Document:

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                                                                    EXHIBIT 10.1
                         SECURITIES PURCHASE AGREEMENT

     This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March 2,
                                              ---------
2001, is entered into by and among Data Race Inc. (doing business as IP Axess),
a Texas corporation, with headquarters located at 6509 Windcrest Drive, Suite
120, Plano, Texas 75024 (the "Company"), and the investors listed on Schedule 1
                              -------                                ----------
attached hereto (individually, a "Buyer" and collectively, the "Buyers").
                                  -----                         ------

     WHEREAS:

     A.  The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
                  ------------
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
                              ---
(the "1933 Act");
      --------

     B.  The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, an aggregate of 3,047,620 shares of the Company's Common Stock,
no par value per share (the "Common Shares"), in the respective amounts set
                             -------------
forth opposite each Buyer's name on Schedule 1 and warrants, in substantially
                                    ----------
the same form attached hereto as Exhibit D (the "Warrants") to acquire 304,762
                                 ---------       --------
shares of Company Common Stock (as exercised, collectively, the "Warrant
                                                                 -------
Shares"); and
------

     C.  Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A (the "Registration Rights
                                             ---------       -------------------
Agreement") pursuant to which the Company has agreed to provide certain
---------
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.

     NOW THEREFORE, the Company and the Buyers hereby agree as follows:

     1.   PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.
          -----------------------------------------------

          a.  Purchase of Common Shares and Warrants.  In connection with the
              --------------------------------------
offering (the "Offering") by the Company of its common stock and warrants to the
               --------
Buyers, and subject to the satisfaction (or waiver) of the conditions set forth
in Sections 6 and 7 below, the Company shall issue and sell to each Buyer and
each Buyer severally agrees to purchase from the Company the respective number
of shares of Common Shares set forth opposite such Buyer's name on Schedule 1,
                                                                   ----------
along with Warrants to acquire the respective number of Warrant Shares set forth
opposite such Buyer's name on Schedule 1 (the "Closing").  For each share of
                              ----------       -------
Common Stock purchased by a Buyer pursuant to this Agreement, the Company shall
issue a Warrant to purchase 10/100 (0.10) Warrant Shares.  The purchase price
for each share of Common Stock and Warrant
<PAGE>

to purchase 10/100 (0.10) Warrant Shares shall be $0.65625 (the "Purchase Price
                                                                 --------------
Per Unit"), which shall equal the lesser of (i) seventy percent (70%) of the
--------
closing bid price for the Company's Common Stock (as quoted on the Principal
Market, defined below) on the Closing Date (defined below) or (ii) seventy
percent (70%) of the average of the closing bid prices for the Company's Common
Stock (as quoted on the Principal Market) for the five (5) Business Days
(defined below) immediately preceding the Closing Date. The Warrants shall have
a term of five (5) years and an exercise price equal to the average of the
closing bid prices for the Company's Common Stock (as quoted on the Principal
Market) for the five (5) Business Days immediately preceding the Closing Date.
The aggregate purchase price (the "Purchase Price") of the Common Shares and the
                                   --------------
related Warrants at the Closing shall be $2,000,000.

          b.  Closing Date.  The date and time of the Closing (the "Closing
              ------------                                          -------
Date") shall be 10:00 a.m. Central Time, within three (3) Business Days
----
following the date hereof, subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and the Buyers). The Closing
shall occur on the Closing Date at the location mutually agreed upon by the
Buyers and the Company. For purposes of this Agreement, "Business Day" means any
                                                         ------------
day on which the Principal Market is open for business and the Company's Common
Stock is able to be purchased or sold through such Principal Market.

          c.  Form of Payment.  On the Closing Date, (i) subject to the
              ---------------
satisfaction (or waiver) of the conditions set forth in Section 7 below, each
Buyer shall pay the Purchase Price to the Company, for the Common Shares and
Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) subject to the satisfaction (or waiver) of the conditions
set forth in Section 6 below, the Company shall deliver to Strategic Investment
Counsel, LLC, c/o Anthony J. Ribaudo, Esq., located at 666 Dundee Road, Suite
1901, Northbrook, Illinois 60062, as the escrow agent (the "Escrow Agent"), on
                                                            ------------
behalf of each Buyer, stock certificates (in the denominations as such Buyer
shall request) (the "Common Share Certificates") representing such number of the
                     -------------------------
Common Shares which such Buyer is then purchasing (as indicated opposite such
Buyer's name on Schedule 1) along with the Warrants such Buyer is purchasing (as
                ----------
indicated opposite such Buyer's name on Schedule 1) hereunder, duly executed on
                                        ----------
behalf of the Company and registered in the name of such Buyer or its designee.
Upon the completion of the conditions contained in Sections 6 and 7 of this
Agreement, the Escrow Agent shall deliver the certificates representing the
Common Shares and the Warrants to the Buyers via overnight courier after the
Buyers have wired the Purchase Price to the Company.

     2.   BUYER'S REPRESENTATIONS AND WARRANTIES.
          --------------------------------------

          Each Buyer represents and warrants with respect to only itself that:

          a.  Investment Purpose.  Such Buyer is acquiring the Common Shares and
              ------------------
Warrants (the Common Shares, Warrants and Warrant Shares may also be referred to
herein as

                                       2
<PAGE>

the "Securities"), for its own account for investment only and not with a view
     ----------
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, such Buyer does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act.

          b.  Accredited Investor Status.  Such Buyer is an "accredited
              --------------------------
investor" as that term is defined in Rule 501 of Regulation D.

          c.  Reliance on Exemptions.  Such Buyer understands that the
              ----------------------
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.

          d.  Information.  Such Buyer and its advisors, if any, have been
              -----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer.  Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company.  Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below.  Such Buyer understands that its
investment in the Securities involves a high degree of risk.  Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities. Such Buyer understands that only officers of the Company are
authorized to provide information on behalf of the Company and that no other
person is authorized to provide information on the Company's behalf. Such Buyer
acknowledges that it has reviewed the SEC Documents (as defined below) and
information set forth under the heading "Risk Factors" in the Company's annual
report on Form 10-K filed October 1, 1999.

          e.  No Governmental Review.  Such Buyer understands that no United
              ----------------------
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

          f.  Transfer or Resale.  Such Buyer understands that except as
              ------------------
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or

                                       3
<PAGE>

transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company an opinion of counsel, in a generally acceptable
form, to the effect that such Securities to be sold, assigned or transferred may
be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) such Buyer provides the Company with reasonable assurance
that such Securities can be sold, assigned or transferred pursuant to Rule 144
promulgated under the 1933 Act, as amended, (or a successor rule thereto) ("Rule
                                                                            ----
144"); (ii) any sale of the Securities made in reliance on Rule 144 may be made
---
only in accordance with the terms of Rule 144 and further, and (iii) if Buyer
intends to utilize Rule 144 but Rule 144 is not applicable to such resale, any
resale of the Securities under circumstances in which the Buyer (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder.

          g.  Legends.  Such Buyer understands that the certificates or other
              -------
instruments representing the Warrants, Warrant Shares, and Common Shares, except
as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
     APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
     ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
     SOLD, TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF AN
     EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
     APPLICABLE STATE SECURITIES LAWS, OR (2) IN THE ABSENCE OF
     AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
     REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR (3)
     UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144
     UNDER SAID ACT.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered and sold under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.

          h.  Validity; Enforcement.  This Agreement has been duly and validly
              ---------------------
authorized, executed and delivered on behalf of such Buyer and is a valid and
binding agreement

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<PAGE>

of such Buyer enforceable against such Buyer in accordance with its terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.

          i.  Residency.  Such Buyer is a resident of that country and state
              ---------
specified in its address on Schedule 1.
                            ----------

          j.  No Broker-Dealer Affiliation.  Such Buyer is not an affiliate (as
              ----------------------------
that term is defined in Rule 144(a) promulgated under the 1933 Act) of a broker-
dealer registered with the SEC.

          k.  Short Sales.  No Buyer shall have as of the Closing Date, and no
              -----------
Buyer shall have had during the 10 Business Days prior to the Closing Date, any
net short position, put option or other similar exchange-traded instrument with
respect to the Company's Common Stock.

     3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
          ---------------------------------------------

          The Company represents and warrants to each of the Buyers that:

          a.  Organization and Qualification.  The Company and its
              ------------------------------
"Subsidiaries" (which for purposes of this Agreement means any entity in which
 ------------
the Company, directly or indirectly, owns a controlling position of capital
stock or holds a controlling position of an equity or similar interest) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted.  Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect.  As used in this Agreement, "Material Adverse Effect"
                                                        -----------------------
means any material adverse effect on the business, properties, assets,
operations, results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below).

          b.  Authorization; Enforcement; Validity.  (i) The Company has the
              ------------------------------------
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Transfer Agent Instructions
(as defined in Section 5), the Warrants and each of the other agreements entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the "Transaction Documents"), and to issue the
                                   ---------------------
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the consummation by
it of the transactions

                                       5
<PAGE>

contemplated hereby and thereby, including without limitation the issuance of
the Common Shares and the Warrants and the reservation for issuance and the
issuance of the Warrant Shares issuable upon exercise thereof, have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) the Transaction Documents have been duly executed and
delivered by the Company, and (iv) the Transaction Documents constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.

          c.  Issuance of Securities.  The Common Shares and Warrants are duly
              ----------------------
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable and (ii) free from all taxes,
liens and charges with respect to the issue thereof. 304,762 shares of Common
Stock have been duly authorized and reserved for issuance upon exercise of the
Warrants.  Upon exercise in accordance with the Warrants, the Warrant Shares
will be validly issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock.  The issuance by
the Company of the Securities is exempt from registration under the 1933 Act.

          d.  No Conflicts.  The execution, delivery and performance of the
              ------------
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
Company's issuance of the Common Shares and the reservation for issuance and
issuance of the Warrant Shares) will not (i) result in a violation of the
Company's Articles of Incorporation, as amended and as in effect on the date
hereof (the "Articles of Incorporation") or the Company's By-laws, as amended
             -------------------------
and as in effect on the date hereof (the "By-laws") or (ii) conflict with, or
                                          -------
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market (as defined below)) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected; provided that the
issuance of the Common Shares at a discount from the current market price will
result in typical anti-dilution adjustments to outstanding warrants.  Neither
the Company nor its Subsidiaries is in violation of any term of or in default
under its Articles of Incorporation, or By-laws or their organizational charter
or by-laws, respectively.  Neither the Company or any of its Subsidiaries is in
violation of any term of or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
possible conflicts, defaults, terminations, amendments which would not
reasonably be expected to have a Material Adverse Effect.  The business of the
Company and

                                       6
<PAGE>

its Subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, ordinance, regulation of any governmental entity, except
for possible violations the sanctions for which either individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect.
Except as specifically contemplated by the Transaction Documents and as required
under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Transaction Documents in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain prior to Closing pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company is not in violation of the listing
requirements of the Principal Market (as defined below).

          e.  SEC Documents; Financial Statements.  As of the Closing, the
              -----------------------------------
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
                                                         --------
foregoing filed since June 30, 1999 and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents").  As of
                                                        -------------
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.  As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto.  Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).  No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not
misleading.  Neither the Company nor any of its Subsidiaries or any of their
officers, directors, employees or agents have provided the Buyers with any
material, nonpublic information.  The representations herein are subject to
Schedule 3(e).
-------------

                                       7
<PAGE>

          f.  Absence of Certain Changes.  Since the most recent 1934 Act filing
              --------------------------
by the Company with the SEC, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition or results of operations of the Company or its Subsidiaries.  The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.

          g.  Absence of Litigation.  Except as set forth in the SEC Documents
              ---------------------
and Schedule 3(g), there is no action, suit, proceeding, inquiry or
    -------------
investigation before or by any court, public board, government agency, self-
regulatory organization or body pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened against or materially adversely affecting
the Company, the Company's common stock, the Common Shares or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such.

          h.  [Omitted].

          i.  No Undisclosed Events, Liabilities, Developments or Circumstances.
              -----------------------------------------------------------------
No event, liability, development or circumstance has occurred or exists, or is
contemplated to occur, with respect to the Company or its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement filed with the SEC relating to an
issuance and sale by the Company of its common stock and which has not been
publicly announced.

          j.  No General Solicitation.  Neither the Company, nor any of its
              -----------------------
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.

          k.  No Integrated Offering.  Neither the Company, nor any of its
              ----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would
require registration of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.

                                       8
<PAGE>

          l.  Employee Relations.  Neither the Company nor any of its
              ------------------
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened.

          m.  Intellectual Property Rights. To the best of their knowledge, the
              ----------------------------
Company and its Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted.  To the best of their knowledge, none of
the Company's trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights necessary to conduct its business have expired or
terminated, or are expected to expire or terminate within two years from the
date of this Agreement.  The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.  The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.

          n.  Environmental Laws.  The Company and its Subsidiaries (i) are in
              ------------------
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
               ------------------
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval; except for, in each of the
foregoing cases, the failure to so comply would not reasonably be expected to
have a Material Adverse Effect.

          o.  Title.  The Company and its Subsidiaries have good and marketable
              -----
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the SEC Documents or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries.  Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.

                                       9
<PAGE>

          p.  Insurance.  The Company and each of its Subsidiaries are insured
              ---------
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged and the Company does not have any reason to believe it will not be able
to renew its existing insurance coverage under substantially similar terms for
the next two (2) years.

          q.  Regulatory Permits.  The Company and its Subsidiaries possess all
              ------------------
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses (except where the failure to so comply would not reasonably be
expected to have a Material Adverse Effect), and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit.

          r.  Tax Status.  The Company and each of its Subsidiaries has made or
              ----------
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.

          s.  Transactions With Affiliates.  Except as set forth in the SEC
              ----------------------------
Documents filed at least ten days prior to the date hereof, and except for
transactions which are entered into on arm's length terms pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties unaffiliated with the
Company, and except for grants and payments pursuant to employee benefit plans
approved by the Company's board of directors, none of the officers, directors,
or employees or controlling shareholders of the Company is presently a party to
any transaction with the Company or any of its Subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.

          t.  Eligibility.  The Company is currently eligible to register the
              -----------
resale of the Common Shares on a registration statement on Form S-3 under the
1933 Act.

                                       10
<PAGE>

     4.   COVENANTS.
          ---------

          a.  Best Efforts.  Each party shall use its best efforts timely to
              ------------
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.

          b.  Form D and Blue Sky.  The Company agrees to file a Form D with
              -------------------
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing.  The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date.  The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.

          c.  Reporting Status.  Until the earlier of (i) the date which is one
              ----------------
year after the date as of which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Common Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which the Investors shall have sold all the Common
Shares and Warrant Shares (the "Registration Period"), the Company shall file
                                -------------------
all reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.

          d.  [Omitted].

          e.  Right of First Refusal.  Subject to the exceptions described
              ----------------------
below, the Company and its Subsidiaries shall not negotiate or contract with any
party for any equity financing (including any debt financing with an equity
component) or issue any equity securities of the Company or any Subsidiary or
securities convertible or exchangeable into or for equity securities of the
Company or any Subsidiary (including debt securities with an equity component)
in any form ("Future Offerings") during the period beginning on the date hereof
              ----------------
and ending on, and including, the date which is 180 days after the Closing Date,
unless it shall have first delivered to each Buyer or a designee appointed by
such Buyer written notice (the "Future Offering Notice") describing the proposed
                                ----------------------
Future Offering, including the terms and conditions thereof, and providing each
Buyer an option to purchase up to its Aggregate Percentage (as defined below) of
the securities to be issued in such Future Offering, as of the date of delivery
of the Future Offering Notice, in the Future Offering (the limitations referred
to in this sentence are referred to as the "Capital Raising Limitations").  For
                                            ---------------------------
purposes of this Section 4(e), "Aggregate Percentage" at any time with respect
                                --------------------
to any Buyer shall mean the percentage obtained by dividing (i) the aggregate
number of the Common Shares initially issued at the Closing to such Buyer by
(ii) the aggregate number of the Common Shares sold to the Buyers by the Company
at the Closing in

                                       11
<PAGE>

connection with the Offering. A Buyer can exercise its option to participate in
a Future Offering by delivering written notice thereof to participate to the
Company within five (5) Business Days after receipt of a Future Offering Notice,
which notice shall state the quantity of securities being offered in the Future
Offering that such Buyer will purchase, up to its Aggregate Percentage, and that
number of securities it is willing to purchase in excess of its Aggregate
Percentage. In the event that one or more Buyers fail to elect to purchase up to
each such Buyer's Aggregate Percentage, then each Buyer which has indicated that
it is willing to purchase a number of securities in such Future Offering in
excess of its Aggregate Percentage shall be entitled to purchase its pro rata
portion (determined in the same manner as described in the preceding sentence)
of the securities in the Future Offering which one or more of the Buyers have
not elected to purchase. In the event the Buyers fail to elect to fully
participate in the Future Offering within the period described in this Section
4(e), the Company shall have 90 days thereafter to sell the securities of the
Future Offering that the Buyers did not elect to purchase, upon terms and
conditions, no more favorable to the purchasers thereof than specified in the
Future Offering Notice. In the event the Company has not sold such securities of
the Future Offering within such 90 day period, the Company shall not thereafter
issue or sell such securities without first offering such securities to the
Buyers in the manner provided in this Section 4(e). The Capital Raising
Limitations shall not apply to (i) a loan from a commercial bank which has only
an incidental equity feature or any equity line or similar transaction from any
financial institution, (ii) any transaction involving the Company's issuances of
securities (A) as consideration in a merger or consolidation, (B) in connection
with a strategic partnership or joint venture (the primary purpose of which is
not to raise equity capital), or (C) as consideration for the acquisition of a
business, product, license or other assets by the Company, (iii) the issuance of
common stock in a firm commitment, underwritten public offering, (iv) the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof, (v)
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option plan, restricted stock plan, stock
purchase plan or other plan or written compensation agreement for the benefit of
the Company's employees, directors, consultants or advisors, or (vi) the
issuance of securities pursuant to any shareholder rights plan adopted by the
Company prior to the Closing ((i) through (vi) collectively, the "Exempt
                                                                  ------
Issuances"). The Buyers shall not be required to participate or exercise their
---------
right of first refusal with respect to a particular Future Offering in order to
exercise their right of first refusal with respect to later Future Offerings.

          f.  Listing.  The Company shall, following the Closing Date and by the
              -------
ninetieth (90th) calendar day following the date hereof, secure the listing of
all of the Registrable Securities (as that term is defined in the Registration
Rights Agreement) upon each national securities exchange, automated quotation
system or bulletin board system, if any, upon which shares of the Company's
common stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of common stock shall be so listed, such
listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents.  The Company shall use its bests efforts to
maintain the Common Stock's authorization for quotation on the Nasdaq National
Market, Nasdaq Small-Cap Market, The New York Stock

                                       12
<PAGE>

Exchange, Inc. or The American Stock Exchange, Inc., (as applicable, the
"Principal Market"). Neither the Company nor any of its Subsidiaries shall take
 ----------------
any action which would be reasonably expected to result in the delisting or
suspension of Company common stock on the Principal Market. The Company shall
promptly, but in no event later than the public disclosure of such information,
provide to each Buyer copies of any notices it receives from the Principal
Market regarding the continued eligibility of Company common stock for listing
on such automated quotation system or securities exchange. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(f).

          g.  Reservation of Shares.  The Company shall take all action
              ---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon exercise of all
outstanding Warrants.

          h.  [Omitted].

          i.  Limitation on Filing Registration Statements.  The Company shall
              --------------------------------------------
not file a registration statement (other than the Registration Statement (as
defined in the Registration Rights Agreement) or a registration statement on
Form S-8 or a registration statement concerning any equity line or similar
transaction from any financial institution entered into by the Company within
thirty (30) calendar days following the Closing Date) covering the sale or
resale of shares of Company common stock with the SEC during the period
beginning on the date hereof and ending on the date which is 90 days after the
Registration Statement has been declared effective by the SEC.

          j.  Independent Auditors.  The Company shall, until at least three (3)
              --------------------
years after the Closing Date, maintain as its independent auditors an accounting
firm authorized to practice before the SEC.

     5.   TRANSFER AGENT INSTRUCTIONS.
          ---------------------------

          The Company shall issue irrevocable instructions to the Transfer
Agent, and any subsequent transfer agent, substantially in the form of Exhibit B
                                                                       ---------
hereto (the "Transfer Agent Instructions") and use its best efforts, without
             ---------------------------
incurring additional fees, to obtain the Transfer Agent's agreement thereto.
Prior to registration of the Common Shares and Warrant Shares under the 1933
Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement.  The Company warrants that no instruction other
than the Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof will be given by the
Company to its Transfer Agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement.  Nothing in
this Section 5 shall affect in any way each Buyer's obligations and agreements
set forth in Section 2(g) to comply with all applicable prospectus delivery
requirements, if any, upon resale of the Securities.  If a Buyer

                                       13
<PAGE>

provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act or the Buyer provides the
Company with reasonable assurances that the Securities can be sold pursuant to
Rule 144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, promptly instruct its Transfer Agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer
and without any restrictive legend. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Buyers by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyers shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.

     6.   CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
          ----------------------------------------------

          The obligation of the Company hereunder to issue and sell the Common
Shares and Warrants to each Buyer at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing each Buyer with
prior written notice thereof:

          a.  Such Buyer shall have executed each of the Transaction Documents
to which it is a party and delivered the same to the Escrow Agent for the
transactions contemplated by this Agreement;

          b.  The representations and warranties of such Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date; and

          c.  Such Buyer shall have delivered to the Escrow Agent such other
documents relating to the transactions contemplated by this Agreement as the
Escrow Agent may reasonably request.

                                       14
<PAGE>

     7.   CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
          -------------------------------------------------

          The obligation of each Buyer hereunder to purchase the Common Shares
and Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:

          a.  The Company shall have executed each of the Transaction Documents
and delivered the same to the Escrow Agent;

          b.  The Company's common stock shall be authorized for quotation on
the Principal Market and trading in Company common stock shall not have been
suspended by the SEC or the Principal Market;

          c.  The representations and warranties of the Company shall be true
and correct  as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date;

          d.  The Company shall have delivered to the Escrow Agent the opinion
of the Company's counsel dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially the form of
Exhibit C attached hereto;
---------

          e.  The Company shall have executed and delivered to the Escrow Agent
the Warrants and the certificates representing Common Shares (in such
denominations as such Buyer shall request) for the Common Shares being purchased
by such Buyer at the Closing;

          f.  The Transfer Agent Instructions, in the form of Exhibit B attached
                                                              ---------
hereto, shall have been executed by the Company and delivered to the Company's
transfer agent and a copy of the Company executed Transfer Agent Instructions
shall have been delivered to the Escrow Agent;

          g.  The Company shall have made all filings, other than those
contemplated by the Registration Rights Agreement, under all applicable federal
and state securities laws necessary to consummate the issuance of the Securities
pursuant to this Agreement in compliance with such laws;

          h.  The Company shall have delivered to the Escrow Agent such other
documents relating to the transactions contemplated by this Agreement as the
Escrow Agent may reasonably request;

                                       15
<PAGE>

          i.  Subject to Section 11(l) below, at Closing, the Company shall
reimburse the Buyers for the Buyers' attorneys' fees and expenses (in an amount
not to exceed $10,000.00) incurred by the Buyers concerning the due diligence
review of the contemplated transactions and the Company, and the negotiation and
preparation of the Transaction Documents and the consummation of the
transactions contemplated thereby; provided, however, that the Buyers may elect,
                                   --------
in their sole discretion, to effect such reimbursement by deducting such costs
and expenses from the Purchase Price prior to making such payment to the
Company; and

          j.  The Company and Cranshire Capital, L.P., Keyway Investments Ltd
and Lionhart Investments Ltd. (the "1999 Warrant Holders") shall enter into
                                    --------------------
letter agreements whereby those certain warrants (the "1999 Warrants"),
                                                       -------------
purchased by the 1999 Warrant Holders in the June 1999 private placement and
December 1999 private placement by the Company of its common stock and warrants
to the 1999 Warrant Holders, shall be amended as follows: the 1999 Warrants
shall have (i) an exercise price equal to the average of the closing bid prices
for the Company's Common Stock (as quoted on the Principal Market) for the five
(5) Business Days immediately preceding the Closing Date of this Agreement, (ii)
an expiration date of December 10, 2003 and (iii) the same limitations on
beneficial ownership as set forth in Section 2(e) of the Warrants purchased
pursuant to this Agreement.

     8.   INDEMNIFICATION.
          ---------------

          In consideration of each Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their stockholders, officers,
directors, employees and direct or indirect investors and any of the foregoing
person's agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
                    -----------
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
 -----------------------
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities.  To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.

                                       16
<PAGE>

     9.   ANTI-DILUTION ADJUSTMENTS.
          -------------------------

          a.  [Omitted].

          b.  Issuance of Common Stock or Rights to Purchase Company Common
              -------------------------------------------------------------
Stock Below Offering Price. Prior to the earlier of 150 days after the Closing
--------------------------
Date or the effective date of the Registration Statement (as described in the
Registration Rights Agreement) covering the resale of the Common Shares, if the
Company shall, at any time or from time to time, issue Company common stock or
instruments convertible or exercisable into Company common stock (other than an
Exempt Issuance (as defined in Section 4(e) above)) at a price per common stock
share, a  conversion price per common stock share or an exercise price per
common stock share less than the Purchase Price Per Unit (such lesser price
shall be deemed the "Differential Price"), then the Company shall issue
                     ------------------
additional shares of Company common stock to the Buyers equal to the Share
Differential Amount.  The Share Differential Amount shall equal the sum of (i)
the amount determined by dividing the Differential Price into the Buyers'
aggregate Purchase Price, less (ii) the number of Common Shares purchased by the
Buyer at the Closing.  Any such additional shares of common stock after issuance
shall be deemed to be Common Shares for purposes of this Agreement and shall
have the registration rights set forth in the Registration Rights Agreement.

     10.  [Omitted.]

     11.  GOVERNING LAW; MISCELLANEOUS.
          ----------------------------

          a.  Governing Law; Jurisdiction; Jury Trial.  This Agreement shall be
              ---------------------------------------
governed by and construed in all respects by the internal laws of the State of
Illinois (except for the proper application of the United States federal
securities laws), without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois.  Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

          b.  Counterparts.  This Agreement may be executed in two or more
              ------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

                                       17
<PAGE>

          c.  Headings.  The headings of this Agreement are for convenience of
              --------
reference and shall not form part of, or affect the interpretation of, this
Agreement.

          d.  Severability.  If any provision of this Agreement shall be invalid
              ------------
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

          e.  Entire Agreement; Amendments.  This Agreement supersedes all other
              ----------------------------
prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters.  No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Buyers owning at such time two-thirds of the Common Shares
purchased pursuant to this Agreement, and no provision hereof may be waived
other than by an instrument in writing signed by the party against whom
enforcement is sought.

          f.  Notices.  Any notices, consents, waivers or other communications
              -------
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered:  (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically  or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same.  The addresses and facsimile numbers
for such communications shall be:

     If to the Company:

          Data Race Inc.
          6509 Windcrest Drive, Suite 120
          Plano, Texas 75024
          Telephone: (972) 205-4005
          Facsimile: (210) 558-0356
          Attention: Jim Scogin

                                       18
<PAGE>

     With a copy to:

          Jackson Walker LLP
          901 Main Street, Suite 6000
          Dallas, Texas 75202
          Telephone: (214) 953 - 5801
          Facsimile: (214) 953 - 5736
          Attention: Jim Ryan, Esq.

     If to the Transfer Agent:

          Chase Mellon Shareholder Services, L.L.P.
          2323 Bryan St., Suite 2300
          Dallas, TX 75201
          Telephone: (214) 965-2236
          Facsimile: (214) 965-2233
          Attention: Mona Vorhees

If to a Buyer, to it at the address and facsimile number set forth on Schedule 1
                                                                      ----------
with copies to such Buyer's representatives as set forth on Schedule 1, or at
                                                            ----------
such other address and/or facsimile number and/or to the attention of such other
person as the recipient party has specified by written notice given to each
other party five days prior to the effectiveness of such change.

          g.  Successors and Assigns.  This Agreement shall be binding upon and
              ----------------------
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Common Shares from Buyers in a transaction not
involving a public offering.  The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the Buyers
owning at such time two-thirds of the Common Shares purchased pursuant to this
Agreement.  A Buyer may assign some or all of its rights hereunder without the
consent of the Company, provided, however, that any such assignment shall not
release such Buyer from its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented to such assignment and
assumption.

          h.  No Third Party Beneficiaries.  This Agreement is intended for the
              ----------------------------
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

          i.  Survival.  Unless this Agreement is terminated under Section
              --------
11(l), the agreements and covenants set forth in Sections 4, 5 and 11, the
indemnification provisions set forth in Section 8, the anti-dilution adjustments
and provisions set forth in Section 9 and the liquidated damage provisions set
forth in Section 10 shall survive the Closing.  Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.

                                       19
<PAGE>

          j.  [Omitted].

          k.  Further Assurances.  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.

          l.  Termination.  In the event that the Closing shall not have
              -----------
occurred with respect to a Buyer on or before three (3) Business Days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 11(l), the Company shall remain obligated to reimburse the
nonbreaching Buyers for the expenses described in Section 7(i) above.

          m.  Placement Agent.  The Company acknowledges that it has not engaged
              ---------------
any party, person or entity as placement agent in connection with the sale of
the Common Shares and Warrants.  The Company shall be responsible for the
payment of any placement agent's fees or broker's commissions relating to or
arising out of the transactions contemplated hereby.  The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorneys' fees and out of pocket expenses) arising in
connection with any such claim.

          n.  No Strict Construction.  The language used in this Agreement will
              ----------------------
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

          o.  Remedies.  Each Buyer and each holder of the Securities shall have
              --------
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law.  Any Person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.

          p.  Payment Set Aside.  To the extent that the Company makes a payment
              -----------------
or payments to the Buyers hereunder or pursuant to the Transaction Documents or
the Buyers enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other person
under any

                                       20
<PAGE>

law (including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.

                           [Signature Page Follows]

                                       21
<PAGE>

     IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.

COMPANY:                                BUYERS:

DATA RACE INC.                          PROTIUS OVERSEAS LIMITED

By: /s/ James G. Scogin                 By: /s/ Gordon J. Mundy
   ------------------------------          ---------------------------

Name: James G. Scogin                   Name: Gordon J. Mundy
     ----------------------------            -------------------------

Title: Senior Vice President, CFO       Title: Director
      ---------------------------             ------------------------

                                        LIONHART INVESTMENTS LTD.

                                        By: /s/ Walter Reich
                                           ---------------------------

                                        Name: Walter Reich
                                             -------------------------

                                        Title: Director
                                              ------------------------

                                        KEYWAY INVESTMENTS LTD.

                                        By: /s/ Paul Moore
                                           ---------------------------

                                        Name: Paul Moore
                                             -------------------------

                                        Title: Director
                                              ------------------------

<PAGE>

<TABLE>
<CAPTION>
                                                   SCHEDULE 1: LIST OF INVESTORS
                                                   -----------------------------

----------------------------------------------------------------------------------------------------------------------------------
    Investor        Contact Information    Purchase Price    Number of       Number of              Legal Representative
                                                           Common Shares   Warrant Shares
----------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                      <C>             <C>             <C>                 <C>
Protius           PO Box 175                 $1,200,000      1,828,572          182,857        Strategic Investment  Counsel, LLC
 Overseas         12-14 Finch Road                                                             666 Dundee Rd., Ste. 1901
 Limited          Douglas, Isle of Man                                                         Northbrook, IL 60062
                  United Kingdom                                                               Attn: Anthony J. Ribaudo, Esq.
                  IM99 1TT                                                                     (p)847/564-9293
                  Attn: Gordon J. Mundy                                                        (f)847/564-5497
                  (p) 01624-646700
                  (f) 01624-520588
----------------------------------------------------------------------------------------------------------------------------------
Keyway            19 Mount Havelock          $   50,000         76,191            7,619
 Investments      Douglas, Isle of Man
 Ltd.             United Kingdom
                  1M1 2QG
                  Attn: Martin Peters
                  (p) 011-44-171-323-2131
                  (f) 011-44-171-323-0773
----------------------------------------------------------------------------------------------------------------------------------
Lionhart          19 Camp Rd.                $  750,000      1,142,857          114,286
 Investments      Heston Court
 Ltd.             Wimbledon, London
                  United Kingdom
                  SW194UW
                  Attn: Terry Duffy
                  (p) 011-44-181-947-6934
                  (f) 011-44-181-971-0212
----------------------------------------------------------------------------------------------------------------------------------
TOTAL                                        $2,000,000      3,047,620          304,762
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

                                 Schedule 3(e)
                                 -------------

     The Company covenants that the Company shall file, within seven Business
Days after the Closing Date of this Offering, a Form 8-K which describes the
material terms of the Offering and, as exhibits to such 8-K, will include
descriptions and/or copies of the foregoing plans.  The representations and
warranties of the Company made pursuant to the Securities Purchase Agreement
shall be qualified by the disclosure contained in this Schedule 3(e).
<PAGE>

                                 Schedule 3(g)
                                 -------------

     The Company represents that it has received letters dated October 13, 2000,
November 13, 2000, December 20, 2000, January 11, 2001 and February 12, 2001
from Robert Plotkin indicating possible litigation against the Company by such
party; such letters have been provided by the Company to counsel to the Buyers
prior to the Closing Date.
<PAGE>

                                   EXHIBITS
                                   --------

Exhibit A      Form of Registration Rights Agreement
Exhibit B      Form of Transfer Agent Instructions
Exhibit C      Form of Company Counsel Opinion
Exhibit D      Form of Warrant

                                   SCHEDULES
                                   ---------

Schedule 3(e)  SEC Documents; Financial Statements
Schedule 3(g)  Absence of Litigation<PAGE>

                                                                    EXHIBIT 10.2

                         REGISTRATION RIGHTS AGREEMENT

     This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of March 2,
                                               ---------
2001, is entered into by and among Data Race Inc. (doing business as IP Axess),
a Texas corporation, with headquarters located at 6509 Windcrest Drive, Suite
120, Plano, Texas 75024 (the "Company"), and the undersigned buyers (each, a
                              -------
"Buyer" and collectively, the "Buyers").
 -----                         ------

     WHEREAS:

     A.   In connection with the Securities Purchase Agreement by and among the
parties dated as of March 2, 2001 (the "Securities Purchase Agreement"), the
                                        -----------------------------
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, (i) to issue and sell to the Buyers 3,047,620
shares of the Company's Common Stock, no par value per share (the "Common
                                                                   ------
Shares") and (ii) to issue Warrants (the "Warrants") which will be exercisable
------                                    --------
to purchase 304,762 shares of Company Common Stock (the "Warrant Shares"); and
                                                         --------------

     B.   To induce the Buyers 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 "1933 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 Buyers hereby
agree as follows:

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

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

          a.   "Investor" means a Buyer, any transferee or assignee thereof to
                --------
whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.

          b.   "Person" means a corporation, a limited liability company, an
                ------
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.

          c.   "Register," "registered," and "registration" refer to a
                --------    ----------        ------------
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 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(s) by the United States
Securities and Exchange Commission (the "SEC").
                                         ---
<PAGE>

          d.   "Registrable Securities" means the Common Shares purchased
                ----------------------
pursuant to the Securities Purchase Agreement and the Warrant Shares issued or
issuable upon exercise of the Warrants and any shares of capital stock issued or
issuable with respect to the Common Shares, Warrants or Warrant Shares as a
result of any stock split, stock dividend, recapitalization, exchange, anti-
dilution rights or similar event or otherwise, without regard to any limitation
on exercise of the Warrants.

          e.   "Registration Statement" means a registration statement of the
                ----------------------
Company filed under the 1933 Act and pursuant to Rule 415.

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, as soon
               ----------------------
as practicable but in no event later than thirty (30) calendar days after the
date hereof, file with the SEC a Registration Statement or Registration
Statements (as is necessary) on Form S-3 (or if such form is unavailable, such
other form as is available for registration) covering the resale of all of the
Registrable Securities. The initial Registration Statement prepared pursuant
hereto shall register for resale at least that number of Company common stock
shares equal to the number of Registrable Securities as of the date immediately
preceding the date the Registration Statement is initially filed with the SEC,
subject to adjustment as provided in Section 3(b). The Company shall use its
best efforts to have the Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than ninety (90) calendar days after
the date hereof.

          b.   Piggy-Back Registrations.  If at any time prior to the expiration
               ------------------------
of the Registration Period (as defined in Section 3(a)) the Company proposes to
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its securities
(other than on Form S-4 or Form S-8 (or their equivalents at such time) relating
to 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 promptly send to each
Investor written notice of the Company's intention to file a Registration
Statement and of such Investor's rights under this Section 2(b) and, if within
twenty (20) days after receipt 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,
subject to the priorities set forth in Section 2(b) below.  No right to
registration of Registrable Securities under this Section 2(b) shall be
construed to limit any registration required under Section 2(a).  The
obligations of the Company under this Section 2(b) may be waived by the Buyers.
If an offering in connection with which an Investor is entitled to registration
under this Section 2(b) 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

                                      -2-
<PAGE>

terms and conditions as other shares of Company common stock included in such
underwritten offering. If a registration pursuant to this Section 2(b) is to be
an underwritten public offering and the managing underwriter(s) advise the
Company in writing, that in their reasonable good faith opinion, marketing or
other factors dictate that a limitation on the number of shares of Company
common stock which may be included in the Registration Statement is necessary to
facilitate and not adversely affect the proposed offering, then the Company
shall include in such registration: (1) first, all securities the Company
proposes to sell for its own account, (2) second, up to the full number of
securities proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the Registration
Statement by reason of demand registration rights, and (3) third, the securities
requested to be registered by the Investors and other holders of securities
entitled to participate in the registration, as of the date hereof, drawn from
them pro rata based on the number each has requested to be included in such
registration.

          c.   Allocation of Registrable Securities.  The initial number of
               ------------------------------------
Registrable Securities included in any Registration Statement filed pursuant to
Section 2(b) above and each increase in the number of Registrable Securities
included therein shall be allocated pro rata among the Investors based on the
number of Registrable Securities held, or which could be held, by each Investor
at the time the Registration Statement covering such initial number of
Registrable Securities or increase thereof is declared effective by the SEC.  In
the event that an Investor sells or otherwise transfers any of such Person's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the then remaining number of Registrable Securities included in such
Registration Statement for such transferor.  Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities shall be allocated to the remaining
Investors, pro rata based on the number of Registrable Securities then held by
such Investors.

          d.   Legal Counsel.  Subject to Section 5 hereof, the Buyers  shall
               -------------
have the right to select one legal counsel to review and oversee any offering
pursuant to this Section 2 ("Legal Counsel"), which shall be Strategic
                             -------------
Investment Counsel, LLC or such other counsel as thereafter designated by the
holders of a majority of Registrable Securities.  The Company shall reasonably
cooperate with Legal Counsel in performing the Company's obligations under this
Agreement.

          e.   [Omitted.]

          f.   Rule 416.  The Company and the Investors each acknowledge that
               --------
each Registration Statement prepared in accordance hereunder shall include an
indeterminate number of Registrable Securities pursuant to Rule 416 under the
1933 Act so as to cover any and all Registrable Securities which may become
issuable (i) to prevent dilution resulting from stock splits, stock dividends or
similar transactions and (ii) if permitted by law, by reason of the anti-
dilution provisions contained in the Securities Purchase Agreement and the
Warrants in accordance with the terms thereof (collectively, the "Rule 416
                                                                  --------
Securities").  In this regard, although the Company shall not be required to
----------
refer to Rule 416 in the Registration Statement, the Company agrees to use all
reasonable efforts to ensure that the maximum number of Registrable Securities
which may be registered pursuant to Rule 416 under the 1933 Act are covered by
each Registration Statement and, absent guidance from the SEC or other
definitive authority to the

                                      -3-
<PAGE>

contrary, the Company shall use all reasonable efforts to affirmatively support
and to not take any position adverse to the position that each Registration
Statement filed hereunder covers all of the Rule 416 Securities. If the Company
determines that the Registration Statement filed hereunder does not cover all of
the Rule 416 Securities, the Company shall immediately (i) provide to each
Investor written evidence setting forth the basis for the Company's position and
the authority therefor and (ii) prepare and file an amendment to such
Registration Statement or a new Registration Statement in accordance with
Section 2(g).

          g.   Sufficient Number of Shares Registered.  In the event the number
               --------------------------------------
of shares available under a Registration Statement filed pursuant to Section
2(a) is insufficient to cover all of the Registrable Securities or an Investor's
allocated portion of the Registrable Securities pursuant to Section 2(c) (a
"Deficit Failure"), the Company shall amend the Registration Statement, or file
 ---------------
a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover at least one hundred percent (100%) of such
Registrable Securities in each case, as soon as practicable, but in any event
not later than fifteen (15) days after the necessity therefor arises.  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.  For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if at any time the number of Registrable
Securities is greater than the number of shares of Company common stock
available for resale under such Registration Statement.

     3.   RELATED OBLIGATIONS.
          -------------------

     Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(b) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a) or 2(g),
the Company will use its best efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following obligations:

          a.   The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the thirtieth (30th) calendar day after the date hereof for the registration
of Registrable Securities pursuant to Section 2(a)) and use its best efforts to
cause such Registration Statement relating to the Registrable Securities to
become effective as soon as possible after such filing (but in no event later
than the ninetieth (90th) calendar day after the date hereof for the
registration of Registrable Securities pursuant to Section 2(a)), and keep such
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (ii) the date on which the
Investors shall have sold all the Registrable Securities (the "Registration
                                                               ------------
Period"), which Registration Statement (including any amendments or supplements
------
thereto and prospectuses contained 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, in light of the
circumstances in which they were made, not misleading.

                                      -4-
<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 such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement.

          c.   The Company shall permit Legal Counsel to review and comment upon
a Registration Statement and all amendments and supplements thereto at least
seven (7) days prior to their filing with the SEC (or such shorter period as
Legal Counsel may agree), and not file any document in a form to which Legal
Counsel reasonably objects.  The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which consent
shall not be unreasonably withheld.  The Company shall furnish to Legal Counsel,
without charge, (i) any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to any Registration Statement, (ii)
promptly after the same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits and (iii) upon the effectiveness of any Registration Statement, one
copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto.

          d.   The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits, (ii) upon the effectiveness of any Registration Statement, fifteen
(15) copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.

          e.   The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as Legal Counsel or any Investor 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

                                      -5-
<PAGE>

not be required in connection therewith or as a condition thereto to (x) qualify
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(e), (y) subject itself to general taxation in any
such jurisdiction, or (z) file a general consent to service of process in any
such jurisdiction. The Company shall promptly notify Legal Counsel and each
Investor who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threatening of any proceeding for such purpose.

          f.   In the event Investors who hold a majority of the Registrable
Securities being offered in the 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
and reasonable indemnification and contribution obligations, with the
underwriters of such offering.

          g.   As promptly as practicable after becoming aware of such event,
the Company shall notify Legal Counsel and each Investor in writing of the
happening of any event as a result of which the prospectus included in a
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, in light of the circumstances under
which they were made, not misleading, and promptly prepare a supplement or
amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to Legal
Counsel and each Investor (or such other number of copies as Legal Counsel or
such Investor may reasonably request). The Company shall also promptly notify
Legal Counsel and each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel and each
Investor by facsimile on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and (iii)
of the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.

          h.   The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel and each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.

          i.   At the request of any Investor, the Company shall furnish to such
Investor, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as an Investor may reasonably request
if required by an underwriter, (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as

                                      -6-
<PAGE>

is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investors.

          j.   The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel, (iii) any underwriter participating in any
disposition pursuant to a Registration Statement, (iv) one firm of accountants
or other agents retained by the Investors, and (v) one firm of attorneys
retained by 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 necessary for
                                -------
each Inspector to carry out the purposes of this Agreement, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use 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 or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or 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 of which the Inspector has knowledge.  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.

          k.   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 final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement.  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
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

          l.   The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities 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

                                      -7-
<PAGE>

designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market. The Company shall pay all
fees and expenses in connection with satisfying its obligation under this
Section 3(l).

          m.   [Omitted.]

          n.   [Omitted].

          o.   If requested by the managing underwriters or an Investor, the
Company shall (i) immediately incorporate in a prospectus supplement or post-
effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if requested by a shareholder or any underwriter of such Registrable Securities.

          p.   The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.

          q.   [Omitted.]

          r.   The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder and the Company shall use its best efforts to file with
the SEC in a timely manner all reports and documents required of the Company
under the 1933 Act and the 1934 Act (as defined in Section 6(a)).

          s.   Within two (2) Business Days after the Registration Statement
which includes the Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) confirmation that the Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
                                                    ---------

          t.   [Omitted.]

          u.   The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.

                                      -8-
<PAGE>

          v.   Notwithstanding anything to the contrary contained in this
Agreement, the Registration Statement (other than a Registration Statement filed
pursuant to Section 2(b) above) shall register only the Registrable Securities.

     4.   OBLIGATIONS OF THE INVESTORS.
          ----------------------------

          a.   At least seven (7) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor in
writing of the information the Company requires from each such Investor if such
Investor elects to have any of such Investor's Registrable Securities included
in such Registration Statement. 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 and 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.

          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 any 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 such Registration Statement.

          c.   In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2, each such 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.

     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, and
fees and disbursements of counsel for the Company and fees and disbursements of
Legal Counsel, shall be paid by the Company.

     6.   INDEMNIFICATION.
          ---------------

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

          a.   To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the

                                      -9-
<PAGE>

directors, officers, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and any
                                                      --------
underwriter (as defined in the 1933 Act) for the Investors, and the directors
and officers of, and each Person, if any, who controls, any such underwriter
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified
                                                              -----------
Person"), against any losses, claims, damages, liabilities, judgments, fines,
------
penalties, charges, costs, reasonable attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "Claims") incurred in
                                                          ------
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("Indemnified Damages"), to which any of them may become
                         -------------------
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("Blue Sky Filing"), or the omission or alleged omission to state a material
  ---------------
fact required to be stated therein 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, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 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 pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations").  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 by an
Indemnified Person 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 such Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(d);
(ii) with respect to any preliminary prospectus, shall not inure to the benefit
of any such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3(d), 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; (iii) shall not be available to the extent such Claim is based

                                      -10-
<PAGE>

on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(d); and (iv) 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. 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.

          b.  In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is 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 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
                                         -----------------
or Indemnified Damages to which any Indemnified Party may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are 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(d), such Investor will reimburse any legal or other expenses
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) and the agreement with respect to contribution contained in Section
7 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 Section 6(b) for only that amount of a Claim
or Indemnified Damages 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.  The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.

          d.  Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and

                                      -11-
<PAGE>

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 Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent, provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
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
prejudiced in its ability to defend such action.

          e.  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 and when bills are received or Indemnified Damages are incurred.

          f.  The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

                                      -12-
<PAGE>

     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 seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution 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.  LIQUIDATED DAMAGES.
         ------------------

         The Company agrees that the Buyers will suffer damages if the Company
fails to fulfill its obligations pursuant to Sections 2(a), 2(g), 3(a), 3(b),
3(e), 3(h) or 3(v) of this Agreement or Section 4(f) of the Securities Purchase
Agreement (each such event referred to herein as a "Registration Default") and
                                                    --------------------
that it would not be possible to ascertain the extent of such damages.
Accordingly, in the event of such Registration Default, the Company hereby
agrees to pay liquidated damages ("Liquidated Damages") to each Buyer following
                                   ------------------
the occurrence of such Registration Default in an amount determined by
multiplying (i) two percent (2%) of the Purchase Price Per Unit, by (ii) the
number of Registrable Securities then held by such Buyer, by (iii) the
percentage derived by dividing (A) the actual number of days elapsed from the
last day of the date of the Registration Default or the prior 30-day period, as
applicable, to the day such Registration Default has been completely cured by
(B) 30, in cash, or at the Buyer's option, but subject to the Company's
reasonable consent, in the number of shares of Company common stock equal to the
quotient of (v) the dollar amount of the Liquidated Damages on the Payment Date
(as defined below) by (w) the closing bid price of the Company's common stock as
of the date of the Registration Default (as quoted in the Principal Market or
the market or exchange where the Company's common stock is then traded).  The
Liquidated Damages payable pursuant hereto shall be payable within five (5)
Business Days from the end of each calendar month commencing on the first
calendar month in which the Registration Default occurs (each, a "Payment
                                                                  -------
Date").  In the event the Buyer elects to receive the Liquidated Damages amount
in shares of Company common stock, such shares shall also be considered
Registrable Securities and shall have the registration rights set forth in this
Agreement (subject to any limitations with respect to the registration of such
shares under the 1933 Act).  The Company shall not be obligated to pay any
Liquidated Damages under this Section with respect to Registration Defaults
which may be continuing after the second anniversary of the date of issuance of
the relevant Common Shares.  Further, the Company shall not be obligated to pay
to any Buyer any Liquidated Damages to the extent that any Registration Default
is attributable to any material breach by Buyer of this Agreement or the
Securities Purchase Agreement.

                                      -13-
<PAGE>

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

          The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of 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) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws; provided, however, that the transferee
or assignee may subsequently transfer or assign all or any portion of the
Registrable Securities if an exemption from registration under the 1933 Act is
applicable to such transfer or assignment; (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 the written consent of the Company
and Investors who then hold two-thirds (2/3) of the Registrable Securities.  Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.  No such amendment shall be effective to the
extent that it applies to less than all of the holders of the Registrable
Securities.  No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.

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

          a.   A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.

                                      -14-
<PAGE>

          b.   Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

          If to the Company:

               Data Race Inc.
               6509 Windcrest Drive, Suite 120
               Plano, Texas 75024
               Telephone: (972) 205-4005
               Facsimile: (210) 558-0356
               Attention: Jim Scogin

          With a copy to:

               Jackson Walker LLP
               901 Main Street, Suite 6000
               Dallas, Texas 75202
               Telephone: (214) 953 - 5801
               Facsimile: (214) 953 - 5736
               Attention: Jim Ryan, Esq.

          If to Legal Counsel:

               Strategic Investment Counsel, LLC
               666 Dundee Road, Suite 1901
               Northbrook, Illinois 60062
               Telephone: (847) 564-9293
               Facsimile: (847) 564-5497
               Attention: Anthony J. Ribaudo, Esq.

If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers attached hereto, with copies to such Buyer's representatives
as set forth on the Schedule of Buyers, or at such other address and/or
facsimile number and/or to the attention of such other person as the recipient
party has specified by written notice given to each other party five days prior
to the effectiveness of such change.

          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.

                                      -15-
<PAGE>

          d.  This Agreement shall be governed by and construed in all respects
by the internal laws of the State of Illinois (except for the proper application
of the United States federal securities laws), without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Illinois.   Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting the City of Chicago, for the adjudication of any dispute
hereunder.  If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

          e.  This Agreement, the Securities Purchase Agreement and the Warrants
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, the Securities Purchase Agreement and the Warrants
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, this Agreement shall
inure to the benefit of and be binding upon the permitted 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 identical 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
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Investors holding a majority of the Registrable Securities.

          k.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.

                                      -16-
<PAGE>

          l.  This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                           [Signature Page Follows]

                                      -17-
<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.

COMPANY:                                    BUYERS:

DATA RACE INC.                              PROTIUS OVERSEAS LIMITED

By:  /s/ James G. Scogin                    By:  /s/ Gordon J. Mundy
   ----------------------------------          -----------------------------

Name:  James G. Scogin                      Name: Gordon J. Mundy
     --------------------------------            ---------------------------

Title:  Senior Vice President, CFO          Title:  Director
      -------------------------------              -------------------------

                                            LIONHART INVESTMENTS LTD.

                                            By:  /s/ Walter Reich
                                               -----------------------------

                                            Name:  Walter Reich
                                                 ---------------------------

                                            Title:  Director
                                                  --------------------------

                                            KEYWAY INVESTMENTS LTD.

                                            By:  /s/ Paul Moore
                                               -----------------------------

                                            Name:  Paul Moore
                                                 ---------------------------

                                            Title:  Director
                                                  --------------------------
<PAGE>

                              SCHEDULE OF BUYERS

--------------------------------------------------------------------------------
         Investor Name                                Contact Information
--------------------------------------------------------------------------------
Protius Overseas Limited                     PO Box 175
                                             12-14 Finch Road
                                             Douglas, Isle of Man
                                             United Kingdom
                                             IM99 1TT
                                             Attn: Gordon J. Mundy
                                             (p) 01624-646700
                                             (f) 01624-520588
--------------------------------------------------------------------------------
Keyway Investments Ltd.                      19 Mount Havelock
                                             Douglas, Isle of Man
                                             United Kingdom
                                             1M1 2QG
                                             Attn: Martin Peters
                                             (p) 011-44-171-323-2131
                                             (f) 011-44-171-323-0773
--------------------------------------------------------------------------------
Lionhart Investments Ltd.                    19 Camp Rd.
                                             Heston Court
                                             Wimbledon, London
                                             United Kingdom
                                             SW194UW
                                             Attn: Terry Duffy
                                             (p) 011-44-181-947-6934
                                             (f) 011-44-181-971-0212
--------------------------------------------------------------------------------
<PAGE>

                                                                       EXHIBIT A

                        FORM OF NOTICE OF EFFECTIVENESS
                           OF REGISTRATION STATEMENT

[TRANSFER AGENT]
Attn:______________________

      Re: DATA RACE INC.
          --------------

Ladies and Gentlemen:

      We are counsel to Data Race Inc., a Texas corporation (the "Company"), and
have represented the Company in connection with that certain Securities Purchase
Agreement (the "Purchase Agreement") entered into by and among the Company and
the buyers named therein (collectively, the "Holders") pursuant to which the
Company issued to the Holders shares of its Common Stock, no par value per
share, (the "Common Shares") and Warrants exercisable into its Common Stock (the
"Warrant Shares").  Pursuant to the Purchase Agreement, the Company also has
entered into a Registration Rights Agreement with the Holders (the "Registration
Rights Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the Common Shares and Warrant Shares, under the Securities
Act of 1933, as amended (the "1933 Act").  In connection with the Company's
obligations under the Registration Rights Agreement, on _________, 2001, the
Company filed a Registration Statement on Form S-3 (File No. _____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.

      In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC and
the Registrable Securities are available for resale under the 1933 Act pursuant
to the Registration Statement.

                                   Very truly yours,

                                   [ISSUER'S COUNSEL]

                                   By:_________________________

cc:   [LIST NAMES OF HOLDERS]

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