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                                                                   Exhibit 10.28
                                                                   -------------

                         REGISTRATION RIGHTS AGREEMENT

     REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of January 10,
1997 by and among DATA RACE, INC., a Texas corporation, with headquarters
located at 12400 Network Blvd., San Antonio, TX  78249 (the "COMPANY"), and the
undersigned (together with affiliates, the "INITIAL INVESTORS").

     WHEREAS:

     A.  In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "SECURITIES
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors (i)
shares of its 1997 Series A Convertible Preferred Stock (the "PREFERRED STOCK")
that is convertible into shares (the "CONVERSION SHARES") of the Company's
common stock (the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in the Statement of Designations, Rights
and Preferences with respect to such Preferred Stock (the "CERTIFICATE OF
DESIGNATION") and (ii) warrants (the "WARRANTS") to acquire shares of Common
Stock (the "WARRANT SHARES"); and

     B.  To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investors hereby agree as follows:

     1.  DEFINITIONS.
         ----------- 

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

            (i)  "INVESTORS" means the Initial Investors and any transferees or
assignees who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.

            (ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
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             (iii) "REGISTRABLE SECURITIES" means the Conversion Shares and the
Warrant Shares issued or issuable with respect to the Preferred Stock and
Warrants and any shares of capital stock issued or issuable, from time to time
(with any adjustments), on or in exchange for or otherwise with respect to any
of the foregoing.

             (iv) "REGISTRATION STATEMENT" means a registration statement of the
Company under the Securities Act.

          b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.

     2.  REGISTRATION.
         ------------ 

         a.  Mandatory Registration.  The Company shall prepare, and, on or 
             ----------------------
prior to February 28, 1997, file with the SEC a Registration Statement on Form 
S-3 (or, if Form S-3 is not then available, on such form of Registration
Statement as is then available to effect a registration of the Registrable
Securities, subject to the consent of the Initial Investors (as determined
pursuant to Section 11(j) hereof), which consent will not be unreasonably
withheld) covering the resale of the Registrable Securities, which Registration
Statement, to the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock and exercise
of the Warrants (i) to prevent dilution resulting from stock splits, stock
dividends or similar transactions or (ii) by reason of changes in the Conversion
Price of the Preferred Stock or the Exercise Price of the Warrants in accordance
with the terms thereof. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of) the Initial Investors and
their counsel prior to its filing or other submission.

         b.  Payments by the Company.  The Company shall use its best efforts to
             -----------------------                                            
obtain effectiveness of the registration statement as soon as practicable.  If
the registration statement(s) covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not declared effective
by the SEC on or before April 30, 1997 (the "FIRST DEADLINE") or on or before
June 1, 1997 (the "SECOND DEADLINE") or if, after the registration statement has
been declared effective by the SEC, sales cannot be made pursuant to the
registration statement by reason of a stop order or the Company's failure to
update the registration statement or any other reason outside the control of the
Investors, then the Company will make payments to the Investors in such amounts
and at such times as shall be determined pursuant to this Section 2(b) as
liquidated damages to the Investors by reason of any such delay in or reduction
of their ability to sell the Registrable Securities (which remedy shall be
exclusive of any other remedies available at law or in equity except as
otherwise provided in the Certificate of Designation).  The Company shall pay to
each Investor an amount equal to the sum of (i) the aggregate Purchase Price of
the Units held by such Investor (the "AGGREGATE SHARE PRICE") multiplied by two
hundredths (.02) times the number of months (prorated for partial months) after
the First Deadline and prior to the earlier of the Second Deadline and the

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date the Registration Statement filed pursuant to Section 2(a) is declared
effective by the SEC and (ii) the Aggregate Share Price multiplied by three
hundredths (.03) times the sum of: (y) the number of months (prorated for
partial months) after the Second Deadline and prior to the date the Registration
Statement filed pursuant to Section 2(a) is declared effective by the SEC and
(z) the number of months (prorated for partial months) that sales cannot be made
pursuant to the registration statement after the registration statement has been
declared effective; provided, however that there shall be excluded from each
such period any delays which are solely attributable to changes (other than
corrections of Company mistakes with respect to information previously provided
by the Investors) required by the Investors in the registration statement with
respect to information relating to the Investors, including, without limitation,
changes to the plan of distribution. (For example, if the Registration Statement
is not effective by April 30, 1997, the Company would pay $20,000 per month for
each $1,000,000 of Aggregate Share Price and would continue to pay $20,000 per
month for each $1,000,000 of Aggregate Share Price until the registration
statement becomes effective, and if the Registration Statement is not effective
on the Second Deadline, then from the Second Deadline the Company would pay
$30,000 per month for each $1,000,000 of Aggregate Purchase Price until the
Registration Statement becomes effective or the shares of Preferred Stock are
redeemed pursuant to the Certificate of Designation.) Such amounts shall be paid
in cash or, at each Investor's option, may be convertible into Common Stock at
the "CONVERSION PRICE" (as defined in the Certificate of Designation). Any
shares of Common Stock issued upon conversion of such amounts shall be
Registrable Securities. If the Investor desires to convert the amounts due
hereunder into Registrable Securities it shall so notify the Company in writing
within two (2) business days of the date on which such amounts are first payable
in cash and such amounts shall be so convertible (pursuant to the mechanics set
forth under Article VI of the Certificate of Designation), beginning on the last
day upon which the cash amount would otherwise be due in accordance with the
following sentence. Payments of cash pursuant hereto shall be made within ten
(10) days after the end of each period that gives rise to such obligation,
provided that, if any such period extends for more than thirty (30) days,
interim payments shall be made for each such thirty (30) day period.

         d.  Piggy-Back Registrations.  If at any time prior to the expiration 
             ------------------------
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to (i) a firm underwritten offering
for its own account or the account of others under the Securities Act of any of
its equity securities or (ii) any other offering for its own account or the
account of others under the Securities Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall send to each Investor who is
entitled to registration rights under this Section 2(d) written notice of such
determination and, if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is

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necessary to facilitate public distribution, then the Company shall be obligated
to include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has requested
inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities, in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however, that the
                                                    --------  -------
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided,
                                                                    --------
further, however, that, after giving effect to the immediately preceding
-------  -------
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under this Section
2(d) shall be construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.

         e.  Eligibility for Form S-3.  The Company represents and warrants 
             ------------------------ 
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investors and any other Investor of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3 .

     3.  OBLIGATIONS OF THE COMPANY.
         -------------------------- 

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

         a.  The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2(a), and thereafter use its best
efforts to cause such Registration Statement relating to Registrable Securities
to become effective as soon as possible after such filing, and keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which the Registrable Securities
(in the reasonable opinion of counsel to the Initial Investors) may be
immediately sold to the public without registration (the "REGISTRATION PERIOD"),
which Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein and all documents incorporated by reference
therein) shall not contain any 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.

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<PAGE>
 
         b.  The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
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 seller or sellers
thereof as set forth in the Registration Statement.  In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Preferred Stock and exercise of the Warrants, the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefore, if applicable), or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable, but in any
event within fifteen (15) days after the necessity therefor arises (based on the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely).  The Company shall use its best efforts to cause
such amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof.

         c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary 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. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement under such
other securities or "blue sky" laws of such jurisdictions in the United States
as each Investor who holds Registrable Securities being offered reasonably
requests, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other 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,
(c) file a general consent to service of

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<PAGE>
 
process in any such jurisdiction, (d) provide any undertakings that cause the
Company undue expense or burden, or (e) make any change in its charter or
bylaws, which in each case the Board of Directors of the Company determines to
be contrary to the best interests of the Company and its stockholders.

         e.  In the event the Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.

         f.  As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, 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 omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.

         g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.

         h.  The Company shall permit a single firm of counsel designated by the
Initial Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.

         i. The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.

         j. At the request of any Investor, the Company shall furnish, on the
date of effectiveness of the Registration Statement (i) an opinion, dated as of
such date, from counsel representing the Company addressed to the Investors and
in form, scope and substances as is customarily given in an underwritten public
offering and (ii) in the case of an underwriting, a letter, dated such date,
from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and the Investors.

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<PAGE>
 
         k. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
                                    --------  -------                           
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement.  The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k) (although failure to
require separate confidentiality agreements shall not affect the provisions
hereof).  Each Investor agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.  Nothing herein shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

         l.  The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement, or (v) such Investor consents to the form and
content of any such disclosure.  The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor prior to making such disclosure, and allow
the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

         m.  The Company shall use its best efforts either to (i) cause all the
Registrable Securities covered by the Registration Statement to be listed on the
NYSE or the AMEX or another national securities exchange and on each additional
national securities exchange on which securities 

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<PAGE>
 
of the same class or series issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) secure the designation and quotation, of all the
Registrable Securities covered by the Registration Statement on the Nasdaq
National Market and, without limiting the generality of the foregoing, to
arrange for or maintain at least two market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities.

         n. The Company shall provide 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.

         o. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates to be in
such denominations or amounts, as the case may be, as the managing underwriter
or underwriters, if any, or the Investors may reasonably request and registered
in such names as the managing underwriter or underwriters, if any, or the
Investors may request, and, within three (3) business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall 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 instruction in the form attached hereto as EXHIBIT 1 and an
opinion of such counsel in the form attached hereto as EXHIBIT 2.

         p. At the request of any Investor, the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.

     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. At least three (3) business
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.

                                       8
<PAGE>
 
         b.  Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.

         c.  In the event Investors holding a majority in interest of the
Registrable Securities being offered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.

         d.  Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue 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(f) or 3(g) 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.

         e.  No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.

     5.  EXPENSES OF REGISTRATION.
         ------------------------ 

     All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, the fees and disbursements contemplated by Section 3(j)
hereof, and the reasonable fees and disbursements of one counsel selected by the
Investors pursuant to Section 3(k) hereof shall be borne by the Company.

                                       9
<PAGE>
 
     6.  INDEMNIFICATION.
         --------------- 

     In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

         a.  To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, members, employees, agents and each
person who control any Investor within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), if any, (each,
an "INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses  (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "VIOLATIONS").  Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Investors and each such underwriter or controlling
person, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim.  Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (iii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, if such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it.  Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.

                                       10
<PAGE>
 
         b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees severally and not jointly to
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act, and
any other stockholder selling securities pursuant to the Registration Statement
or any of its directors or officers or any person who controls such stockholder
or underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
                                                --------  -------
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
          --------  -------  -------
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.

         c. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
                                                                     --------
however, that an Indemnified Person or Indemnified Party shall have the right to
-------
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one 

                                       11
<PAGE>
 
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of the Initial Investor
if it holds Registrable Securities included in such Registration Statement), if
the Investors are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.

     7.  CONTRIBUTION.
         ------------ 

     To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that (i) no
                                          --------  -------             
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation, and (iii) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.

     8.  REPORTS UNDER THE EXCHANGE ACT.
         ------------------------------ 

     With a view to making available to the Investors the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation of
the SEC 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:

         a. make and keep public information available, as those terms are
understood and defined in Rule 144;

         b. file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

                                       12
<PAGE>
 
         c.  furnish to each Investor so long as such Investor owns shares of
Preferred Stock, Warrants or Registrable Securities, promptly upon request, (i)
a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.

     9.  ASSIGNMENT OF REGISTRATION RIGHTS.
         --------------------------------- 

     The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the shares of Preferred Stock, the Warrants, or the Registrable
Securities if: (i) 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, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this sentence, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein, and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.

     10.  AMENDMENT OF REGISTRATION RIGHTS.
          -------------------------------- 

     Provisions 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 written consent of the Company, the Initial
Investors (to the extent the Initial Investors still own shares of Preferred
Stock, Warrants or Registrable Securities) and Investors who hold a majority
interest of the Registrable Securities.  Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.

     11.  MISCELLANEOUS.
          ------------- 

         a. A person or entity is 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.

                                       13
<PAGE>
 
         b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:

         If to the Company:

             Data Race, Inc.
             12400 Network Blvd.
             San Antonio, TX  78249
             Attn:  President
             Telecopy:  (210) 263-2075

         with copy to:

             Akin, Gump, Strauss, Hauer & Feld, L.L.P.
             1500 NationsBank Plaza
             300 Convent Street
             San Antonio, TX  78205
             Attn:  Matthew R. Bair, Esq.
             Telecopy:  (210) 224-2035

and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b).

         c.  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.

         d.  This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State.  In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof. The parties hereto hereby submit to the exclusive
jurisdiction of the United States federal courts located in New York City with
respect to any dispute arising under this Agreement or the transactions
contemplated hereby.

                                       14
<PAGE>
 
         e.  This Agreement, the Securities Purchase Agreement  and the Warrants
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein.  This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

         f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.

         g. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

         h.  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.  This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

         i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

         j. All consents and other determinations to be made by the Investors or
Initial Investors pursuant to this Agreement shall be made by the Investors or
Initial Investors, as the case may be, holding a majority of the Registrable
Securities (determined as if all shares of Preferred Stock and Warrants then
outstanding had been converted into or exercised for Registrable Securities).

                                       15
<PAGE>
 
     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.


DATA RACE, INC.


By: /s/ Gregory T. Skalla
   ----------------------------------------
Name:  Gregory T. Skalla
     --------------------------------------
Its:  Chief Financial Officer and Secretary
    ---------------------------------------

INITIAL INVESTOR:

Capital Ventures International
-------------------------------------
Investor's Name


By: Bala International, Inc., as agent

By: /s/ Andrew Frost 
   ----------------------------------
Name:  Andrew Frost
     --------------------------------
Its:  Director
    ---------------------------------

Address: Capital Place
        --------------------------------
         P. O. Box 1787GT
        --------------------------------
         Grand Cayman, Cayman Island BWI
        --------------------------------

INITIAL INVESTOR:

Credit Suisse First Boston
-------------------------------------
Investor's Name

By: /s/ John McAvoy
   ----------------------------------
Name:  John McAvoy
     --------------------------------
Its:  Managing Director
    ---------------------------------


Address: Eleven Madison Avenue
        -----------------------------
        New York, New York 10010-3629
        -----------------------------


INITIAL INVESTOR:

Zanett Lombardier, Ltd.
-------------------------------------
Investor's Name

By: /s/ Tomaso Barbini
   ----------------------------------
Name:  Tomaso Barbini
     --------------------------------
Its:  Director to Advisor
    ---------------------------------


Address: Kirk House
        --------------------------------
        P.O. Box 1100
        --------------------------------
        Grand Cayman, Cayman Islands BWI
        --------------------------------

                                       16
<PAGE>
 
                                                                       EXHIBIT 1
                                                                              TO
                                                                    REGISTRATION
                                                                          RIGHTS
                                                                       AGREEMENT


                             [Company Letterhead]

                                           [Date]

[Name and address of Transfer Agent]

Ladies and Gentlemen:

          This letter shall serve as our irrevocable authorization and direction
to you (1) to transfer or re-register the certificates for the shares of Common
Stock, no par value (the "COMMON STOCK"), of DATA RACE, INC., a Texas
corporation (the "COMPANY"), represented by certificate numbers _____ for an
aggregate of _____ shares (the "OUTSTANDING SHARES") of Common Stock presently
registered in the name of [Name of Investor] (which shares were previously
issued upon conversion or exercise of the Company's 1997 Series A Convertible
Preferred Stock (the "PREFERRED STOCK") or Warrants (as hereinafter defined)
upon surrender of such certificates to you (or evidence of loss, theft or
destruction thereof), notwithstanding the legend appearing on such certificates,
and (2) to issue shares (the "CONVERSION SHARES") of Common Stock to or upon the
order of the registered holder from time to time of the Preferred Stock upon
surrender to you of a properly completed and duly executed Conversion Notice and
such Preferred Stock, notwithstanding the legend appearing on such Preferred
Stock, and (3) to issue shares (the "WARRANT SHARES") of Common Stock to or upon
the order of the registered holder from time to time of the Warrants of the
Company issued at the time of the original issuances of the Preferred Stock (the
"WARRANTS") upon surrender to you of a properly completed and duly executed
Exercise Agreement and such Warrants (or evidence of loss, theft or destruction
thereof) notwithstanding the legend appearing on such Warrants.  The transfer or
re-registration of the certificates for the Outstanding Shares by you should be
made at such time as you are requested to do so by the record holder of the
Outstanding Shares.  The certificate issued upon such transfer or re-
registration should be registered in such name as requested by the holder of
record of the certificate surrendered to you and should not bear any legend
which would restrict the transfer of the shares represented thereby.  In
addition, you are hereby directed to remove any stop-transfer instruction
relating to the Outstanding Shares. Certificates for the Conversion Shares and
Warrant Shares should not bear any restrictive legend and should not be subject
to any stop-transfer restriction.

          Contemporaneous with the delivery of this letter, the Company is
delivering to you an opinion of ___________________ as to registration of the
Outstanding Shares, the Conversion Shares and the Warrant Shares under the
Securities Act of 1933, as amended.

                                       17
<PAGE>
 
          Should you have any questions concerning this matter, please contact
me.

                                                   Very truly yours,

                                                   DATA RACE, INC.



                                                   By:
                                                      --------------------------
                                                        Name:
                                                        Title:

Enclosures:
cc:  [Name of Investor]

                                       18
<PAGE>
 
                                                                       EXHIBIT 2
                                                                              TO
                                                                    REGISTRATION
                                                                          RIGHTS
                                                                       AGREEMENT

                                     [Date]


[Name and address
of transfer agent]


               RE:  DATA RACE, INC.

Ladies and Gentlemen:

     We are counsel to DATA RACE, INC., a Texas corporation (the "COMPANY") ,
and we understand that [Name of Investor] (the "HOLDER") has purchased from the
Company shares of the Company's 1997 Series A Convertible Preferred Stock (the
"PREFERRED STOCK") and warrants (the "WARRANTS") that are convertible or
exercisable, as the case may be, into the Company's Common Stock, no par value
(the "Common Stock").   The Preferred Stock and Warrants were purchased by the
Holder pursuant to a Securities Purchase Agreement, dated as of January 10,
1997, by and among the Company and the signatories thereto (the "AGREEMENT").
Pursuant to a Registration Rights Agreement, dated as of  January 10, 1997, by
and among the Company and the signatories thereto (the "REGISTRATION RIGHTS
AGREEMENT"), the Company agreed with the Holder, among other things, to register
the Registrable Securities (as that term is defined in the Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
upon the terms provided in the Registration Rights Agreement.  In connection
with the Company's obligations under the Registration Rights Agreement, on _____
__, 1997, the Company filed a Registration Statement on Form S-___ (File No.
333- _____________) (the "REGISTRATION STATEMENT") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities, which
names the Holder as a selling stockholder thereunder.

     [Other introductory and scope of examination language to be inserted]

     Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.

                                       19
<PAGE>
 
                  [Other appropriate language to be included.]


                                                  Very truly yours,



cc:   [Name of investor]

                                       20