, whether by reason of
deferment or advancement of loan proceeds, acceleration of maturity of the loan
evidenced hereby, or otherwise, shall the amount paid or agreed to be paid to
Lenders hereunder for the loan, use, forbearance or detention of money exceed
that permissible under applicable law.  If at any time the performance of any
provision hereof or of any other such agreement involves a payment exceeding the
limit of the price that may be validly charged for the loan, use, forbearance or
detention of money under applicable law, then automatically and retroactively,
ipso facto, the obligation to be performed shall be reduced to such limit, it
being the specific intent of the Company and Lenders hereof that all payments
under this Agreement or the Notes are to be credited first to interest as
permitted by law, but not in excess of (i) the agreed rate of interest set forth
herein, or (ii) that permitted by law, whichever is the lesser, and the balance
toward the reduction of principal.  The provisions of this paragraph shall never
be superseded or waived and shall control every 


                                      -3-

<PAGE>

other provision of the Transaction Agreements and all other agreements 
between the Company and Lenders.

          1.8  FEES AND COMMISSIONS.  Except for a processing fee payable to
each of the Lenders equal to 3% of any loans made to the Company pursuant to
this Agreement, there shall be no fees or commissions paid by the Company
pursuant to this Agreement.

          1.9  ADDITIONAL AGREEMENTS.  The Lenders listed on SCHEDULE B (the
"Investors") shall have the following additional rights:

               a.    RIGHT OF FIRST REFUSAL.  The Company hereby grants to each
Investor a right of first refusal (the "Right of First Refusal") to purchase a
Pro Rata Share (as defined below) of all (or any part) of any Note issued by the
Company pursuant to this Agreement at any Subsequent Closing Date beyond the
first $500,000 aggregate principal amount of Notes sold by the Company (a "New
Note") hereunder.  A Pro Rata Share for an Investor, for purposes of this
section, is the ratio of (i) the aggregate principal amount of any Notes issued
by the Company to such Investor pursuant to this Agreement to (ii) the total
aggregate principal amount of all Notes issued by the Company to the Investors
pursuant to this Agreement.  The Right of First Refusal shall be subject to the
following provisions:

                     (1)  In the event the Company proposes to issue New
Notes pursuant to this agreement, it shall give each Investor written notice of
its intention.  Each Investor shall have ten (10) days after receipt of such
notice to agree to purchase its Pro Rata Share of the New Notes under the terms
of this Agreement.  If any Investor fails to agree to purchase its full Pro Rata
Share within such ten (10) day period, the Company will give the Investors who
did so agree (the "Electing Investors") notice of the amount of New Notes which
were not subscribed for.  Such notice may be by telephone if followed by written
confirmation within two days.  The Electing Investors shall have ten (10) days
from 


                                      -4-

<PAGE>

the date of such notice to agree to purchase pro rata any or all of the New 
Note not purchased by such non-purchasing Investors.

                     (2)  In the event that the Investors fail to exercise
in full the Right of First Refusal within the ten (10) plus ten (10) day period
specified above, the Company shall have thirty (30) days thereafter to sell (or
enter into an agreement to sell) New Notes upon the terms of this Agreement to
Additional Lenders.  In the event the Company has not sold (or entered into an
agreement to sell) the New Notes within such thirty (30) day period the Company
shall not thereafter issue or sell any New Notes, without first offering such
New Notes to the Investors in the manner provided above.

               b.    RIGHT TO PURCHASE ADDITIONAL NOTES.  The Company hereby
agrees to sell to each of the Investors at the election of such Investor at any
time prior to December 31, 1997 a Pro Rata Share of $250,000 aggregate principal
amount of Notes pursuant to the terms of this Agreement, subject in all cases to
the $3,000,000 Credit limitation contained in Section 1.1 hereof.  In the event
that upon exercise of such right, the total amount borrowed by the Company would
exceed the amount of the Credit limitation, the Investors' right to purchase
additional Notes will be deemed to represent a right to purchase such lesser
amount of Notes which, together with Notes previously purchased hereunder, will
equal the Credit limitation.

     2.   REPRESENTATIONS AND WARRANTIES OF THE LENDERS

          Each Lender hereby represents and warrants to the Company with respect
to the issuance of the Notes and the Warrants and the issuance of the Common
Stock issuable upon conversion of the Notes and the purchase of the Common Stock
issuable upon exercise of the Warrants (collectively, the "Securities") as
follows:


                                      -5-

<PAGE>

          2.1  EXPERIENCE.  It is experienced in evaluating and investing in
high technology companies such as the Company.

          2.2  INVESTMENT.  It is acquiring the Securities for investment for
its own account and not with the view to, or for resale in connection with, any
distribution thereof.  It understands that the Securities to be purchased have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act") by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein and the accuracy
of the Lenders' representations and warranties as expressed herein.

          2.3  TAX CONSEQUENCES.  It understands and acknowledges that any
financing structured in the manner provided for herein involves certain tax
risks, and therefore it has consulted its own tax advisors regarding all the
federal and state tax consequences of the transactions contemplated by this
Agreement.

          2.4  RULE 144.  It acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available.  It is aware of the provisions of
Rule 144 promulgated under the Securities Act.

          2.5  AUTHORITY.  It has all corporate rights, power and authority to
enter into the Transaction Agreements and to consummate the transactions
contemplated thereby.  The execution and delivery of the Transaction Agreements
by the Lenders and the consummation by it of the transactions contemplated
thereby have been duly authorized by all necessary corporate action on its
behalf.  The Transaction Agreements have been duly executed and delivered by and
constitute legal, valid and binding obligations of the Lenders, enforceable in
accordance with their respective terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing 


                                      -6-

<PAGE>

specific performance, injunctive relief or other equitable remedies, and to 
limitations of public policy as they may apply to Section 9 of the 
Registration Rights Agreement.

          2.6  ACCESS TO DATA.  It has had an opportunity to discuss the
Company's business, management, and financial affairs with its management and
the opportunity to review the Company's facilities.  It understands that such
discussions, as well as any written information issued by the Company, were
intended to describe the aspects of the Company's business and prospects which
it believes to be material but were not necessarily a thorough or exhaustive
description.

          2.7  ACCREDITED INVESTOR.  It is an "accredited investor" within the
meaning of Regulation D promulgated by the Securities and Exchange Commission
pursuant to the Securities Act.


     3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          For purposes of this Section 3, unless the context otherwise requires,
the term "Company" shall include the Company and its subsidiaries as listed on
its most recent Annual Report on Form 10-K for the year ended March 31, 1997,
filed with the Securities and Exchange Commission (the "SEC").  Except as set
forth in the Schedule of Exceptions attached hereto as EXHIBIT E, the Company
represents and warrants to the Lenders as follows:

          3.1  CORPORATE ORGANIZATION AND AUTHORITY OF THE COMPANY.  The Company
and each of its subsidiaries:

               (i)   is a corporation duly organized, validly existing,
authorized to exercise all its corporate powers, rights and privileges and in
good standing in the state or jurisdiction of its incorporation;


                                      -7-

<PAGE>

               (ii)  has the corporate power and authority to own and operate
its properties and to carry on its business as presently conducted and as
proposed to be conducted; and

               (iii) is qualified to do business as a foreign corporation in
each jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the business, properties or financial
condition of the Company and its subsidiaries, taken as a whole.  The Company
has made available to the Lenders true and correct copies of its Certificate of
Incorporation and By-laws as amended.

          3.2  CORPORATE POWER.  The Company will have at the Closing Date all
requisite legal and corporate power and authority to execute and deliver the
Transaction Agreements, to sell and issue the Notes and Warrants hereunder to
issue Common Stock upon conversion of the Notes and upon exercise of the
Warrants and to carry out and perform its obligations under the terms of the
Transaction Agreements.

          3.3  CAPITALIZATION.  The authorized capital stock of the Company
consists of:

               (i)   COMMON STOCK.  50,000,000 shares of Common Stock, $0.001
par value, of which 2,104,155 shares were issued and outstanding as of October
23, 1997.

               (ii)  PREFERRED STOCK.  5,000,000 shares of Preferred Stock,
$0.001 par value, of which 99,993 shares were issued and outstanding as of
October 23, 1997.

               (iii) All outstanding shares of the Company's Common Stock 
have been duly authorized and validly issued (including, without limitation, 
issued in compliance with applicable federal and state securities laws), and 
are fully-paid and nonassessable.

               (iv)  At October 31, 1997, the Company had reserved 400,000
shares of Common Stock for future issuance to employees, officers, directors,
and consultants of the Company 


                                      -8-

<PAGE>

pursuant to employee stock benefit plans or agreements approved by the Board 
of Directors, and 1,886,305 shares of Common Stock for issuance upon exercise 
of outstanding warrants.  Except as provided or described in this Agreement, 
there are no other options, warrants, conversion privileges or other 
contractual rights presently outstanding to purchase or otherwise acquire any 
shares of the Company's capital stock or other securities (whether or not 
authorized).

          3.4  AUTHORIZATION.  All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution, delivery and performance by the Company of all its obligations under
this Agreement and the other Transaction Agreements and for the authorization,
issuance, sale and delivery of the shares of common stock issuable upon
conversion of the Notes and exercising of the Warrants has been taken, and this
Agreement, the Registration Rights Agreement, the Notes and the Warrants, once
executed by the Company and the Lenders, will constitute legally binding valid
obligations of the Company enforceable in accordance with their respective
terms, such enforceability being subject only to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy as they may apply to Section 9 of the
Registration Rights Agreement.  Except as provided herein, the issuance of the
Notes and the Warrants and the issuance of the common stock upon conversion of
the Notes and upon exercise of the Warrants will not give rise to any preemptive
rights or rights of first refusal on behalf of any person in existence on the
date hereof.

          3.5  VALIDITY OF SHARES.  The shares of common stock, when issued and
delivered in accordance with the terms and for the consideration expressed in
the Notes and the Warrants, shall be 


                                      -9-

<PAGE>

duly and validly issued (including, without limitation, compliance with 
applicable federal and state securities laws), fully-paid and nonassessable.

          3.6  ACCURACY OF REPORTS.  The Company's Annual Report on Form 10-K
for the year ended March 31, 1997 filed with the SEC, and all reports required
to be filed by the Company thereafter up to the date of this Agreement under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), copies of
which have been made available to the Lenders, have been duly filed, were in
substantial compliance with the requirements of their respective report forms,
were complete and correct in all material respects as of the dates at which the
information was furnished, and contained (as of such dates) no untrue statement
of a material fact nor omitted to state a material fact necessary in order to
make the statements made therein in light of the circumstances in which made not
misleading.  Since the date of the latest of such reports, there has not been
any material adverse change in the condition (financial or otherwise) or results
of operations of the Company and its subsidiaries taken as a whole.

          3.7  GOVERNMENTAL CONSENT, ETC.  No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Transaction Agreements, or the offer, sale or issuance of the
Notes or the shares of common stock issuable upon conversion of the Notes, or
the consummation of any other transaction contemplated hereby, except such
filings as may be required to be made with the SEC and the National Association
of Securities Dealers, Inc. and except for filings to perfect security interests
pursuant to the Security Agreement and Notes.

          3.8  THIRD PARTY CONSENTS.  No third party consents are required in
connection with any indebtedness of the Company, or with respect to indebtedness
of Theatrix Interactive, Inc., the 


                                     -10-

<PAGE>

Company's wholly-owned subsidiary, including existing bank lines of credit 
with Silicon Valley Bank, Phoenix Leasing, Inc. or Steelcase Financial 
Services, Inc.

          3.9  FULL DISCLOSURE.  The representations and warranties of the
Company contained in this Agreement, the other provisions of this Agreement, the
Schedule of Exceptions and the other exhibits, when read together, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained herein or therein in
light of the circumstances under which they were made not misleading.

     4.   SECURITIES LAWS COVENANTS OF LENDERS.  Each Lender covenants that it
will dispose of any of the shares of Common Stock issuable upon conversion of
the Notes and upon exercise of the Warrants only in compliance with the
Registration Rights Agreement.  All certificates representing such shares shall
bear the legend set forth in Section 3 of such Registration Rights Agreement.

     5.   CONDITIONS OF LENDERS' OBLIGATIONS AT CLOSING.  The obligations of the
Lenders under Section 1 of this Agreement are subject to the fulfillment at or
before the Closing of each of the following conditions, any of which may be
waived in writing by the Lenders:

          5.1  REPRESENTATIONS AND WARRANTIES.  The representations and
warranties of the Company contained in the Security Agreement and in this
Agreement shall be true on and as of such Closing with the same effect as if
made on and as of such Closing.

          5.2  PERFORMANCE.  The Company shall have performed or fulfilled all
agreements, obligations and conditions contained herein and in the Security
Agreement required to be performed or fulfilled by the Company before such
Closing.


                                     -11-

<PAGE>

          5.3  BLUE SKY COMPLIANCE.  The Company shall have complied with and be
effective under all state securities or Blue Sky laws applicable to the
execution and delivery of the Notes and the issuance of the common stock upon
conversion of the Notes to the Lenders.

          5.4  PROCEEDINGS SATISFACTORY.  All corporate and legal proceedings
taken by the Company in connection with the transactions contemplated by this
Agreement and all documents and papers relating to such transactions shall be
satisfactory to the Lenders, in the reasonable exercise of the judgment of the
Lenders.

          5.5  OTHER AGREEMENTS.  The Company and the Lenders shall have entered
into the Registration Rights Agreement and the Security Agreement.

          5.6  NO ACTIONS PENDING.  There shall not then be in effect any order
enjoining or restraining the transactions contemplated by the Transaction
Agreements.

     6.   CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.  The obligations
of the Company under Section 1 of this Agreement are subject to the fulfillment
at or before the Closing of each of the following conditions, any of which may
be waived in writing by the Company:

          6.1  REPRESENTATIONS AND WARRANTIES.  The representations and
warranties of the Lenders contained in Section 2 hereof shall be true on and as
of the Closing with the same effect as though said representations and
warranties had been made on and as of the Closing.

          6.2  BLUE SKY COMPLIANCE.  The Company shall have complied with and be
effective under the securities laws of the State of Oregon and any other
applicable states as necessary to execute and deliver the Notes to the Lenders
and to issue the common stock upon conversion of the Notes to the Lenders.


                                     -12-

<PAGE>

          6.3  NO ORDER PENDING.  There shall not then be in effect any order
enjoining or restraining the transactions contemplated by the Transaction
Agreements.

     7.   MISCELLANEOUS

          7.1  GOVERNING LAW.  This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents.

          7.2  SUCCESSORS AND ASSIGNS.  Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

          7.3  ENTIRE AGREEMENT.  The Transaction Agreements and the other
documents delivered hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.   None of the Transaction Agreements nor any term hereof and
thereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.

          7.4  NOTICES, ETC.  Any notice and other communications as required or
permitted under the Transaction Agreements shall be  mailed, by registered or
certified mail, postage prepaid with return receipt requested, or otherwise
delivered by hand, by messenger or by facsimile (with confirmation of receipt),
addressed (a) if to a Lender, at such Lender's address set forth on the
signature page hereof, or at such other address as such Lender shall have
furnished to the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Securities who has so furnished an address to the Company, or (c) if to the
Company, at its address set 


                                     -13-

<PAGE>

forth on the signature page of this Agreement, or at such other address as 
the Company shall have furnished to the Lenders.

          7.5  COUNTERPARTS.  This Agreement may be executed in two or more
counterparts, each of which may be executed by less than all of the parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

          7.6  SEVERABILITY.  In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.

          7.7  HEADINGS.  Headings and the table of contents in this Agreement
are for reference purposes only and shall not be deemed to have any substantive
effect.

          7.8  SURVIVAL OF REPRESENTATIONS AND WARRANTIES.  The representations
and warranties of the parties contained in or made pursuant to this Agreement
and the Security Agreement shall survive the execution and delivery of this
Agreement and the Closing; provided however, that such representations and
warranties need only be accurate as of the date of such execution and delivery
and as of the Closing.

          7.9  AMENDMENT OF AGREEMENT.  Any provision of this Agreement may be
modified or amended by a written instrument signed by the Company and by the
Lenders.

          7.10 FINDER'S FEES.  Each of the Company and the Lenders represents
and warrants to the others that no person is entitled, directly or indirectly,
to compensation by reason of any contract or understanding with such party, as a
finder or broker in connection with the sale and purchase of the Notes and
Warrants hereunder or in connection with the issuance of the common stock upon
conversion of the 


                                     -14-

<PAGE>

Notes or upon exercise of the Warrants.  Each of the Company and the Lenders 
will indemnify the other against all liabilities incurred by the indemnifying 
party with respect to claims related to investment banking or finders fees in 
connection with the transactions contemplated by this Agreement, arising out 
of arrangements between the party asserting such claims and the indemnifying 
party, and all costs and expenses (including reasonable fees of counsel) of 
investigating and defending such claims.

          7.11 EXPENSES.  The Company and the Lenders will each bear their
respective legal and other fees and expenses in connection with the transactions
contemplated by this Agreement.


                                     -15-

<PAGE>

     The foregoing agreement is hereby executed as of the date first above
written.

SANCTUARY WOODS MULTIMEDIA              PEQUOT PARTNERS FUND, L.P.
CORPORATION,
A DELAWARE CORPORATION



By:                                     By:
   ----------------------------------       -----------------------------------
                                                  Name: 
                                                        -----------------------
Name:                                             Its:  
     --------------------------------                   -----------------------

Title:
      -------------------------------

Address:  1250 45th Street, Suite 350   Address: 
          Emeryville, CA  94608-2924             ------------------------------

                                                 ------------------------------




                                        PEQUOT INTERNATIONAL FUND, INC.

                                        By:                                     
                                            ----------------------------------- 
                                                  Name:                         
                                                        ----------------------- 
                                                  Its:                          
                                                        ----------------------- 
                                                                                
                                                                                
                                                                                
                                                                                
                                        Address:                                
                                                 ------------------------------ 
                                                                                
                                                 ------------------------------ 


                           *NOTE PURCHASE AGREEMENT*
                                   SCHEDULE A


<PAGE>

                                    LENDERS


Pequot Partners Fund, L.P.         $250,000.00

Pequot International Fund, Inc.         $250,000.00




                                      -2-

<PAGE>

                                   SCHEDULE B

                                   INVESTORS
                           (Pursuant to Section 1.9)


Pequot Partners Fund, L.P.

Pequot International Fund, Inc.




                                      -3-

<PAGE>

                                   EXHIBIT A

                      FORM OF CONVERTIBLE PROMISSORY NOTE




                                      -4-

<PAGE>

                                   EXHIBIT B

                                FORM OF WARRANT




                                      -5-

<PAGE>

                                   EXHIBIT C

                               SECURITY AGREEMENT




                                      -6-

<PAGE>

                                   EXHIBIT D

                         REGISTRATION RIGHTS AGREEMENT




                                      -7-


<PAGE>

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO SUCH SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.

                     SANCTUARY WOODS MULTIMEDIA CORPORATION
                      SECURED CONVERTIBLE PROMISSORY NOTE


                                                              December 29, 1997


     Subject to the terms and conditions of this Secured Convertible Promissory
Note (the "Note"), for value received, SANCTUARY WOODS MULTIMEDIA CORPORATION, a
Delaware corporation (the "Company"), whose address is 1250 45th Street, Suite
350, Emeryville, CA  94608-2924 promises to pay to PEQUOT INTERNATIONAL FUND,
INC., the principal amount of ONE HUNDRED TWENTY-EIGHT THOUSAND SEVEN HUNDRED
FIFTY DOLLARS ($128,750) (the "Principal Amount"), together with interest at
the rate of 15.0% per annum, payable on the terms set forth in Section 2 herein.
The following is a statement of the rights of the holder of this Note and the
terms and conditions to which this Note is subject, and to which the holder
hereof, by the acceptance of the Note agrees:

     THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT
(THE "SECURITY AGREEMENT") DATED AS OF THE DATE HEREOF AND EXECUTED BY COMPANY
IN FAVOR OF HOLDER.  ADDITIONAL RIGHTS OF HOLDER ARE SET FORTH IN THE SECURITY
AGREEMENT.

     1.   CERTAIN DEFINITIONS.  Unless the context otherwise requires, as used
in this Note, the following terms will have the following meanings:

          1.1  "Company" means Sanctuary Woods Multimedia Corporation and any
corporation which succeeds to, or assumes the obligations of Sanctuary Woods
Multimedia Corporation under this Note.

          1.2  "Noteholder," "Holder," "Holder of this Note," or similar terms,
when the context refers to a holder of this Note, will mean any person who at
the time in question is the registered holder of this Note.

          1.3  The "Act" means the Securities Act of 1933, as amended.

                                      
<PAGE>

          1.4  "Conversion Stock" mean the Common Stock of the Company to be
issued on conversion of this Note.

          1.5  "Purchase Agreement" means the Note Purchase Agreement, dated as
of November 20, 1997, by and between the Company and the Lenders set forth on
Schedule A thereto (as amended from time to time).

          1.6  "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 20, 1997 by and between the Company and the
Investors set forth on Exhibit A thereto.

          1.7  "Senior Indebtedness" shall mean, unless expressly subordinated
to or made on a parity with the amounts due under this Note, the principal of
(and premium, if any), unpaid interest on, amounts reimbursable and fees,
expenses, costs of enforcement and other amounts due in connection with, (i)
indebtedness of the Company, or with respect to indebtedness of Theatrix
Interactive Inc., the Company's wholly-owned subsidiary, pursuant to existing
bank lines of credit with Silicon Valley Bank, Phoenix Leasing, Inc. or
Steelcase Financial Services, Inc., (ii) indebtedness of the Company, or with
respect to which the Company is a guarantor, to a lending institution for a bank
line of credit created after the date hereof and for a principal amount greater
than or equal to $125,000, whether or not secured and (iii) any such
indebtedness or any debentures, notes or other evidence of indebtedness issued
in exchange for such Senior Indebtedness, or any indebtedness arising from the
satisfaction of such Senior Indebtedness by a guarantor.

     2.   MATURITY DATE AND PAYMENT.

          2.1  MATURITY DATE.  Unless otherwise extended as provided in Section
2.4 herein, this Note will mature and be subject to Holder's options, in
accordance with Section 2.3 hereof, on December 29, 2000 (the "Maturity Date").
Subject to Section 3 below, interest shall accrue hereon and shall be payable
every six months (an "Interest Payment Date") in cash or in Common Stock of the
Company, at the Holder's election, provided, however, that unless the Holder
provides the Company with notice within 5 business days of an Interest Payment
Date of its election to convert such interest payment to Common Stock in
accordance with Section 3.1 hereof, the Holder shall be deemed to have elected
to receive cash.

          2.2  PREPAYMENT.  The remaining principal amount of this Note and all
accrued but unpaid interest of this Note may be prepaid by the Company at any
time upon fifteen (15) business days prior written notice to the Holder (the
fifteenth business day following the date such notice is delivered shall be
defined as the "Prepayment Date") at 115% of the Principal Amount plus any
accrued interest; provided however, that in such event, the Holder may convert
the Note to Common Stock of the Company according to the provisions of
Section 3.1 hereof by delivering to the Company a Conversion Notice, a form of
which is attached hereto as EXHIBIT A (the "Conversion Notice"), at least one
business day prior to the Prepayment Date.


                                      -2-

<PAGE>

          2.3  HOLDER'S OPTIONS AT MATURITY DATE.  On the Maturity Date, the
Holder shall have the option to (i) convert the outstanding principal amount and
all interest and other amounts owing to the Holder in connection with Note to
Common Stock pursuant to Section 3.1 hereof, by delivering to the Company a
Conversion Notice at least one business day prior to the Maturity Date, (ii)
demand payment of the principal amount of the Note and all accrued interest
thereon, which amounts have not been prepaid pursuant to Section 2.2 hereof, by
delivering to the Company a Demand Notice, a form of which is attached hereto as
EXHIBIT B, at least one business day prior to the Maturity Date, or (iii) extend
the Maturity Date pursuant to and subject to the conditions of Section 2.4
hereof.  The Holder shall give the Company notice, not less than three business
days but not more than five business days prior to the Maturity Date, as to its
option pursuant to this Section 2.3; provided however, that if the Holder has
not given the Company notice by the Maturity Date, the Maturity Date shall be
extended for ninety (90) days, and this extended date shall be deemed the
Maturity Date for purposes of this Note, including the provisions of this
Section 2.3.

          2.4  EXTENSION OF MATURITY DATE.  On or prior to the Maturity Date,
the Holder shall have the option, with the prior written consent of the Company,
to extend the date on which this Note is due and payable or convertible, by
executing and delivering to the Company an Extension Agreement, a form of which
is attached hereto as EXHIBIT C, at least one business day prior to the Maturity
Date; and, if agreed by the Company, this agreed-upon date shall be deemed the
Maturity Date for purposes of this Note.

     3.   CONVERSION.

          3.1  CONVERSION.  If the Company receives from the Holder a Conversion
Notice at least one business day prior to the Maturity Date, the Prepayment Date
or in the event of a deemed conversion election for an Interest Payment Date, as
the case may be, the outstanding principal amount of the Note and all interest
and other amounts owing to the Holder in connection with such Note (in the case
of a Conversion Notice delivered with respect to the Maturity Date or the
Prepayment Date) or the amount of interest payable on the Note (in the case of a
deemed conversion election for an Interest Payment Date) shall be converted into
shares of Common Stock of the Company, on the date specified on the Conversion
Notice, or in the case of a deemed conversion of interest pursuant to Section
2.1, on such Interest Payment Date.  The number of shares of Conversion Stock of
the Company upon such conversion shall be calculated by dividing the amount
payable with respect to the Note for such Maturity Date, Prepayment Date or
Interest Payment Date, as the case may be, by a conversion rate (the "Conversion
Rate") of $0.20 per share of Common Stock.  The Conversion Rate and the number
of shares issuable upon conversion hereof are subject to adjustment from time to
time as follows:

               (a)  RECLASSIFICATION, ETC.  If the Company at any time while 
this Note, or any portion thereof, remains outstanding and unexpired shall, 
by reclassification of securities or otherwise, change any of the securities 
as to which conversion rights under this Note exist into the same or a 
different number of securities of any other class or classes, this Note shall 
thereafter be convertible into such number and kind of securities as would 
have been issuable as the result of such change with respect to the securities
which were subject to the conversion rights under this Note 


                                      -3-

<PAGE>

immediately prior to such reclassification or other change and the Conversion 
Rate therefor shall be appropriately adjusted, all subject to further 
adjustment as provided in this Section 3.1.

               (b)  SPLIT, SUBDIVISION OR COMBINATION OF SHARES.  If the Company
at any time while this Note, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which
conversion rights under this Note exist, into a different number of securities
of the same class, the Conversion Rate for such securities shall be
proportionately decreased and the number of securities issuable upon conversion
proportionately increased in the case of a split or subdivision or the
Conversion Rate of such securities shall be proportionately increased and the
number of securities issuable upon conversion proportionately decreased in the
case of a combination.

               (c)  ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR
PROPERTY.  If, while this Note, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which conversion rights under this
Note exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Note shall be convertible into, in addition to the number
of shares of the security receivable upon the conversion of this Note, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company which such holder would hold on the date of such
conversion had it been the holder of record of the security receivable upon
conversion of this Note on the date hereof and had thereafter, during the period
from the date hereof to and including the date of such conversion, retained such
shares and/or all other additional stock available by it as aforesaid during
such period, giving effect to all adjustments called for during such period by
the provisions of this Section 3.1.

               (d)  CERTIFICATE AS TO ADJUSTMENTS.  Upon the occurrence of each
adjustment or readjustment pursuant to this Section 3.1, the Company shall, upon
the written request, at any time, of such holder of this Note, furnish or cause
to be furnished to such holder a certificate setting forth: (i) such adjustments
and readjustments; (ii) the Conversion Rate at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the conversion of the Note.

               (e)  NO IMPAIRMENT.  The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all of the provisions of this Section
3.1 and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the holders of this Note against impairment.

          3.2  MECHANICS AND EFFECT OF CONVERSION.  No fractional shares of
Conversion Stock will be issued upon conversion under Section 3.1.  In lieu of
any fractional share to which the Holder would otherwise be entitled, the
Company will pay to the Holder in cash that amount of the unconverted balance
under this Note (including both principal and accrued interest); provided that
such fractional share amount shall not be deemed to constitute an amount due
under the Note.  Upon conversion of the outstanding principal amount of this
Note in accordance with Section 3.1, the 


                                      -4-

<PAGE>

Holder of this Note shall surrender this Note, duly endorsed, at the 
principal offices of the Company or any transfer agent for the Company.  At 
its expense, the Company will, as soon as practicable after a conversion by a 
Holder pursuant to Section 3.1 and, in accordance with this Section 3.2, 
issue and deliver to such Holder at the Holder's address set forth on the 
signature page of the Purchase Agreement, a certificate or certificates for 
the number of shares of Conversion Stock to which such Holder is entitled 
upon such conversion, together with any other securities and property to 
which the Holder is entitled upon such conversion under the terms of this 
Note, including a check payable to the Holder for any cash amounts payable as 
described above.  Upon conversion of the outstanding principal amount of this 
Note, the Company will be forever released from all its obligations and 
liabilities under this Note, including without limitation the obligation to 
pay the principal amount or accrued interest.

          3.3  LEGENDS.  The Conversion Stock shall bear the legends set forth
in Section 3 of the Registration Rights Agreement.

     4.   SUBORDINATION.  The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all of Company's Senior
Indebtedness.

          (a)  INSOLVENCY PROCEEDINGS.  If there shall occur any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization,
or arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation, or any other marshaling of the assets and liabilities of Company,
(i) no amount shall be paid by Company in respect of the principal of, interest
on or other amounts due with respect to this Note at the time outstanding,
unless and until the principal of and interest on the Senior Indebtedness then
outstanding shall be paid in full, and (ii) no claim or proof of claim shall be
filed with Company by or on behalf of Holder of this Note which shall assert any
right to receive any payments in respect of the principal of and interest on
this Note except subject to the payment in full of the principal of and interest
on all of the Senior Indebtedness then outstanding.

          (b)  DEFAULT ON SENIOR INDEBTEDNESS.  If there shall occur an event of
default which has been declared in writing with respect to any Senior
Indebtedness, as defined therein, or in the instrument under which it is
outstanding, permitting the holder to accelerate the maturity thereof and Holder
shall have received written notice thereof from the holder of such Senior
Indebtedness, then, unless and until such event of default shall have been cured
or waived or shall have ceased to exist, or all Senior Indebtedness shall have
been paid in full, no payment shall be made in respect of the principal of or
interest on this Note, unless within sixty (60) days after the happening of such
event of default, the maturity of such Senior Indebtedness shall not have been
accelerated.  Not more than one notice may be given to Holder pursuant to the
terms of this Section 4(b) during any 360 day period.

          (c)  FURTHER ASSURANCES.  By acceptance of this Note, Holder agrees to
execute and deliver customary forms of subordination agreement requested from
time to time by holders of Senior Indebtedness, and as a condition to Holder's
rights hereunder, Company may require that Holder 


                                      -5-

<PAGE>

execute such forms of subordination agreement; provided that such forms shall 
not impose on Holder terms less favorable than those provided herein and in 
the Security Agreement.

          (d)  OTHER INDEBTEDNESS.  No indebtedness which does not constitute
Senior Indebtedness shall be senior in any respect to the indebtedness
represented by this Note.

          (e)  SUBROGATION.  Subject to the payment in full of all Senior
Indebtedness, Holder shall be subrogated to the rights of the holder(s) of such
Senior Indebtedness (to the extent of the payments or distributions made to the
holder(s) of such Senior Indebtedness pursuant to the provisions of this
Section 4) to receive payments and distributions of assets of Company applicable
to the Senior Indebtedness.  No such payments or distributions applicable to the
Senior Indebtedness shall, as between Company and its creditors, other than the
holders of Senior Indebtedness and Holder, be deemed to be a payment by Company
to or on account of this Note; and for purposes of such subrogation, no payments
or distributions to the holders of Senior Indebtedness to which Holder would be
entitled except for the provisions of this Section 4 shall, as between Company
and its creditors, other than the holders of Senior Indebtedness and Holder, be
deemed to be a payment by Company to or on account of the Senior Indebtedness.

          (f)  NO IMPAIRMENT.  Subject to the rights, if any, of the holders of
Senior Indebtedness under this Section 4 to receive cash, securities or other
properties otherwise payable or deliverable to Holder, nothing contained in this
Section 4 shall impair, as between Company and Holder, the obligation of
Company, subject to the terms and conditions hereof, to pay to Holder the
principal hereof and interest hereon as and when the same become due and
payable, or shall prevent Holder, upon default hereunder, from exercising all
rights, powers and remedies otherwise provided herein or by applicable law.

          (g)  RELIANCE OF HOLDERS OF SENIOR INDEBTEDNESS.  Holder, by its
acceptance hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the creation of the
indebtedness evidenced by this Note, and each such holder of Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Indebtedness.
Holder agrees to execute all other documents reasonably requested by the Company
or holders of Senior Indebtedness to evidence such subordination.

     5.   ASSIGNMENT.  The rights and obligations of the Company and the Holder
of this Note will be binding upon and inure to the benefit of the successors,
assigns, heirs, administrators and transferees of the parties.  Notwithstanding
the foregoing, the Holder may not assign, pledge or otherwise transfer this Note
without the prior written consent of the Company.

     6.   WAIVER AND AMENDMENT.  This Note or any provisions hereof may be
amended, waived or modified with the written consent of the Company and the
Holder.


                                      -6-

<PAGE>

     7.   LOST DOCUMENTS.  Upon receipt by the Company of evidence and indemnity
satisfactory to it of the loss, theft, destruction or mutilation of, and upon
surrender and cancellation of this Note, if mutilated, the Company will make and
deliver in lieu of this Note a new Note of the same series and of like tenor and
unpaid principal amount and dated as of the date to which interest, if any, has
been paid on the unpaid principal amount of this Note.

     8.   GOVERNING LAW.  This Note shall be governed by, and construed in
accordance with, the laws of the State of California, excluding that body of law
relating to conflict of laws.


                                      -7-

<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the
date first written above.

                                       SANCTUARY WOODS MULTIMEDIA
                                       CORPORATION



                                       By: 
                                           ----------------------------------

                                       Name: 
                                             --------------------------------

                                       Title: 
                                              -------------------------------


ACCEPTED AND AGREED TO:

PEQUOT INTERNATIONAL FUND, INC.

By: 
    -------------------------------

Name: 
      -----------------------------

Title: 
       ----------------------------


                                      -8-

<PAGE>

                                   EXHIBIT A

                              NOTICE OF CONVERSION


     Pursuant to Section 3.1 of the Secured Convertible Promissory Note, dated
December 29, 1997, the Holder hereby irrevocably converts the outstanding
principal and accrued interest on the Note in accordance with Section 3.1 of the
Note.

     This conversion notice may be revoked only with the express written consent
of the Holder and the Company.



_____________, 19__



                                       PEQUOT INTERNATIONAL FUND, INC.



                                       By: 
                                           ----------------------------------

                                       Name: 
                                             --------------------------------

                                       Title: 
                                              -------------------------------




                                      -9-
<PAGE>

                                   EXHIBIT B

                                 DEMAND NOTICE


     Pursuant to Section 2.3 of the Secured Convertible Promissory Note, dated
December 29, 1997, the Holder hereby demands immediate payment of the principal
amount of the Note and all accrued interest thereon, which amounts have not been
prepaid pursuant to Section 2.2 of the Note.





                                       PEQUOT INTERNATIONAL FUND, INC.



                                       By: 
                                           ----------------------------------

                                       Name: 
                                             --------------------------------

                                       Title: 
                                              -------------------------------




                                      -10-

<PAGE>

                                     EXHIBIT C

                         AGREEMENT TO EXTEND MATURITY DATE


     Pursuant to Section 2.4 of the Secured Convertible Promissory Note, dated
December 29, 1997, the Holder and the Company agree to extend the Maturity Date,
as defined in the Note, to ___________, 19__; and this date shall be the
Maturity Date for purposes of the Note.



                                       PEQUOT INTERNATIONAL FUND, INC.


                                       By: 
                                           ----------------------------------

                                       Name: 
                                             --------------------------------

                                       Title: 
                                              -------------------------------


ACCEPTED AND AGREED TO:

SANCTUARY WOODS MULTIMEDIA
CORPORATION


By: 
    -------------------------------

Name: 
      -----------------------------

Title: 
       ----------------------------




                                      -11-


<PAGE>

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO SUCH SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.


                                                  Warrant to Purchase
                                                  125,000 Shares
                                                  of Common Stock
                                                  Dated December 29, 1997

                         WARRANT TO PURCHASE COMMON STOCK

                                        OF

                      SANCTUARY WOODS MULTIMEDIA CORPORATION

                             Void after December 29, 2002
     This certifies that, for value received, PEQUOT INTERNATIONAL FUND, INC. 
or its registered assigns ("Holder") is entitled, subject to the terms set 
forth below, to purchase from SANCTUARY WOODS MULTIMEDIA CORPORATION (the 
"Company"), a Delaware corporation, ONE HUNDRED TWENTY-FIVE THOUSAND 
(125,000) shares of the Common Stock of the Company, as constituted on the 
date hereof (the "Warrant Issue Date"), upon surrender hereof, at the 
principal office of the Company referred to below, with the subscription form 
attached hereto duly executed, and simultaneous payment therefor in lawful 
money of the United States or otherwise as hereinafter provided, at the 
Exercise Price as set forth in Section 2 below. The number, character and 
Exercise Price of such shares of Common Stock are subject to adjustment as 
provided below.

     1.   TERM OF WARRANT.  Subject to the terms and conditions set forth 
herein, this Warrant shall be exercisable, in whole or in part, during the 
term commencing on the Warrant Issue Date and ending at 5:00 p.m., Pacific 
Standard Time, on December 29, 2002 (the "Term"), and shall be void 
thereafter.

     2.   EXERCISE PRICE.  The Exercise Price at which this Warrant may be 
exercised shall be $0.15 per share of Common Stock as adjusted from time to 
time pursuant to Section 10 hereof (the "Exercise Price").

     3.   EXERCISE OF WARRANT.

          (a)  This Warrant is exercisable by the Holder in whole or in part, 
but not for less than one hundred thousand (100,000) shares at a time (or if 
the maximum number of shares purchasable upon exercise of this Warrant is 
less than 100,000, this Warrant shall be exercisable for such lesser number 
of shares which may then constitute the maximum number purchasable), at any 
time, or from time to time, during the term hereof as described in Section 1 
above, by the surrender of this Warrant and the Notice 


<PAGE>

of Exercise annexed hereto duly completed and executed on behalf of the 
Holder, at the office of the Company (or such other office or agency of the 
Company as it may designate by notice in writing to the Holder at the address 
of the Holder appearing on the books of the Company), upon payment (i) in 
cash or by check acceptable to the Company, (ii) by cancellation by the 
Holder of indebtedness of the Company to the Holder, or (iii) by a 
combination of (i) and (ii), of the Exercise Price multiplied by the number 
of shares being purchased.

          (b)  This Warrant shall be deemed to have been exercised 
immediately prior to the close of business on the date of its surrender for 
exercise as provided above, and the person entitled to receive the shares of 
Common Stock issuable upon such exercise shall be treated for all purposes as 
the holder of record of such shares as of the close of business on such date. 
As promptly as practicable on or after such date and in any event within ten 
(10) days thereafter, the Company at its expense shall issue and deliver to 
the person or persons entitled to receive the same a certificate or 
certificates for the number of shares issuable upon such exercise.  In the 
event that this Warrant is exercised in part, the Company at its expense will 
execute and deliver a new Warrant of like tenor exercisable for the remaining 
number of shares for which this Warrant may then be exercised.

     4.   NO FRACTIONAL SHARES OR SCRIP.  No fractional shares or scrip 
representing fractional share shall be issued upon the exercise of this 
Warrant. In lieu of any fractional share to which the Holder would otherwise 
be entitled, the Company shall make a cash payment equal to the Exercise 
Price multiplied by such fraction.

     5.   REPLACEMENT OF WARRANT.  On receipt of evidence reasonably 
satisfactory to the Company of the loss, theft, destruction, or mutilation of 
this Warrant and, in the case of loss, theft, or destruction, on delivery of 
an indemnity agreement reasonably satisfactory in form and substance to the 
Company or, in the case of mutilation, on surrender and cancellation of this 
Warrant, the Company at its expense shall execute and deliver, in lieu of 
this Warrant, a new warrant of like tenor and amount.

     6.   RIGHTS OF STOCKHOLDERS.  Subject to Sections 8 and 10 of this 
Warrant, the Holder shall not be entitled to vote or receive dividends or be 
deemed the holder of Common Stock or any other securities of the Company that 
may at any time be issuable on the exercise hereof for any purpose, nor shall 
anything contained herein be construed to confer upon the Holder, as such, 
any of the rights of a stockholder of the Company or any right to vote for 
the election of directors or upon any matter submitted to stockholders at any 
meeting thereof, or to give or withhold consent to any corporate action 
(whether upon any recapitalization, issuance of stock, reclassification of 
stock, change of par value, or change of stock to no par value, 
consolidation, merger, conveyance, or otherwise) or to receive notice of 
meetings, or to receive dividends or subscription rights or otherwise until 
the Warrant shall have been exercised and the shares of Common Stock 
purchasable upon the exercise hereof (the "Warrant Shares") shall have been 
issued, as provided herein.

     7.   COMPLIANCE WITH SECURITIES LAWS.  This Warrant may not be 
transferred or assigned in whole or in part without compliance with all 
applicable federal and state securities laws by the transferor and the 
transferee (including the delivery of investment representation letters and 
legal opinions reasonably satisfactory to the Company, if such are requested 
by the Company).


                                      -2-

<PAGE>

          (a)  The Holder of this Warrant, by acceptance thereof, 
acknowledges that this Warrant and the shares of Common Stock to be issued 
upon exercise hereof are being acquired solely for the Holder's own account 
and not as a nominee for any other party, and for investment, and that the 
Holder will not offer, sell or otherwise dispose of this Warrant or any 
shares of Common Stock to be issued upon exercise hereof except under 
circumstances that will not result in a violation of any federal securities 
laws, including without limitation the Securities Act of 1933, as amended 
(the "Act"), any state securities laws or any applicable securities law of 
foreign jurisdictions, or any rules or regulations promulgated thereunder.  
Upon exercise of this Warrant, the Holder shall, if requested by the Company, 
confirm in writing in a form satisfactory to the Company, that the shares of 
Common Stock so purchased are being acquired solely for the Holder's own 
account and not as a nominee for any other party, for investment, and not 
with a view toward distribution or resale.

          (b)  Without in any way limiting the representations set forth in 
(a) above, the Holder further agrees not to make any disposition of all or 
any portion of this Warrant or any Warrant Shares unless and until the 
transferee has agreed in writing for the benefit of the Company to be bound 
by this Section 7, and:

               (i)   the Holder shall have notified the Company of the 
proposed disposition and shall have furnished the Company with a detailed 
statement of the circumstances surrounding the proposed disposition, and (ii) 
if reasonably requested by the Company, the Holder shall have furnished the 
Company with an opinion of counsel, reasonably satisfactory to the Company, 
that such disposition will not require registration of such securities under 
the Act.

          (c)  This Warrant and all shares issuable hereunder shall bear the 
following legends:

               (i)   "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN 
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY 
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE 
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH 
SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL IN FORM AND SUBSTANCE 
SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH OFFER, SALE OR 
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT."

               (ii)  Any legend required by applicable state law.

     8.   RESERVATION OF STOCK.  The Company covenants that during the Term 
this Warrant is exercisable, the Company will reserve from its authorized and 
unissued Common Stock a sufficient number of shares to provide for the 
issuance of Common Stock upon the exercise of this Warrant and, from time to 
time, will take all steps necessary to provide sufficient reserves of shares 
of the Common Stock issuable upon the exercise of the Warrant.  The Company 
further covenants that all shares that may be issued upon the exercise of 
rights represented by this Warrant and payment of the Exercise Price, all as 
set forth herein, will be free from all taxes, liens, and charges in respect 
of the issue thereof (other than taxes in respect of any transfer occurring 
contemporaneously or otherwise specified herein).  The 


                                      -3-

<PAGE>

Company agrees that its issuance of this Warrant shall constitute full 
authority to its officers who are charged with the duty of executing stock 
certificates to execute and issue the necessary certificates for shares of 
Common Stock upon the exercise of this Warrant.

     9.   AMENDMENTS AND WAIVERS.  Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively) only with the
written consent of the Company and the Holder.  No waivers of or exceptions to
any term, condition or provision of this Warrant, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.

     10.  ADJUSTMENTS.  The Exercise Price and the number of shares 
purchasable hereunder are subject to adjustment from time to time as follows:

          (a)  RECLASSIFICATION, ETC.  If the Company at any time while this 
Warrant, or any portion thereof, remains outstanding and unexpired shall, by 
reclassification of securities or otherwise, change any of the securities as 
to which purchase rights under this Warrant exist into the same or a 
different number of securities of any other class or classes, this Warrant 
shall thereafter represent the right to acquire such number and kind of 
securities as would have been issuable as the result of such change with 
respect to the securities which were subject to the purchase rights under 
this Warrant immediately prior to such reclassification or other change and 
the Exercise Price therefor shall be appropriately adjusted, all subject to 
further adjustment as provided in this Section 10.

          (b)  SPLIT, SUBDIVISION OR COMBINATION OF SHARES.  If the Company 
at any time while this Warrant, or any portion hereof, remains outstanding 
and unexpired shall split, subdivide or combine the securities as to which 
purchase rights under this Warrant exist, into a different number of 
securities of the same class, the Exercise Price for such securities shall be 
proportionately decreased and the number of securities issuable upon exercise 
proportionately increased in the case of a split or subdivision or the 
Exercise Price of such securities shall be proportionately increased and the 
number of securities issuable upon exercise proportionately decreased in the 
case of a combination.

          (c)  ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR 
PROPERTY.  If, while this Warrant, or any portion hereof, remains outstanding 
and unexpired the holders of the securities as to which purchase rights under 
this Warrant exist at the time shall have received, or, on or after the 
record date fixed for the determination of eligible Stockholders, shall have 
become entitled to receive, without payment therefor, other or additional 
stock or other securities or property (other than cash) of the Company by way 
of dividend, then and in each case, this Warrant shall represent the right to 
acquire, in addition to the number of shares of the security receivable upon 
the exercise of this Warrant, and without payment of any additional 
consideration thereof, the amount of such other or additional stock or other 
securities or property (other than cash) of the Company which such holder 
would hold on the date of such exercise had it been the holder of record of 
the security receivable upon exercise of this Warrant on the date hereof and 
had thereafter, during the period from the date hereof to and including the 
date of such exercise, retained such shares and/or all other additional stock 
available by it as aforesaid during such period, giving effect to all 
adjustments called for during such period by the provisions of this 
Section 10.


                                      -4-

<PAGE>

          (d)  CERTIFICATE AS TO ADJUSTMENTS.  Upon the occurrence of each 
adjustment or readjustment pursuant to this Section 10, the Company shall, 
upon the written request of any holder of this Warrant, furnish or cause to 
be furnished to such holder a certificate setting forth: (i) such adjustments 
and readjustments; (ii) the Exercise Price at the time in effect; and (iii) 
the number of shares and the amount, if any, of other property which at the 
time would be received upon the exercise of the Warrant.

          (e)  NO IMPAIRMENT.  The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all of the provisions of this Section 10 and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holders of this Warrant against impairment.

     11.  SUCCESSORS AND ASSIGNS.  The terms and provisions of this Warrant 
shall inure to the benefit of and be binding upon the Company and Holder and 
their respective permitted successors and assigns.

     12.  ATTORNEYS' FEES.  If any action of law or equity is necessary to 
enforce or interpret the terms of this Warrant, the prevailing party shall be 
entitled to its reasonable attorneys' fees, costs and disbursements in 
addition to any other relief to which it may be entitled.

     13.  GOVERNING LAW.  This Warrant shall be governed by the laws of the 
State of California.

     14.  NOTICES.  All notices required under this Warrant and shall be 
deemed to have been given or made for all purposes (i) upon personal 
delivery, (ii) upon confirmation receipt that the communication was 
successfully sent to the applicable number if sent by facsimile; (iii) one 
day after being sent, when sent by professional overnight courier service, or 
(iv) five days after posting when sent by registered or certified mail to 
either party hereto at the address set forth below or at such other address 
as either party may designate by notice pursuant to this Section 14.

     If to the Company:       Sanctuary Woods Multimedia Corporation
                              1250 45th Street, Suite 350
                              Emeryville, CA  94608-2924
                              Attn:  President

     with a copy to:          Wilson Sonsini Goodrich & Rosati
                              650 Page Mill Road
                              Palo Alto, CA  94304
                              Attn:  Judith O'Brien

     If to the Holder:        PEQUOT INTERNATIONAL FUND, INC.
                              Dawson-Samberg Capital Management, Inc.
                              354 Pequot Avenue
                              Southport, CT 06490


                                      -5-

<PAGE>

     15.  CAPTIONS.  The Section and subsection headings of this Warrant are 
inserted for convenience only and shall not constitute a part of this Warrant 
in construing or interpreting any provision hereof.


                                      -6-

<PAGE>

IN WITNESS HEREOF, SANCTUARY WOODS MULTIMEDIA CORPORATION has caused this 
Warrant to be executed by its officers thereunto duly authorized.

Dated: December 29, 1997


                                   SANCTUARY WOODS MULTIMEDIA CORPORATION


                                   By: 
                                       ----------------------------------












                   *PEQUOT INTERNATIONAL FUND, INC. WARRANT*


                                      -7-

<PAGE>

                               NOTICE OF EXERCISE

To:  SANCTUARY WOODS MULTIMEDIA CORPORATION

     (1)  The undersigned hereby elects to:

          Purchase _______________________ shares of Common Stock of
     SANCTUARY WOODS MULTIMEDIA CORPORATION, pursuant to the terms of the
     attached Warrant and tenders herewith payment of the purchase price for
     such shares in full;

     (2)  In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell, or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of any federal securities laws, including without
limitation the Securities Act of 1933, as amended, any state securities laws or
any applicable securities laws of foreign jurisdictions or any rules or
regulations promulgated thereunder.

                                   PEQUOT PARTNERS FUND, L.P.


                                   By: 
-------------------------              ---------------------------------------
[Date]

                                   Title: 
                                          ------------------------------------


                                      -8-